Document:

<PAGE>
                                                                EXHIBIT 10.57

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

                                 LEASE AGREEMENT

                          dated as of February 22, 2000

                                     between

                        WILLIS LEASE FINANCE CORPORATION,

                                     Lessor

                                       and

                              ALOHA ISLANDAIR, INC.

                                     Lessee

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

                          Covering One (1) de Havilland
                               Dash 8-102 Aircraft
                        Manufacturer's Serial Number 026
                          U.S. Registration No. N812PH,
                             Two (2) Pratt & Whitney
                              Model PW 120 Engines
                              Manufacturer's Serial
                            Numbers 120107 and 120142
                                       and
                            Two (2) Hamilton Standard
                               14 SF-7 Propellers,
                              Manufacturer's Serial
                            Numbers 851114 and 890711

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

THIS LEASE AGREEMENT HAS BEEN EXECUTED IN COUNTERPARTS. TO THE EXTENT 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 THEREFOR EXECUTED BY THE LESSOR ON THE SIGNATURE PAGE
THEREOF.

<PAGE>

                               TABLE OF CONTENTS
                                                                        Page
                                                                        ----
LEASE AGREEMENT .........................................................  1

SECTION 1.   DEFINITIONS ................................................  1

SECTION 2.   AGREEMENT TO LEASE: TERM ...................................  7
      2.01   LEASING OF AIRCRAFT ........................................  7
      2.02   ACCEPTANCE .................................................  7
      2.03   DELIVERY OF AIRCRAFT .......................................  8
      2.04   TERM .......................................................  8

SECTION 3.   CONDITIONS PRECEDENT .......................................  8
      3.01   CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS ...............  8
      3.02   CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS ............... 10

SECTION 4.   LESSEE'S REPRESENTATIONS AND WARRANTIES .................... 11
      4.01   DUE ORGANIZATION, STANDING ETC. ............................ 11
      4.02   OPERATIVE DOCUMENTS ........................................ 11
      4.03   NO CONFLICT; CONSENT ....................................... 12
      4.04   GOVERNMENTAL CONSENTS ...................................... 12
      4.05   NO ADVERSE AGREEMENTS ...................................... 12
      4.06   NO DEFAULTS OR VIOLATIONS .................................. 12
      4.07   LITIGATION ................................................. 12
      4.08   NO EVENT OF DEFAULT ........................................ 13
      4.09   FINANCIAL STATEMENTS ....................................... 13
      4.10   CHIEF EXECUTIVE OFFICE ..................................... 13
      4.11   FILINGS MADE ............................................... 13
      4.12   CERTIFICATE ................................................ 13

SECTION 5.   LESSOR'S REPRESENTATIONS AND WARRANTIES .................... 13
      5.01   DUE ORGANIZATION, STANDING ETC. ............................ 14
      5.02   OPERATIVE DOCUMENTS ........................................ 14

SECTION 6.   COVENANTS OF LESSEE ........................................ 14
      6.01   AIR OPERATOR'S CERTIFICATE ................................. 14
      6.02   FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED ............. 14
      6.03   EXISTENCE .................................................. 15
      6.04   INSPECTION RIGHTS; RECORDS ................................. 15
      6.05   PAYMENT OF TAXES AND CLAIMS ................................ 16
      6.06   NOTICE OF LITIGATION ....................................... 16
      6.07   MERGER ..................................................... 16
      6.08   CHIEF EXECUTIVE OFFICE ..................................... 16
      6.09   CERTIFICATE ................................................ 17

                                       i
<PAGE>

SECTION 7.   PAYMENTS ................................................... 17
      7.01   RENT ....................................................... 17
      7.02   NET LEASE; NO SET-OFF OR DEDUCTIONS ........................ 17
      7.03   IMMEDIATELY AVAILABLE FUNDS ................................ 18
      7.04   SUPPLEMENTAL RENT; OVERDUE RENT ............................ 18
      7.05   RESERVED ................................................... 18
      7.06   GROSS UP ................................................... 18

SECTION 8.   LIMITATION OF LESSOR'S LIABILITY ........................... 18

SECTION 9.   USE, OPERATION AND MAINTENANCE ............................. 19
      9.01   GENERAL .................................................... 19
      9.02   OPERATION AND USE .......................................... 19
      9.03   MAINTENANCE IN GENERAL ..................................... 20
      9.04   SPECIFIC ITEMS OF MAINTENANCE .............................. 21
      9.05   PARTS ...................................................... 22
      9.06   AIRWORTHINESS DIRECTIVES ................................... 23
      9.07   SERVICE BULLETINS: NONDISCRIMINATION ....................... 23
      9.08   CORROSION CONTROL .......................................... 24
      9.09   MODIFICATIONS .............................................. 24
      9.10   POSSESSION; SUBLEASING; EQUIPMENT SUBSTITUTION ............. 24
      9.11   REPAIRS .................................................... 26
      9.12   AIRCRAFT RECORDS ........................................... 26
      9.13   WARRANTIES ................................................. 26
      9.14   AIRPORT CHANGE ............................................. 27
      9.15   RIGHT TO INSPECT ........................................... 27
      9.16   REPORTING .................................................. 27

SECTION 10.  RETURN OF AIRCRAFT ......................................... 27
     10.01   RETURN ..................................................... 27
     10.02   CONDITION OF AIRCRAFT ...................................... 27
     10.03   BOROSCOPE INSPECTION ....................................... 27
     10.04   HISTORICAL RECORDS; TREND MONITORING DATA .................. 28
     10.05   INSPECTION ................................................. 28
     10.06   OPERATIONAL GROUND CHECK ................................... 28
     10.07   OPERATION CHECK FLIGHT ..................................... 29
     10.08   ACCEPTANCE ................................................. 29
     10.09   DEFERRED DISCREPANCY CORRECTION ............................ 29
     10.10   FLIGHT COST ................................................ 30
     10.11   INDEMNIFICATION ............................................ 30
     10.12   INSURANCE .................................................. 30
     10.13   MANUALS AND TECHNICAL RECORDS .............................. 30
     10.14   SERVICE BULLETIN KITS ...................................... 31
     10.15   LESSEE'S SPECIAL EXTERIOR MARKINGS . ....................... 31
     10.16   OWNERSHIP .................................................. 31
     10.17   STORAGE UPON RETURN ........................................ 31

SECTION 11.  TITLE; REGISTRATION; LIENS . ............................... 31
     11.01   TITLE ...................................................... 31
     11.02   REGISTRATION; FILINGS; REGISTRATION ........................ 32
     11.03   LIENS ...................................................... 32
     11.04   NOTICE OF OWNERSHIP ........................................ 32

                                      ii
<PAGE>

SECTION 12.  INSURANCE .................................................. 33
     12.01   ALL-RISK INSURANCE ......................................... 33
     12.02   WAR RISK INSURANCE ......................................... 33
     12.03   LIABILITY INSURANCE ........................................ 34
     12.04   ELECTRONIC DATE RECOGNITION INSURANCE ...................... 34
     12.05   DEDUCTIBLES AND SELF INSURANCE ............................. 34
     12.06   ADDITIONAL REQUIREMENTS; LOSS PAYMENT ...................... 34
     12.07   NO SET-OFF ................................................. 35
     12.08   NOTICE OF MATERIAL ALTERATION OR CANCELLATION .............. 35
     12.09   APPLICATION OF CERTAIN INSURANCE PROCEEDS .................. 35
     12.10   INSURANCE FOR OWN ACCOUNT .................................. 36
     12.11   CERTIFICATES AND REPORT .................................... 36

SECTION 13.  LOSS, DAMAGE OR REQUISITION ................................ 36
     13.01   AN EVENT OF LOSS OF AIRFRAME ............................... 36
     13.02   ENGINE OR PROPELLER LOSS ................................... 37
     13.03   PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR REQUISITION
             OF TITLE OR USE ............................................ 38
     13.04   APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT
             OF DEFAULT ................................................. 38

SECTION 14.  EVENT OF DEFAULT ........................................... 39
     14.01   FAILURE TO MAKE PAYMENTS ................................... 39
     14.02   FAILURE TO OBTAIN OR MAINTAIN INSURANCE .................... 39
     14.03   FAILURE TO PERFORM OTHER OBLIGATIONS ....................... 39
     14.04   REPRESENTATIONS AND WARRANTIES UNTRUE ...................... 39
     14.05   INSOLVENCY OR BANKRUPTCY ................................... 39
     14.06   LOSS OF REGISTRATION OR PROTECTION ......................... 40
     14.07   LOSS OF LICENSE ............................................ 40
     14.08   OTHER LEASE ................................................ 40
     14.09   FINAL JUDGMENT ............................................. 40
     14.10   OTHER DEFAULT .............................................. 40
     14.11   CONTEST .................................................... 40
     14.12   FAILURE TO MAINTAIN LETTER OF CREDIT ....................... 40
     14.13   FAILURE TO MAINTAIN THE GUARANTY ........................... 41

SECTION 15.  REMEDIES ................................................... 41

SECTION 16.  INDEMNITIES AND EXPENSES ................................... 43
     16.01   GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS ....... 43
     16.02   GENERAL TAX INDEMNITY ...................................... 44
     16.03   AFTER-TAX BASIS; SURVIVAL .................................. 49
     16.04   EXPENSES ................................................... 50

SECTION 18.  ASSIGNMENT ................................................. 50

SECTION 19.  NOTICES .................................................... 51

SECTION 20.  LESSOR'S RIGHT TO PERFORM FOR LESSEE ....................... 51

                                     iii
<PAGE>

SECTION 21.  LEASE; SECTION 1110 ........................................ 51
     21.01   LEASE ...................................................... 51
     21.02   SECTION 1110 ............................................... 52

SECTION 22.  MISCELLANEOUS .............................................. 52
     22.01   WAIVERS, HEADINGS .......................................... 52
     22.02   COUNTERPARTS ............................................... 52
     22.03   GOVERNING LAW .............................................. 52
     22.04   BENEFIT AND BINDING EFFECT ................................. 52
     22.05   FURTHER ASSURANCES ......................................... 53
     22.07   USURY LAWS ................................................. 53
     22.08   ENTIRE AGREEMENT ........................................... 54

Exhibit A        Description of Aircraft

Schedule 1       to Exhibit A - Delivery Conditions

Exhibit B        Rent and Other Financial Matters

Schedule 1       to Exhibit B - Letter of Credit

Exhibit C        Acceptance Certificate

Exhibit D        Schedule of Manuals and Technical Records

Exhibit E        Return Acceptance Certificate

Exhibit F        General Return Conditions of the Aircraft

                                    iv
<PAGE>

                             LEASE AGREEMENT

         THIS LEASE AGREEMENT, dated as of February 22, 2000 ("Lease"), is
between WILLIS LEASE FINANCE CORPORATION ("Lessor"), a Delaware corporation
having its principal place of business at 2320 Marinship Way, Sausalito, CA
94965 and ALOHA ISLANDAIR, INC. ("Lessee"), a Delaware corporation having its
principal place of business at 99 Kapalulu Place, Honolulu, Hawaii 96819.

                          W I T N E S S E T H :

         WHEREAS, Lessee desires to lease the Aircraft from Lessor, and
Lessor desires to lease the Aircraft to Lessee, pursuant to the terms and
conditions of this Lease;

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:

         SECTION 1. DEFINITIONS.

         The following terms shall have the following respective meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined). All definitions of documents shall refer to such
documents as they may now or hereafter be amended or supplemented. All
definitions of parties hereto shall include the successors and permitted
assigns of such parties.

         "ACCEPTANCE CERTIFICATE" means a certificate in substantially the
form of Exhibit C, to be signed by Lessee on the Delivery Date as required
under Section 2.02 hereof.

         "AERONAUTICAL  AUTHORITY" means as of any time of determination, the
FAA or other governmental airworthiness authority having jurisdiction over
the Aircraft under the laws of the country in which the Aircraft is then
registered.

         "AFFILIATE" with respect to a specified Person, means any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

         "AIRCRAFT" means (A) the Airframe and Engines and Propellers (or any
engine or propeller substituted for any of said Engines or Propellers
pursuant to Section 13.02 of this Lease), whether or not any of such Engines
or Propellers or engines or propellers may from time to time be installed on
such Airframe or may be installed on any other airframe or on any other
aircraft; and (B) where the context permits, the Manuals and Technical Records.

                                    -1-
<PAGE>

         "AIRFRAME" means (i) the aircraft (except the Engines or engines and
Propellers or propellers from time to time installed thereon) identified and
described in Exhibit A hereto and (ii) any and all Parts so long as the same
shall be incorporated or installed in or attached to the Airframe, or so long
as title thereto shall remain vested in Lessor in accordance with the terms
of Section 9.05 of this Lease, after removal from the Airframe.

         "AIR OPERATOR'S CERTIFICATE" means, the certificate, license or
permit required by the Aeronautical Authority or any other governmental
authority having jurisdiction required for the Lessee to carry passengers in
common carriage as it then does in its operations.

         "AIRWORTHINESS DIRECTIVE(S)" has the meaning given in Section 9.06
hereof.

         "APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority and all
interpretations, implementation and enforcement of any of the foregoing,
whether or not enforceable as a matter of law, by any court, government body,
instrumentality, agency or authority.

        "BASIC RENT" means the rent payable throughout the Term for the
Aircraft pursuant to Section 7.01 of the Lease in the amount and as set forth
in Exhibit B hereto.

         "BUSINESS DAY(S)" means any day other than a Saturday, a Sunday or a
day on which banks are permitted. or required to close in San Francisco,
California or Honolulu, Hawaii.

         "CERTIFICATE OF AIRWORTHINESS" means, at any time that the FAA is
the Aeronautical Authority, a Standard Certificate of Airworthiness issued by
the FAA and, at any time that the FAA is not the Aeronautical Authority, any
analogous certificate, document or approval required by the Aeronautical
Authority for operation of the Aircraft in the manner that it will be
operated by Lessee.

         "CERTIFICATED AIR CARRIER" means any U.S. air carrier holding an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code.

         "CONTRIBUTION AMOUNT" has the meaning given in Exhibit B hereto.

         "CYCLE" means one takeoff and landing of an aircraft.

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

         "DELIVERY DATE" means the date on which the Acceptance Certificate
is delivered by the Lessee pursuant to Section 2.02 hereof.

                                   -2-
<PAGE>

         "DOLLARS" or "dollars" or the symbol "$" means dollars in lawful
currency of the United States of America.

         "ENGINE" means: (i) any or all of the engines identified and
described in Exhibit A, whether or not from time to time installed on the
Airframe or installed on any other airframe; (ii) any engine that may from
time to time be substituted, pursuant to Section 9.10 or 13.02 of this Lease,
for such Engine and (iii) any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section
9.05 of this Lease after removal from such Engine. Each such engine is 750 or
more rated takeoff horsepower or the equivalent thereof.

         "EVENT OF DEFAULT" has the meaning given in Section 14 hereof.

         "EVENT OF LOSS" with respect to the Aircraft, Airframe or any Engine
or Propeller means any of the following events with respect to such property:
(i) loss of such property or the use thereof due to theft or disappearance
for more than 30 days; (ii) loss of such property or the use thereof due to
destruction, damage beyond repair or rendition of such property permanently
unfit for normal use; (iii) any event which should or does result in the
receipt of insurance proceeds with respect to such property on the basis of a
total loss, arranged total loss or constructive total loss; (iv)(A) the
taking, confiscation or seizure of title to the Aircraft or Airframe or (B)
the condemnation, taking, confiscation or seizure of the use of the Aircraft
or Airframe for a period in excess of 30 days by any government or agency or
instrumentality thereof; or (v) with respect to any Engine or Propeller, the
taking of title or requisition for use by any government and any divestiture
of title deemed an Event of Loss pursuant to Section 9.10 of this Lease. An
Event of Loss with respect to the Aircraft shall be deemed to occur if an
Event of Loss occurs with respect to the Airframe.

         "FAA" means the United States Federal Aviation Administration, the
Administrator thereof and any agency or instrumentality of the United States
government succeeding to their functions.

         "FLIGHT HOUR" means (i) with respect to the Airframe, any hour,
including calculating by aggregating fractions of an hour, occurring on any
flight, measured from the time the wheels of the Airframe leave the ground
until the wheels next touch the ground, or (ii) with respect to any Engine or
Propeller, any hour, including calculating by aggregating fractions of an
hour, occurring on any flight, measured from the time the wheels of any
airframe, including the Airframe, on which such Engine or Propeller is
installed leave the ground until the wheels next touch the ground.

         "GUARANTOR" means Aloha Airgroup, Inc., a Hawaii corporation.

         "GUARANTY" means the Guaranty, dated the date hereof, from the
Guarantor in favor of the Lessor.

         "IMPOSITION" has the meaning given in Section 16.02 hereto.

                                     -3-
<PAGE>

         "INDEMNITEE" means the Lessor, its Affiliates, any permitted
assignee of the Lessor (whether such assignment is for security or other
reasons and, if such assignment is to an owner trustee, agent, indenture
trustee or other Person acting in a fiduciary or similar capacity for other
Persons, such other Persons shall also be Indemnitees), and each agent,
director, employee, representative and successor thereof.

         "INSURED PARTY" means the Lessor,  its Affiliates,  any permitted
assignee of the Lessor (whether such assignment is for security or other
reasons and, if such assignment is to an owner trustee, agent, indenture
trustee or other Person acting in a fiduciary or similar capacity for other
Persons, such other Persons shall also be Insured Parties), including without
limitation Lender, and any successor thereof.

         "LEASE" has the meaning given in the Introductory Statement hereof
and includes all Exhibits and Schedules hereto.

         "LENDER" means any bank or other financial  institution providing
debt financing to the Lessor.

         "LESSEE" means the Lessee (as defined in the Introductory Statement
hereof) and its successors and permitted assigns.

         "LESSOR" means the Lessor (as defined in the Introductory Statement
hereof) and its successors and permitted assigns.

         "LESSOR'S LIENS" means any Lien arising as a result of (i) claims
against Lessor or its Affiliates not related to the transactions contemplated
by the Lease, (ii) any act or omission of Lessor or its Affiliates which is
not related to the transactions contemplated by the Lease or is in violation
of any of the terms of the Lease, (iii) claims against Lessor or its
Affiliates with respect to Taxes against which Lessee is not required to
indemnify Lessor, (iv) claims against the Aircraft arising out of events
occurring prior to the commencement of the Term or after the expiration or
termination of the Term and the redelivery of the Aircraft in accordance with
this Lease and (v) claims against the Lessor or its Affiliates for any acts
or omissions of Lessor or its Affiliates related to the transactions
contemplated by this Lease; provided that the same are not the direct or
indirect result of any Default or Event of Default hereunder and provided
that the same are not covered by the Lessee's indemnity obligations hereunder.

         "LETTER OF CREDIT" has the meaning given in Exhibit B hereto.

         "LIFE LIMITED PART" means a part having a designated finite number
of Flight Hours, Cycles or days the Part can be used before being permanently
removed from use.

         "LIEN" means any mortgage, pledge, lien, charge or encumbrance,
lease,

                                    -4-
<PAGE>

financing statement, claim, exercise of rights or security interest.

         "MAINTENANCE PROGRAM" has the meaning given in Section 9.03 hereof.

         "MANUALS AND TECHNICAL RECORDS" means all such manuals, technical
data, log books and other records pertaining to the Aircraft (including,
without limitation, the technical manuals and aircraft records listed in
Exhibit D hereto) to be maintained by Lessee or as shall be required to
comply with the requirements of the Aeronautical Authority from time to time
in force. All such manuals, technical data, logbooks and other records shall
be maintained in English or with English translations.

         "MANUFACTURER"  means, with respect to the Airframe, de Havilland,
with respect to the Engines, Pratt & Whitney Canada, and, with respect to the
Propellers, Hamilton Standard.

         "MODIFICATIONS" means Optional Modifications and Required
Modifications.

         "OFFICER'S CERTIFICATE" means as to any company a certificate signed
by a duly authorized officer of the company.

         "OPERATIVE DOCUMENTS"  means this Lease, the Acceptance Certificate
and the Guaranty.

         "OPTIONAL MODIFICATIONS" has the meaning given in Section 9.09(b)
hereof.

         "OTHER LEASE" means the Lease Agreement, between the Lessor and
Lessee with respect to the Other Aircraft.

         "OTHER AIRCRAFT" means that certain de Havilland Dash 8-102
aircraft, manufacturer's serial number 023, as further identified in the
Other Lease.

         "OVERDUE RATE" has the meaning given in Exhibit B hereto.

         "PARTS"  means  all  appliances,  parts,  instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature (other than Engines or engines or Propellers or propellers) which may
from time to time be incorporated or installed in or attached to the Airframe
or any Engine or Propeller or so long as title thereto shall remain vested in
Lessor in accordance with Section 9.05 after removal therefrom.

         "PERMITTED  LIENS" means (i) Lessor's  Liens;  (ii) the respective
rights of Lessor and Lessee as provided herein; (iii) the rights of others
under agreements or arrangements to the extent expressly permitted in Section
9.10 hereof; (iv) Liens for Taxes either not yet due or being contested in
good faith (and for the payment of which adequate reserves have been
provided) by appropriate proceedings conducted in due diligence, so long as
such proceedings do not involve any material danger of the sale, forfeiture
or loss of the Airframe or any Engine or Propeller; (v) material suppliers',
mechanics', workers', repairers', employees' or other like liens arising in
the ordinary

                                    -5-
<PAGE>

course of business and for amounts the payment of which is either not yet
delinquent or is being contested in good faith (and for the payment of which
adequate reserves have been provided) by appropriate proceedings conducted in
due diligence, so long as such proceedings do not involve any material danger
of the sale, forfeiture or loss of the Airframe or any Engine or Propeller;
and (vi) Liens arising out of judgments or awards against Lessee with respect
to which at the time an appeal or proceeding for review is being prosecuted
in good faith (and for the payment of which adequate reserves have been
provided) and there shall have been secured a stay of execution pending such
appeal or proceeding for review.

         "PERSON" means any natural person, corporation, partnership, joint
venture, firm,  association,  trust,  unincorporated  organization,
government or governmental agency or political subdivision or any other
entity, whether acting in an individual, fiduciary or other capacity.

         "PROPELLER" means (i) any or all of the propellers identified and
described in Exhibit A, whether or not from time to time installed on an
Engine or any other engine; (ii) any propeller that may from time to time be
substituted, pursuant to Section 9.10 or 13.02 of this Lease, for such
Propeller; and (iii) any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as such title
thereto shall remain vested in Lessor in accordance with the terms of Section
9.05 of this Lease after removal from such propeller. Each such propeller is
capable of absorbing 750 or more rated takeoff shaft horsepower or the
equivalent thereof.

         "REGISTRY" means, at any time that the FAA is the Aeronautical
Authority, the FAA and, at any time that the FAA is not the Aeronautical
Authority, the registry maintained in the country of registration of the
Aircraft during the Term to register and record ownership of and other
interests in aircraft.

         "RENT" means Basic Rent and Supplemental Rent.

         "RENT PAYMENT DATE" means each day on which an installment of Basic
Rent is due throughout the Term as set forth in Exhibit B hereto.

         "REPLACEMENT ENGINE" means an engine of the same or an improved
model (and manufactured by the same manufacturer) as an Engine being replaced
pursuant to Section 13.02 hereof, which is suitable for installation and use
on the Airframe without materially impairing the value or utility of the
Airframe and having a modification status, value (giving consideration to
maintenance status and time remaining to any scheduled or required
replacement of any Life Limited Part), condition and utility at least equal
to the Engine it is replacing (assuming such Engine was in the time status,
modification status, condition and repair required by the terms hereof
immediately prior to being replaced).

         "REPLACEMENT PROPELLER" means a propeller of the same or an improved
model (and manufactured by the same manufacturer) as a Propeller being
replaced pursuant to Section 13.02 hereof, which is suitable for installation
and use on an Engine

                                   -6-
<PAGE>

and the Airframe and having a time status, modification status, value,
condition and utility at least equal to the Propeller that it is replacing
(assuming such Propeller was in the time and Cycle status, modification
status, value, condition and repair required by the terms hereof immediately
prior to being replaced).

         "REQUIRED MODIFICATION" has the meaning given in Section 9.09(a)
hereof.

         "RETURN LOCATION" has the meaning given in Section 10.01 hereof.

         "SERVICE BULLETINS" means service bulletins issued by the
Manufacturer or any other manufacturer or vendor setting forth Alert and
other service procedures applicable to the Aircraft or any Engine or
Propeller.

         "STANDARD CERTIFICATE OF AIRWORTHINESS" means the certificate of
airworthiness issued by the Aeronautical Authority.

         "STIPULATED LOSS VALUE" has the meaning given in Exhibit B hereto.

         "SUPPLEMENTAL RENT" means all monetary amounts, liabilities and
obligations (other than Basic Rent) that Lessee assumes or agrees to pay or
requires any other person to pay under any Operative Documents to Lessor or
others, including, without limitation, indemnity payments, requisition
proceeds and Stipulated Loss Value.

         "TAX" means all license, documentation and registration fees and all
taxes, levies, imposts, duties, charges, assessments or withholdings of any
nature whatsoever together with any penalties, additions to tax, fines or
interest thereon, (including, without limitation, income, gross receipts,
rental, turnover, occupation, sales, use, excise, value added, personal
property (tangible and intangible) and other taxes imposed by any federal,
state or local or governmental taxing authority in the United States or any
foreign government or taxing authority.

         "TERM" has the meaning given in Exhibit B hereto.

         SECTION 2. AGREEMENT TO LEASE: TERM.

         2.01 LEASING OF AIRCRAFT.

         Subject to the terms and conditions hereof, Lessor agrees to lease
the Aircraft to Lessee hereunder on the Delivery Date, such leasing to be
evidenced by Lessee executing and delivering the Acceptance Certificate
hereunder, and (to the extent that it has not already done so) executing and
delivering all documents or certificates and taking such other actions as are
required by Lessor to be executed and delivered or taken on or before the
Delivery Date pursuant to the terms of any Operative Document.

         2.02 ACCEPTANCE.

         Subject to the terms and conditions hereof and of the other Operative

                                      -7-
<PAGE>

Documents to which Lessee or Guarantor is a party, Lessee hereby agrees to
lease the Aircraft from Lessor hereunder on the Delivery Date, and (to the
extent that it has not already done so) taking the following action:

         (a) Execute and deliver to Lessor the Acceptance Certificate; and

         (b) Execute and deliver all other documents and certificates, and
take all other actions as are required to be executed and delivered or taken
by Lessee on or before the Delivery Date pursuant to the terms of any
Operative Document to which Lessee or Guarantor is a party.

         2.03 DELIVERY OF AIRCRAFT.

         The Aircraft shall be delivered for purposes of this Lease at
Wichita, Kansas, or at a mutually agreed location, which shall be in a
jurisdiction that is intended to avoid any sales, use, transfer and other
similar taxes payable upon the purchase and lease of the Aircraft. The Lessee
shall be obligated to accept delivery of the Aircraft pursuant to this Lease,
at the time and place and in the condition, AS IS, WHERE IS. The execution
and delivery of the Acceptance Certificate shall, as between Lessor and
Lessee, constitute conclusive evidence that the Aircraft satisfies such
conditions without prejudice, however, to any claim Lessor or Lessee may
have against any Manufacturer.

         2.04 TERM.

         Except as otherwise provided herein, the Aircraft shall be
leased for the Term, which shall commence on the Delivery Date.

         SECTION 3. CONDITIONS PRECEDENT.

         3.01 CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS.

         The Lessor's obligation to Lease the Aircraft to Lessee hereunder is
subject to the prior satisfaction, as determined by Lessor, of the following
conditions precedent, including the determination by Lessor that each
document, certificate, opinion or other writing referred to below is in form
and substance satisfactory to Lessor:

         (a) RESERVED.

         (b) the Letter of Credit shall have been established and delivered
to Lessor.

         (c) Lessor shall have received the following:

         (i) the Chattel Paper counterpart of the Lease, duly executed by
Lessee;

         (ii) the Acceptance Certificate, duly executed by Lessee;

                                   -8-
<PAGE>

         (iii) original copies of the other Operative Documents, each duly
executed by each of the parties thereto;

         (iv)  evidence that the Lease has been duly filed for recordation
with the FAA;

         (v) evidence  that  "precautionary"  or other  financing statements
or other instruments covering the Lease and Aircraft have been duly filed in
a form acceptable to Lessor under the Uniform Commercial Code or other
applicable law of all jurisdictions in which Lessor reasonably deems it
necessary or desirable in order to perfect and protect its interest in the
Aircraft;

         (vi) copies of the resolutions of the boards of directors of Lessee
and of the Guarantor approving the execution, delivery and performance by the
Lessee and the Guarantor of the Lease and other Operative Documents to which
either is a party, certified by the Lessee's and Guarantor's secretaries,
together with such other evidence of corporate action as Lessor shall
reasonably request;

         (vii) certificates of the Lessee's and Guarantor's secretaries
certifying as to the incumbency and signatures of the persons authorized to
execute and deliver the Lease and other Operative Documents;

         (viii) copies, certified by the Lessee's and Guarantor's
secretaries, of Lessee's and Guarantors charter documents and bylaws;

         (ix) a certificate signed by an officer of Lessee to the effect that
no default or event which, with notice or the lapse of time, or both, would
constitute a default has occurred and is continuing or will exist under any
of the Operative Documents to which Lessee or Guarantor is a party upon
delivery of the Aircraft to the Lessee  hereunder  and that the
representations and warranties of Lessee in this Agreement are true and
correct with the same force and effect as if made on and as of the Delivery
Date;

         (x) certificates of corporate good standing for Lessee and Guarantor;

         (xi) an insurance report of an independent insurance broker and
certificates of insurance as to Lessee's due compliance with the terms of
Section 12 of this Lease;

         (xii) opinions from Char Sakamoto Ishii Lum & Ching, counsel for
Lessee and Guarantor, addressed to Lessor and covering such matters incident
to the transactions hereto as Lessor may reasonably request;

         (xiii) an opinion of McAfee & Taft, special FAA counsel, addressed
to Lessor and covering such matters incident to the transactions hereto as
Lessor may reasonably request;

                                   -9-
<PAGE>

         (xiv) a letter from CT Corporation Systems accepting appointment as
Lessee's and Guarantor's agent for service of process in California;

         (xv) a copy of Lessee's Air Operator Certificate; and

         (xvi) a copy of the Summary of Lessee's Aeronautical Authority
approved Maintenance Program.

         (d) No material adverse change in Lessee's or Guarantor's
financial or operational condition or its ability to meet its obligations under
the Operative Documents shall have occurred, as determined by Lessor, since
September 30, 1999.

         (e) No change shall have occurred in Applicable Law after the date
of this Agreement that in the opinion of Lessor would make it illegal or
inadvisable to consummate the transactions contemplated hereunder.

         (f) Lessee shall have paid the fees and expenses of Lessor's FAA
counsel as to which invoices have been presented to Lessee and any other
expenses payable by Lessee pursuant to this Lease as to which invoices have
been presented to Lessee, which invoices are then due and owing.

         (g) Lessee and Guarantor shall have taken such other actions, or
delivered such other documents, as may be reasonably requested by Lessor in
connection with the transactions contemplated herein.

         3.02 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS.

         The Lessee's obligations to Lessor hereunder are subject to the
prior satisfaction of the following conditions precedent:

         (a) Lessee shall have received copies of the following:

         (i) original copies of the Operative Documents, each duly executed
by the parties thereto;

         (ii) copies of the resolutions of the Board of Directors of Lessor
approving the execution, delivery and performance by the Lessor of this Lease
and any other Operative Documents to which the Lessor is a party, certified
by the Lessor's secretary, together with such other evidence of corporate
action as Lessee may reasonably request; and

         (iii) a certificate of the Lessor's Secretary certifying as to the
incumbency and signatures of the persons authorized to execute and deliver
the Lease and any other Operative Documents to which the Lessor is a party.

         (b) The Aircraft shall be registered in the name of Lessor with the
FAA.

                                       -10-
<PAGE>

         (c) The Aircraft shall have a Standard  Certificate of Airworthiness.

         (d) Lessee shall have viewed and approved the video borescope that
was performed on the Engines after last flight of the Aircraft operated by
the previous operator.

         (e) The Engines shall have undergone a power assurance run at model
121 engine settings.

         (f) The Engines shall have undergone and passed a power assurance at
model 120A settings and all discrepancies shall have been corrected.

         (g) The Aircraft shall be in substantially the same condition as
when inspected by Lessee in the week of January 24, 2000; and any Part that
has been replaced since such inspection shall be replaced by a part having a
modification status, value, condition and utility and remaining life, hour or
cycle status and overhaul status (whichever is applicable) at least equal to
the Part it is replacing;

provided, however, that in the event the conditions set forth in Section
3.02(e) or (f) are not satisfied and all other conditions of this Section
3.02 are satisfied, then Lessee's obligations under this Lease shall be
effective, subject to the adjustment in the date of the first Rent Payment
Date set forth in Section 4(b) of Exhibit B hereto.

         SECTION 4. LESSEE'S REPRESENTATIONS AND WARRANTIES.

         Lessee represents and warrants to Lessor on the date hereof and on
the Delivery Date as follows:

         4.01 DUE ORGANIZATION, STANDING ETC.

         Each of Lessee and Guarantor is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
incorporation and has the power and authority to enter into and to perform
its obligations under the Operative Documents to which either is a party.
Each of Lessee and Guarantor is duly qualified and in good standing in all of
the jurisdictions in which the character of the properties owned or it or the
business conducted by it makes such qualification necessary and the failure
to so qualify would adversely effect Lessee's or Guarantor's ability to
perform its obligations under the Operative Documents to which it is a party.

         4.02 OPERATIVE DOCUMENTS.

         The Operative Documents to which each is a party have been duly
authorized, executed and delivered by Lessee and Guarantor, and, assuming
due authorization, execution and delivery by the other parties thereto, are
legal, valid and binding agreements of Lessee and Guarantor, enforceable in
accordance with their resive terms.

                                 -11-
<PAGE>

         4.03 NO CONFLICT; CONSENT.

         The execution and delivery by Lessee and Guarantor of the Operative
Documents to which either is a party are not, and the performance by Lessee
and Guarantor of their respective obligations under each will not be,
inconsistent with its charter or bylaws or other organizational documents, do
not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to it, and do not and will not contravene the
provisions of, or constitute a default or result in the creation of any Lien
upon any property of Lessee or Guarantor under any indenture, mortgage,
contract, agreement or other instrument to which either is a party or by
which either is bound or require the consent or approval of, the giving of
notice to, the registration with or the taking of any action in respect of or
under any federal, state or local governmental authority or agency in the
United States or any foreign country, except such as has been obtained, given
or accomplished.

         4.04 GOVERNMENTAL CONSENTS.

         Neither the execution and delivery of any of the Operative Documents
to which Lessee or Guarantor is a party nor performance of any of the
transactions contemplated thereby by either Lessee or Guarantor, or, to the
knowledge of Lessee, Lessor, requires the consent or approval of, the giving
of notice to, the registration with, or the taking of any other action with
respect to the Aeronautical Authority or any other governmental authority or
agency, including any judicial body, in the United States or any other
country, except for the filings for recording and registration with the
Registry referred to in Section 3.01(c)(iv) and (v) hereof and the other
filings and consents, referred to in Section 3.01 (c)(vi) and (xvi) hereof.

         4.05 NO ADVERSE AGREEMENTS.

         Neither Lessee nor Guarantor is a party to any agreement or
instrument or subject to any charter or any corporate restriction which, if
performed in accordance with its terms, would materially and adversely affect
Lessee's or Guarantor's financial condition, business or operations or the
ability of Lessee or Guarantor to perform its obligations under any of the
Operative Documents to which it is a party.

         4.06 NO DEFAULTS OR VIOLATIONS.

         Neither Lessee nor Guarantor is in default under any mortgage, deed
of trust, indenture or other instrument or agreement to which it is a party
or by which it or any of its properties or assets may be bound, or in
violation of any Applicable Law, which default or violation would have a
material adverse effect on the financial condition, business or operations of
Lessee or Guarantor or its ability to perform any of its obligations under
any of the Operative Documents to which it is a party.

         4.07 LITIGATION.

         Except as the Lessee has otherwise disclosed to the Lessor in
writing on

                                   -12-
<PAGE>

or before the date hereof there are no pending or threatened actions,
proceedings or investigations (or any basis therefore known to Lessee) that
would either individually or in the aggregate materially and adversely affect
the financial condition, business or operations of Lessee or Guarantor or the
ability of Lessee or Guarantor to perform its obligations under any of the
Operative Documents to which it is a party.

         4.08 NO EVENT OF DEFAULT.

         No event exists attributable to Lessee's or Guarantor's acts or
omissions which, upon delivery and leasing of the Aircraft hereunder, would
be an Event of Default or Default.

         4.09 FINANCIAL STATEMENTS.

         The consolidated audited financial statements of the Guarantor and
its Affiliates delivered to Lessor, each prepared in accordance with
generally accepted accounting principles and practices, fairly present the
financial position of the Guarantor and its Affiliates as of the dates
covered thereby. Since the date of such financials there has been no material
adverse change in the overall financial condition, business or operations of
the Guarantor and its Affiliates.

         4.10 CHIEF EXECUTIVE OFFICE.

         The chief executive office of Lessee and its records with respect to
the Aircraft are located at 99 Kapalulu Place, Honolulu, Hawaii, 96819.

         4.11 FILINGS MADE.

         Except for the filing and recording of the Lease with the Registry,
the "precautionary" UCC Financing Statement in Hawaii and Delaware and the
filings referred to in the opinion required by Section 3.01(c)(xiv) hereof,
no further action (including filing any financing statement in respect
thereof under the Uniform Commercial Code of any applicable jurisdiction) is
necessary in order to establish and perfect Lessor's interest in the Aircraft
and Lease in any jurisdiction in the United States or elsewhere.

         4.12 CERTIFICATE.

         Lessee holds an air carrier operating certificate issued by the U.S.
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code.

         SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES.

         Lessor represents and warrants to Lessee on the date hereof and on
the Delivery Date as follows:

                                   -13-
<PAGE>

     5.01 DUE ORGANIZATION, STANDING ETC.

     Lessor is a corporation duly organized and validly existing in good
standing under the laws of its jurisdiction of incorporation and has the
power and authority to enter into and to perform its obligations under the
Operative Documents to which it is a party. Lessor is duly qualified and in
good standing in all of the jurisdictions in which the character of the
properties owned or leased by it or the business conducted by it makes such
qualification necessary and the failure to so qualify would adversely effect
Lessor's ability to perform its obligations under the Operative Documents to
which it is a party.

     5.02 OPERATIVE DOCUMENTS.

     The Operative Documents to which Lessor is a party have been duly
authorized, executed and delivered by Lessor, and, assuming due
authorization, execution and delivery by the other parties thereto, are
legal, valid and binding agreements of Lessor, enforceable in accordance with
their respective terms.

     SECTION 6. COVENANTS OF LESSEE.

     From the Delivery Date and until the return of the Aircraft pursuant to
Section 10 hereof, Lessee covenants to Lessor that Lessee shall:

     6.01 AIR OPERATOR'S CERTIFICATE.

     Maintain its Air Operators Certificate and any other required licenses
and permits from the Aeronautical Authority and any other governmental
authority having jurisdiction required to enable Lessee to carry passengers
in common carriage.

     6.02 FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED.

     Furnish to Lessor:

          (a) as soon as possible and in any event within 10 days after the
occurrence of an Event of Default, an Officer's Certificate setting forth in
detail the nature of such Event of Default and the action which Lessee
proposes to take with respect thereto;

          (b) as soon as available, and. in any event within 60 days after
the end of each of the first three fiscal quarters in each fiscal year of
Guarantor, consolidated balance sheets of Guarantor and its Affiliates as of
the end of such quarter and related statements of income and shareholders'
equity and changes in financial condition of Guarantor and its Affiliates for
the period commencing at the end of the previous fiscal year and ending with
the end of such quarter,  setting forth in each case in comparative  form the
corresponding figures for the corresponding period in such other preceding
fiscal year, all in reasonable detail and duly certified (subject to year-end
audit adjustments) by a financial officer of Guarantor as having been
prepared in accordance with generally accepted accounting principles and
practices, together

                                  -14-
<PAGE>

with detailed information regarding any Event of Default as may have occurred
in the relevant period and the action taken or proposed to be taken with
respect thereto;

         (c) as soon as available, and in any event within 90 days after the
end of each fiscal year of Guarantor, a copy of the annual report for such
year for Guarantor and the affiliated group of which Guarantor is a member on
a consolidated basis, including therein consolidated balance sheets of
Guarantor as of the end of such fiscal year and related statement of income,
shareholders' equity and changes in financial condition of Guarantor and its
Affiliates for such fiscal year, in comparative form with the preceding
fiscal year, in each case certified by independent certified public
accountants of national standing as having been prepared in accordance with
generally accepted accounting principles and practices consistently applied
(except as noted therein; PROVIDED that any changes in accounting principle
or practices must be disclosed by such accountants), together with detailed
information regarding any Event of Default as may have occurred in the
relevant period and the action taken or proposed to be taken with respect
thereto;

         (d) from time to time, such other information relating to its
financial,  operational or business affairs or conditions as Lessor may
reasonably  request by written  notice  including,  but not limited to,
correspondence with any Manufacturer and with Lessee's insurance carriers or
brokers.

     6.03 EXISTENCE.

     At all times maintain its corporate existence and do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate rights, powers, privileges and franchises except for any corporate
right, power, privilege or franchise that it determines is no longer
necessary or desirable in the conduct of its business as a common carrier for
the commercial transport of passengers and the loss of which will not
materially adversely affect or diminish the rights of Lessor under the
Operative Documents.

     6.04 INSPECTION RIGHTS: RECORDS.

          (a) Permit any duly authorized representative or designee of Lessor
(which may be a manufacturer's representative, an outside consultant or
representative of Lessor or of a lender secured by the Aircraft) to inspect
the Aircraft, to examine Lessee's technical books and Aircraft records, to
take memoranda and extracts therefrom and to make copies thereof, and to
discuss the affairs, finances and accounts of Lessee. Such inspections shall
be at Lessor's expense unless an Event of Default exists, in which case
inspections shall be at Lessee's expense. Unless an Event of Default exists,
such inspections may only take place at any reasonable time. Lessee shall
notify Lessor in writing when "C" and "D" Checks, if Lessee shall no longer
be utilizing the de Havilland Equalized Maintenance Program, are scheduled to
take place and if Lessee shall be utilizing the de Havilland Equalized
Maintenance Program, when structural inspections required by the Maintenance
Program and not included in the de Havilland Equalized Maintenance Program
are scheduled to take place and if Lessor

                                     -15-
<PAGE>

advises Lessee in writing that it or its designee will be inspecting during
such check, the parties will use reasonable efforts to coordinate regarding
the exact time and place thereof. Lessee shall also provide Lessor, quarterly,
with scheduling information regarding the performance of the various
segments of the de Havilland Equalized Maintenance Program required to be
performed or performed during each such quarter and if Lessor advises Lessee
in writing that it or its designee will be inspecting during such segments,
the parties will use reasonable efforts to coordinate regarding the exact
time and place thereof.

          (b) Maintain or cause to be maintained at all times records
adequate to identify the Aircraft and to disclose its location, use and
maintenance.

     6.05 PAYMENT OF TAXES AND CLAIMS.

     Pay when due all Lessee's Taxes, assessments and other liabilities
except as contested in good faith and by appropriate proceedings, provided
that adequate reserves have been established with respect thereto to the
extent required by generally accepted accounting principles as established in
the United States.

     6.06 NOTICE OF LITIGATION.

     Give prompt written notice to Lessor of any litigation or governmental
proceeding pending or, to its knowledge, overtly threatened against Lessee or
Guarantor which, if determined adversely to Lessee, might materially
adversely affect the financial condition of Lessee or adversely affect the
ability of Lessee or Guarantor to perform its obligations under the Operative
Agreements to which either is a party.

     6.07 MERGER.

     Not, without prior written consent of Lessor, merge into or with any
Person, or be acquired by any Person, or sell or agree to sell all or
substantially all of its assets (whether directly or through a series of
transactions)  unless (a) the successor to Lessee or purchaser in such
transaction enters into an agreement acceptable to Lessor to assume all
obligations of Lessee under the Operative Documents unless such successor or
purchaser succeeds to such obligations by operation of law and provides an
opinion of counsel acceptable to Lessor with respect thereto in form and
substance acceptable to Lessor and (b) such transaction shall not give rise
to a Default or Event of Default; provided, however, the written consent of
Lessor shall not be required if such successor or purchaser shall be an
Affiliate of Guarantor of which Guarantor is the owner of all of the
outstanding capital stock or other ownership interests and the consolidated
net worth of the Guarantor and its Affiliates after giving effect to such
transaction shall be equal to or greater than such net worth immediately
prior to giving effect to such transaction.

     6.08 CHIEF EXECUTIVE OFFICE.

     Lessee shall provide Lessor with not less than 30 days prior written
notice

                                     -16-
<PAGE>

of any change in its chief executive office or office where records
pertaining to the Aircraft are kept, if moved, to any place or location
outside of the State of Hawaii and will file such financing statements or
other filings as may be reasonably requested by Lessor with respect to such
change.

     6.09 CERTIFICATE.

     Lessee shall maintain the certificate described in Section 4.12.

     SECTION 7. PAYMENTS.

     7.01 RENT.

     During the Term, Lessee shall pay Basic Rent as follows:

     (a) BASIC RENT. On each Rent Payment Date during the Term, Lessee shall
pay to Lessor Basic Rent with respect to the Aircraft in the amount and as
provided in Exhibit B hereto.

     (b) REPORTS. At least quarterly during the Term and on the 10th day of
the first calendar month following termination of the Term, Lessee shall
deliver to Lessor internally generated reports setting forth the number of
Flight Hours and Cycles flown by the Airframe and each Engine during the
preceding calendar quarter.

     7.02 NET LEASE; NO SET-OFF OR DEDUCTIONS.

     This Lease is a net lease, and Lessee acknowledges and agrees that
Lessee's obligation to pay all Rent and the rights of Lessor in and to such
Rent shall be ABSOLUTE AND UNCONDITIONAL UNDER ALL CIRCUMSTANCES and shall
not be subject to any abatement,  reduction,  set-off, defense, counterclaim
or recoupment ("ABATEMENTS") for any reason whatsoever (other than
Impositions as defined in Section 16.02 with respect to which Lessee is not
required to indemnify Lessor or any Indemnitee under Section 16.02),
including without limitation, Abatements due to any present or future claims
of Lessee against Lessor under this Lease or otherwise or against the
Manufacturer or against any other Person for whatever reason. Except as
otherwise expressly provided herein, this Lease shall not terminate for any
cause, nor shall the obligations of Lessee be affected, by reason of any
invalidity of title or any defect in the title, condition, design,
merchantability or fitness for use of, or operation of the Aircraft or any
Engine or Propeller or Part thereof as a result of damage to, or any loss, or
destruction of the Aircraft or any Engine or Propeller or any Part thereof
from whatsoever cause, or the interference with the use thereof by Lessor or
any Person, the invalidity or unenforceability of this Lease or any other
Operative Document, the insolvency, bankruptcy or reorganization of any
Person, or for any other cause, whether similar or dissimilar to the
foregoing, any present or future law or regulation to the contrary
notwithstanding. Lessee hereby waives, to the extent permitted by Applicable
Law, any and all rights which it may now or hereafter have, by statute or
otherwise, to terminate, cancel, quit or surrender the Lease and the leasing
thereunder of the Aircraft,

                                      -17-
<PAGE>

it being the express intention of Lessor and Lessee that all Rent payable by
Lessee hereunder shall be, and continue to be, payable in all events unless
the obligation to pay the same shall be terminated pursuant to the express
provisions of this Lease. Notwithstanding the foregoing, Lessee shall retain
separate rights of action with respect to any present or future claims
against Lessor under this Lease.

     7.03 IMMEDIATELY AVAILABLE FUNDS.

     All Rent shall be paid by wire transfer in immediately available funds
by 1:00 p.m. San Francisco, California time on the day in question to the
Lessor at the account listed on Exhibit B hereto or at such other account as
shall be designated in writing by Lessor to Lessee. Funds not received by
such time on such day shall be deemed to have been received on the next day
that the recipient bank is open for business. If any Rent is due on a day
which is not a Business Day, it shall be due on the next succeeding Business
Day. All payments hereunder shall be in United States Dollars.

     7.04 SUPPLEMENTAL RENT; OVERDUE RENT.

     Lessee also agrees to pay to Lessor or to whomsoever shall be entitled
thereto any and all Supplemental Rent when the same shall become due and
owing, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity in the case of nonpayment of Basic Rent.
Without limitation of the foregoing, Lessee shall pay interest at the Overdue
Rate on any payment of Rent not paid when due hereunder for the period in
which such Rent remains overdue and not paid.

     7.05 RESERVED.

     7.06 GROSS UP.

     All Rent shall be paid free and clear of, and without deduction for, any
taxes, levies, imposts, charges, duties, fees or withholdings of any nature
whatsoever now or hereafter imposed by or within any governmental authority
or pursuant to any governmental rule or regulation or any administrative
subdivision or taxing authority thereof or therein, respectively, unless
Lessee is compelled by law to deduct or withhold such taxes, levies, imposts,
charges, duties or fees, in which event Lessee shall pay such additional
amounts as shall result in the effective receipt by Lessor of the Rent due to
Lessor or any other Person had no such deduction or withholding been made.

     SECTION 8. LIMITATION OF LESSOR'S LIABILITY.

     LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS", "WHERE-IS" AND LESSOR HAS
NOT MADE, AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESSED OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR PARTICULAR PURPOSE
OF THE

                                 -18-
<PAGE>

AIRCRAFT, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY FROM COURSE OF PERFORMANCE OR DEALING OR
USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER
CONSEQUENTIAL DAMAGES, except that on the Delivery Date, Lessor (a) warrants
that the Aircraft shall be free of Lessor's Liens and (b) agrees that it will
not directly or indirectly create, incur, assume or suffer to exist any
Lessors Lien on or with respect to the Airframe or any Engine or Propeller.

     SECTION 9. USE, OPERATION AND MAINTENANCE.

     9.01 GENERAL.

     Lessee, at its own cost and expense shall (i) service, repair, maintain
and overhaul or cause the same to be done to the Airframe and each Engine and
Propeller under the Maintenance Program in the same manner and with the same
care as used by Lessee with similar aircraft and engines and propellers
operated by Lessee and so as to keep the Airframe and each Engine and
Propeller in as good operating condition as when delivered to the Lessee
hereunder, ordinary wear and tear excepted, and (ii) maintain the Manuals and
Technical Records in the English language in accordance with the Maintenance
Program.

     9.02 OPERATION AND USE.

     (a) Lessee agrees not to operate or locate the Airframe or any Engine or
Propeller, or suffer the Airframe or any Engine or Propeller to be operated
or located by any other Person, in any area (i) excluded from coverage by any
insurance policy required to be maintained hereunder with respect to the
Airframe or Engines or Propellers or (ii) in any recognized or threatened
area of hostilities. Lessee agrees not to operate the Airframe or any Engine
or Propeller, or suffer the Airframe or any Engine or Propeller to be
operated by any other Person (1) unless the Airframe and Engine and Propeller
are covered by insurance as required by the provisions of Section 12 hereof
or (2) contrary to the terms of such insurance as required by the provisions
of Section 12 hereof.

     (b) Lessee agrees not to (i) operate the Airframe or any Engine or
Propeller except in a passenger configuration, in commercial operations for
which Lessee is duly authorized by the Aeronautical Authority or (ii) use the
Aircraft for a purpose for which the Aircraft is not designed or reasonably
suitable. Lessee will not maintain, use or operate the Aircraft in violation
of any Applicable Law, or contrary to any manufacturer's operating manuals
or instructions.

                                     -19-

<PAGE>

     9.03 MAINTENANCE IN GENERAL.

     Lessee  agrees that until the Aircraft is delivered to Lessor  pursuant
to Section 10 (except as specified  below),  it has the sole  obligation to,
and shall maintain and repair or to cause to be maintained and repaired the
Airframe and the Engines and Propellers under Lessee's  Aeronautical
Authority  approved maintenance program as in effect on the Delivery Date as
the same may be amended from time to time in accordance  with the second
sentence of this paragraph with respect  to the  Airframe  and the  Engines
and  Propellers  (the  "Maintenance Program") and so as to keep them in as
good a condition as on the Delivery Date, ordinary wear and tear  excepted.
If any material  changes  (including  without limitation,  time  limit
changes)  shall be made to such  Maintenance  Program, including  without
limitation,  any  change  from  the de  Havilland  Equalized Maintenance
Program,  Lessee  shall give Lessor not less than 30 days'  advance written
notice  thereof and no such changes shall be implemented  until approved by
the Aeronautical Authority. Included within the obligation of maintenance and
repair is the  obligation  and  affirmative  undertaking by Lessee to replace
or cause to be replaced from time to time all  unserviceable or defective
Parts, to the extent required to cause the Aircraft to be in an airworthy
condition in all respects, and covered by a valid Certificate of
Airworthiness at all times.

Notwithstanding  the above, Lessor agrees, on a one time only basis, at its
sole cost and expense to:

     (i)  reimburse  Lessee  for  the  cost  of  the  first  major
          refurbishment following  the  Delivery  Date of  Engines  serial
          numbers  120107 and 120142. Such costs, payable within 30 days
          after invoices, satisfactory to the Lessor,  are  received,  shall
          be for the  refurbishment  of the Engines only.  All other costs,
          including but not limited to,  removal and  installation  of the
          Engines,  transportation  and/or  substitute engine(s)  are for
          the  account  of the  Lessee.  Notwithstanding  the foregoing,  if
          the  refurbishment  is performed  due to foreign  object damage
          ("FOD")  or  FOD  is  discovered   during   performance  of  the
          refurbishment  under  this  subsection  9.03(i),  (A)  Lessee  will
          use commercially  reasonable  best  efforts to recover the  maximum
          damage amount recoverable from any and all insurance providers
          with respect to the Aircraft and (B) Lessee shall  contribute  an
          amount up to the full amount of any  applicable  insurance
          deductible and the full amount of any recovery  from any  insurance
          provider with respect to such damage toward the cost of the
          refurbishment. For purposes of this subpart (i), refurbishment
          shall include the  replacement of all Life Limited Parts having
          fewer than 10,000 cycles remaining.

     (ii) either provide Lessee serviceable  replacement flaps and carriages,
          as necessary,  modified to eliminate the repeat inspection
          requirements of DHC-8  Maintenance  Program task numbers  5750/09A
          and 5750/10A through the term or reimburse  Lessee for the cost of
          replacing  such flaps and carriages. Not less than 180 days prior
          to the estimated date the flaps

                                      -20-

<PAGE>

          will  accumulate  60,000 total Cycles,  Lessor and Lessee will
          commence cooperation  with each other in  locating  such
          replacement  flaps and carriages.  In the event Lessor  replaces
          such flaps and carriages,  as necessary,  Lessor  shall  furnish
          such flaps and  carriages to Lessee between  90 and 180 days  prior
          to the  estimated  date the flaps  will accumulate 60,000 total
          cycles. In the event Lessee replaces such flaps and carriages, as
          necessary,  and Lessor is to reimburse Lessee for the cost of
          replacing such flaps and carriages,  such cost,  payable within 30
          days after invoices  satisfactory to the Lessor are received,
          shall be for the  Lessee's  reasonable  net cost of such flaps and
          carriages only. Notification, in writing, from the Lessee to the
          Lessor, shall be given no later than 12 months  prior to the date
          the  Lessee  estimates the flaps will have accumulated 60,000 total
          Cycles.

     (iii) reimburse Lessee for the reasonable cost of replacing landing gear
          Life Limited  Parts  replaced  because of expired life.  Such cost,
          payable within 30 days after invoices satisfactory to the Lessor
          are received, shall be for the Lessee's reasonable net cost of the
          part only.

     (iv) reimburse  Lessee  the  cost  of  modifying  the  Aircraft  to a
          model DHC-8-103  including the cost of  converting  the Engines to
          P/W 121's. Such cost shall be payable within 30 days after
          invoices  satisfactory to the Lessor have been received.

     (v)  reimburse Lessee the cost of stripping the entire Aircraft and
          painting the Lessee's livery up to a total  aggregate  amount of
          $60,000 for the painting of Lessee's livery on the Aircraft and the
          Other Aircraft.

     9.04 SPECIFIC ITEMS OF MAINTENANCE.

     Lessee agrees that maintenance and repairs shall include, but shall not
be limited to, the following specific items:

     (a)  to perform or have  performed in  accordance  with the  Maintenance
Program all routine  maintenance  work,  including  on-line  maintenance  on
the Aircraft,  and to ensure that all such  maintenance  shall be in
accordance with the regulations and directives of the Aeronautical Authority.
Lessee shall cause all maintenance and repairs to be performed at repair
facilities approved by the Aeronautical Authority;

     (b)  to maintain or cause to be maintained  all Aircraft  documentation,
including,  without limitation, the Manuals and Technical Records, in
compliance with Aeronautical  Authority regulations and in up-to-date status
(if necessary, through manufacturers'  revision service) and to make these
available for review by Lessor on reasonable notice at Lessee's principal
maintenance base;

     (c)  if required by Aeronautical  Authority  regulations,  to notify the
Manufacturer   promptly  (with  a  copy  to  Lessor)  of  any  modifications
or configuration

                                      -21-

<PAGE>

changes to the Airframe  which would have a material  effect on or be a
material change to the type design and/or the manuals  relating to the
Airframe  (such as flight, operations and maintenance); and

     (d)  on Lessor's  request to furnish Lessor  promptly with copies of any
written  communications  with  manufacturers with respect to material defects
or malfunctions of the Aircraft.

     9.05 PARTS.

     (a)  Lessee,  at its own cost and  expense,  will  promptly  replace all
Parts that 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.  In addition,  in the ordinary
course of maintenance, service,  repair,  overhaul or testing,  Lessee may
remove any Parts, whether or not unserviceable,  lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use, provided that Lessee shall replace such Parts as promptly as practicable
with  replacement  parts. All replacement parts  shall be made by the  same
manufacturer  and  shall be of the same or an improved model number and
modification status or substitutes (whether or not the same  manufacturer  is
involved)  approved by the  Aeronautical  Authority  and normally used by
Lessee,  shall be free and clear of all Liens except  Permitted Liens and
shall be in as good  operating  condition  as, and shall have a value,
utility and a remaining useful life at least equal to that of the Parts
replaced assuming  such replaced  Parts were in the  condition and repair
required to be maintained by the terms hereof.

     (b)  Except  as  provided  in  Section  9.05(d),  all Parts at any time
removed from the  Airframe or any Engine or Propeller  shall remain the
property of Lessor and subject to this Lease, no matter where located, until
such time as such Parts shall be replaced by parts that have been
incorporated  or installed in or  attached  to such  Airframe  or  Engine  or
Propeller  and that meet the requirements for replacement Parts specified in
clause (a) of this Section 9.05. Immediately upon any replacement  part
becoming  incorporated or installed in or attached  to such  Airframe  or
Engine or  Propeller  as  provided in clause (a) hereof,  without further
act, (i) title to such replacement part shall thereupon vest in Lessor and it
shall become a Part for all purposes  hereof to the same extent as the Part
originally  incorporated or installed in or attached to such Airframe  or
Engine or  Propeller;  and (ii)  title to the  replaced  Part shall thereupon
vest in  Lessee,  free and clear of all rights of Lessor and free and clear
of Lessor Liens (other than Lessor Liens  arising out of events  occurring
after the  transfer  which are not  attributable  to  actions  of the  Lessor
or omissions  by the Lessor of actions  which the  Lessor is legally
obligated  to take) and such replaced Part shall no longer be deemed a Part
hereunder.

     (c)  Title to all parts  incorporated  or  installed  in or  attached or
added  to  the  Airframe  or any  Engine  or  Propeller  as  the  result  of
any alteration,  modification or addition effected by Lessee shall,  without
further act,  vest in Lessor  and  become  subject  to this Lease and such
part shall be deemed to be a Part for all purposes

                                      -22-

<PAGE>

hereof.

     (d)  Lessee may remove Parts which Lessee  determines in its  reasonable
judgment to be obsolete or no longer  suitable or appropriate  for use by
Lessee on the Airframe or any Engine or Propeller ("Obsolete Parts"),
PROVIDED that (i) such  removal  is being  applied  by Lessee on a
fleet-wide  basis and does not discriminate  against the  Aircraft  and (ii)
removal of any such Part shall not diminish the fair market value, utility or
remaining useful life of the Airframe or such Engine or Propeller,  or
materially  impair the condition or impair the airworthiness  thereof,  below
the  fair  market  value,  utility,   condition, airworthiness or remaining
useful life thereof immediately prior to such removal assuming the  Airframe
or such Engine or  Propeller  was then of the fair market value  and  utility
and in  the  condition  and  airworthiness  required  to be maintained by
the terms of this Lease.

     9.06 AIRWORTHINESS DIRECTIVES.

     (a)  Lessee agrees to carry out or cause to be carried out in accordance
with the requirements thereof on the Aircraft any airworthiness directive or
any other mandatory  regulation or directive  ("Airworthiness  Directive")
which the Aeronautical  Authority  from time to time may issue and which
becomes due prior to the  later of the end of the Term or  return of the
Aircraft  to the  Lessor pursuant to Section 10, which shall include without
limitation,  compliance with any terminating  action with which  compliance
must be met prior to the later of the end of the Term or the  return of the
Aircraft  to the Lessor  pursuant  to Section  10.  All  Airworthiness
Directives  shall be  timely  accomplished  in accordance  with  all
applicable   bulletins  and  manuals  published  by  the Manufacturer  of
the Airframe or Engines or Propellers or Parts or data approved by the
Aeronautical  Authority to the extent the same are incorporated in or by
reference into the Airworthiness Directive.

     (b)  Title  to any  parts  installed  on the  Aircraft  pursuant  to an
Airworthiness Directive issued after the Delivery Date shall vest in Lessor
free and clear of any Liens except  Permitted Liens and such parts shall be
deemed to be Parts for all purposes hereof.

     (c)  Lessee  shall  pay the cost of  complying  with all  Airworthiness
Directives.

     9.07 SERVICE BULLETINS: NONDISCRIMINATION.

     Lessee  agrees,  at its sole cost and  expense to  incorporate  Service
Bulletins  into the  Aircraft  which  Lessee  has  accomplished  on 30% of
it's Aircraft  fleet  during  the Term of this  Lease.  It is not the  intent
of the parties that the Aircraft shall be  discriminated  from the rest of
the Lessee's Aircraft fleet in Service Bulletin  compliance or other
maintenance,  provided, however,  the foregoing shall not be interpreted to
expand Lessee's  obligations beyond the express requirements of Section 10 and

                                      -23-

<PAGE>

Exhibit "F".

     9.08 CORROSION CONTROL.

     Lessee  shall carry out such work as may be required for the control of
corrosion, including without limitation,  periodic inspections by penetration
of fuel tanks,  periodic  inspection and clean-up  under  galleys,  forward
and aft cargo pit areas and  lavatories,  periodic  treatment of all mild
corrosion and correcting  of all moderate and severe or  exfoliation
corrosion in  accordance with the Maintenance Program.

     9.09 MODIFICATIONS.

     (a)  Lessee,  at its own  expense,  shall  make  such  alterations  and
modifications in and additions to the Airframe or any Engine or Propeller as
may be  required  to be made from time to time by  Applicable  Law  during
the Term regardless upon whom such  requirements  are, by their terms,
nominally imposed ("Required Modifications").

     (b)  Lessee shall not, without Lessor's prior written consent,  make any
major   modifications,   alterations  or  additions   (collectively,
"Optional Modifications") to the Aircraft,  other than Required
Modifications,  including, without limitation,  Optional  Modifications which
will result in changes to the Aircraft structure or performance,  or which
could adversely affect spare parts, interchangeability or irreplaceability.

     (c)  NOTWITHSTANDING  ANY OTHER  PROVISION  OF THIS LEASE,  NO OPTIONAL
MODIFICATION SHALL BE MADE WHICH HAS THE EFFECT OF DECREASING THE UTILITY,
VALUE OR  REMAINING   USEFUL  LIFE  OF  THE  AIRCRAFT  OR  ADVERSELY
AFFECTING   ITS AIRWORTHINESS OR USE FOR TRANSPORTING PASSENGERS OR CARGO IN
COMMERCIAL SERVICE.

     (d)  All Modifications  shall be accomplished at Lessee's expense except
for  modifications  in (1) below  which  Lessee  will make at  Lessor's
expense provided the rent is adjusted per Exhibit B and only by a Person
approved by the FAA.  Lessee shall provide  copies of all drawings and data
to be used by Lessee in accomplishing such Optional  Modifications for
Lessor's consent prior to such work.

          (1)  Lessor  will   reimburse   Lessee  for  Optional
               Modifications accomplished in accordance with Section
               9.09(b)(c) and (d) above in an amount not to exceed the
               Contribution  Amount.  Basic Rent will be increased for such
               modifications per Exhibit B, 4(a) of the Lease.

     9.10 POSSESSION; SUBLEASING; EQUIPMENT SUBSTITUTION.

     Lessee  shall not  sublease  the  Aircraft or  otherwise  in any manner
deliver,  relinquish  or transfer  possession  of the  Airframe or any Engine
or Propeller  to any  Person or  install  any  Engine,  or permit  any Engine
to be installed, on any airframe other

                                      -24-

<PAGE>

than the  Airframe  or install  any  Propeller,  or permit any  Propeller  to
be installed,  on any engine  other than an Engine or permit any other Person
to do any of the  foregoing  during the Term,  without  the prior  written
consent of Lessor,  PROVIDED,  HOWEVER,  that so long  as  Lessee  shall
comply  with  the provisions of Section 12 hereof,  Lessee,  without the
prior written  consent of Lessor (except as specified below) may:

     (a)  deliver possession of the Airframe or an Engine or Propeller to the
Manufacturer  thereof for testing or other similar  purposes or to any
qualified organization for service, repair,  maintenance or overhaul work on
such Airframe or such Engine or Propeller or for alterations or
modifications in or additions to such  Airframe  or such  Engine  or
Propeller,  to the  extent  required  or permitted by the terms of this Lease;

     (b)  with the prior  consent of Lessor,  subject any Engine or Propeller
to normal interchange or pooling  agreements or arrangements,  entered into
with any  Certificated  Air Carrier  consented to in advance of such
arrangement  in writing by the Lessor (a  "Permitted  Air  Carrier"),
provided that (i) no such agreement or arrangement  contemplates or requires
the transfer of title to such Engine or Propeller; and (ii) if Lessor's title
to any Engine or Propeller shall be divested under any such agreement or
arrangement,  such divestiture  shall be deemed to be Fan Event of Loss with
respect  to such  Engine or  Propeller  and Lessee  shall  comply  with
Section  13 hereof  in  respect  of such  Engine or Propeller;

     (c)  install an Engine on an airframe  owned by Lessee free and clear of
all Liens,  except (i) Permitted  Liens,  and (ii) 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 (iii) those created by the rights of other  Permitted  Air  Carriers
under  normal  interchange  or pooling  agreements or arrangements  customary
in the airline  industry which do not  contemplate,  permit  or  require  the
transfer  of title to such  engines installed thereon; or

     (d)  install  an  Engine  on an  airframe  leased to Lessee or owned by
Lessee subject to a conditional sale or other security  agreement,  PROVIDED
that (i) such  airframe  is free and clear of all Liens  except (A) the
rights of the parties to the lease, conditional sale or other security
agreement and (B) Liens of the type permitted by clause (c) above, and (ii)
such lease, conditional sale or other  security  agreement  effectively
provides  that such Engine shall not become  subject to the Lien of such
lease,  conditional  sale or other  security agreement,  notwithstanding  the
installation  thereof on such airframe in which particular connection,  a
provision contained in such lease, conditional sale or other  security
agreement  substantially  to the  effect of clause  (e) of this Section 9.10
shall be deemed to so effectively provide;

PROVIDED that the rights of a transferee who receives  possession by reason
of a transfer  permitted by this Section 9.10 shall be subject and
subordinate to all the terms of this Lease and the rights of the Lessor
hereunder to repossess such property and any such arrangement  shall
expressly state it is so subordinate or contain a provision  substantially
to the effect of clause (e) of this  Section 9.10, and Lessee shall remain

                                      -25-

<PAGE>

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.

     (e)  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 propeller (other than a Propeller) owned by the Lessee, any lessor of any
engine (other  than an Engine) or  propeller  (other  than a  Propeller)
leased to the Lessee  and any  conditional  vendor of any  engine  (other
than an  Engine) or propeller  (other  than a  Propeller)  purchased  by the
Lessee  subject to a conditional sale agreement or any other security
agreement, that no right, title to or interest in any such engine or
propeller 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  propeller  as a result of its
installation on the Airframe.

     9.11 REPAIRS.

     Any repair to the Aircraft accomplished prior to return of the Aircraft
to Lessor pursuant to Section 10 hereof shall be accomplished  where
applicable pursuant to the appropriate  Manufacturer's  repair manual
instructions (if any) and the Maintenance  Program.  All such repairs,
inclusive of corrosion control repairs,  are to be documented and mapped
identifying the location,  dimensions and repair procedure.

     9.12 AIRCRAFT RECORDS.

     All  records  maintained  by Lessee  prior to  return  of the  Aircraft
pursuant to Section 10 hereof  relating to the  location,  service,
inspection, maintenance,  modification,  repair and  overhaul of the
Airframe,  Engines and Parts installed therein,  will at all times be
maintained in accordance with all applicable requirements of the Aeronautical
Authority and any other governmental authority having jurisdiction with
respect thereto and shall be kept current, up to date, in English, accurate
and complete.

     9.13 WARRANTIES.

Lessor  agrees that  during the Term,  so long as no Default or Event of
Default has  occurred  and is  continuing,  Lessee  shall have the right to
enforce  all manufacturer  and vendor  warranties  with  respect to the
Aircraft,  PROVIDED, HOWEVER,  that (i) all such rights shall  immediately
revert to the Lessor upon expiration of the Term or upon the  occurrence  and
continuance of a Default or Event of Default,  (ii) Lessee shall not attempt
to enforce any such  warranties by legal  proceedings  without Lessors
approval and (iii) Lessee shall indemnify Lessor and each other  Indemnitee
against any  Impositions  with respect to any warranties or  enforcement  of
warranties  pursuant to Section 16.01 hereof and (iv) Lessor makes no
warranties or representations  whatever to Lessee as to the existence or
enforceability of any such warranties.  Lessee agrees that it shall maintain
the Aircraft in such a manner so as not to knowingly void any available
warranties.

                                      -26-

<PAGE>

     9.14 AIRPORT CHARGES.

     Lessee shall as the same become due, pay and discharge,  or procure the
payment and discharge of any and all charges, fees, taxes, imposts and levies
of whatsoever  nature  which are incurred by Lessee or Lessee's  sublessees
in the course  of the  operation  of the  Aircraft  under  this  Lease or of
any  other aircraft  under the  management  or  control of Lessee or
Lessee's  sublessees, including  without  limitation  all  charges  of
airport  authorities  (whether relating to landing fees,  parking fees,
handling  charges or otherwise),  all charges  imposed by air  navigation
authorities  whatsoever  and all charges of aviation  authorities  whether
relating to navigation or otherwise and will upon written  request  therefore
by Lessor  supply  evidence  of payment of any such charges.

     9.15 RIGHT TO INSPECT.

     The  Lessor  or its  designee(s)  shall  have  the  right,  but not the
obligation,  after  ten  (10)  Business  Days  written  notice  to  the
Lessee, periodically  to inspect  the  Aircraft,  Technical  Records  and
Manuals,  for condition  and  compliance  with this  Lease.  Except as
otherwise  provided in Section 6.04, such inspections shall be at the cost of
the Lessor.

     9.16 REPORTING.

     Lessee  agrees  to  provide  to the  Lessor  no  less  frequently  than
quarterly such  operational data as may be requested by the Lessor to
maintain a record of the  Aircraft  maintenance  and parts  status  including
the Engines, Propellers and landing gear.

     SECTION 10. RETURN OF AIRCRAFT.

     10.01 RETURN.

     At the end of the Term or upon  termination  of this Lease  pursuant to
Section 15 hereof,  Lessee,  at Lessee's  expense,  shall return the Aircraft
to Lessor at an airport located in the western  continental  United States
selected by Lessor (the "Return Location").  The Aircraft at the time of its
return shall be free and clear of all Liens other than Lessor's  Liens. At
the time of return of the Aircraft to Lessor, Lessor shall execute a return
acceptance  certificate (the "Return Acceptance Certificate") in the form
attached hereto as Exhibit E.

     10.02 CONDITION OF AIRCRAFT.

     The  Aircraft  at the time of its  return  to  Lessor  shall  have been
maintained  and repaired in  accordance  with the  Maintenance  Program and
this Lease, and shall meet the requirements set forth in Exhibit F hereof.

     10.03 BOROSCOPE INSPECTION.

                                      -27-

<PAGE>

     A boroscope inspection shall be performed by Lessor at Lessee's expense
at the time of the Aircraft's return to Lessor and Lessee shall provide
evidence satisfactory  to Lessor  reflecting  the correction of any
discrepancies  found during such  inspection and  determined not to have been
in compliance  with the Maintenance Program.

     10.04 HISTORICAL RECORDS: TREND MONITORING DATA.

     If the Engine  historical and maintenance  records or trend  monitoring
data indicate a rate of acceleration in performance  deterioration of any
Engine which is outside of the parameters  permitted by the Pratt & Whitney
maintenance manual,  Lessee shall,  prior to the Aircraft's  return,  correct
or cause to be corrected  such  conditions  which are  determined to have
caused such increased deterioration, such correction to be made in compliance
with the Pratt & Whitney maintenance manual.

     10.05 INSPECTION.

     (a)  During the last twelve (12) months of the Term,  Lessor,  from time
to time,  may wish to make the Aircraft  available for  inspection to
designated representatives  or technical  teams  evaluating  the Aircraft for
use after the Term.  Lessor  agrees to give  Lessee not less than 10
Business  Days'  advance written  notice of such  inspection  and Lessee
agrees to cooperate  fully with Lessor's  requests in making the Aircraft and
the Manuals and Technical  Records available  to such  authorized  technical
teams  and  Lessor  agrees  that such requests  will be  reasonable  and
will be  coordinated  with  Lessee  so as to minimize  disturbance  to
Lessee's  operations  and  its  personnel,  provided, however,  the parties
agree that such  inspections  shall be  scheduled in such manner that
scheduled flights shall not be delayed or cancelled.

     (b)  The Aircraft  (including  the Manuals and  Technical  Records to be
returned  therewith as set forth in this Section 10 and Exhibit F) shall be
made available  to Lessor or its  designee  for  ground  inspection  by
Lessor or its designee  at Lessee's  facilities  or where the heavy
maintenance  check or its equivalent,  if required  by Exhibit F hereto,  is
being  performed,  while such heavy maintenance  check or its  equivalent
is being  performed.  Lessee shall remove the Aircraft from scheduled service
and open the areas of the Aircraft as required by the Maintenance  Program
for such heavy maintenance check, and shall allow Lessor or its designee to
accomplish  its inspection in order to determine that the  Aircraft
(including  the  Manuals  and  Technical  Records) is in the condition
required by the  provisions  of this Section 10 and Exhibit F hereto. Lessee
shall promptly correct any discrepancies  from the condition  required by the
provisions of this Section 10 and Exhibit F hereto which are observed during
such inspection.

     10.06 OPERATIONAL GROUND CHECK.

     Promptly  after  completion of any  corrections  required under Section
10.05(b) above,  Lessee shall conduct an operational  ground check in
accordance with  the  requirements  of the  Maintenance  Program  and shall
correct  any discrepancies

                                      -28-

<PAGE>

disclosed by such check.

     10.07 OPERATIONAL CHECK FLIGHT.

     Promptly  after  completion of all  corrections  required under Section
10.05 and 10.06 above,  the Aircraft  shall be check flown by Lessee at
Lessee's risk and expense,  using qualified flight  personnel,  for not more
than two (2) hours on a noncommercial  flight, for the purpose of
demonstrating to Lessor the satisfactory  operation  of the Aircraft and its
equipment  and systems.  If no major  discrepancy  is found,  the Aircraft
may proceed to the Return  Location. Lessor's  representatives may
participate in such flight as observers.  Lessee's pilot shall be in command
of the  Aircraft.  Such flight shall be flown using de Havilland's
operational check flight  procedures  sufficient to demonstrate the proper
operation of all systems for normal  passenger  use. Upon  completion of such
operational  check  flight,  the  representatives  of  Lessee  and  Lessor
participating  in such flight shall agree in writing upon any  discrepancies
in such  Aircraft  required to be  corrected  by Lessee in order to comply
with the provisions  of this  Section 10 and Exhibit F hereto and Lessee
shall  promptly correct or cause to be corrected at Lessee's expense any such
discrepancies.  If any of the  discrepancies  referred  to in  Sections
10.05  and  10.06 or 10.07 continue to persist,  Lessor may (but shall not be
obligated to) accept delivery of the  Aircraft  and apply the  procedure  set
forth in  Section  10.9 for such discrepancies.

     10.08 ACCEPTANCE.

     Unless otherwise  mutually agreed,  the operational  check flight shall
take place at the location in the United States where the final  maintenance
to put  the  Aircraft  into  the  required  return  condition  is  being
performed ("Maintenance  Location").  Upon completion of the  operational
check flight or after Lessee has  corrected  the  discrepancies  as required
to comply with this Section,  the Aircraft shall be technically accepted at
the Maintenance Location and be  ferried by Lessee at its risk and  expense,
including  accumulation  of Basic Rent, to the Return  Location.  To the
extent  possible,  the  operational check  flight will be  combined  with the
ferry  flight to the Return  Location. Lessee  shall  remedy  or  correct
any  defects  or  deficiencies  that  may be discovered during such flight.

     10.09 DEFERRED DISCREPANCY CORRECTION.

     Any  discrepancies  found  during  the ground  inspection,  operational
ground check and operational check flight set forth in Sections 10.05, 10.06
and 10.07 above,  which were not  corrected by Lessee prior to return of
Aircraft to Lessor,  may be corrected by Lessor or its designee after return
of the Aircraft and Lessee shall reimburse  Lessor for all reasonable  direct
costs and expenses paid by Lessor or its designee for accomplishing  such
discrepancy  corrections. Lessee shall pay Lessor or its designee for all
such costs and expenses incurred within 10 days of the date of receipt of an
invoice therefor.

                                      -29-

<PAGE>

     10.10 FLIGHT COST.

     All  flights  pursuant  to  Section  10.07 and  10.08  shall be made at
Lessee's  expense  and  Lessee  shall  pay  for any  and  all  reasonable
costs associated with such flights including, but not limited to, costs for
crew, oil, airport fees, insurance, takeoff/landing fees, airway
communication fees, ground handling fees and customs duties, if any. All
obligations and risks with respect to the Aircraft  under this Lease or
otherwise  shall be Lessor's from and after technical  acceptance  by  Lessor
under  Section  10.08,  except  as  otherwise expressly provided herein.

     10.11 INDEMNIFICATION.

     Section 16 hereof shall apply to all activity  pursuant to this Section
10 and shall  cover  Lessor's  representatives  with regard to the return of
the Aircraft.

     10.12 INSURANCE.

     To the extent not covered by the existing insurance certificates,  with
respect to Lessee's aviation liability insurance,  Lessee shall (i) cause
Lessor to be named as an additional insured under Lessee's aviation liability
insurance policies to the extent of Lessee's  undertaking  set forth in
Section 10.11 and (ii) shall  furnish to Lessor not later than 7 Business
Days prior to the start of  Lessor's  ground  inspection  of the  Aircraft
certificates  from  Lessee's aviation  liability  insurance  carriers in a
form  reasonably  satisfactory  to Lessor stating the limits and terms of
Lessee's  liability  insurance  coverage, and showing that Lessor has been
named as an additional insured and specifically referring to Section 10.11.
With  respect to Lessee's  hull  insurance,  Lessee shall (i)  cause
Lessee's  hull and war risk  insurance  carriers  to waive all rights of
subrogation  against  Lessor  and  Lender to the  extent of  Lessee's
undertaking  set forth in Section 10.11 and (ii) shall  furnish to Lessor,
not later than 7 Business Days prior to the start of Lessor's  ground
inspection on the Aircraft,  certificates from Lessee's hull and war risk
insurance  carriers, in a form acceptable to Lessor (such approval not to be
unreasonably  withheld), stating  that such  carriers  have so waived all
rights of  subrogation  against Lessor and specifically referring to Section
10.11.

     10.13 MANUALS AND TECHNICAL RECORDS.

     (a)  Lessee shall return to Lessor, at the time the Aircraft is returned
to Lessor,  all of the Manuals and Technical  Records and other data
previously provided to Lessee at delivery as described in Exhibit D hereto,
as updated and maintained  by Lessee  through  the date of return of the
Aircraft  subject  to retention time limits of the Aeronautical Authority.
In addition,  Lessee shall also provide Lessor at the time the Aircraft is
returned to Lessor, all records, documents,  manuals,  authorizations,
drawings  and data in English  which were developed or caused to be
developed  by Lessee or required by the  Aeronautical Authority,  updated and
maintained  by Lessee for the  Aircraft and through the date of return of
the Aircraft in an accurate and correct condition.

                                      -30-

<PAGE>

     (b)  All  Manuals  and  Technical  Records  which have been  supplied by
Lessor to Lessee shall be returned in  accordance  with United States FAA
F.A.R. 91.417 and 121.380.

     10.14 SERVICE BULLETIN KITS.

     All  vendors'  and  manufacturers'  Service  Bulletin  kits ordered and
received by Lessee at the time of  redelivery  of the  Aircraft and which
Lessee obtained free of charge from such vendors or manufacturers  for the
Aircraft but not  installed  therein  shall be  returned  with the  Aircraft,
as part of the Aircraft at the time of return,  free of charge to Lessor and
shall be loaded by Lessee on board the Aircraft as cargo.

     10.15 LESSEE'S SPECIAL EXTERIOR MARKING.

     At the time of the  return  of the  Aircraft,  Lessee  shall  paint the
Aircraft solid white. In the event that,  notwithstanding Lessee's obligation
to do so,  Lessee does not paint the  Aircraft  solid  white,  Lessor shall
have no obligation to remove any markings prior to the sale, lease, or other
disposition of the Aircraft by Lessor after its return;  however,  if Lessor
elects to paint the Aircraft solid white,  Lessee shall pay Lessor's
reasonable direct costs and expenses  paid for such painting  within 10 days
of the date of Lessors  invoice therefor.

     10.16 OWNERSHIP.

     Any  documents,  equipment  and any  other  items  returned  to  Lessor
pursuant  to this  Section  10  which  are not  already  owned by  Lessor
shall thereupon become the property of Lessor.

     10.17 STORAGE UPON RETURN.

     Upon  request of Lessor  received  at least 30 days prior to the end of
the Term, Lessee will store the Aircraft at its expense in Honolulu,  Hawaii
for a period not exceeding 60 days.  Lessee shall at its expense maintain
liability and hull insurance with respect to the Aircraft  during such
storage period that meet  industry  standards  for a stored  aircraft  and
Lessor  shall be named an additional insured and loss payee under such
insurance.

     SECTION 11. TITLE; REGISTRATION; LIENS.

     11.01 Title.

     Lessee  acknowledges that during the Lease Term full legal title to the
Aircraft  shall remain vested in Lessor  notwithstanding  the possession and
use thereof by Lessee,  and Lessee  shall take all  actions,  subject to
Section 18, where applicable,  at its expense that Lessor may reasonably
require to evidence the interest of Lessor in the Aircraft or to protect such
interest  against the claims of any other Person (other than  claimants
under Lessor  Liens).  Lessee shall not  attempt to hold  itself out as
having any power to sell or dispose of the Aircraft or any Engine or
Propeller.

                                      -31-

<PAGE>

     11.02 REGISTRATION: FILINGS: REGISTRATION.

     (a)  The Aircraft  shall be  registered at the FAA in the name of Lessor
throughout  the Term and  Lessee  shall not do, and shall  further  use its
best endeavors  to ensure that no third party  (except  with regard to Lessor
Liens) does, any act or thing which might prejudice or cancel such
registration.

     (b)  Lessee  shall  take or cause to be  taken,  at  Lessee's  cost and
expense, such actions as are necessary or requested by Lessor and appropriate
to maintain,  so long as this Lease is in effect,  (i) registration of the
Aircraft at the FAA, in the name of the Lessor including,  without
limitation, the filing of all reports and applications and the payment of all
fees and (ii) maintaining the  ownership  interest  of  Lessor in the
Aircraft,  provided,  however,  the foregoing  shall not be deemed to impose
upon Lessee any obligation with respect to Lessor  Liens.  Lessee  shall take
such  actions at  Lessee's  expense as are necessary or  reasonably
requested by Lessor to maintain the  perfection of any security  interest
that may be claimed to be created by this  Lease,  including without
limitation, the recording,  filing,  re-recording,  and refiling of this
Lease,  any  other  Operative  Document,   any  financing  statements  or
other instruments.   Lessee  shall  take  no  action   adversely   affecting
the  due registration of the Aircraft with the FAA in the name of the Lessor.

     11.03 LIENS.

     Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with  respect to the Airframe or any Engine or
Propeller other than Permitted Liens. Lessee promptly, at its own expense,
shall take such action as may be  necessary  to duly  discharge  any Lien
other than a Permitted Lien if the same shall arise at any time and shall
indemnify Lessor with respect to any charge or cost incurred in connection
with such Lien.

     11.04 NOTICE OF OWNERSHIP.

     As soon as practicable  after the Delivery Date but in any event within
5  Business  Days of the  Delivery  Date,  Lessee  shall  affix in a
reasonably prominent position on the flight deck or cockpit,  and on each of
the Engines, a reasonably legible notice which shall be provided by Lessor,
reading as follows:

                       "WILLIS LEASE FINANCE CORPORATION,

                                Owner and Lessor,

                    Leased to ALOHA ISLANDAIR, INC., Lessee"

Once affixed as aforesaid,  such notice shall not be defaced, covered or
removed during the Term,  unless  the Lessor  instructs  Lessee by notice
hereunder  to change  such  notice.  Lessee  will not allow the name of any
person  other than Lessor or a lender  designated in writing by Lessor to be
placed on the Airframe or any Engine or Propeller

                                      -32-

<PAGE>

as a  designation  that  might be  interpreted  as a claim of  ownership  or
any security or other interest therein.

     SECTION 12. INSURANCE.

     On or before the  Delivery  Date and until the  Aircraft is returned to
Lessor in accordance  with Section 10 hereof,  Lessee,  at its cost and
expense, shall obtain, maintain and keep in full force and effect the
following insurance with respect to the Aircraft  (Lessor  recognizes  that
such  insurances may not cover the Manuals and Technical Records),  carried
with insurers and re-insurers of recognized  standing who normally
participate in aviation  insurances in the leading international insurance
markets:

     12.01 ALL-RISK INSURANCE.

     All-risk  hull,  ground  and flight  insurance  on the  Aircraft  (with
flight,  taxiing  and  ingestion  coverages)  in an  amount  not  less  than
the Stipulated  Loss Value.  Such hull  insurance  shall  cover  Engines or
engines, Propellers or propellers and Parts temporarily removed from the
Airframe pending installation of the same or similar Engines,  engines,
Propellers or propellers or Parts on the Airframe in an amount not less than
their replacement cost.

     12.02 WAR RISK INSURANCE.

     War risk and allied  perils  insurance on the Aircraft in an amount not
less than the Stipulated Loss Value covering the perils of:

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

     (b)  strikes, riots, civil commotions or labor disturbances;

     (c)  any act of  one  or more  persons,  whether  or not  agents  of a
sovereign  power,  for  political or terrorist  purposes and whether the loss
or damage therefrom is accidental or intentional;

     (d)  any malicious act or act of sabotage;

     (e)  confiscation,   nationalization,  seizure,  restraint,  detention,
appropriation,  requisition  of  title  or  use by or  under  the  order  of
any government  (whether  civil,  military or de facto) or public or local
authority other than the  government  or any public or local  authority  of
the country of registration; and

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

                                      -33-

<PAGE>

     12.03 LIABILITY INSURANCE.

     Public liability insurance for a combined single limit of not less than
the amount set forth in Exhibit B hereto for public liability  insurance,
which shall:

     (a)  include public liability  insurance,  passenger liability insurance
and property damage liability insurance; and

     (b)  provide  that all the  provisions  thereof,  except  the limits of
liability,  shall operate in the same manner as if there were a separate
policy covering each such insured.

     12.04 ELECTRONIC DATE RECOGNITION INSURANCE.

     Satisfactory coverage against the risks associated with electronic date
recognition  problems, in the form of Date Recognition Limited Coverage
Clauses AVN2000 and AVN2001, or equivalent, substitute or replacement in
respect thereof in  accordance  with then  current  market  practice  (and
Lessee shall make and comply with the warranties,  representations,  and
undertakings  required to be given in connection with obtaining/maintaining
such clauses).

     12.05 DEDUCTIBLES AND SELF INSURANCE.

     Any insurance  carried in accordance with this Section 12 may contain a
provision  for a  deductible  or self  insurance  in an amount not to exceed
the amount set out in Exhibit B hereto as the permitted insurance deductible.

     12.06 ADDITIONAL REQUIREMENTS: LOSS PAYMENT.

     The  insurance  required  under this Section 12 shall be provided on an
agreed value basis (as to the Aircraft as a whole,  but not as to its
individual parts) and the policies shall, where applicable:

     (a)  name Lessor and each other Insured Party as additional  insureds as
its interests may appear;

     (b)  provide that the insurance  shall not be  invalidated by any action
or inaction by Lessee or any other  Person and insure the interest of Lessor
and each other Insured Party  regardless of any breach or violation by Lessee
or any other Insured Party of any warranty,  declaration or condition
contained in such policies;

     (c)  provide  that the  insurers  shall  waive any right of  subrogation
against Lessor and any other Insured Party;

     (d)  provide that in the event of separate  insurance  being arranged to
cover the all-risk hull insurance and the war risk and allied perils
insurance, the  underwriters  subscribing to such insurance  agree to a 50/50
claim funding arrangement in the event of any dispute as to which insurance
is applicable;

                                      -34-

<PAGE>

     (e)  be of the  type  usually  carried  by  major  airlines  owning  and
operating  similar aircraft,  engines and propellers,  and covering risks of
the kind customarily insured against by such airlines;

     (f)  be primary and without right of  contribution  from other insurance
which may be available to Lessor and any other Insured Party;

     (g)  provide  that  Lessor and each other  Insured  Party shall have no
liability for premiums,  commissions,  calls or assessments with respect to
such policies; and

     (h)  subject to Section  12.09  hereof,  name  Lessor (or any lender or
other  assignee  designated  by Lessor) as loss payees,  as their  interests
may appear, and provide that losses will be adjusted with lessee and payable
to loss payees, as their interests may appear, to the extent of coverage
required herein by Section 12.

     (i)  contain a "cut through" clause satisfactory to Lessor.

     12.07 NO SET-OFF.

     Each  insurance  policy to be  maintained  under this  Section 12 shall
contain a waiver of any right of the insurers to any set-off or  counterclaim
or any other  deduction  against  Lessee,  and Lessor and each other  Insured
Party other than with  respect to unpaid  premiums  then due and owing with
respect to the Aircraft (and not any other aircraft).

     12.08 NOTICE OF MATERIAL ALTERATION OR CANCELLATION.

     Each  insurance  policy to be  maintained  under this  Section 12 shall
provide that no  cancellation or lapse of coverage for nonpayment of premium
or otherwise,  and no substantial change of coverage which adversely affects
Lessor or Lender  shall be  effective as to Lessor or Lender until not less
than thirty (30) days (seven (7) days in the case of war risk  policies)
after  issuance to Lessor or Lender (as the case may be) of written  notice
from the  insurers  of such cancellation, lapse or change.

     12.09 APPLICATION OF CERTAIN INSURANCE PROCEEDS.

     As among Lessor and Lessee,  any payments  received  under  policies of
insurance  required to be  maintained  by Lessee  pursuant to Sections  12.01
or 12.02, shall be applied as follows:

     (a)  if such  payments  are  received  with  respect  to loss or  damage
(including  an Event  of Loss  with  respect  to an  Engine  or  Propeller)
not constituting an Event of Loss with respect to the Airframe,  such
payments shall be paid over to Lessee or at Lessee's  election,  to the
repair facility jointly with Lessee,  upon  performance by Lessee of the
Lessee's repair  obligations or (if applicable) replacement obligations

                                      -35-

<PAGE>

under this Lease pursuant to Section 13.02 hereof to the reasonable
satisfaction of Lessor and,  where  appropriate,  Lessor  shall issue any
necessary  payment orders with respect to such payments;

     (b)  if such payments are received with respect to an Event of Loss with
respect to the Aircraft, so much of such payments as shall not exceed the
amount required to be paid by Lessee  pursuant to Section 13.01 hereof shall
be applied by Lessor in reduction of Lessee's  obligation to pay such amount
if not already paid by  Lessee,  and to  reimburse  Lessee if it shall have
paid all or part of such amount; and the balance,  if any, of such payments
shall be paid over to or retained by Lessee.

     12.10 INSURANCE FOR OWN ACCOUNT.

     Nothing in this Section 12 shall prohibit  Lessee,  Lessor or any other
Insured Party (in that order of priority should insurance  capacity in excess
of the  insurances  required in this  Section 12 be limited as to
availability  or amount),  at its cost,  from  obtaining  insurance  for its
own  account and any proceeds payable thereunder shall be payable as provided
in the insurance policy relating  thereto,  provided that no such  insurance
may be obtained which would limit or otherwise  adversely  affect the
coverage or payment of any  insurance required to be obtained or maintained
pursuant to this Section 12.

     12.11 CERTIFICATES AND REPORTS.

     Lessee  shall  furnish to Lessor and Lender not later than the Delivery
Date  certificates  of insurance  satisfactory to Lessor and Lender and a
report signed by a firm of independent  insurance  brokers  satisfactory  to
Lessor and Lender,  such report  stating the opinion of such firm that the
insurance  then carried and  maintained on the Aircraft  complies with the
terms of this Section 12. Lessee will prior to the renewal dates of the
insurance  policies  required pursuant to this Section 12 (but in any event
prior to the  cancellation,  lapse or expiration of such insurance policies)
provide additional  certificates and a report to Lessor and Lender meeting
the terms of the preceding sentence.  Lessee will cause such firm to advise
Lessor  and  Lender in writing  promptly  of any default in the payment of
any premium and of any other act or  omissions  on the part of  Lessee of
which  they have  knowledge  and which  would in such  firm's opinion
invalidate or render  unenforceable,  in whole or in any material part, any
insurance on the Aircraft. Lessee will also cause such firm to advise Lessor
and Lender in writing at least  thirty  (30) days (seven (7) days in the case
of war risk insurance)  prior to the  termination or  cancellation  of, or
material adverse  change in,  such  insurance  carried  and  maintained  on
the  Aircraft pursuant to this Section 12.

     SECTION 13. LOSS, DAMAGE OR REQUISITION.

     13.01 AN EVENT OF LOSS OF AIRFRAME.

     (a)  Upon  the  occurrence  of an Event  of Loss  with  respect  to the
Aircraft  during the Term,  Lessee shall give Lessor written  notice of
such Event of Loss

                                      -36-

<PAGE>

as soon as is  practicable  but in no event  later than ten (10)  Business
Days after such  occurrence.  Lessee shall  thereafter pay or cause to be
paid to the Lessor in  immediately  available  funds  upon the  earlier  of
(i)  receipt  of insurance  proceeds with respect to such Event of Loss or
(ii) 60 days following the  Event of Loss,  an  amount  equal to (A) the
Basic  Rent,  if any,  due and payable  pursuant  to the terms of Section
7.01 and  Exhibit B hereto due on or before such date of payment,  PLUS (B)
all unpaid  Supplemental Rent (other than Stipulated  Loss  Value)  due on or
before  such date of  payment,  PLUS (C) the Stipulated Loss Value for the
Aircraft determined as of the date of payment.

     (b)  In the event of a payment in full of the Stipulated  Loss Value for
the Aircraft and other Rent payable as provided in Section 13.01 (a) above,
(i) this Lease and the obligations of Lessee to pay Basic Rent and
Supplemental Rent shall  terminate;  and (ii) Lessor shall convey to Lessee
all of Lessors  right, title and interest,  AS-IS,  WHERE-IS WITHOUT
RECOURSE OR WARRANTY,  EXPRESS OR IMPLIED except for a warranty against
Lessor's Liens, in and to (1) the Airframe and Engines and  Propellers  and
(2) all claims for damage to the  Airframe  and Engines and Propellers,  if
any, against third persons arising from the Event of Loss (unless any
insurance carrier requires that such claims be assigned to it).

     13.02 ENGINE OR PROPELLER LOSS.

     Upon the occurrence during the Term of an Event of Loss with respect to
an Engine or  Propeller  not then  installed on the Airframe or an Event of
Loss with respect to an Engine or Propeller  installed on the Airframe not
involving an Event of Loss with  respect to the  Airframe,  Lessee  shall
give  Lessor and Lender written  notice  thereof as soon as is practicable
but in no event later than ten (10)  Business Days after such  occurrence
and shall within 45 days of the  occurrence  of such  Event of Loss and on at
least 5 days'  prior  written notice  to  Lessor  substitute  a  Replacement
Engine  for  such  Engine  or  a Replacement  Propeller for such Propeller.
In such event,  immediately upon the effectiveness  of such  substitution  on
the date set forth in such  notice  and without  further  act,  (i)  title
to the  Replacement  Engine  or  Replacement Propeller shall thereupon vest
in Lessor (subject only to Permitted Liens), (ii) title to the replaced
Engine or Propeller  shall  thereupon vest in Lessee,  in AS-IS,  WHERE-IS
CONDITION,  free and clear of all rights of Lessor and free and clear of
Lessor Liens (other than Lessor Liens  arising out of events  occurring after
the  transfer  which are not  attributable  to  actions  of the  Lessor or
omissions  by the Lessor of actions  which the  Lessor is legally  obligated
to take) and shall no longer be deemed an Engine or Propeller hereunder,  and
(iii) such  Replacement  Engine or Replacement  Propeller shall become
subject to this Lease and be deemed part of the  Aircraft  for all  purposes
hereof to the same extent as the Engine or  Propeller  originally  installed
on or attached to the Airframe.  Upon such  substitution,  Lessee shall
execute and deliver to Lessor such bills of sale, opinions and other
documents and instruments as Lessor shall reasonably  request by notice
hereunder  to evidence the interest of Lessor and conveyance to Lessor of
good and marketable title to such Replacement  Engine or Replacement
Propeller.  Upon such  substitution,  (x) Lessor shall  execute and deliver
to Lessee such

                                      -37-

<PAGE>

bills of sale and other documents and instruments, prepared at Lessee's
expense, as Lessee  shall  reasonably  request to evidence  such  transfer
and vesting of title in and to the replaced  Engine or  Propeller in Lessee,
free and clear of all rights of Lessor and (y) Lessee  shall  receive all
insurance  proceeds and proceeds in respect of any Event of Loss causing such
replacement.  No Event of Loss with respect to an Engine or Propeller under
the circumstances contemplated by this Section 13.02 shall result in any
reduction of Lessee's  obligations  to pay Rent  hereunder.  Lessee  agrees
that it shall at all times  during the Term maintain or cause to be
maintained one (1) Engine,  or other aircraft engine and one (1) Propeller or
other aircraft  propeller suitable and available for use on the Airframe
and/or the airframe included with the Other Aircraft.

     13.03 PAYMENTS FROM  GOVERNMENTAL  AUTHORITIES FOR REQUISITION OF TITLE
           OR USE.

     (a)  Any  payments on account of an Event of Loss (other than  insurance
proceeds or other  payments  the  application  of which are provided for in
this Section 13, or elsewhere in this Lease, as the case may be) received at
any time by Lessor or by Lessee from any  governmental  authority or other
Person will be applied as follows:

          (i)  if such payments are received with respect to an Engine or
     Propeller,  such  payments  shall be paid over to, or retained  by, the
     Lessor,   and  upon   completion   of  (or,  if  requested  by  Lessee,
     simultaneously  with) Lessee's  replacement  obligation,  shall be paid
     over to, or retained by, Lessee; and

          (ii) if  such  payments  are  received  with  respect  to the
     Aircraft,  (A) so  much  of such  payments  as  shall  not  exceed  the
     Stipulated  Loss  Value and any  other  amount  required  to be paid by
     Lessee  pursuant to Section 9.01 hereof,  shall be applied in reduction
     of Lessee's  obligation  to pay such  Stipulated,  Loss Value and other
     amounts,  to the extent not already paid by Lessee,  and, to the extent
     already paid by Lessee  shall be applied to  reimburse  Lessee for such
     payment,  (B) the balance, if any, of such payment remaining thereafter
     shall be retained by Lessor; and

     (b)  In the event of a requisition for use by any government, so long as
it does not  constitute  an  Event of Loss of the  Airframe  and the  Engine
or engines or Propellers or propellers  installed  thereon during the Term,
Lessee shall promptly notify Lessor of such  requisition and all Lessee's
obligations under this Lease shall  continue to the same extent as if such
requisition  had not  occurred.  Any payments  received by Lessor or Lessee
from such  government with respect to such requisition shall be paid over to
or retained by, Lessee.

     13.04 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.

     Any amount  referred  to in  Section  13 or Section 12 hereof  which is
payable  to Lessee  shall not be paid to Lessee,  or, if it has been
previously paid directly

                                      -38-

<PAGE>

to Lessee,  shall not be  retained  by Lessee if at the time of such  payment
an Event of Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor as security  for the  obligations  of Lessee under
this Lease and/or  applied to any unpaid Rent hereunder then due, and at such
time as there shall not be continuing any such Event of Default,  such
remaining  amount shall be paid over to Lessee.

     SECTION 14. EVENT OF DEFAULT

     Each of the following events shall be an Event of Default:

     14.01 FAILURE TO MAKE PAYMENTS.

     If Lessee or Guarantor shall fail to pay in full in the manner provided
in, and at the place  required by the terms of,  Section 7 and Exhibit B
hereof, any  payment  of Rent  when due and such  failure  shall  continue
for five (5) Business Days.

     14.02 FAILURE TO OBTAIN OR MAINTAIN INSURANCE.

     If Lessee  fails to obtain or maintain  any  insurance  pursuant to the
provisions  of  Section  12 of this  Lease or  operates  or  locates  or
permits operation or location of the Aircraft in violation of Section 9.02
hereof.

     14.03 FAILURE TO PERFORM OTHER OBLIGATIONS.

     If Lessee or  Guarantor  fails to duly  observe or  perform  any of its
other  obligations or agreements  under any Operative  Document and such
failure shall not have been  remedied  within a period of ten (10)  Business
Days after delivery  of  written  notice  to  Lessee  or  Guarantor,  as the
case  may be, specifying  the same from Lessor  unless  such  failure is
curable and Lessee or Guarantor,  as the case may be,  shall  after the
delivery of such  notice,  be diligently  proceeding  to correct  such
failure and shall in fact correct such failure within thirty (30) days after
the delivery of such notice.

     14.04 REPRESENTATIONS AND WARRANTIES UNTRUE.

     If any  representation  or  warranty  made by Lessee  in any  Operative
Document or in any  document  or  certificate  furnished  to Lessor or Lender
in connection  therewith shall be untrue,  inaccurate or incomplete in any
material respect.

     14.05 INSOLVENCY OR BANKRUPTCY.

     (a)  If Lessee or Guarantor  shall become  insolvent or shall  generally
not pay its debts as they mature or acknowledges that it cannot pay its debts
as they  mature or Lessee or  Guarantor  shall  apply  for,  shall  consent
to, or acquiesce in the appointment of a trustee, custodian,  liquidator or
receiver of Lessee or Guarantor  or its  property;  or, in the absence of
such  application, consent or acquiescence,  a trustee, custodian,
liquidator or receiver shall be appointed for Lessee or Guarantor by a court
of competent  jurisdiction or for a material  part  of  its  property;  or
any  bankruptcy,   reorganization,  debt arrangement or other proceedings
under any bankruptcy or

                                      -39-

<PAGE>

insolvency law shall be instituted by or against Lessee or Guarantor.

     (b)  If  any  bankruptcy,  reorgarization,  dissolution  or  liquidation
proceeding shall be instituted (i) by Lessee or Guarantor or (ii) against
Lessee or  Guarantor  and not be  vacated  within  60 days  of the
initiation  of such preceding.

     14.06 LOSS OF REGISTRATION OR PROTECTION.

     If Lessee  fails to comply with its  obligations  under  Section  11.02
hereof.

     14.07 LOSS OF LICENSE.

     If Lessee  shall fail to remain a  Certificated  Air  Carrier or Lessee
shall suspend all or substantially all of its airline operations or Lessee
shall fail to retain a valid Air Operator's Certificate.

     14.08 OTHER LEASE.

     If an "Event of  Default"  (as defined  therein)  shall occur under the
Other Lease or any other lease between the Lessor and the Lessee.

     14.09 FINAL JUDGMENT.

     Final  judgment  for the  payment of money in I excess of  $500,000  or
final  judgments for the payment of money in excess of $500,000 in the
aggregate shall be rendered against Lessee or Guarantor unless such
judgment(s) shall have been stayed,  insured against or adequate reserves for
the payment thereof shall have been set aside in accordance with generally
accepted accounting principles.

     14.10 OTHER DEFAULT.

     Any event of  default  shall  have been  declared  under any  agreement
relating to  Lessee's  or  Guarantor's  debt or lease  obligations  in an
amount exceeding $500,000 individually or in the aggregate (and determined,
in the case of lease obligations, by the present value of the remaining lease
payments).

     14.11 CONTEST.

     The existence,  validity or  enforceability of the rights of the Lessor
under the Lease are contested by Lessee.

     14.12 FAILURE TO MAINTAIN LETTER OF CREDIT.

     If Lessee  fails to deliver to Lessor and keep in full force and effect
an acceptable Letter of Credit at the times and in the form and amounts
required under Exhibit B hereto.

                                      -40-

<PAGE>

         14.13 FAILURE TO MAINTAIN THE GUARANTY.

         If, for any reason, the Guaranty ceases to be in full force and effect.

         SECTION 15. REMEDIES.

         Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor, at its option,
may declare this Lease to be in default;  and at any time  thereafter so long
as Lessee shall not have remedied all outstanding Events of Default, Lessor
may do, and Lessee shall comply with, one or more of the following with
respect to all or any part of the Airframe and the Engines and Propellers,
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) Cause  Lessee,  upon  notice  hereunder  to Lessee by Lessor and
at Lessee's expense, to, and Lessee shall,  promptly return all or such part
of the Airframe  or the  Engines or  Propellers  as Lessor may demand to
Lessor at such location in the United  States as selected by Lessor in the
manner and condition required by, and otherwise in accordance  with all of
the provisions of, Section 10 hereof;  or Lessor,  at its  option,  may enter
upon the  premises  where the Airframe  or any or all  Engines or
Propellers  are  located or believed to be located and take immediate
possession of and remove such Airframe or Engines or Propellers  without  the
necessity  for first  instituting  proceedings,  or by summary proceedings
or otherwise,  in which connection,  to the extent permitted by Applicable
law, Lessee waives and agrees to waive any requirement that Lessor post any
bond or other  security in connection  with any such  proceedings,  and
Lessee shall comply therewith,  all without liability to Lessor for or by
reason of such entry or taking  possession,  whether for the  restoration  or
damage to property caused by such taking or otherwise;

         (b) Sell or otherwise dispose of any or all of the Aircraft,  at
public or private sale and with or without notice to Lessee or advertisement,
as Lessor may  determine or hold,  use,  operate,  lease to others or keep
idle all or any part  of the  Airframe  or any  Engine  or  Propeller  as
Lessor,  in its  sole discretion,  may  determine,  in any such case  free
and clear of any  rights of Lessee except as  hereinafter  set forth in this
Section 15 and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with  respect  thereto  and the
proceeds  of any such sale  shall be applied by Lessor to  reduce  Lessee's
obligations  under  15(d)  below or  otherwise  due hereunder;

         (c) Whether or not Lessor shall have exercised,  or shall thereafter
at any time exercise,  any of its rights under paragraph (a) or paragraph (b)
above with  respect  to all or any part of the  Aircraft,  (i) if  Lessor
shall  have succeeded  in  repossessing  the  Aircraft  as a result of the
exercise of such rights within thirty (30) Business Days following  such
declaration of default, Lessor shall have the right to recover from Lessee
any amounts which may be then due and unpaid or which may become due for the
use of the  Aircraft  (including, without limitation, any Basic Rent and

                                      -41-

<PAGE>

other  obligations  accruing  hereunder  after the date of the occurrence of
the Event of Default  through the date the Lessor is revested with possession
of the Aircraft  as a result of the  exercise of such  rights) and also to
immediately recover  from  Lessee any  damages,  costs and  expenses,
including  reasonable Attorney's  fees which Lessor shall have sustained by
reason of such Event(s) of Default or any other breach by Lessee of its
obligations  hereunder;  or (ii) if Lessor shall not have succeeded in
repossessing  the Aircraft as a result of the exercise  of such  rights
within  thirty  (30)  Business  Days  following  such declaration of default,
Lessor, by written notice to Lessee specifying a payment date not  earlier
than ten (10) days from the date of such  notice,  may demand that the Lessee
pay to Lessor,  and Lessee shall pay Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent due for periods  commencing on or after the
payment date  specified in such  notice),  any unpaid Basic Rent due for
periods prior to the period  commencing  with the payment date specified in
such notice, plus whichever of the following  amounts Lessor,  in its sole
discretion,  shall specify in such  notice:  (aa) an amount  equal to the
excess,  if any,  of the Stipulated  Loss  Value  for  the  Aircraft,
computed  as of the  payment  date specified in such notice,  over the
aggregate fair market rental value (computed as hereafter in this Section
provided) of the Aircraft for the remainder of the scheduled  Term,  after
discounting  such aggregate fair market rental value to present  worth  using
a discount  rate  equal to 1/2 of 1 % per annum  above the prime rate as
announced  from time to time by  Citibank,  N.A. in effect on the date of
computation;  or (bb) an amount  equal to the  excess,  if any,  of the
Stipulated  Loss Value for the  Aircraft on the payment  date  specified  as
the payment  date in such notice over the fair  market  sales value of the
Aircraft (computed  as  hereafter  in  this  Section  provided)  as of the
payment  date specified in such notice;

         (d) In the event Lessor,  pursuant to paragraph  (b) above,  shall
have sold the Aircraft,  Lessor, in lieu of exercising its rights under
paragraph (c) above with  respect to the  Aircraft,  may,  if it shall so
elect,  demand  that Lessee pay Lessor,  and Lessee shall pay to Lessor, on
the date of such sale, as liquidated  damages  for loss of a bargain  and not
as a penalty (in lieu of the Basic Rent due for periods commencing on or
after such date of sale), any unpaid Basic  Rent due for  periods up to and
including  the period in which such sale occurs,  plus the amount of any
deficiency between the net proceeds of such sale (after deduction of all
costs of sale including,  without  limitation,  costs of overhaul,
maintenance,  broker's fees,  preparation  and moving to sale) and the
Stipulated Loss Value; and/or

         (e)  Terminate  this  Lease  as to  the  Airframe  or any or all of
the Engines  or  Propellers,  or  exercise  any other  right or remedy  which
may be available under Applicable Law or proceed by appropriate court action
to enforce the terms  hereof or to recover  damages  for the  breach  hereof
(which  shall include  recovery of the present value,  calculated at a
discount rate equalling the prime rate as announced from time to time of
Citibank,  N.A. as in effect on the date of calculation,  of all Basic Rent
for the period  corresponding to the unexpired  portion of the Term),
provided,  however,  that this Lease  shall be deemed to be terminated
automatically and immediately upon the occurrence of any Event of Default
under Section 14.05.

                                      -42-

<PAGE>

         In addition,  Lessee shall be liable for any and all Rent due
hereunder before or after any  termination  hereof,  together with interest
on such unpaid amounts at the Overdue Rate,  and all costs and expenses
(including  reasonable attorneys' fees and disbursements)  paid by Lessor as
a result of the occurrence of any Event of  Default  or the  exercise  of
remedies  with  respect  thereto including all costs and expenses  incurred
in connection  with the return of the Airframe or any Engine or Propeller in
accordance  with the terms of Section 10 hereof or in  placing  the  Aircraft
in the  condition  and with  airworthiness certification  as required by
such Section and such obligation shall survive any termination  of the Lease.
Except as otherwise  expressly  provided  above,  no remedy  referred to in
this  Section 15 is intended  to be  exclusive,  but each shall be
cumulative  and in addition to any other  remedy  referred to above or
otherwise available to Lessor at law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all such
other  remedies.  No express or implied waiver by Lessor of any Default or
Event of Default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent Default or Event of Default.

         For the purposes of paragraph  (c) above,  the  "aggregate  fair
market rental  value" or the "fair market  sales  value" of the  Aircraft
shall be the rental value or sales  value,  as the case may be, which would
be obtained in an arm's-length transaction between an informed and willing
lessee or purchaser, as the case may be, under no compulsion  to lease or
purchase,  as the case may be, and an  informed  and willing  lessor or seller,
as the case may be, in each case based upon the actual condition and
location of the Aircraft,  which value shall be  determined  by  mutual
agreement  or,  in the  absence  of  mutual  written agreement,  pursuant to
an appraisal prepared and delivered in the United States by a nationally
recognized firm of independent  aircraft appraisers selected by Lessor. The
cost of such appraisal shall be borne by Lessee.

         (f) To the extent  permitted by applicable  law,  Lessee waives any
and all rights and remedies  conferred upon a lessee by UCC Sections  2A-508
through 2A-522 (where  applicable),  including  (without  limitation)  any
rights to (i) cancel  or  repudiate  this  Lease,  (ii)  reject or  revoke
acceptance  of any Aircraft,  (iii)  recover  damages from Lessor for breach
of warranty or for any other  reason,  (iv) claim a  security  interest  in
any  rejected  property  in Lessee's  possession or control,  (v) deduct from
the Rent or other sums due and payable under this Lease all or any part of
any claimed  damages  resulting from Lessor's  alleged  defaults  under this
Lease,  (vi)  recover  from  Lessor any general, special, incidental or
consequential damages for any reason whatsoever, and (vii) specific
performance,  replevin or the like for the Aircraft.  Lessee further waives
its rights under Section 2A-401 and 2A-402 to suspend performance of any of
its obligations under this Lease with respect to the Aircraft.  Lessee waives
any and all rights to notice and to a judicial  hearing  with  respect to the
repossession  of the Aircraft by Lessor upon the  occurrence of an Event of
Default hereunder.

         SECTION 16. INDEMNITIES AND EXPENSES.

         16.01 GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.

                                      -43-

<PAGE>

         (a) INDEMNIFICATION. Lessee assumes liability for, and hereby agrees
to indemnify,  protect, save and keep harmless each Indemnitee from and
against any and all liabilities,  obligations,  losses, damages, injuries,
penalties, claims (including,  without  limitation,  claims involving or
alleging any Indemnitee's negligence and claims involving strict or absolute
liability in tort),  demands, actions, penalties, suits, costs, expenses and
disbursements (including, without limitation,   legal  fees  and   expenses,
consultation   fees  and  costs  of environmental  investigation  and
remediation) of any kind and nature whatsoever (collectively,  a "CLAIM")
which may be imposed  on,  incurred  by or  asserted against an Indemnitee,
whether or not such Indemnitee shall also be indemnified as to any such Claim
by any other Person,  in any way relating to or arising out of this Lease,
any Operative  Document to which Lessee or Guarantor is a party, or any other
document  contemplated hereby, or the performance or enforcement of any of
the terms hereof or thereof,  or in any way relating to or arising out of the
manufacture,  purchase, acceptance,  rejection,  ownership, delivery, lease,
sublease,  possession,  use, operation,  maintenance,  condition,
registration, sale,  return,  storage or other  disposition  of each Aircraft
or any Engine or Part  thereof  or any  accident  in  connection  therewith
(including,  without limitation,  latent and other defects, whether or not
discoverable and any claim for patent, trademark or copyright  infringement),
regardless of where, how and by whom operated, the failure of Lessee to
perform or comply with any law or any provision of the Operative  Documents
to which Lessee or Guarantor is a party or the  breach by Lessee  of its
obligations  or  representations  and  warranties hereunder  or the failure
of Lessee to comply with any law;  provided,  however, that Lessee shall not
be required to indemnify any  Indemnitee  for any Claim in respect  of any
Aircraft  arising  from acts or  events  which  occur  prior to commencement
of the Term of this Lease or after  possession of such Aircraft has been
re-delivered  to Lessor in  accordance  with  Section 10  hereof.  Further
provided that Lessee shall not be required to indemnify  (i) an  Indemnitee
for any Claim resulting from acts which would  constitute the willful
misconduct or gross negligence of such Indemnitee, (ii) Lessor or its
Affiliates for any Claim resulting  from acts which  would  constitute  the
willful  misconduct  or gross negligence of any respective agent,  director,
employee or  representative,  if acting  within  the  scope of their
employment  or  duties,  of  Lessor  or its Affiliates,  or (iii) any other
Indemnitee  for any Claim  resulting  from acts which would constitute the
willful  misconduct or gross negligence of any agent, director,  employee  or
representative,  if  acting  within  the scope of their employment or
duties, of such Indemnitee.

         (b) WAIVER OF CERTAIN  CLAIMS.  Lessee  hereby  waives and releases
any Claim now or hereafter  existing against any Indemnified  Person arising
out of death or personal injury to personnel of the Lessee, loss or damage
to property of Lessee,  or the loss of use of any property of Lessee,  which
may result from or arise out of the condition, use or operation of the
Aircraft during the Term, including  without  limitation  any  latent  or
patent  defect  whether  or not discoverable.

         16.02 GENERAL TAX INDEMNITY.

         (a) INDEMNITY. Lessee agrees to pay and to indemnify each

                                      -44-

<PAGE>

Indemnitee for, and hold each Indemnitee harmless from and against,  all
license and registration fees,  income,  franchise,  gross receipts,  sales,
use, excise (including without  limitation,  any excise tax imposed by the
State of Hawaii), personal  property,  ad valorem,  value added  (except as
indicated in subclause 16.02(a)(i) below), leasing, leasing use, stamp,
documentary,  landing, airport use or other taxes, and all levies, imposts,
duties, charges, or withholdings of any nature,  each of the  foregoing
together with any  penalties,  forfeitures, fines or  interest  thereon
("Impositions"),  arising  out of the  transactions contemplated  by this
Lease and  imposed  against an  Indemnitee,  Lessee or the Aircraft or any
part thereof by any Federal,  state, local or foreign government or other
taxing  authority  upon or with  respect to the  Aircraft  or any part
thereof or upon the sale, purchase,  ownership,  delivery, leasing,
possession, use,  operation,  return,  transfer or other disposition  thereof
or based on or measured by the rentals, receipts or earnings arising
therefrom, or upon or with respect to this Lease.  Notwithstanding  the
provisions of the above  paragraph, Lessee's  obligations  under this
Section  16.02  shall not  include any of the following:

                  (i)  Impositions  on,  based on, or measured by, net income
        of any Indemnitee  (other than taxes in the nature of sales, use,
        property or value added tax but including within this exclusion, any
        value added tax, consumption tax or similar tax in the event such tax
        is enacted by a taxing  jurisdiction,  as a complete  substitute or
        replacement of an Imposition on, based on, or measured by, net income
        as a revenue source for that jurisdiction),  imposed by the United
        States of America or any United States federal taxing authority or
        imposed by any state or local political subdivision or taxing
        authority in any jurisdiction where the Lessor  maintains  an office
        or other place of  business  (and for this purpose  the   ownership
        or  leasing  of  the  Aircraft  in  any  such jurisdiction  shall not
        be deemed to constitute  the  maintenance  of a place of  business)
        and in which the Lessor would have been subject to taxation without
        regard to the transactions contemplated by this Lease;

                  (ii) any impositions  imposed as a result of a voluntary
        sale, transfer of title, mortgaging,  pledging, financing, or other
        voluntary disposition  by any  Indemnitee  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 occurrence of a Default or an Event of Default or the  exercise
        of  Lessor's  remedies under this Lease upon an Event of Default;

                  (iii) any Impositions  imposed on any Indemnitee to the
        extent caused by the gross negligence or willful misconduct of such
        Indemnitee;

                  (iv) Impositions 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  or  after  the  expiration  of the  Term
        of this  Lease  and the redelivery of the Aircraft in accordance with
        this Lease;

                                      -45-

<PAGE>

                  (v)  indemnification  of the Lessor,  but without prejudice
        to the rights of indemnification of any other Indemnitee,  with
        respect to any Impositions imposed as a direct result of the willful
        misconduct or gross  negligence of the Lessor or its  affiliates or,
        if acting within the  scope  of their  employment  or  duties,  of
        Lessor's officers, directors,  employees,  agents or
        representatives or as a direct result of a breach by Lessor of its
        express obligations under this Lease or as a direct  result of an
        express  representation  or  warranty  given by Lessor in this  Lease
        not being true and  correct at the date when,  or when deemed to have
        been, given or made;

         (vi)  indemnification of any lender to Lessor or any permitted
        successor  or assign  thereof,  but without  prejudice to the rights
        of indemnification  of any  other  Indemnitee,  (aa) with respect  to
        any Impositions  imposed on such  lender,  successor  or assign as a
        direct result of its own willful  misconduct or gross negligence or,
        if acting within the scope of their employment or duties,  the
        willful misconduct or gross negligence of the officers, directors,
        employees,  agents or representatives of such lender, successor or
        assign otherwise asserting the right to indemnification hereunder;
        or (bb) in the event any such lender, its successor or assign shall,
        in the course of the exercise of rights and  remedies  under the
        relevant  security  agreement or other assignment,  exercise  the
        rights and remedies of the Lessor under this Lease,  (I) with
        respect to any  Impositions  imposed on such  lender, successor  or
        assign as a direct  result of its own  breach of its own obligations
        expressly undertaken in its own capacity (and not merely as successor
        in interest to Lessor under the relevant  security  agreement or
        other assignment); or (II) with respect to any Imposition imposed as
        a direct result of an express  representation or warranty given by
        such lender,  successor  or assign in its own  capacity  (and not
        merely as successor in interest to Lessor under the relevant
        security  agreement or other  assignment)  not being true and correct
        at the date when,  or when deemed to have been, given or made; or

         (vii)  Impositions  imposed  on  an  Indemnitee  by  a  taxing
        jurisdiction (other than the United States or any jurisdiction in
        which the Lessee is  organized,  maintains  a place of business or
        from which the Lessee may make payments under this Lease or where the
        Aircraft may be  located  or  operated)  which  would not have been
        imposed on such Indemnitee but for such Indemnitee  engaging in
        transactions  unrelated to the transactions contemplated by this
        Lease.

         (b) Reports. In case of any report or return to be made with respect
to any  Imposition or possible  Imposition,  Lessee will either make such
report or return in such manner as will show the ownership in Lessor of the
Aircraft,  and when  requested  by an  Indemnitee  send a copy of such
report or return to the Indemnitee,  or will notify the  Indemnitee  of such
requirement  and make such report or return in such  manner  as shall be
satisfactory  to the  Indemnitee. Lessee  shall,  at its own expense,  duly
file all required  reports and returns respecting all  Impositions  paid or
indemnified  against by Lessee  pursuant to this Section 16.02 to the extent
Lessee is permitted by Applicable

                                      -46-

<PAGE>

Law to do so. If the same must be filed by an  Indemnitee,  Lessee  will
advise such  Indemnitee  of the  necessity of filing the same and, in
sufficient  time before the same is due,  furnish such  Indemnitee with a
completed copy thereof. Lessee shall hold each  Indemnitee  harmless  from
and against any  liabilities, obligations,  losses,  damages,  penalties,
claims,  actions,  suits  and costs arising out of any insufficiency or
inaccuracy in any information in such report or return  filed or  supplied
by Lessee,  except to the extent that the same is attributable  to an
Indemnitee's  failure  to timely  provide  Lessee  accurate information which
Lessee has requested,  in writing,  with specificity and which Lessee needs
to fulfill its  reporting or return  obligations,  an  Indemnitee's failure
to timely and properly file returns  which have been timely  prepared by
Lessee and timely  delivered to such  Indemnitee or with respect to which
Lessee has provided such Indemnitee the necessary  information  which would
enable such Indemnitee to do so. If actual notice is given by any authority
to an Indemnitee that a report  or  return  is  required  to be filed  with
respect  to any such Impositions  referred  to in this  Section  16.02 and
Lessor  has actual  notice thereof,  Lessor shall cause that  Indemnitee to
promptly  notify Lessee of such required report or return.  Lessor agrees to
cause each Indemnitee to respond to any  reasonable  request,  of which
Lessor  has  actual  notice,  of Lessee for information  within the control
of such Indemnitee with respect to the filing of any such report or return.
Lessee agrees to pay any reasonable  costs,  fees or other charges of
independent  counsel or  independent  accountants  incurred by Lessor or such
Indemnitee  in  connection  with any such  response  or  request
contemplated by this subsection.

         (c) Contests. If claim is made against an Indemnitee for any
Imposition with respect to which  Lessee has an  obligation  under this
Section  16.02 and Lessor has actual notice thereof, Lessor shall cause such
Indemnitee to promptly notify the Lessee but  failure  to so notify the
Lessee  shall not  reduce  the Lessee's  obligations  hereunder,  except to
the extent  that  Lessee is thereby precluded from contesting such claim or
Imposition.  If reasonably requested by the Lessee in writing  and  provided
no Default or Event of Default  shall have occurred and is  continuing,
Lessor,  at the sole expense of the Lessee,  shall itself (or shall cause
such Indemnitee to) in good faith and diligently  contest (and not settle
without  Lessee's written consent) or shall (or shall cause such Indemnitee
to) permit the Lessee,  if desired by the Lessee,  to contest in the name of
the Lessee the  validity,  applicability  or amount of such  Imposition.
Lessee may contest,  or require that Lessor or such Indemnitee  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 and such Indemnitee 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 and,  prior to the
        commencement  of any appeal of an  adverse  judicial  decision,  with
        an opinion of such legal  counsel to be effect that a  reasonable
        basis  exists to appeal such adverse judicial decision (which opinions

                                      -47-

<PAGE>

        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  civil  or
        criminal  fines, penalties,  forfeitures  or sanctions  against
        Lessor or such  Indemnitee or the creation of any Lien other than a
        Lien for  Impositions  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 principles have been made unless  Lessee has
        provided to Lessor a bond or other  security  reasonably satisfactory
        to Lessor (provided that in the case of civil or criminal  fines,
        penalties,  forfeitures  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 16.02 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,  an Indemnitee  or the Lessee,  as the case may be, had
        asserted in such previous contest would prevail;

                 (iv) no  Default or 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 or any Indemnitee with
        respect to which Lessor or such Indemnitee is required to follow the
        direction of the Lessee, the Lessee shall have  delivered to  Lessor
        a written  acknowledgement of its obligations to indemnify fully
        Lessor and such Indemnitee 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 Imposition,  Lessee shall have
        advanced to Lessor or such Indemnitee  sufficient  funds (on an
        interest-free  basis) to make such payments,  provided,  however,
        that  Lessee  shall  indemnify  Lessor  and such Indemnitee for any
        adverse tax consequences resulting from such advance; and

                (vii) such contest does not involve any Imposition or taxes
        of any Indemnitee not indemnified hereunder.

                Lessee shall not be deemed to be in default under any of the
        above

                                      -48-

<PAGE>

        indemnification  provisions of this Section 16.02 so long as Lessee
        shall diligently prosecute  a contest in conformity with the
        requirements of this Section 16.02(c),  or in the case where the
        Lessor or an Indemnitee  shall be  prosecuting  such contest
        pursuant to this Section  16.02(c),  Lessee has fulfilled all of its
        obligations  under this Section 16.02(c) with respect to such
        contest. Notwithstanding the foregoing,  if  a  claim  is  made
        against  an  Indemnitee  which,  if successful,  would result in an
        Imposition  under  circumstances  which would require the Lessee to
        indemnity such Indemnitee,  such Indemnitee 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 event an Indemnitee fails diligently to contest,
        or refuses to permit the Lessee to contest,  a claim or, part thereof
        which  such  Indemnitee  has the obligation to contest or to permit
        Lessee to contest under this Section 16.02,  then Lessee shall not be
        obligated to indemnify such  Indemnitee  for such claim or such part
        thereof to the extent that Lessee is precluded  thereby  from
        contesting  any such claim and Lessor  shall cause such  Indemnitee
        to refund to Lessee to such extent any amounts  paid or advanced by
        Lessee in connection  with such Imposition that were the subject of
        such claim (plus interest from the date payment is due at the rate
        established for refunds by the authority imposing such Imposition).

         (d) REFUNDS.  If an Indemnitee shall obtain a refund of all or any
part of such Imposition paid by Lessee, Lessor shall cause such Indemnitee to
pay the Lessee the amount of such refund less the amount of any Impositions
payable by such  Indemnitee  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 Default or Event of Default  is  outstanding  and
continues  unremedied.  If in addition to such refund,  such Indemnitee
shall receive an amount  representing attorneys  fees,  interest or other
amount with  respect to of such refund,  the Lessee shall be paid that
proportion  of such  amounts (net of any  Impositions imposed on the  receipt
of such  amounts  by such  Indemnitee)  which is fairly attributable  to
Impositions  paid by the Lessee  prior to the  receipt of such refund.

         16.03 AFTER-TAX BASIS; SURVIVAL.

         It is  understood  and agreed  that all  payments  for which  Lessee
is obligated  hereunder  are to be made on an "after  tax basis" so that the
amount the Lessee  shall be  required  to pay with  respect to any Claim or
Imposition indemnified  against  hereunder  shall be an amount  sufficient
to restore  the Indemnitee(s)  to the same  position such  Indemnitee(s)
would have been in had such Claim not been asserted or such  Imposition  not
been incurred  taking into account, INTER ALIA, Impositions,  fees and
other  charges, however  imposed, required to be paid on the  receipt of an
indemnity  under this  Section 16 and further taking into account any tax
benefits realized by such Indemnitee(s) that is  attributable  to such
indemnifiable  imposition. The  Lessee's  obligations hereunder shall survive
the expiration or earlier

                                      -49-

<PAGE>

termination of this Lease and return of the Aircraft to Lessor.

         16.04 EXPENSES.

         Lessee  shall pay its own legal  fees and  disbursements and its
other fees and expenses  incurred in connection with  documenting and
negotiating this transaction,  together with the fees and  disbursements of
Lessor's FAA counsel. Lessor shall pay all of Lessor's other fees and
expenses  including the fees and disbursements of its outside counsel.

         SECTION 17. QUIET ENJOYMENT.

         The Lessor  agrees that unless a Default or Event of Default
hereunder has  occurred  and is  continuing,  neither  the Lessor nor any
Person  claiming through or under any of them will  interfere with the quiet
enjoyment,  use and operation  of the  Aircraft  by the  Lessee as  provided
hereunder,  including, without limitation, Lessee's possession and use of the
Aircraft.

         SECTION 18. ASSIGNMENT.

         Lessee  shall not assign or transfer  any of its rights or
obligations under this Lease or in the Aircraft without the prior written
consent of Lessor. Lessor  may  assign  all or any  portion  of its  rights
or  obligations  in the Aircraft and Lease without consent of the Lessee,
for security or for any other purpose,  and Lessee shall take such actions in
connection  therewith as Lessor shall  reasonably  request,  including,  but
not limited to, (i)  delivering  an estoppel  certificate causing such
assignee to be named as an additional insured and loss payee under the
insurances required hereunder,  naming such assignee as an indemnified  party
under the  indemnities  provided  hereunder and addressing such  additional
matters  as Lessor may  reasonably  request,  (ii)  causing an insurance
report and certificates to be issued  confirming that the assignee has been
named as additional  insured and loss payee under the  insurances  required
hereunder, (iii) delivering an opinion of counsel to Lessee and (iv) taking
such additional  action,  and  delivering  such  additional  documents  as
Lessor may reasonably  request.  Without  limitation of the  foregoing,  any
assignment by Lessor may (but shall not be required to be) be to an owner
trustee,  indenture trustee,  agent or other  Person  acting in a fiduciary
or similar  capacity on behalf of other Persons and such other  Persons (as
well as such trustee,  agent or other  Person  acting on  behalf of such
Persons)  shall be  entitled  to be Indemnitees and Insured  Persons
hereunder.  No assignment by Lessor  hereunder shall release Lessor from its
obligations  hereunder except that if, pursuant to any  assignment,  Lessor
assigns  all of its right,  title and  interest to the Aircraft and Lease,
the assignee thereof shall assume,  in a written  agreement reasonably
satisfactory  to Lessee,  all of the Lessors  obligations  under the Lease
from and after such assignment, the Lessor shall be released from all such
obligations  and such assignee shall be the "Lessor"  hereunder for all
purposes of this Lease.  Lessor  will pay the  reasonable  out-of-pocket
expenses of the Lessee in connection with an assignment by the Lessor
hereunder.  No assignment by Lessor hereunder shall result in an increase in
Lessee's

                                      -50-

<PAGE>

obligations under this Lease.

         SECTION 19. NOTICES.

         Unless otherwise. specifically provided herein, all notices required
or permitted  by the terms  hereof  shall be in writing.  Any written  notice
shall become  effective when  received.  Any written notice shall be sent by
telecopy, commercial  courier  service or delivered by hand. Any notice shall
be addressed as follows:.

             IF TO LESSOR:

             Willis Lease Finance Corporation
             2320 Marinship Way
             Suite 300
             Sausalito, CA 94965
             Attention: General Counsel
             Telephone: (415) 331-5281
             Telecopy: (415) 331-5167

             If to Lessee:

             Aloha Islandair, Inc.
             99 Kapalulu Place
             Honolulu, Hawaii 96819
             Attention: President
             Telephone:
             Telecopy: (808) 833-5498

Such  persons and addresses may be changed, from time to time, by means of a
notice given in the manner provided in this Section 19.

         SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE.

         If Lessee  fails to perform or comply  with any of its payment or
other obligations  herein,  Lessor may itself pay or perform such obligation,
and the amount of such  payment  and the  amount of the  reasonable
expenses  of Lessor incurred in connection with such payment or the
performance of such  obligation, as the case may be, together with interest
thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand by notice hereunder.  No such  payment or  performance  by
Lessor shall be deemed to waive any Default or Event of Default or relieve
Lessee of any of its obligations hereunder.

         SECTION 21. LEASE; SECTION 1110.

         21.01 LEASE.

         Lessee and Lessor agree that this Lease is to be treated as a Lease
for Federal  income tax  purposes, that the Lessor is the owner of the
Aircraft for Federal

                                      -51-

<PAGE>

income tax purposes  and all other purposes and that the interest of the Lessee
in the Aircraft is that of a lessee only.

         21.02 SECTION 1110.

         TO  THE  EXTENT  PROVIDED  THEREBY  (OR TO THE  FULLEST  EXTENT  IT
MAY LAWFULLY SO AGREE,  WHETHER OR NOT PROVIDED THEREBY),  LESSEE HEREBY
AGREES THAT ANY RIGHT OF LESSOR TO TAKE  POSSESSION OF THE AIRCRAFT OR
ENGINES OR PROPELLERS IN COMPLIANCE  WITH THE PROVISIONS OF THIS LEASE AND IN
ACCORDANCE  WITH SECTION 1110 OF TITLE 11 OF THE UNITED  STATES  CODE OR ANY
SIMILAR  PROVISION  OF ANY SUPERSEDING  STATUTE, AS AMENDED FROM TIME TO
TIME, SHALL NOT BE AFFECTED BY THE PROVISIONS OF SECTIONS 362, 363 OR 1129 OF
SAID TITLE,  OR OTHER  ANALOGOUS PART OF ANY SUPERSEDING STATUTE, AS AMENDED
FROM TIME TO TIME, AND ACCORDINGLY, IT IS THE INTENTION OF THE PARTIES
HERETO THAT TO THE FULLEST EXTENT THAT THE PARTIES HERETO MAY  LAWFULLY SO
AGREE THIS  AGREEMENT  BE AFFORDED  THE BENEFITS OF SAID SECTION 1110.

         SECTION 22. MISCELLANEOUS.

         22.01 WAIVERS, HEADINGS.

         No term or provision of this Lease may be changed,  waived,
discharged or terminated  orally,  but only by an instrument in writing
signed by the party against which  enforcement  of the change,  waiver,
discharge or termination is sought.  The headings contained herein are for
convenience of reference only and are not intended to define or limit the
scope of any provisions of this lease.

         22.02 COUNTERPARTS.

         This  Lease  may be signed in one or more counterparts with the same
effect as if the signatures to each counterpart were upon a single instrument.
All counterparts shall be considered an original of this Lease.

         22.03 GOVERNING LAW.

         THIS LEASE HAS BEEN  DELIVERED IN THE STATE OF CALIFORNIA  AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE LAWS
OF THE STATE OF  CALIFORNIA,  INCLUDING  ALL  MATTERS  OF  CONSTRUCTION,
VALIDITY  AND PERFORMANCE,  WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF. THIS LEASE SHALL BE EFFECTIVE FOR ALL PURPOSES AS OF THE
DATE FIRST ABOVE WRITTEN.

         22.04 BENEFIT AND BINDING EFFECT.

         The terms and provisions of this Lease shall inure to the benefit of
and be

                                      -52-

<PAGE>

binding on Lessor and Lessee and their respective successors and permitted
assigns.

         22.05 FURTHER ASSURANCES.

         Lessor and Lessee,  from time to time,  shall do and perform such
other and  further  acts and  execute  and  deliver any and all such other
and further instruments  as  may  be  required  by law or  reasonably
requested  by  notice hereunder by the other party to establish,  maintain
and protect the  respective rights and remedies of the other  party,  to
carry out the intent and purpose of this Lease and the other Operative
Documents to which either is a party.

         22.06 SERVICE OF PROCESS: WAIVER OF JURY TRIAL AND IMMUNITY.

         (a)  LESSEE  HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT WITH RESPECT TO THE OPERATIVE DOCUMENTS MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT LOCATED IN SAN FRANCISCO,  CALIFORNIA
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, LESSEE HEREBY IRREVOCABLY
SUBMITS TO EACH SUCH JURISDICTION AND HEREBY IRREVOCABLY WAIVES ANY AND ALL
OBJECTIONS WHICH IT MAY HAVE AS TO VENUE IN ANY OF THE ABOVE COURTS.

         (b) Lessee  hereby  irrevocably appoints CT Corporation Systems
(the "Process  Agent") as agent for service of process in  California.
Lessee hereby authorizes and directs the Process Agent to accept service on
its behalf. In the event that Lessee does not maintain the Process  Agent as
its validly  appointed agent for service of process, Lessee  hereby agrees
that service of process may be made on it by certified or registered mail,
return receipt requested,  at its address for notices specified or
determined  in  accordance  with  Section 15 hereof. Nothing herein  shall
affect the right to serve  process in any other manner  permitted by law. Any
judicial  proceeding by Lessee  against the Lessor involving, directly or
indirectly, any matter in any way arising out of, related to, or connected
with any of the Operative  Documents shall be brought only in a court
located in the State of  California.  THE LESSEE AND LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL  PROCEEDING BROUGHT BY THE LESSEE OR BY THE
LESSOR OR LENDER  INVOLVING  DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE OPERATIVE DOCUMENTS.

         22.07 USURY LAW.

         The parties intend to contract in strict compliance with the usury
laws of the State of California  and, to the extent  applicable,  the United
States. Notwithstanding anything to the contrary in the Operative Documents,
Lessee will not be obligated to pay interest at the Overdue Rate on overdue
payments of Rent or other  interest in excess of the maximum  non-usurious
interest  rate, as in effect from time to time, which may by Applicable
Law be charged, contracted for, reserved, received or collected by Lessor
in connection with the Operative Documents. During any period of time in which

                                      -53-

<PAGE>

the then-applicable highest lawful rate is lower than the Overdue Rate,
interest on overdue  payments of Rent will accrue and be payable at such
highest  lawful rate.  However,  if at later times such highest  lawful rate
is greater than the Overdue Rate,  then Lessee will pay interest on overdue
payments of Rent at the highest lawful rate until the interest on overdue
payments of Rent which is paid by Lessee  equals the  amount of  interest
that would have been  payable at the Overdue Rate.

         22.08 ENTIRE AGREEMENT.

         This Lease and the other Operative Documents embody the entire
agreement and understanding among the parties thereto and supersede all prior
agreements and understandings relating to the subject matter thereof.

                           [Continued on next page]

                                      -54-

<PAGE>

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

LESSOR                                    WILLIS LEASE FINANCE CORPORATION

                                          By:    /s/ James McBride
                                              --------------------------------
                                              Name:       JAMES D. MCBRIDE
                                              Title:  EXECUTIVE VICE PRESIDENT
                                                      CHIEF FINANCIAL OFFICER

LESSEE                                    ALOHA ISLANDAIR, INC.

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

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

Lease of de Havilland Dash 8-102 Aircraft
MSN 026

                                     -55-

<PAGE>

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

LESSOR                                 WILLIS LEASE FINANCE CORPORATION

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

LESSEE                                 ALOHA ISLANDAIR, INC.

                                       By:   /s/ Brenda F. Cutwright
                                           --------------------------------
                                           Name:     BRENDA F. CUTWRIGHT
                                           Title: EXECUTIVE VICE PRESIDENT AND
                                                    CHIEF FINANCIAL OFFICER

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

Lease of de Havilland Dash 8-102 Aircraft
MSN 026

<PAGE>

                                    EXHIBIT B

                        RENT AND OTHER FINANCIAL MATTERS

      [Two pages of confidential information are omitted and filed separately
      with the Commission]

<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

                                LETTER OF CREDIT

Lessee shall provide  Lessor, on  the  Closing  Date, with an irrevocable
transferable  Letter of Credit in the amount of U.S. $80,000 in a form and
drawn on a U.S.  bank  acceptable  to Lessor,  which  Letter of Credit  shall
be valid during the Term of this Lease and the Other Lease and for ninety
(90) days after the later of the last day of the Term  under  this Lease and
the last day of the Term  under  the Other  Lease,  guaranteeing  payment  of
Rent due and all other obligations of Lessee to Lessor  hereunder and under
the Other Lease,  which may be drawn by Lessor upon  demand in the event of
Lessee's  failure to fulfill any of its  obligations  hereunder  or under the
Other Lease or receipt of notice by Lessor that the Letter of Credit will not
be renewed on a date prior to the last date on which the Letter of Credit
must be valid under this  Agreement.  Lessor may,  but shall not be obliged
to, apply the proceeds of the Letter of Credit in whole or in part, to the
payment of any rent,  indemnities,  attorneys  fees and other expenses,
insurance and other casualty payments and any other amount owing from time to
time by Lessee  hereunder  or under the Other  Lease,  or under any other
agreement  between  Lessor  or its  associate,  subsidiary  or  affiliate
companies,  and Lessee, for the payment of any loss or damage suffered by
Lessor as a result of any other Event of Default or utilize the  proceeds of
the Letter of Credit in whole or in part to perform any of Lessee's
obligations under this Lease  and the Other  Lease or otherwise remedy  any
other  Event of  Default hereunder  or  thereunder, including,  without
limitation,  in the  redelivery condition for the Aircraft or the Other
Aircraft, without prejudice to any other remedy of Lessor.

In the event  Lessor  draws upon the Letter of Credit  during the Term,  then
in such event Lessee shall, upon demand, restore the amount of the Letter of
Credit to the full amount  thereof.  Failure to so restore promptly  the
amount of the Letter of Credit to the full amount  thereof  shall
constitute  an Event of Default.

Notwithstanding the foregoing, in the event that:

            (i) the Letter of Credit provided for pursuant to this Lease shall
        not have been drawn upon during the Term of this Lease; and

            (ii) the  Guarantor  and its consolidated affiliates shall have a
        combined net worth of not less than $5,000,000 as of the last day of the
        Term of this  Lease as evidenced  by the then  most recent financial
        statements  required  to be  delivered  to the Lessor  pursuant  to this
        Lease,

then the Lessor  shall  release the Letter of Credit  provided  pursuant to this
Lease on the later of:

                                       B-3

<PAGE>

            (x) the date the Aircraft is redelivered to the Lessor and accepted
        by the  Lessor in full compliance with Section 10 of this Lease and
        Exhibit F thereto, and

            (y)  the  date on  which Lessee  shall have  satisfied  all of its
        obligations under this Lease, including its obligations with respect to
        the return condition of the Aircraft and the payment of any adjustments
        to the Lessor in connection therewith.

For avoidance of doubt, if the condition  specified in paragraph (ii) above
is not satisfied, the Letter of Credit  shall remain in effect until the
later of the  ninetieth  day after the last day of the Term under this Lease
or the Other Lease and shall thereupon be returned to Lessee for cancellation.

                                       B-4

<PAGE>

                                    EXHIBIT C

                             ACCEPTANCE CERTIFICATE

    ALOHA ISLANDAIR,  INC. ("LESSEE"), a corporation organized under the laws of
Delaware, hereby represents, acknowledges, warrants and agrees as follows:

    1. Lessee has  received  this      day of          , 2000 (Time:   ),
at    , from WILLIS LEASE FINANCE CORPORATION ("Lessor") possession of:

    A.   One (1) de Havilland  Model Dash 8-102  Aircraft (described in the
        FAA records as a Model DHC-8-102), bearing Manufacturer's Serial
        Number 026, U.S. Registration No. N812PH, together with two (2) Pratt
        & Whitney PW 120 Engines, Manufacturer's Serial Numbers 120107 and
        120142,  two (2) Hamilton Standard 14 SF-7  Propellers,
        Manufacturer's  Serial Numbers 851114 and 890711 and all appliances,
        instruments, accessories, equipment (not including an APU) and parts
        attached thereto and thereon, in an airworthy condition;

    B.  Fuel on board the Aircraft,            pounds;

    C.  All  manuals, logbooks, flight records and historical information
        regarding the Aircraft, the engines and the accessories and
        equipment, including, without limitation, those listed on Exhibit D
        to the Lease[, in the possession of Lessor]; and

    D.  the items listed on Schedule 1 hereto.

    2. All of the  foregoing  were delivered and accepted to Lessee's  full
satisfaction  and pursuant to the terms and  provisions  of the  Aircraft
Lease Agreement  between  Lessor  and  Lessee,  dated as of  February 22,
2000 (the "Lease"), except as set forth on Schedule 2 hereto.  For purposes
of the Lease, Lessor and Lessee agree that the installed hard time components
have, as of the Delivery Date, the time, Flight Hours and Cycles operating
time remaining as set forth on Schedule 3 hereto.

    3. The  Aircraft,  Engines,  Propellers  and Parts as described in the
Lease have been fully  examined by Lessee and have been received in a
condition  fully satisfactory to Lessee and in full  conformance  with the
Lease in every respect except as set forth in Schedule 2 hereto.

                                      C-1

<PAGE>

    4. The Lease and Operative  Documents (as defined therein) are in full
force and effect;  Lessor has fully,  duly and timely performed all of its
obligations of every  kind or nature  under the Lease  and other  Operative
Documents;  and Lessee has no claims; deductions,  set-offs or defenses of
any kind or nature in connection with the Lease and other Operative Documents.

    5. Prior to the Delivery  Date,  Lessee has  obtained all required
permits, authorizations,  and licenses required, and has paid all required
foes and taxes relating  to the Lease  imposed  by the  United  States or any
other  government and/or any  political  subdivision  thereof  and any
agencies  and  departments thereof to allow Lessee to operate the Aircraft as
permitted by the terms of the Lease.

    6. Lessor and its successors and assigns shall be entitled to rely upon this
Acceptance Certificate.

    7. The Delivery Date (as defined in the Lease) is the date written in
paragraph 1 herein.

                                         ALOHA ISLANDAIR, INC. (LESSEE)

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

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

Lease Acceptance Certificate

Lease of de Havilland Dash 8-102

MSN 026

                                       C-2

<PAGE>

                                   SCHEDULE 1

                            AIRCRAFT LOOSE EQUIPMENT

QTY    ITEM DESCRIPTION
3      Crew Oxygen Mask
3      Smoke Goggles
2      Coffee Cup Holders
1      AFM
2      Crew Life Vest
1      Observers Life Vest
2      Hand Microphones
2      Crew Flashlights
1      Crew Fire Extinguisher
1      Crew Fire Ax
1      Spare Filament Holder
1      PBE in cockpit
1      Alternate Extension Handle in cockpit
1      Overhead Emergency Light in cockpit
1      Galley Service Cart with trays
3      Galley Food Tray Boxes
2      Galley Hot Jugs
1      PBE in forward galley storage area
1      Fire Extinguisher in forward galley storage compartment
3      Seat Belt Extensions in forward galley storage compartment
2      Passenger 02 Bottles in forward galley storage compartment
5      Cabin Seat Tables
1      Life Vest under F/A seat
1      Flash Light under F/A seat
1      First Aid Kit in forward galley storage compartment
1      Medical Kit in forward galley storage compartment
1      PBE on aft bulkhead
1      Fire Extinguisher on aft bulkhead
2      Propeller Restraints
2      Engine Plug
2      Static Port Covers
1      Set Windshield Covers
2      Pilot Tube Covers
1      Set Landing Gear Safety Pins

                                     C-3

<PAGE>

                                   SCHEDULE 2

                             LIST OF DISCREPANCIES

1.   Refurbish left ice shield as necessary.

2.   Refurbish right ice shield as necessary.

3.   Left wing to fuselage aft brace upper bolts have rust and corrosion on
     the heads. Clean or replace as necessary.

4.   Left wing to fuselage aft brace upper bolts have rust and corrosion on
     the heads. Clean or replace as necessary.

5.   Left engine outboard cowl door de-laminating at aft lower edge. Repair
     as necessary.

6.   Check top composite access panel just forward of the left exhaust
     fingernail for de-lamination. Repair as necessary.

7.   Repair damage to forward edge of overhead bin door at seat row 9CDE.

8.   Seat 3B table cracked at forward right corner. Replace table.

9.   Trim at lower inboard corner of flight attendants seat is damaged.
     Repair or replace as necessary.

10.  Check cockpit door for freedom of opening and interference with lavatory
     door.

11.  The overhead ceiling panel around the captain's map light is cracked and
     has a piece missing. Repair or replace as necessary.

12.  Cockpit floor coming loose in front of the pedestal and inboard of the
     copilots seat. Secure as necessary.

13.  Check observers seat belt for fraying. Replace as necessary.

14.  The pilots coat hook will not stow. Replace as necessary.

15.  Composite panel on the outboard side of #2 nacelle just aft of the flap
     trailing edge needs repair on the aft edge.

16.  Engine condition panel door in the left wheel well has the wrong
     fasteners. Replace with correct fasteners.

17.  The bottom edge of left and right exhaust fingernails need to be
     straightened and smoothed.

18.  Non-standard grommet installed on structure under the cockpit floor for
     the left elevator cable. Ref. EO 8-53-99-199. Repair as necessary.

19.  FDAU needs repair.

Note: Lessor will pay the cost for the correction of items 1 through 18 by
Avmax.

                                     C-4

<PAGE>

                                    SCHEDULE 3

              TIME CONTROLLED/LIFE LIMITED PARTS STATUS AT DELIVERY

Aircraft: Total Time 31,539     Total Cycles 43,190     Date 23 March 2000

<Table>
<Caption>

NOMENCLATURE                    POSITION          SERIAL NUMBER          TIME SINCE OVERHAUL/INSTALLATION
------------                    --------          -------------          --------------------------------
<S>                             <C>               <C>                    <C>

Cockpit Voice Recorder          only              101128                 due
Flight Data Recorder            only              2893                   on condition
Air Cycle Machine               only              unk                    on condition
Starter/Generator               left              290                    170 hr
Starter/Generator               right             96117                  702 hr
AC Generator                    left              578                    170 hr
AC Generator                    right             96108                  2,187 hr
ELT                             only              408241                 due
Fire Bottle Disc. Cart          F#1               9705145                1,032 da
Fire Bottle Disc. Cart          F#2               9705146                1,032 da
Fire Bottle Disc. Cart          A#1               9705143                1,032 da
Fire Bottle Disc. Cart          A#2               9705144                1,032 da
Fire Bottle HST                 fwd               21548D1                1,044 da
Fire Bottle HST                 aft               15280D1                1,044 da
Crew O2 Bottle, HST             only              544077                 4,958 da
Transponder                     left              4371                   619 da
Transponder                     right             4355                   635 da
Propeller                       left              851114 Hub s/n199      7,929 hr
Blade, Prop.                    #1                852759                 3 hr
Blade, Prop.                    #2                854366                 1 hr
Blade, Prop.                    #3                876632-7               208 hr
Blade, Prop.                    #4                886214-7               6,432 hr
Propeller Actuator              left              890124                 6,389 hr
Propeller Control Unit          left              870553                 4,297 hr
Propeller                       right             890711 Hub s/n641      6,350 hr
Blade, Prop.                    #1                860036-7               6,872 hr
Blade, Prop.                    #2                856034                 7,542 hr
Blade, Prop.                    #3                865607-7               7,050 hr
Blade, Prop.                    #4                851590                 6,872 hr
Propeller Actuator              right             106                    7,747 hr
Propeller Control Unit          right             890357                  1,732 hr
Engine                          left              120107                 on condition
Impeller, HP                    left              2E542                  22,890 cy
Impeller, LP                    left              3F823                  9,048 cy
Cover, HP Front                 left              15B144                 9,048 cy
Cover, HP Rear                  left              15B172                 9,048 cy
Disc, HP                        left              14B921                 9,048 cy
Disc, LP                        left              94A609                 9,048 cy
Disc, PT-1                      left              86A734                 9,048 cy
Disc, PT-2                      left              97A582                 9,048 cy
Seal, Interstage Air            left              11B719                 9,048 cy
Blades, HP                      left              various                9,048 cy
Engine                          right             120142                 on condition
Impeller, HP                    right             5E754                  17,361 cy
Impeller, LP                    right             7F528                  3,062 cy
Cover, HP Front                 right             23B271                 7,383 cy

</Table>

                                      C-5

<PAGE>

<Table>
<Caption>

NOMENCLATURE                    POSITION          SERIAL NUMBER          TIME SINCE OVERHAUL/INSTALLATION
------------                    --------          -------------          --------------------------------
<S>                             <C>               <C>                    <C>

Cover, HP Rear                  right             27B996                 7,383 cy
Disc, HP                        right             17B182                7,383 cy
Disc, LP                        right             23B548                 7,383 cy
Disc, PT-1                      right             56AO52                 15,099 cy
Disc, PT-2                      right             18A324                 22,021 cy
Seal, Air Interstage            right             27B788                 7,383 cy
Blades, HP                      right             various                3,062 cy
Ground Prox. Warning            only              6345                   1 hr.
Air Data Computer               left              86101758               40 da
Air Data Computer               right             87092321               184 da
Altimeter                       pilot             unk                    on condition
Altimeter                       co-pilot          unk                    on condition.
Altimeter                       standby           8309                   541 da
Yolk Assembly, MLG              left              DCL104-85              OH       5 cy / LL 38,545 cy
Yolk Assembly, MLG              right             DCL103-85              OH 2,962 cy / LL 41,262 cy
Drag Strut, MLG                 left              DCL127-86              OH 2,961 cy / LL 41,262 cy
Drag Strut, MLG                 right             DCL259-87              OH 2,961 cy / LL 30,380 cy
Shock Strut, MLG                left              DCL060-85              OH 14,676 cy / LL 36,892 cy
Piston, MLG Shock Strut         left              0364WH                 OH 14,676 cy / LL 36,892 cy
Cylinder, MLG Shock Strut       left              057                    OH 14,676 cy / LL 36,892 cy
Link, MLG Up. Torque            left              DCL1 65                OH 14,676 cy / LL 23,730 cy
Link, MLG Lo. Torque            left              DCL637                 OH 14,676 cy / LL 39,455 cy
Shock Strut, MLG                right             CL1188693R             OH 14,676 cy / LL 36,938 cy
Piston, MLG Shock Strut         right             231                    OH 14,676 cy / LL 36,938 cy
Cylinder, MLG Shock Strut       right             DCL116                 OH 14,676 cy / LL 36,938 cy
Link, MLG Up. Torque            right             DCL138                 OH 14,676 cy / LL 39,455 cy
Link, MLG Lo. Torque            right             DCL691                 OH 14,676 cy / LL 15,434 cy
Pin, Strut to Yolk, MLG         left              CL1188693R                          / LL 14,676 cy
Pin, Strut to Yolk, MLG         right             DCL060-85                           / LL 14,676 cy
Stabilizer Stay, MLG            left              DCL1288688             OH 3,883 cy / LL 37,137 cy
Stabilizer Stay, MLG            right             DCL1 68-86             OH 7,485 cy / LL 37,308 cy
Drag Strut, NLG                 only              DCL233-89              OH 8,232 cy / LL 29,111 cy
Shock Strut, NLG                only              PCL092-86              OH 6,046 cy / LL 36,205 cy
Piston, NLG Shock Strut         only              CH008                  OH 6,046 cy    LL 36,205 cy
Cylinder, NLG Outer             only              DCL206                 OH 6,046 cy    LL 31,338 cy
Cylinder, NLG Inner             only              0165WH                 OH 6,046 cy    LL 36,205 cy
Axle, NLG                       only              CH008                  OH 6,046 cy    LL 36,205 cy
Trailing Arm, NLG               only              DCL161                 OH 6,046 cy    LL 31,338 cy
Actuator, Steering, NLG         only              DCL0338586             on condition / LL 36,205 cy
Trunnion Plates, NLG            left & right      NSN                    on condition / LL 43,190 cy
Trunnion Cap, NLG               left & right      NSN                    on condition / LL 43,190 cy

</Table>

                                       C-6

<PAGE>

                                    EXHIBIT D

                     SCHEDULE OF MANUALS/MAINTENANCE RECORDS

<Table>
<Caption>

DESCRIPTION                                                                    QUANTITY
-----------                                                                    --------
<S>                                                                            <C>

Aircraft Journey and Maintenance Log Books                                     Numerous
Aircraft Technical Log Book, Record of Installations and Modifications         1
Engine Log Book for each Engine                                                1
Propeller Log Book for each Propeller                                          1
Component Serialization Record                                                 1
Aircraft Technical Log for Airframe                                            1
FAA Approved Flight Manual (FAA 102)                                           1
Weight & Balance Manual                                                        1
Customized Chapters Maintenance Manual                                         1
Customized Wiring Diagram Manual                                               1
Airworthiness Directive Records for Airframe, Engines and Propellers           Numerous
STC Record File                                                                1
Serviceable Tags for Time Controlled and Life Limited Parts                    1 Box
Serviceable Tags for On Condition Components                                   1 Box
Structural Deviation Inspection Requirements Log                               1
Electrical Load Analysis File                                                  1
Engineering Orders                                                             Numerous
Engineering Authorizations                                                     Numerous
Previous Maintenance Checks Accomplished, A1-A10,C-1-C-6, 40K                  1 ea
Computer Runs for Current status of Inspections, time controlled and LLPs      Numerous
Current Weight & Balance File                                                  1 ea

</Table>

                                      D-1

<PAGE>

                                    EXHIBIT E

                          RETURN ACCEPTANCE CERTIFICATE

                  WILLIS LEASE  FINANCE  CORPORATION  ("LESSOR"),  a corporation
organized  under  the  laws  of  California,  hereby  represents,  acknowledges,
warrants and agrees as follows:

                  1.  Lessor has received this day of                    , 200-
(Time: __), at               from ALOHA ISLANDAIR, [ INC.  ("Lessee")
possession of:

                  A.    One (1) de Havilland Model Dash 8-102 Aircraft,  bearing
                        Manufacturer's  Serial  Number 026 together with two (2)
                        Pratt & Whitney_ Engines,  Manufacturer's Serial Numbers
                            and   , two (2)   Hamilton   Standard    propellers,
                        Manufacturer's  Serial  Numbers and and all  appliances,
                        instruments,  accessories,  equipment  (not including an
                        APU) and  parts  attached  thereto  and  thereon,  in an
                        airworthy condition;

                  B.    Fuel on board the Aircraft,      ; and

                  C.    All  usual  and  customary  manuals,   logbooks,  flight
                        records  and   historical   information   regarding  the
                        Aircraft, the engines and the accessories and equipment,
                        including, without limitation, those listed on Exhibit D
                        to the Lease.

     2.   All  of  the  foregoing   were  delivered  and  accepted  to
Lessor's  full satisfaction  and pursuant to the terms and  provisions of
the Lease  Agreement between Lessor and Lessee dated as of February 22, 2000
(the "Lease")  except as set forth on Schedule 2 hereto.

     3.   The Aircraft,  Engines,  Propellers and Parts as described in the
Lease have been fully  examined  by Lessor and have been  received  in a
condition fully  satisfactory to Lessor and in full  conformance with the
Lease except as set forth on Schedule 2 hereto.

                                      E-1

<PAGE>

Dated this ______________ day of __________________. 200__

                                        WILLIS LEASE FINANCE CORPORATION

                                        (LESSOR)

                                        By: _______________________________
                                        Name: _____________________________
                                        Title: ____________________________

Lease Return Acceptance Certificate

Lease of de Havilland Dash 8-102

MSN 026

                                      E-2

<PAGE>

                                    EXHIBIT F

                    GENERAL RETURN CONDITIONS OF THE AIRCRAFT

1.      GENERAL RETURN CONDITIONS OF THE AIRCRAFT.

                 (a)  OPERATING  CONDITION.  The  Aircraft  shall be in as good
operating condition as on the Delivery Date, ordinary wear and tear from normal
airline passenger operations excepted.

                 (b)  CLEANLINESS  STANDARDS.  The  Aircraft  shall be clean by
United States commercial  airline standards and shall have received an exterior
and an interior deep cleaning since its last commercial  flight and shall be in
the condition  required for  immediate  service in the  commercial  carriage of
passengers.

                 (c) CERTIFICATE OF AIRWORTHINESS. The Aircraft shall have, and
be in  compliance with, a current valid Standard  Certificate of Airworthiness
issued by the FAA without any corrections, repairs, modifications,  alterations
or overhauls having to be performed by Lessor to meet such standards and rules.
If required by Lessor, Lessee shall assist Lessor to do the necessary paperwork
to request in the name of Lessor or such other Person  designated by the Lessor
a Certificate of  Airworthiness  for Export so as to allow Lessor to place the
Aircraft on a different aircraft registry. If any work, including  engineering,
is required on the Aircraft to obtain such  Certificate  of  Airworthiness  for
Export,  Lessee will  cooperate with Lessor to do or cause to be done such work
at Lessor's expense.

                 (d) COMPLIANCE WITH  GOVERNMENTAL  REQUIREMENTS.  The Aircraft
shall  be  in  compliance  with  all  Airworthiness  Directives  affecting  the
Aircraft.  In the event  Lessee has obtained a waiver or  applicable  deviation
from  the   Aeronautical   Authority  from  having  to  comply  with  any  such
Airworthiness  Directives,  Lessee at its expense shall,  irrespective  of such
waiver  or  deviation,  fully  comply  with all such  Airworthiness  Directives
covered by such  waiver or  deviation  prior to the return of the  Aircraft  to
Lessor as if such waiver or deviation did not exist. It is expressly understood
that with respect to Airworthiness  Directives with respect to which compliance
is required during the Term Section 9.06 shall apply.

                 (e)  DEFERRED   MAINTENANCE.   The  Aircraft  shall  have  had
accomplished  thereon all  outstanding  deferred  maintenance  items and flight
discrepancies.  Items deferred  because of maintenance  concessions  (i.e.,  an
exemption to operate beyond the normal limits by  monitoring)  shall be brought
up-to-date as if such maintenance concessions or exemptions did not exist.

                 (f)  CORROSION TREATMENT. The Aircraft shall have been
maintained by cleaning and treating of all mild corrosion and correcting of all
moderate and

                                      F-1

<PAGE>

severe or exfoliated corrosion in accordance with the Maintenance Program.

                  (g)  CONFIGURATION  AND  CONDITION.   The  Aircraft  shall  be
returned  in the same  configuration  as on the  Delivery  Date and in the same
condition with all Parts installed  therein as on the Delivery Date,  excepting
only  Modifications,  additions,  replacements and substitution of Parts as may
have been  properly  made by Lessee  pursuant  to Section 9 of the Lease and as
specifically otherwise set forth in this Exhibit F. Lessee shall, prior to such
return of the Aircraft,  furnish  Lessor with a list of all such  Modifications
made during the Term.  Lessee  shall  provide  Lessor with the last twelve (12)
reliability reports for the Aircraft as provided to the Aeronautical  Authority
and a list of all  rotable  Parts  installed  on the  Aircraft  during the last
twelve (12) months of the Term and of all rotable  Parts  replaced  during said
last twelve (12) months.  Lessee  shall not replace  Parts with parts having an
operating record indicating a higher failure rate than the average for the same
type of parts placed by Lessee in other  aircraft or engines or  propellers  of
the same respective model and  manufacturer  during the last twelve (12) months
of the Term.

                  (h) PART 121  OPERATION.  The Aircraft shall be in a condition
as to be immediately capable of being operated as a Part 121 Aircraft.

                  (i) INTERIOR  CONDITION.  The interior of the Aircraft will be
in  substantially  the same condition as it was on the Delivery Date,  ordinary
wear and tear excepted.  Cabin windows shall be clear and without major crazing
or scratches.

II.  CONDITION OF AIRFRAME AND ENGINES.

                 The  Airframe  at the time of its return to Lessor  shall meet
the requirements set forth below, all at Lessee's expense,  except as otherwise
provided herein:

                 (a) Lessee  shall  have  performed  or caused to be
performed prior to  redelivery  to the  Lessor  the  following:  (i) a
segment  of the de Havilland   Equalized   Maintenance  Program  (without
changing  the  sequence thereof),   (ii)  any   maintenance  or
inspections,   including   structural inspections,  required  by the
Maintenance  Program  and not  included  in the Equalized  Maintenance
Program or, any replacement  Maintenance Program for the de Havilland
Equalized  Maintenance  Program, in effect on the Redelivery Date, (the "Out
of Phase Items") due within 3,500 Flight Hours or Cycles or 12 months
(whichever is the more  limiting)  after the end of the Term,  and (iii)
either the Aircraft  shall be  redelivered to the Lessor with not less than
the number of Cycles remaining until the next 40,000 cycle structural
inspection required under the de Havilland  Maintenance Program as it had
remaining on the Delivery Date,  or Lessee  shall  compensate  Lessor in
respect  of the  deficiency  as provided in Section III hereof. In the event,
during the Term, the Lessee adopts a Maintenance Program other than the de
Havilland Equalized Maintenance Program the requirement in (i) above shall be
changed to, an "A" and "C" check or their equivalent under the Maintenance
Program. The

                                      F-2

<PAGE>

Aircraft shall not have been operated  since the  completion of the  maintenance
required in this section except for flights pursuant to Section 10.07 and 10.08.
For  purposes  of clause II (a) (ii)  above,  in the  event any  maintenance  or
inspection  is  required  within the period  after the end of the Term set forth
therein,  Lessee  shall be  deemed  to have  satisfied  such  requirement  if it
performs the next such  maintenance  or inspection due after the end of the Term
(it not being intended that Lessee be required to perform any terminating action
due after the later of the end of the Term or the return of the  Aircraft to the
Lessor pursuant to Section 9.06).

                  (b) Lessee will correct any deficiencies  revealed during such
check, if any, and all deferred maintenance items;

                  (c) The  cockpit  shall be cleaned  and  placards  replaced if
required by the Maintenance Program.  Those items which are reasonably found by
Lessor to be  defective  items in the  Aircrafts  interior  will be replaced or
repaired in accordance with the Maintenance  Program.  All cockpit  windshields
and windows shall be free of delamination, bubbles or signs of overheat;

                 (d)  Lessee  will  permanently  repair  impact  damage  to the
Aircraft not within the limits of the structural repair manual caused by ground
handling  equipment or impact damage  caused by foreign  objects if required by
and shall be repaired in accordance with the structural  repair manual or other
FAA approved data;

                 (e) Except as otherwise  provided in this Exhibit F, all Parts
shall be serviceable in accordance with Aeronautical  Authority  standards and
have a  value,  modification  status  and  condition  equivalent  to the  Parts
originally  installed in the  Aircraft,  ordinary wear and tear  excepted.  All
installed  life-limited and time controlled  components,  including the landing
gear, shall either (i) have not less than the number of Flight Hours and Cycles
or days as its respective  then authorized life remaining to the next scheduled
maintenance  as it did on the  Delivery  Date or (ii) Lessee  shall  compensate
Lessor in respect  of the  deficiency  as  provided  in  Section  III  hereof.
Notwithstanding  the  foregoing and Section III,  below,  in no event shall any
single  component  have less  than  3,500  Flight  Hours or Cycles or 12 months
(whichever is the most limiting) of its then  authorized  life remaining to the
next scheduled maintenance;

                   (f) The  Propellers  shall  either (i) have not less than the
number of Flight Hours and Cycles remaining to their next scheduled  removal as
each did on the  Delivery  Date or (ii)  Lessee  shall  compensate  Lessor  in
respect of the  deficiency  as provided in Section III hereof.  Notwithstanding
the foregoing  and Section III,  below,  in no event shall any  Propeller  have
fewer than 3,500 Flight Hours or Cycles  (whichever is more limiting) until its
next scheduled removal;

                  (g) The  Engines  shall be  returned  zero  time from a major
refurbishment  except for flights pursuant to Section 10.07 and 10.08.  Engine
Life Limited  Parts (LLP) and time  controlled  Parts shall either (i) have not
less than the

                                      F-3

<PAGE>

number of Flight Hours or Cycles (whichever is more limiting) remaining to their
next scheduled removal as each had on the Delivery Date, or, with respect to any
Life  Limited  Part  or time  controlled  component  that  -is  replaced  in the
refurbishment performed at Lessor's expense pursuant to Section 9.03, had at the
time of installation,  or (ii) Lessee shall compensate  Lessor in respect of the
deficiency as provided in Section III hereof.  Notwithstanding the foregoing and
Section III,  below, in no event shall any LLP or time controlled Part have less
than 3,500 Flight Hours or Cycles  (whichever is more  limiting)  until its next
scheduled removal, and

                 (h) The  Aircraft  shall be  returned  with the same amount of
fuel on board as when delivered. All engine oil tanks, hydraulic reservoirs and
oxygen cylinders shall be serviced full.

Ill. ADJUSTMENTS.

                 In the event the Airframe, Engines, Propellers, Parts or other
components  (each a "Component")  do not meet the return  conditions in Part II
above, and the relevant  provision permits Lessee to either meet such condition
or compensate Lessor (herein, a "Compensation  Item"), the Lessee shall pay the
Lessor a dollar amount computed by multiplying (i) the cost to Lessee of having
an outside supplier or contractor perform checks, scheduled removal,  scheduled
maintenance  or  replacement  of the  Component,  whichever is the  appropriate
measure for such return condition (the "Periodic Service"),  by (ii) a fraction
of which (x) the numerator shall be the difference  between the required number
of Flight Hours or Cycles  (whichever is more  limiting) for such  Component to
the next Periodic  Service  specified in Part II above and the actual number of
Flight  Hours  or  Cycles  (whichever  is more  limiting)  remaining  for  such
Component to the next  Periodic  Service and (y) the  denominator  shall be the
number of Flight Hours or Cycles (whichever is more limiting) allowable between
each instance of Periodic  Service for such  Component.  To the extent that the
remaining  life of any  Component  (excluding  for this purpose any LLP or time
controlled  component  that  is  replaced  in the  refurbishment  performed  at
Lessor's  expense  pursuant to Section 9.03) exceeds the Flight Hours or Cycles
(whichever  is more  limiting)  to the  next  Periodic  Service  required  in a
Compensation  Item in part II above and no Default  or Event of  Default  shall
then exist,  the Lessee  shall be entitled to a credit  against  amounts due to
Lessor by operation of the preceding sentence. Such credit shall equal a dollar
amount  calculated by  multiplying  (i) the cost to Lessee of having an outside
supplier  or  contractor  perform  the  appropriate  Periodic  Service  for the
Component by (ii) a fraction of which (x) the numerator shall be the difference
between  the  actual  number  of  Flight  Hours or  Cycles  (whichever  is more
limiting)  remaining for such  Component to the next  Periodic  Service and the
required  number of hours of operation or Cycles for such Component to the next
Periodic Service  specified in Part II above, and (y) the denominator  shall be
the number of Flight Hours or Cycles  (whichever  is more  limiting)  allowable
between each instance of Periodic Service for such Component, provided that (1)
the credit shall only be used to offset the Lessee's obligation to pay a dollar
adjustment to Lessor  pursuant to this Part Ill and in no event shall Lessor be
required to pay any amount

                                      F-4

<PAGE>

to Lessee by reason of the condition of any Component and (2) no credit provided
herein  shall be used to  offset a dollar  adjustment  caused  by the  Component
having less than the minimum hours of Flight Hours or Cycles  (whichever is more
limiting) to the next Periodic Service provided for in Part II above.

                                      F-5

<PAGE>

                             ACCEPTANCE CERTIFICATE

     ALOHA  ISLANDAIR,  INC.  ("LESSEE"),  a corporation  organized under the
laws of Delaware, hereby represents, acknowledges, warrants and agrees as
follows:

     1. Lessee has received  this 24th day of March,  2000 (Time: 11:45 a.m.
CST time) at Wichita,  Kansas,  from WILLIS LEASE FINANCE CORPORATION
("Lessor") possession of:

     A.   One  (1)  de   Havilland   Model  Dash  8-102   Aircraft (described
          in the FAA  records  as a Model  DHC-8-102), bearing
          Manufacturer's   Serial   Number   026,   U.S. Registration  No.
          N812PH,  together with two (2) Pratt & Whitney PW120  Engines,
          Manufacturer's  Serial  Numbers 120107 and  120142,  two (2)
          Hamilton  Standard 14 SF-7 Propellers,  Manufacturer's  Serial
          Numbers  851114 and 890711  and all  appliances,  instruments,
          accessories, equipment  (not  including  an APU) and  parts
          attached thereto and thereon, in an airworthy condition;

     B.   Fuel on board the Aircraft, 2200 pounds;

     C.   All manuals,  logbooks,  flight  records and  historical
          information regarding the Aircraft,  the engines and the
          accessories    and   equipment,    including,    without
          limitation,  those listed on Exhibit D to the Lease,  in the
          possession of Lessor; and

     D.   the items listed on Schedule 1 hereto.

     2.   All  of the  foregoing  were  delivered  and  accepted  to Lessee's
full  satisfaction  and  pursuant to the terms and  provisions  of the
Aircraft Lease  Agreement  between  Lessor and Lessee,  dated as of February
22, 2000 (the  "Lease"),  except as set forth on Schedule 2 hereto.  For
purposes of the Lease, Lessor and Lessee agree that the installed hard time
components have, as of the  Delivery  Date,  the time,  Flight  Hours and
Cycles  operating  time remaining as set forth on Schedule 3 hereto.

     3.   The Aircraft, Engines, Propellers and Parts as described in the
Lease  have  been  fully  examined  by Lessee  and have been  received  in a
condition fully satisfactory to Lessee and in full conformance with the Lease
in every respect except as set forth in Schedule 2 hereto.

     4.   The Lease and Operative  Documents (as defined therein) are in full
force and effect; Lessor has fully, duly and timely performed all of its
obligations  of every  kind or  nature  under  the  Lease  and  other
Operative Documents;  and Lessee has no claims;  deductions,  set-offs or
defenses of any kind or nature in connection with the Lease and, other
Operative Documents.

                                      -1-

<PAGE>

     5.   Prior  to the  Delivery  Date,  Lessee  has  obtained  all required
permits,  authorizations,  and  licenses  required,  and has  paid all
required  fees and taxes  relating to the Lease  imposed by the United States
or any other government and/or any political  subdivision  thereof and any
agencies and departments  thereof to allow Lessee to operate the Aircraft as
permitted by the terms of the Lease.

     6.   Lessor and its  successors and assigns shall be entitled to rely
upon this Acceptance Certificate.

     7.   The  Delivery  Date (as  defined  in the Lease) is the date written
in paragraph 1 herein.

                                    ALOHA ISLANDAIR, INC. (LESSEE)

                             By:     /s/ BRENDA F. CUTWRIGHT
                                    -----------------------------------
                             Title:  EXECUTIVE VICE PRESIDENT AND
                                     CHIEF FINANCIAL OFFICER
                                    -----------------------------------

                             By:     /s/ OWEN SEKIMURA
                                    -----------------------------------
                             Title:  VICE PRESDIENT FINANCE
                                     AND CONTROLLER
                                    -----------------------------------

Lease Acceptance Certificate

 Lease of de Havilland Dash 8-102

 MSN 026

                                       -2-

<PAGE>

                                   SCHEDULE 1

                            AIRCRAFT LOOSE EQUIPMENT

<table>

<caption>

QTY      ITEM DESCRIPTION

      <c>
3        Crew Oxygen Mask
3        Smoke Goggles
2        Coffee Cup Holders
1        AFM
2        Crew Life Vest
1        Observers Life Vest
2        Hand Microphones
2        Crew Flashlights
1        Crew Fire Extinguisher
1        Crew Fire Ax
1        Spare Filament Holder
1        PBE in cockpit
1        Alternate  Extension  Handle in  cockpit
1        Overhead  Emergency  Light in cockpit
1        Galley  Service  Cart with trays
3        Galley Food Tray Boxes
2        Galley Hot Jugs
1        PBE in forward galley storage area
1        Fire Extinguisher in forward galley storage compartment
3        Seat Belt Extensions in forward  galley  storage  compartment
2        Passenger O2 Bottles in forward  galley storage  compartment
5        Cabin Seat  Tables
1        Life Vest under F/A seat
1        Flash  Light under F/A seat
1        First Aid Kit in forward galley storage  compartment
1        Medical Kit in forward galley storage  compartment
1        PBE on aft bulkhead
1        Fire Extinguisher on aft bulkhead
2        Propeller Restraints
2        Engine Plug
2        Static Port Covers
1        Set Windshield Covers
2        Pitot Tube Covers
1        Set Landing Gear Safety Pins

 </table>

<PAGE>

                                   SCHEDULE 2

                              LIST OF DISCREPANCIES

1.   Refurbish  left ice  shield as  necessary.
2.   Refurbish  right ice shield as   necessary.
3.   Left wing to fuselage  aft brace upper bolts have rust and  corrosion
     on the   heads.  Clean or replace as necessary.
4.   Left wing to fuselage aft brace upper   bolts have rust and  corrosion
     on the heads. Clean or replace as  necessary.
5.   Left engine  outboard cowl door  de-laminating  at aft lower edge.
     Repair as   necessary.
6.   Check top composite access panel just forward of the left exhaust
     fingernail   for  de-lamination.  Repair as  necessary.
7.   Repair  damage to forward  edge of overhead bin door at seat row 9CDE.
8.   Seat 3B table cracked at forward right corner. Replace table.
9.   Trim at lower inboard corner of flight attendants seat is damaged. Repair
     or replace as necessary.
10.  Check cockpit door for freedom of opening and interference with lavatory
     door.
11.  The overhead ceiling panel around the captain's map light is cracked and
     has a piece missing. Repair or replace as necessary.

12.  Cockpit floor  coming  loose in front of the  pedestal  and inboard of the
     copilots seat. Secure as necessary.
13.  Check observers seat belt for fraying. Replace as necessary.
14.  The pilots coat hook will not stow. Replace as necessary.
15.  Composite  panel on the  outboard  side of #2 nacelle  just aft of the
     flap trailing edge needs repair on the aft edge.
16.  Engine  condition panel door in the left wheel well has the wrong
     fasteners. Replace with correct fasteners.
17.  The bottom edge of left and right exhaust fingernails need to be
     straightened and smoothed.
18.  Non-standard grommet installed on structure under the cockpit floor for
     the left elevator cable. Ref. EO 8-53-99-199. Repair as necessary.
19.  FDAU needs repair.
Note: Lessor will pay the cost for the correction of items 1 through 18 by
Avmax.

<PAGE>

                                   SCHEDULE 3

             TIME CONTROLLED/ LIFE LIMITED PARTS STATUS AT DELIVERY

       Aircraft: Total Time 31,539 Total Cycles 43,190 Date 23 March 2000

<table>

<Caption>
NOMENCLATURE               POSITION        SERIAL NUMBER         TIME SINCE OVERHAUL/INSTALLATION

                        <c>             <c>                   <c>
Cockpit Voice Recorder     only            101128                due
Flight Data Recorder       only            2893                  on condition
Air Cycle Machine          only            unk                   on condition
Starter/Generator          left            290                   170 hr
Starter/Generator          right           96117                 702 hr
AC Generator               left            578                   170 hr
AC Generator               right           96108                 2,187 hr
ELT                        only            408241                due
Fire Bottle Disc. Cart     F#1             9705145               1,032 da
Fire Bottle Disc. Cart     F#2             9705146               1,032 da
Fire Bottle Disc. Cart     A#1             9705143               1,032 da
Fire Bottle Disc. Cart     A#2             9705144               1,032 da
Fire Bottle HST            fwd             21548D1               1,044 da
Fire Bottle HST            aft             15280D1               1,044 da
Crew O2 Bottle, HST        only            544077                4,958 da
Transponder                left            4371                  619 da
Transponder                right           4355                  635 da
Propeller                  left            851114 Hub s/n199     7,929 hr
Blade, Prop.               #1              852759                3 hr
Blade, Prop.               #2              854366                1 hr
Blade, Prop.               #3              876632-7              208 hr
Blade, Prop.               #4              886214-7              6,432 hr
Propeller Actuator         left            890124                6,389 hr
Propeller Control Unit     left            870553                4,297 hr
Propeller                  right           890711 Hub s/n641     6,350 hr
Blade, Prop.               #1              860036-7              6,872 hr
Blade, Prop.               #2              856034                7,542 hr
Blade, Prop.               #3              865607-7              7,050 hr
Blade, Prop.               #4              851590                6,872 hr
Propeller Actuator         right           106                   7,747 hr
Propeller Control Unit     right           890357                1,732 hr
Engine                     left            120107                on condition
Impeller, HP               left            2E542                 22,890 cy
Impeller, LP               left            3F823                 9,048 cy
Cover, HP Front            left            15B144                9,048 cy
Cover, HP Rear             left            15B172                9,048 cy
Disc, HP                   left            14B921                9,048 cy
Disc, LP                   left            94A609                9,048 cy
Disc, PT-1                 left            86A734                9,048 cy
Disc, PT-2                 left            97A582                9,048 cy
Seal, Interstage Air       left            11B719                9,048 cy

</table>

<PAGE>

<TABLE>
                        <c>             <c>                   <c>
Blades, HP                 left            various               9,048 cy
Engine                     right           120142                on condition
Impeller, LP               right           5E754                 17,361 cy
Impeller, HP               right           7F528                 3,062 cy
Cover, HP Front            right           23B271                7,383 cy
Cover, HP Rear             right           27B996                7,383 cy
Disc, HP                   right           17B182                7,383 cy
Disc, LP                   right           23B548                7,383 cy
Disc, PT-1                 right           56AO52                15,099 cy
Disc, PT-2                 right           18A324                22,021 cy
Seal, Air Interstage       right           27B788                7,383 cy
Blades, HP                 right           various               3,062 cy
Ground Prox. Warning       only            6345                  1 hr.
Air Data Computer          left            86101758              40 da
Air Data Computer          right           87092321              184 da
Altimeter                  pilot           unk                   on condition
Altimeter                  co-pilot        unk                   on condition
Altimeter                  standby         8309                  541 da
Yolk Assembly, MLG         left            DCL104-85             OH     5 cy / LL 38,545 cy
Yolk Assembly   MLG        right           DCL103-85             OH 2,962 cy / LL 41,262 cy
Drag Strut, MLG            left            DCL127-86             OH 2,961 cy / LL 41,262 cy
Drag Strut, MLG            right           DCL259-87             OH 2,961 cy / LL 30,380 cy
Shock Strut, MLG           left            DCL060-85             OH 14,676 cy / LL36,892 cy
Piston, MLG Shock Strut    left            0364WH                OH 14,676 cy / LL 36,892 cy
Cylinder, MLG Shock Strut  left            057                   OH 14,676 cy / LL 36,892 cy
Link, MLG Up. Torque       left            DCL165                OH 14,676 cy / LL 23,730 cy
Link, MLG Lo. Torque       left            DCL637                OH 14,676 cy I LL 39,455 cy
Shock Strut, MLG           right           CL1188693R            OH 14,676 cy / LL 36,938 cy
Piston, MLG Shock Strut    right           231                   OH 14,676 cy / LL 36,938 cy
Cylinder, MLG Shock Strut  right           DCL116                OH 14,676 cy / LL 36,938 cy
Link, MLG Up. Torque       right           DCL138                OH 14,676 cy / LL 39,455 cy
Link, MLG Lo. Torque       right           DCL691                OH 14,676 cy / LL 15,434 cy
Pin, Strut to Yolk, MLG    left            CL1188693R                         / LL 14,676 cy
Pin, Strut to Yolk, MLG    right           DCLO60-85                          / LL 14,676 cy
Stabilizer Stay, MLG       left            DCL1288688            OH 3,883 cy / LL 37,137 cy
Stabilizer Stay, MLG       right           DCL168-86             OH 7,485 cy / LL 37,308 cy
Drag Strut, NLG            only            DCL233-89             OH 8,232 cy / LL 29,111 cy
Shock Strut, NLG           only            DCL092-86             OH 6,046 cy / LL 36,205cy
Piston, NLG Shock Strut    only            CH008                 OH 6,046 cy / LL 36,205 cy
Cylinder, NLG Outer        only            DCL206                OH 6,046 cy / LL 31,338 cy
Cylinder, NLG Inner        only            0165WH                OH 6,046 cy / LL 36,205 cy
Axle, NLG                  only            CH008                 OH 6,046 cy / LL 36,205 cy
Trailing Arm, NLG          only            DCL161                OH 6,046 cy / LL 31,338 cy
Actuator, Steering, NLG    only            DCL0338586            on condition / LL 36,205 cy
Trunnion Plates, NLG       left & right    NSN                   on condition / LL 43,190 cy
Trunnion Cap, NLG          left & right    NSN                   on condition / LL 43,190 cy
</TABLE>

                                       3-2<PAGE>
                                                                EXHIBIT 10.58

                                 LEASE AGREEMENT
                                     BETWEEN
                            WILMINGTON TRUST COMPANY,
                                AS OWNER TRUSTEE,
                                     LESSOR

                                       AND
                              ALOHA AIRLINES, INC.,
                             A DELAWARE CORPORATION,
                                     LESSEE
                                   DATED AS OF
                                 AUGUST 4, 1999

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

                        ONE BOEING MODEL 737-73A AIRCRAFT
                       MANUFACTURER'S SERIAL NUMBER 28499

<PAGE>

                              TABLE OF CONTENTS
<TABLE>
<S>            <C>                                                       <C>
                                                                         PAGE
                                                                         ----
ARTICLE 1.     DEFINITIONS...............................................1-1
ARTICLE 2.     ACCEPTANCE UNDER LEASE....................................2-1
    (a)        Conditions Precedent......................................2-1
    (b)        Time of Delivery..........................................2-3
    (c)        Place of Delivery.........................................2-3
    (d)        Test Flight; Customer Walk-Around.........................2-3
    (e)        Change Orders.............................................2-3
    (f)        Development Changes.......................................2-4
    (g)        Use of Aircraft by Manufacturer...........................2-4
    (h)        Lessor Aircraft Modifications.............................2-4
ARTICLE 3.     TERM AND RENT.............................................3-1
    (a)        Term......................................................3-1
    (b)        Basic Rent................................................3-1
    (c)        Security Deposit..........................................3-1
    (d)        Supplemental Rent.........................................3-2
    (e)        Payments on Business Days.................................3-2
    (f)        Place of Payment..........................................3-2
    (g)        Prohibition Against Setoff, Counterclaim, Etc. ...........3-2
ARTICLE 4.     REPRESENTATIONS AND WARRANTIES............................4-1
    (a)        Lessor's Representations and Warranties...................4-1
    (b)        Lessee's  Representations and Warranties..................4-2
ARTICLE 5.     POSSESSION AND USE........................................5-1
    (a)        Possession................................................5-1
    (b)        Lawful Operations; Use....................................5-1
    (c)        Maintenance...............................................5-2
    (d)        Registration and Insignia.................................5-3
ARTICLE 6.     REPLACEMENT AND POOLING OF PARTS;
               ALTERATIONS, MODIFICATIONS AND ADDITIONS..................6-1
</TABLE>

                                     - i -

<PAGE>

                              [MISSING PAGE -ii-]

<PAGE>

<TABLE>
<S>            <C>                                                       <C>
    (j)        Insurance of Lessee's Interest...........................10-5
ARTICLE 11.    MORTGAGES, LIENS, ETC....................................11-1
ARTICLE 12.    RECORDATION AND FURTHER ASSURANCES.......................12-1
ARTICLE 13.    RETURN OF AIRCRAFT AND RECORDS...........................13-1
    (a)        Return...................................................13-1
    (b)        Inspection; Test Flight..................................13-1
    (c)        Flight Hours/Cycles/Time Requirements....................13-2
    (d)        General Return Requirements..............................13-11
    (e)        Records..................................................13-12
    (f)        Technical Acceptance; Ferry Flight ......................13-12
    (g)        Aid in Disposition.......................................13-13
ARTICLE 14.    EVENTS OF DEFAULT .......................................14-1
ARTICLE 15.    REMEDIES.................................................15-1
ARTICLE 16.    EXCUSABLE DELAY..........................................16-1
    (a)        General..................................................16-1
    (b)        Four (4) Months' Excusable Delay.........................16-1
    (c)        Consequence of Termination...............................16-1
    (d)        Failure to Terminate.....................................16-2
    (e)        Damage to or Destruction of Aircraft - Delivery Delay....16-2
    (f)        Termination Rights Exclusive.............................16-2
 ARTICLE 17.   MISCELLANEOUS............................................17-1
    (a)        Construction and Applicable Law..........................17-1
    (b)        Notices..................................................17-1
    (c)        Lessor's Right to Perform for Lessee.....................17-2
    (d)        Corporate Existence; Merger..............................17-2
    (e)        Training and Customer Support............................17-3
    (f)        Subject and Subordinate..................................17-3
    (g)        Assignment...............................................17-4
    (h)        Expenses.................................................17-4
    (i)        Survival.................................................17-4
    (j)        Integration..............................................17-5
    (k)        Federal Bankruptcy Code..................................17-5

</TABLE>

                                        - iii -

<PAGE>

<TABLE>
<S>            <C>                                                       <C>

    (l)        Counterparts..............................................17-5
    (m)        Execution by Telecopy.....................................17-5
Schedule "1"   ...........................................................S-1
Exhibit "A"    ...........................................................A-1

</TABLE>

                                        - iv -

<PAGE>

                                 LEASE AGREEMENT

       This Lease Agreement, dated as of August 4, 1999, is entered into by and
between Wilmington Trust Company, a Delaware banking corporation, with a  place
of  business at Rodney  Square  North,  1100 North  Market  Street,  Wilmington,
Delaware  19890-0001  acting not in its individual  capacity but solely as Owner
Trustee  (herein  called  "Lessor"),  and  Aloha  Airlines,  Inc.,  a  Delaware
corporation,  having  its  principal  place of  business  at 371  Aokea  Street,
Honolulu, Hawaii 96819 (herein called "Lessee")

                                    RECITALS

        Lessee  desires to lease  from  Lessor and Lessor is willing to lease to
Lessee  the  Aircraft  described  herein  upon  and  subject  to the  terms  and
conditions  of this Lease.  In  consideration  of the mutual  promise's  herein,
Lessor and Lessee agree as follows:

                              TERMS AND CONDITIONS

        ARTICLE 1.  DEFINITIONS  The  following  terms shall have the  following
meanings  and shall be equally  applicable  to both the  singular and the plural
forms of the terms defined herein:

        "Approved   Maintenance   Performer"  means  any  maintenance  performer
approved  by the FAA and  commonly  recognized  in the  industry  as a reputable
maintenance  performer,  or any  other  person  agreed  to from  time to time in
writing by Lessor,  including  Air New Zealand  Limited,  of  Christchurch,  New
Zealand,  Aviation  Management  Systems,  Inc.  or  Goodyear,  each of  Phoenix,
Arizona, Spar Aerospace Limited, of Alberta, Canada, and B.F. Goodrich (formerly
known as Tramco), of Everett, Washington.

        "Aircraft" means the Airframe to be leased hereunder, together with each
Engine  initially  installed on the Airframe when delivered and leased hereunder
(or any engine  substituted  for any such  Engine  pursuant to the terms of this
Lease),  whether or not any of such initial or substituted Engines may from time
to time no longer be installed on the Airframe or on any other aircraft.

        "Airframe"  means (i) the Boeing Model 737-73A  aircraft,  excluding any
Engines  or other  engines that may be installed on such  aircraft  from time to
time, to be manufactured and sold pursuant to the Purchase  Agreement and leased
by Lessor to Lessee hereunder and under a Lease Supplement; and (ii) any and all
Parts,  so long as the same shall be incorporated in 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 Article 6 hereof after removal from the Airframe.

                                       1-1

<PAGE>

        "APU" means the  auxiliary  power unit  installed in the Airframe on the
Delivery Date (or such auxiliary power unit as may be substituted therefor after
the Delivery Date in accordance with the requirements of this Lease).

        "Basic  Rent" for the  Aircraft  means the basic  rent  payable  for the
Aircraft  pursuant  to  Article  3(b) hereof (as  supplemented  by  Schedule "1"
hereto).

        "Business Day" means any day other than a Saturday,  Sunday or other day
on which commercial  banking  institutions are authorized by law to be closed in
the city of Honolulu,  Hawaii,  in the city of New York, New York, or other city
as may be designated by Lessor from time to time pursuant to Article 3(f).

        "Certificated  Air  Carrier"  means an air carrier  certificated  by the
Department  of  Transportation  under  Section  41102 of Title 49 of the  United
States Code, or under similar provisions of any statute enacted in lieu thereof.

        "Companion  Lease"  means the  Lease  Agreement  of even  date  herewith
between Lessor and Lessee pursuant to which Lessor has agreed to lease to Lessee
another Boeing Model 737-73A aircraft,

        "Country of Registration" means the United States of America.

        "Cycle"  means:  (i) with  respect to the  Airframe,  one  take-off  and
landing of the  Airframe  and (ii) with  respect to an Engine or other engine or
any Part or part,  one take-off and landing of the Airframe or other airframe on
which such Engine or other engine or Part or part is installed.

        "Delivery Date" means the date of the Lease Supplement for the Aircraft,
which date shall be the same date the Aircraft is delivered to, and accepted by,
Lessee hereunder.

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

        "Engine" means (i) each of the two CFM  International  Model  CFM56-7B20
engines (to be upgraded to  CFM56-7B24  engines  prior to or promptly  following
delivery) specified by manufacturer's serial numbers in the Lease Supplement and
installed on the Airframe on the Delivery  Date therefor (or an engine which may
from time to time be  substituted  for such an Engine  pursuant to Article  9(b)
hereof),  whether or not from time to time thereafter no longer installed on the
Airframe or installed on any other  aircraft and (ii) any and all Parts, so long
as the same shall be  incorporated in or installed on or attached to such Engine
(or  engine)  or so long as title  thereto  shall  remain  vested  in  Lessor in
accordance with the terms of Article 6 hereof after removal from such Engine (or
engine).

        "Equipment"  means, as the context may require,  the Aircraft,  Airframe
and Engines then leased hereunder.

                                       1-2

<PAGE>

        "Event"  means an event or  occurrence  which,  with the passing of time
and/or the giving of notice, would constitute an Event of Default.

        "Event of  Default"  means any of the events  referred  to in Article 14
hereof.

        "Event of Loss" with respect to any Item of Equipment  means any of the
following  events with respect to such Item of Equipment:  (a) loss of such Item
of  Equipment or the use thereof due to theft or  disappearance  for a period in
excess of thirty (30) days, or  destruction,  damage beyond  economic  repair or
rendition  of such Item of  Equipment  permanently  unfit for normal use for any
reason  whatsoever;  (b) any loss of or damage to such Item of  Equipment  which
results in an insurance  settlement with respect thereto on the basis of a total
loss,  or a  constructive  or  compromised  total  loss;  (c) the  condemnation,
confiscation or requisition of title to or use of such Item of Equipment,  other
than a  requisition  for use of such Item of Equipment by the  Government of the
Country of  Registration  of the  Aircraft  for a period of less than sixty (60)
days; (d) as a result of any rule, regulation, order, or other action by the FAA
or  other  governmental  body  having  jurisdiction,  the  use of  such  Item of
Equipment in the normal course of air  transportation of persons shall have been
prohibited for a period of six consecutive months; or (e) any other deprivation
or seizure of such Item of Equipment  for a period of more than sixty (60) days.
An Event of Loss to the Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe of the Aircraft.

        "Excusable Delay" shall have the meaning set forth in Article 16 hereof.

        "FAA"  means,  as the context may require or permit,  the United  States
Federal   Aviation   Administration,  the  Department  of  Transportation,   the
Administrator   of   the  Federal  Aviation   Administration,  and  any  person,
governmental  department,  bureau,  commission  or  agency  succeeding  to  the
functions of any of the foregoing.

        "FAR" means the United States Federal Aviation Regulations issued by the
FAA pursuant to the United  States  Transportation  Code of 1994,  as amended or
supplemented from time to time.

        "Flight Hour" means: (i) with respect to the Airframe, each hour or part
thereof which elapses from the time the wheels of the Airframe  leave the ground
on  take-off  to the time when the  wheels of the  Airframe  touch the ground on
landing, and (ii) with respect to an Engine or other engine or any Part or part,
including  the APU,  each hour or part thereof  which  elapses from the time the
wheels of the airframe,  whether or not the Airframe leased hereunder,  on which
such Engine or other  engine or Part or part is  installed,  leave the ground on
takeoff  to the time  when the  wheels  of such  airframe  touch  the  ground on
landing.

        "Item of  Equipment"  means,  as the context may require,  the Aircraft,
Airframe or any Engine then leased hereunder.

        "Incentive  Rate" means three (3)  percentage  points above the prime or
base rate of interest  charged by Citibank,  N.A., in New York from time to time
as its prime or base

                                       1-3

<PAGE>

commercial  lending rate,  but, if  prohibited  by  applicable  law, the maximum
contract rate permitted by applicable law.

        "Landing  Gear"  means  the  landing  gear  (as per  the  Manufacturer's
definition,  I.E.,  excluding  actuating  mechanisms,  etc.)  installed  on  the
Airframe  on the  Delivery  Date (or  such  landing  gear as may be  substituted
therefor  after the Delivery Date in accordance  with the  requirements  of this
Lease).

        "Lease Agreement,"  "this Lease," "this Agreement,"  "herein,"
"hereof," "hereunder"  or other like words  means  this  Lease  Agreement  as
the same may hereafter  from  time to time  be  supplemented,  amended,
waived  or  modified pursuant to the applicable  provisions hereof,
including,  without  limitation, supplementation hereof by one or more Lease
Supplements.

        "Lease  Supplement"  means each Lease  Supplement,  substantially in the
form of Exhibit "A" hereto, to be entered into between Lessor and Lessee for the
purpose of leasing an Item of Equipment  under and pursuant to the terms of this
Lease Agreement.

        "Letter  of  Credit"   means  an  irrevocable,   transferable    standby
letter  of  credit  issued  for the benefit of Lessor by a  substantial  banking
institution  in  Honolulu,  Hawaii,  Los  Angeles or San Francisco,  California,
or New York, New York, acceptable to Lessor, in form and substance  satisfactory
to Lessor in its sole discretion.

        "Lien" means any mortgage,  pledge,  lien, charge,  encumbrance,  lease,
security interest or claim.

        "Maintenance  Program," as of any date of determination,  means Lessee's
program of overhaul and maintenance  for the Equipment,  approved by the FAA and
which:  (i) at all times complies in all material  respects with the then latest
revision of the  Manufacturer's  Maintenance  Planning Document and, if Lessee's
program of overhaul and  maintenance is a block  maintenance  program,  the then
latest revision of Appendix C Document No. D626A001 (or any restatement thereof)
applicable to the Aircraft as the result of the Flight  Hours/Cycles  ratio that
the Aircraft  has been  operated  during the Term,  (ii)  incorporates  the then
latest revision of the Manufacturer's  Corrosion  Prevention and Control Program
for aircraft of similar type as the Aircraft, and (iii) at all times complies in
all material respects with the then latest revision of the Engine manufacturer's
Engine Management Program.

        "Manufacturer" means The Boeing Company, a Delaware corporation.

        "Mortgage"  means the mortgage  agreement  pursuant to which Lessor will
grant Mortgagee a mortgage  interest in the Aircraft to secure  repayment of the
financing  obligation incurred by Lessor in connection with Lessor's purchase of
the  Aircraft,  as  such  mortgage  agreement  may  be  modified,  amended  or
supplemented from time to time.

                                       1-4

<PAGE>

        "Mortgagee"  means the mortgagee under the Mortgage,  and its successors
and assigns.

        "Owner  Participant" means Ansett Worldwide  Aviation,  U.S.A., a Nevada
general partnership, and its successors and assigns.

        "Parts"  means  all  appliances,  components,  parts,  instruments,
appurtenances,  accessories, furnishings and other equipment of whatever nature,
including the APU and Landing Gear (but excluding whole Engines or engines),  so
long as the same shall be furnished  with,  incorporated  in,  installed  on, or
attached to the  Aircraft,  Airframe  or any Engine or so long as title  thereto
shall remain vested in Lessor in  accordance  with the terms of Article 6 hereof
after removal from the Aircraft, Airframe or such Engine.

        "Participant"  means Mortgagee,  WTC, Owner  Participant,  and any other
person or entity  that has or may  hereafter  acquire an  ownership  or mortgage
interest  in the  Aircraft,  whether  as  owner  trustee,  mortgagee,  indenture
trustee, owner participant, loan participant or otherwise.

        "Purchase  Agreement" means the Purchase  Agreement No. 1909 dated as of
March  6, 1999, including Detail Specification  D6-38808-7,  Latest Revision, to
the extent the same  relates to the sale and the  purchase of the  Aircraft,  as
such Purchase Agreement has heretofore been, and may hereafter from time to time
be, supplemented, amended or modified.

        "Rent" means Basic Rent and Supplemental Rent.

        "Scheduled Aircraft Delivery" for the Aircraft means the scheduled month
of delivery for the Aircraft set forth in Article 2(b) hereof.

        "Security Deposit" means the cash security or Letter of Credit deposited
with Lessor pursuant to Article 3(c) hereof.

        "Stipulated Loss Value" for the Aircraft and for each Engine shall have
the meanings set forth in Schedule "1" hereto.

        "Supplemental  Rent"  means  any  and  all  amounts,  liabilities  and
obligations which Lessee assumes or agrees hereunder to pay to Lessor or others,
including Stipulated Loss Value payments, but excluding Basic Rent.

        "Term,"  in respect  of an Item of  Equipment,  means the lease term for
which such Item of  Equipment  is leased  hereunder  pursuant  to  Article  3(a)
hereof.

        "Trust  Agreement" means the Trust Agreement dated as of August 2, 1999,
between WTC and Owner Participant, as amended or supplemented from time to time.

        "WTC" means  Wilmington Trust Company,  a Delaware banking  corporation,
and its successors and assigns.

                                       1-5

<PAGE>

        ARTICLE 2. ACCEPTANCE UNDER LEASE.

        (a)  CONDITIONS  PRECEDENT.  Lessor  hereby  agrees  to lease to  Lessee
hereunder,  and  Lessee  hereby  agrees  to lease  from  Lessor  hereunder,  the
Aircraft,  as  further evidenced  by the  execution  by Lessor and Lessee of a
Lease Supplement. Lessor's obligation to lease the Aircraft to Lessee  hereunder
shall be subject to the following  conditions  precedent  being complied with to
Lessor's satisfaction or being waived by Lessor in its discretion:

        (i) PRE-DELIVERY.  On or prior to the date specified below, Lessor shall
have received:

            (1) within ten (10) days  following the date this Lease is signed by
Lessee,  a  resolution  of the Board of  Directors  of Lessee,  certified by the
Secretary or an  Assistant  Secretary of Lessee,  duly  authorizing or ratifying
the lease of the Aircraft hereunder and the execution,  delivery and performance
of this Lease and the Lease supplement,  together with an incumbency certificate
as to the person or persons  authorized to execute and deliver such documents on
behalf of Lessee;

            (2) on the  signing  of this Lease,  Lessor  shall have received the
Security Deposit described in Article 3(c) and Schedule "1" hereto; and

            (3) on or prior to October 1, 1999,  a copy of Lessee's  Maintenance
Program for the Aircraft to enable Lessor to verify to its satisfaction that the
Maintenance  Program  complies  in  all  material  respects  with  the  Boeing
Maintenance  Planning Document and, if Lessee's  maintenance  program is a block
maintenance program, Appendix C No. D626AO01 Blocked Maintenance Program, latest
amendment, applicable to the Aircraft operations of Lessee (and Lessor agrees to
maintain the  confidentiality of Lessee's  Maintenance  Program and not disclose
Lessee's  Maintenance  Program to any person other than Owner  Participant,  its
agents and  representatives  (who in turn  shall  maintain  the  confidentiality
thereof),  or for purposes of bridging the Aircraft  from  Lessee's  Maintenance
Program to another maintenance program).

        (ii) DELIVERY.  The following  additional  conditions  shall be complied
with to Lessor's  satisfaction  (or be waived by Lessor) at or prior to the time
the  Aircraft is ready for delivery  from Lessor to Lessee  hereunder or on such
earlier date as may be applicable to such condition:

            (1) Lessor shall have received the following:

               (A) the  Lease Supplement  for the Aircraft,  duly authorized and
executed by Lessee and dated the Delivery Date for the Aircraft;

                                       2-1

<PAGE>

               (B) the first installment of Basic Rent for the Aircraft required
under Article 3(b), less the sum of $100,000 heretofore deposited by Lessee with
Lessor  (which  $100,000.  deposit  will be applied by Lessor  towards the first
installment of Basic Rent);

               (C) at least five (5) Business Days prior to the Delivery Date, a
certificate and an opinion signed by independent  aircraft  insurance brokers as
to the due compliance with the insurance provisions of Article 10 hereof;

               (D) a favorable opinion of counsel  for  Lessee,  addressed  to
Lessor and dated the Delivery Date for the Aircraft,  concerning the matters set
forth in clauses (i) through (vii), inclusive, of Article 4(b) hereof, and as to
such other matters as Lessor shall specify;

               (E) at  Lessee's  expense,  a  favorable  opinion of FAA  counsel
concerning the proper filing for recordation of this Lease and the Mortgage with
the FAA  to protect  and  perfect  Lessor's  and  Mortgagee's  interests  in the
Aircraft;

               (F) a copy of Lessee's  air  transport  license and  Lessee's air
carrier operating  certificate,  issued by the FAA, authorizing the operation of
Boeing 737-700 aircraft; and

               (G) such other documents as Lessor may reasonably request.

        (2)  On the  Delivery  Date for the  Aircraft the  following  statements
shall be true and Lessor  shall have  received a  certificate  signed by a  duly
authorized officer of Lessee, dated such Delivery Date, stating that:

               (A) the representations and warranties  contained in Article 4(b)
hereof are true and  accurate on and as of such date as though made on and as of
such date (except to the extent that such  representations and warranties relate
solely to an earlier date);

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

               (C) all necessary approvals, authorizations,  consents, licenses,
certificates  and  orders of the FAA and any other  governmental  or  regulatory
authority having jurisdiction with respect to the ownership, use or operation of
the Aircraft or the transactions  contemplated by this Lease have been obtained,
and such approvals, authorizations,  consents, licenses, certificates and orders
are in full force and effect and constitute sufficient authorization therefor.

                                       2-2

<PAGE>

               If  Lessee  fails  for  any  reason  to  fulfill  the  conditions
contained  in  this  Article 2  in  a  timely manner, other than as a result  of
Lessor's failure to perform its obligations hereunder, the same shall constitute
an Event of Default under this Lease.

               (b) TIME OF  DELIVERY.  Subject to the  provisions  of Article 16
hereof,  the Aircraft  shall be delivered  to Lessee in  compliance  with Detail
Specification  D6-38808-7,  Latest Revision, and Lessee shall accept delivery of
the Aircraft  hereunder upon tender of delivery of the Aircraft by  Manufacturer
under the  Purchase  Agreement,  currently  scheduled  during the second half of
October,  1999. Lessor shall give Lessee at least seven (7) days' advance notice
of the expected Delivery Date for the Aircraft. If, after the expiration of such
7-days'  advance notice period,  delivery of the Aircraft is delayed beyond such
expected Delivery Date due to Lessee's fault or responsibility, without limiting
Lessor's  rights to terminate this Lease and to recover damages as the result of
Lessee's  failure  to take  delivery  of the  Aircraft,  Lessee  shall  promptly
reimburse  Lessor for all costs and  expenses  incurred by Lessor as a result of
such delay,  including but not limited to reasonable amounts for transportation,
storage,  insurance,  taxes,  preservation or protection of the Aircraft,  legal
expenses  attributable  to the delay,  and Lessee shall also be obligated to pay
Lessor,  on  demand,  an amount  equal to the Basic  Rent that  would  have been
payable in respect of the Aircraft hereunder if Lessee had taken delivery of the
Aircraft on such expected Delivery Date,  prorated on a daily basis for each day
from and including  such  expected  Delivery Date to the earlier of the date the
Aircraft is delivered to Lessee  hereunder or the date this Lease is  terminated
or canceled by Lessor as a result of  Lessee's  failure to take  delivery of the
Aircraft in accordance with the terms and conditions of this Lease.

               (c) PLACE OF DELIVERY.  The Aircraft shall be delivered to Lessee
hereunder, at Lessee's expense, at an airport in or near Seattle, Washington, or
Las Vegas,  Nevada,  or, at Lessee's  expense,  at such alternate site as may be
mutually agreed upon in writing by Lessor and Lessee in an effort to minimize as
much as reasonably possible,  consistent with law, any sales, use or similar tax
exposure to the parties relating to the place of delivery of the Aircraft.

               (d) TEST  FLIGHT;  CUSTOMER  WALK-AROUND.  Lessee shall have  the
right to participate in the test  flight(s)  and  customer  walk-around  for the
Aircraft contemplated by the Purchase Agreement, and Lessor shall give Lessee as
much advance  notice thereof as is practicable in order for Lessee to be able to
participate in such flight(s) and customer walkaround.

               (e)  CHANGE  ORDERS.  Subject  to  the  terms  of  the  Purchase
Agreement,  the Detail Specification may, by mutual agreement between Lessee and
Lessor, be amended from time to time by change order or other written agreement,
which shall set forth in detail the particular  changes to design,  performance,
weight,  balance,  Scheduled Aircraft Delivery and Rent for the Aircraft and the
other  provisions  of this  Agreement.  Such  change  orders  and other  written
agreements  shall be signed on behalf of Lessee and  Lessor by their  respective
duly authorized representatives.

                                       2-3

<PAGE>

               (f) DEVELOPMENT  CHANGES.  The Detail  Specification  also may be
revised by  Manufacturer  without  Lessee's  consent to incorporate  development
changes if such changes do not affect  Lessor's  cost,  or adversely  affect the
Scheduled Aircraft Delivery,  guaranteed weight or guaranteed performance of the
Aircraft or  interchangeability  or   replaceability   requirements  under   the
Detail  Specification.  Development  changes are  changes  deemed  necessary  to
correct defects, improve the Aircraft,  prevent delay, or insure compliance with
the Purchase  Agreement.  Lessor shall notify  Lessee of all changes made in the
Detail  Specification  pursuant to this  Article  2(f) by  furnishing  to Lessee
revised pages for the Detail Specification.

               (g)  USE  OF  AIRCRAFT  BY  MANUFACTURER.  Lessee  agrees  that
Manufacturer  may use the Aircraft to be leased hereunder for flight tests prior
to delivery if such flight tests are  permitted  under the  Purchase  Agreement.
Lessee  shall  accept  delivery  of the  Aircraft  used  for  ffight  tests  in
accordance  with  this  Article  2(g)  without  any  reduction  in the  Rent for
depreciation or wear and tear resulting therefrom.

               (h) LESSOR AIRCRAFT MODIFICATIONS. Prior to the Delivery Date, if
consistent with Manufacturer's and vendor lead-time  constraints,  but otherwise
as promptly  following  the Delivery  Date as is  consistent  with  modification
facility  and  vendor  lead-time  constraints,  Lessor  shall  cause the  Detail
Specification  for the Aircraft to be amended at Lessor's  cost to: (i) increase
the thrust of the  Engines to 24,000  lbs.,  (ii)  increase  the MTOW to 154,500
lbs., and (iii)  configure the cabin interior to a two-class  layout of 12 first
class  seats and 112  economy  class  seats.  Lessor  shall be  responsible  for
coordinating the completion and certification of the  modifications  referred to
in  clauses (i), (ii) and (iii),  above.  Lessee  shall  be  entitled  to have a
representative   present   during   the  course   of  the  performance  of  such
modifications  by such  modification  facility,  and Lessee shall be entitled to
review  the maintenance  contract in respect  thereof  (but shall not have any
right to require  modifications or additions thereto).  The maintenance contract
shall include warranties that will be assigned to Lessee.

               Promptly  following  the date this  Lease is  signed  by  Lessee,
Lessor will purchase a slimline (or a half G2) galley for installation by Lessee
at Lessor's  expense (but charged to Lessor at Lessee's cost,  i.e., no overhead
or profit) upon delivery by the  manufacturer  thereof. The  estimated  time for
delivery is seven  months,  but Lessor shall work with the  manufacturer  of the
galley in an  effort to  improve  such  delivery  time.  Lessor  also  agrees to
purchase a drop down LCD video  system for  installation  by Lessee at  Lessor's
expense (but charged to Lessor at Lessee's  cost,  i.e.,  no overhead or profit)
upon delivery by the manufacturer  thereof.  The  estimated time for delivery is
ten months,  but Lessor shall work with the  manufacturer of the video system in
an  effort to  improve  such  delivery  time.  Further,  Lessor  will  cause the
Manufacturer or the  modification  facility that configures the interior seating
referred to in the  preceding  paragraph to install  wiring and other  necessary
provisions for the video system during the interior modification,  to the extent
reasonably  practicable.  Lessor  shall  be  responsible  for  coordinating  the
completion and certification of the galley and video system installation.

                                       2-4

<PAGE>

               Lessee shall be entitled to an abatement of Basic Rent,  prorated
on a daily basis,  but not to exceed an aggregate of fifteen (15) days, for each
full day that the Aircraft  cannot be operated by Lessee solely as the result of
the required grounding of the Aircraft to incorporate the modifications referred
to in this Article 2(h). Lessee agrees to use its best efforts to minimize  such
downtime by performing the modifications in a continuous and efficient manner.

               All  Parts  removed  from the  Aircraft  in  connection  with the
foregoing  modifications as well as the parts and equipment  required to perform
such modifications  shall at all times be and remain the property of Lessor, and
Lessee shall make such Parts and equipment  available to Lessor for  disposition
by Lessor.

               Except as specifically  provided above, the Aircraft is delivered
to Lessee hereunder "AS-IS, WHERE-IS."

                                       2-5

<PAGE>

         ARTICLE 3. TERM AND RENT.

         (a) TERM.  Except as otherwise  provided herein,  the Aircraft shall be
leased to Lessee  hereunder  for a Term of ten (10)  years,  commencing  on the
Delivery Date for the Aircraft.

         (b) BASIC RENT.  Lessee  shall pay Lessor  Basic Rent for the  Aircraft
throughout  the Term in 120  consecutive  monthly in advance  payments,  due and
payable commencing on the Delivery Date for the Aircraft and on the like date in
each calendar month  thereafter to and including the 120th calendar month, or if
such month has no such date, on the last Business Day of such month.  The amount
of each monthly Basic Rent payment payable for the Aircraft  throughout the Term
shall be as specified in paragraph 2 of Schedule "I" hereto.

         (c)  SECURITY  DEPOSIT.  On the date this Lease is signed by Lessor and
Lessee, Lessee shall provide   Lessor with the cash or letter of Credit Security
Deposit specified in paragraph 3. of Schedule "1" hereto to be held by Lessor as
security for  performance  of all Lessee's  obligations  hereunder and under the
Companion Lease.  Lessee agrees to maintain the Security Deposit with Lessor for
the original amount thereof until all Lessee's obligations  hereunder shall have
been fully  performed.  Lessor may commingle the cash Security  Deposit with its
general funds.

         In the event Lessee fails to take  delivery of the Aircraft as provided
herein or if any other Event of Default occurs and is continuing or shall result
in the termination or  cancellation of this Lease by Lessor,  in addition to any
other rights or remedies Lessor may have hereunder or under the Companion Lease,
Lessor shall be  entitled,  at its option,  to draw on the Letter of Credit,  if
any,  for the full  amount  thereof or for any portion  thereof as Lessor  shall
elect, and apply all or any proceeds thereof, or, as the case may be, all or any
portion of the cash Security  Deposit  towards any or all amounts due under this
Lease or the Companion  Lease,  whether such amounts due  constitute  Basic Rent
payments  hereunder  or  thereunder,  damages  for  breach of this  Lease or the
Companion Lease, or other Rent payments hereunder or thereunder.  If at the time
the  Letter of  Credit,  if any,  is drawn upon  Lessor  shall not have  finally
determined the full amount to become  payable  hereunder and under the Companion
Lease (including without limitation,  the extent of its damages hereunder or the
damages  under the  Companion  Lease),  Lessor  shall be  entitled to retain the
unapplied portion of the cash Security Deposit or the unapplied  proceeds of the
Letter  of  Credit,  as  the  case  may  be,  until  such  time  as  such  final
determination has been made and full and final payment thereof has been received
(and Lessor agrees to use reasonable efforts to make prompt determination of the
full amount payable hereunder and under the Companion Lease).

         Upon full performance by Lessee of all its obligations  hereunder,  and
provided no Event or Event of Default  shall have  occurred  and be  continuing,
Lessor shall promptly return the Security Deposit to Lessee.

                                       3-1

<PAGE>

         (d)  SUPPLEMENTAL  RENT.  Lessee  also  agrees to pay to Lessor,  or to
whomsoever  Lessor  shall  direct  in  writing,  any and all  Supplemental  Rent
promptly as the same shall become due and owing, and in the event of any failure
on  the part of Lessee to pay any  Supplemental  Rent, Lessor shall have all the
rights, powers and remedies provided for herein, by law or otherwise,  as in the
case  of  non-payment  of  Basic  Rent.  Lessee  will  also  pay to  Lessor,  as
Supplemental Rent, on demand,  interest at the Incentive Rate on any part of any
Basic Rent not paid when due and on any other payment of  Supplemental  Rent not
paid when due or demanded by Lessor in accordance  with the terms hereof for the
period  for which the same shall  become due until the same shall be paid.  Such
interest will accrue on a day to day basis.

         (e) PAYMENTS ON BUSINESS  DAYS.  If any date on which a payment of Rent
becomes due and payable is not a Business  Day, the Rent payment  otherwise  due
and payable on such date shall be due and payable on the immediately  succeeding
Business Day.

         (f) PLACE OF PAYMENT.   All  Rent  shall  be  payable  in  Dollars,  in
immediately available  funds, not later than  11:00 a.m., New  York  City  time,
on  the  due  date thereof, at the office of Citibank, N.A., 21st Floor, Zone 1,
111 Wall Street, New  York,  New  York,  10043,  ABA  No.  02-1000089  (CHIPS ID
0008),  for  credit  to  the  account  of  Ansett  Worldwide  Aviation,  U.S.A.,
Account No. 36953153,  or at such other  location  or  account as  Lessor  shall
from  time  to  time  designate  in  writing.   Rent  payments payable hereunder
shall  be  deemed  to  have  been  paid only at the time  actually  credited  to
Lessor's   account   referred   to  above.   All  interest  and  other  payments
payable  hereunder  that  are  pro-rated  on  an annualized  or  other  periodic
basis  shall  be  calculated  on  the basis of a year consisting of 360 days and
twelve 30 day months.

         (g) PROHIBITION AGAINST SETOFF, COUNTERCLAIM,  ETC. Lessee's obligation
to pay Rent  hereunder  shall be  absolute  and  unconditional  and shall not be
affected by any circumstances,  including,  without limitation:  (i) any setoff,
counterclaim,  recoupment,  defense or other right which Lessee may have against
Lessor,  Manufacturer,  any  Participant  or any  other  person  for any  reason
whatsoever,  (ii) any defect in the  title,  airworthiness,  condition,  design,
operation, or fitness for any particular purpose or for use, or any damage to or
loss or destruction,  of the Aircraft,  or any  interruption or cessation in the
use or  possession  thereof  by  Lessee  for any  reason  whatsoever,  (iii) any
insolvency,  bankruptcy,  reorganization  or similar  proceedings  by or against
Lessor, Lessee, Manufacturer, any Participant or other person, or (iv) any other
circumstance,  happening or event  whatsoever,  whether or not similar to any of
the foregoing.

         Lessee hereby waives,  to the extent  permitted by applicable  law, any
and all  rights  which  it may now have or which  may at any time  hereafter  be
conferred  upon it by  statute or  otherwise  to  terminate,  cancel,  quit,  or
surrender  this Lease or the Aircraft or to reject or revoke  acceptance  of the
Aircraft, or to any abatement, suspension, deferment or reduction of Rent or the
performance  of any other  obligations,  except in  accordance  with the express
terms hereof.

                                       3-2

<PAGE>

         For the  avoidance  of doubt,  nothing  in this  Article  3(g) shall be
construed Io prevent Lessee from commencing legal proceedings  against Lessor to
recover  damages from Lessor for the breach by Lessor of any of its  obligations
under this Lease.

                                       3-3

<PAGE>

         ARTICLE 4. REPRESENTATIONS AND WARRANTIES

         (a) LESSOR'S REPRESENTATIONS AND WARRANTIES.  THE AIRCRAFT IS DELIVERED
AND LEASED  HEREUNDER  "AS-IS,  WHERE-IS" AND NEITHER LESSOR NOR ANY PARTICIPANT
NOR  ANY  OF  THEIR   RESPECTIVE   OFFICERS  DIRECTORS,  EMPLOYEES,  AGENTS   OR
REPRESENTATIVES  HAS  MADE OR  SHALL  BE  DEEMED  TO  HAVE  MADE  ANY  GUARANTY,
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,  AIRWORTHINESS,
VALUE, CONDITION, DESIGN, CONFORMITY TO THE PROVISIONS OF THE PURCHASE AGREEMENT
DESCRIPTION,  OPERATION,  MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR
PURPOSE OF ANY ITEM OF EQUIPMENT OR ANY PART THEREOF,  OR ANY MODIFICATION MADE
PURSUANT  To ARTICLE  2(h)  HEREOF,  OR AS TO THE  QUALITY OF  THE  MATERIAL  OR
WORKMANSHIP  OF  THE  EQUIPMENT  OR  ANY  PART  THEREOF  OR  AS  TO  ANY   OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT OR ANY PART  THEREOF,  OR ANY.  MODIFICATION  MADE PURSUANT TO ARTICLE
2(h) HEREOF,  AND LESSEE HEREBY WAIVES ALL WARRANTIES9,  GUARANTEES,  RIGHTS AND
REMEDIES,  EXPRESS OR IMPLIED,  INCLUDING BUT NOT LIMITED TO, ANY  OBLIGATION OR
LIABILITY OF LESSOR OR ANY PARTICIPANT  WITH RESPECT TO ANY IMPLIED  WARRANTY OF
MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF  DEALING,  USAGE OF TRADE,  ANY IMPLIED  WARRANTY OF FITNESS  AND ANY DIRECT,
INCIDENTAL OR CONSEQUENTIAL  DAMAGES OF ANY KIND OR NATURE,  OR NOT ARISING FROM
THE NEGLIGENCE BUT, AS TO LESSOR OR A PARTICIPANT,  EXCLUDING  GROSS  NEGLIGENCE
AND WILLFUL  MISCONDUCT OF LESSOR OR SUCH  PARTICIPANT,  AS THE CASE MAY BE, AND
ANY RISKS WITH RESPECT THERETO ARE HEREBY ASSUMED BY LESSEE,  except that Lessor
represents to Lessee that:

         (i) Lessor has full power,  authority and legal right to enter into and
perform its obligations under this Lease.

         (ii) This Lease has been duly  authorized by all  necessary  action on
the part-of Lessor.

         (iii)  Neither the  execution  and delivery by Lessor of this Lease nor
the performance by Lessor of any of the transactions contemplated hereby require
the consent,  approval,  order or authorization of, or registration with, or the
giving of notice  to,  the FAA or any other  domestic  or  foreign  governmental
authority.

                                       4-1

<PAGE>

         (iv) This  Lease has been duly  executed  and  delivered  by Lessor and
constitutes, and the Lease Supplement when executed and delivered by Lessor will
constitute,  legal,  valid and binding  obligations  of Lessor,  enforceable  in
accordance with their terms.

         Provided no Event or Event of Default has occurred  and is  continuing,
Lessor  agrees  to  assign  or  otherwise  make  available  to  Lessee,  without
representation,  warranty  or recourse  of any kind,  express or  implied,  such
rights as Lessor may have with  respect  to the  Equipment  under any  warranty,
service policy or product  support plan of  Manufacturer  or any  subcontractor,
vendor or supplier of any  Equipment,  or part  thereof,  to the extent the same
legally may be assigned or otherwise made available to Lessee.

         THE  WARRANTIES OF LESSOR SET FORTH IN THIS ARTICLE 4 ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES OF LESSOR OR ANY PARTICIPANT,  INCLUDING FITNESS
FOR USE OR FOR A  PARTICULAR  PURPOSE  AND  MERCHANTABILITY,  WRITTEN  OR  ORAL,
EXPRESS OR IMPLIED.

         (b) LESSEE'S  REPRESENTATIONS  AND  WARRANTIES.  Lessee  represents and
warrants that:

             (i) Lessee is a  corporation  duly  organized  and existing in good
standing under the laws of Delaware,  has full power,  authority and legal right
to own its properties  and  to carry on its business as presently  conducted and
to perform its obligations  under this Lease, is a Certificated Air Carrier duly
authorized to act as such pursuant to the laws of the Country of  Registration,
holds all licenses,  certificates and permits from all governmental  authorities
necessary for the conduct of its business,  and is duly qualified to do business
as a corporation in good standing in each  jurisdiction  in which the failure to
be so  qualified  would  have a  materially  adverse  effect on Lessee or on its
ability to perform its obligations hereunder.

             (ii) This Lease has been duly authorized by all necessary action on
the part of Lessee, does not require any approval of stockholders of Lessee, and
neither   the  execution  and  delivery  hereof  nor  the  consummation  of  the
transactions  contemplated hereby nor compliance by Lessee with any of the terms
and  provisions  hereof does or will  violate any  provision  of the articles of
incorporation or by-laws of Lessee or any law, rule, regulation, judgment, order
or decree of any  government  or  governmental  instrumentality  or court having
jurisdiction over Lessee or any of its activities or properties, or does or will
result in any breach  of, or  constitute  any  default  under,  or result in the
creation of any Lien upon any property of Lessee under, any indenture, mortgage,
deed of trust,  conditional sale contract,  loan or credit  agreement,  or other
agreement  or  instrument  to which  Lessee is a party or by which Lessee or its
properties may be bound or affected.

             (iii)  Neither the  execution  and delivery by Lessee of this Lease
nor the  performance by Lessee of any of the  transactions  contemplated  hereby
require the consent,  approval, order or authorization of, or registration with,
or the  giving  of  notice  to,  the  FAA  or  any  other  domestic  or  foreign
governmental authority, except for the approvals, authorizations

                                       4-2

<PAGE>

and consents that have  heretofore  been obtained,  true and complete  copies of
which have been delivered to Lessor.

             (iv) This Lease has. been duly executed and delivered by Lessee and
constitutes, and the Lease Supplement when executed and delivered by Lessee will
constitute,  legal,  valid and binding  obligations  of Lessee,  enforceable  in
accordance with their terms.

             (v)  Except for the  registration  of the  Aircraft  in the name of
Lessor and the filing for  recordation of this Lease,  the Lease  Supplement and
the  Mortgage  with the FAA, no  other  registration  and no further  filing  or
recording  of this Lease,  the Mortgage or any other  instrument  or document is
necessary  or  advisable  under the laws of the Country of  Registration  or any
other jurisdiction in order to: (1) establish the priority,  legality,  validity
or  enforceability  of the  obligations of Lessee under this Lease, or (2) fully
protect, establish and perfect Lessor's title to and interest in the Aircraft or
Lessor's rights and interests hereunder  (including with respect to the Security
Deposit) as against Lessee and any third parties in any jurisdiction.

             (vi) There are no suits or proceedings pending or, to the knowledge
of Lessee threatened in any court  or before any regulatory commission,  board
or other  administrative  governmental  agency against or affecting Lessee which
may have a materially  adverse effect on the financial  condition or business of
Lessee except those described in writing to Lessor prior to the date hereof.

             (vii) Lessee is a  Certificated  Air Carrier  within the meaning of
Section 41102 of Title 49 of the United  States Code and an air carrier  holding
an air carrier  operating  certificate  issued by the United States Secretary of
Transportation  pursuant to chapter 447 of Title 49 of the United  States  Code,
and Lessor is entitled to the  benefits and  protections  of Section 1110 of the
Bankruptcy  Code (11 U.S.C.  Section 1110) in respect of the Aircraft  leased to
Lessee under this Lease.

             (viii) Lessee has filed or caused to be filed all tax returns which
are required to be filed and has paid or caused to be paid all taxes shown to be
due or payable on said returns and on any assessment  received by Lessee, to the
extent that such taxes have become due and payable.

             (ix)  The  consolidated  and  consolidating  financial   statements
reflecting Lessee's balance sheet and statements of income and retained earnings
for the three  fiscal  years ended  December 31, 1998 (copies of which have been
furnished  to Lessor) are  complete  and  correct and fairly set forth  Lessee's
financial  condition as of such dates and the results of its operations for such
periods,  and since December 31, 1998, there has been no material adverse change
in such condition or operations.

             (x) Lessee has My  disclosed to Lessor all facts which Lessee knows
are  material  for  disclosure  to Lessor in the  context  of this Lease and the
transactions  contemplated  hereby,  and Lessee  knows of no facts  which  would
render  any  prior  information  furnished  by or on  behalf of Lessee to Lessor
inaccurate or misleading.

                                      4-3

<PAGE>

         ARTICLE 5. POSSESSION AND USE.

         (a) POSSESSION. Subject to the right of Lessee to deliver possession of
any Item of Equipment to the  manufacturer  thereof for testing or other similar
purposes or to any  organization for  service,  repair,  maintenance or overhaul
work on such  Item of  Equipment  or any  part  thereof  or for  alterations  or
modifications  in or additions to such Item of Equipment to the extent  required
or permitted by the terms of Article 6 hereof, LESSEE SHALL NOT SUBLEASE, ASSIGN
OR  OTHERWISE  TRANSFER  OR  RELINQUISH  POSSESSION  OR  CONTROL  OF ANY ITEM OF
EQUIPMENT,  OR ANY PART THEREOF,  WITHOUT THE PRIOR  WRITTEN  CONSENT OF LESSOR,
which consent will not be unreasonably  withheld  (provided that if Lessee seeks
consent  from  Lessor  for a  proposed  sublease,  Lessee  shall be  responsible
(whether or not Lessor  consents to the proposed  sublease)  for  all  expenses,
including  attorneys'  fees,  incurred by Lessor in connection with assessing or
implementing  the  proposed  sublease,  and any  such  sublease  shall be and be
expressly  made subject and  subordinate  to this Lease and the Mortgage and all
Lessor's  rights  and  remedies  hereunder  and  Mortgagee's  rights  under  the
Mortgage).

         (b)  LAWFUL  OPERATIONS;  USE.  Lessee  will  not  permit  any  Item of
Equipment to be  maintained,  used or operated in  violation  of any law,  rule,
regulation,  airworthiness directive or order of any government or  governmental
authority  having  jurisdiction  (domestic   or  foreign,   including,   without
limitation,  any United States law, rule or regulation  governing  United States
manufactured  or  owned  aircraft),  or  in  violation  of  any  airworthiness
certificate, license or registration relating to any Item of Equipment issued by
any  such  authority.  In  the  event  that  any  such  law,  rule,  regulation,
airworthiness directive,  order,  certificate,  license or registration requires
addition to or modification or alteration of the Equipment, Lessee shall conform
therewith  at its expense and shall  maintain the same in proper  condition  for
operation under such laws, rules, regulations, airworthiness directives, orders,
certificates,  licenses  or  registrations.  Lessee will not cause or permit any
Equipment to be flown or transported to any airport or country if so doing would
cause Lessor or any United States owner of such  Equipment to be in violation of
United  States  laws,  rules,  regulations  or  decrees.  Without  limiting  the
foregoing,  Lessee shall use the Equipment  solely in its commercial  operations
for which it is duly licensed.

         Lessee shall ensure that the Aircraft is at all times  operated by, and
under control of,  qualified and duly licensed pilots  employed by Lessee,  with
proper  ratings;  provided,  however,  qualified  pilots that are  contracted to
Lessee,  but  are not  employees  of  Lessee,  may  conduct  ferry  flights  and
maintenance  test flights of the Aircraft.  Lessee agrees not to cause or permit
any person under any  circumstance to cause the Aircraft or any Engine to be (i)
operated  or used for any  purpose  for  which  such Item of  Equipment  was not
designed and  reasonably  suited,  or (ii)  operated or used at any time for any
illegal purpose or in any illegal manner.

                                       5-1

<PAGE>

         Lessee  further  agrees  that it will not use or permit  the use of the
Aircraft for tile 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 tile  animal;  (ii)  acids,  toxic  chemicals,  other
corrosive materials,  explosives,  nuclear fuels, nuclear wastes, or any nuclear
assemblies or components,  except as permitted for cargo 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  maintained in accordance with Article 10  hereof;  or
(iv) any illegal item or substance.

         (c)  MAINTENANCE.  Lessee,  at its own cost  and  expense,  shall:  (i)
service,  repair,  maintain,  modify, overhaul and test, or cause the same to be
done to, each Item of Equipment  leased hereunder (A) so as to keep such Item of
Equipment  in the same  condition  and  appearance  as when  delivered to Lessee
hereunder (after giving effect to the  modifications referred to in Article 2(h)
hereof),  ordinary wear and tear from normal flight operations excepted, and  in
good operating condition, (B) so as to keep the Aircraft in the condition as may
be  necessary  to permit the  airworthiness  certificate  for the Aircraft to be
maintained under the United States  Transportation Code of 1994, as amended, and
to be operated  under FAR Part 121, and (C) in strict  compliance  with Lessee's
Maintenance  Program,  a true and complete copy of which has heretofore  been or
will  promptly  be  delivered  by Lessee to Lessor  (and  Lessee  agrees  not to
materially  modify  or  otherwise  vary or  permit  the  same to be done to such
Maintenance  Program  unless  required by law or unless  otherwise  agreed to by
Lessor); (ii) maintain all records, logs and other materials required by the FAA
to be maintained with respect to such Equipment;  and (iii) promptly  furnish to
Lessor  such  information  as may be  requested  by Lessor in  writing to enable
Lessor or any Participant to file any reports  required to be filed by Lessor or
such  Participant with any  governmental  authority  because of Lessor's or such
Participant's  interest  in  the  Equipment.   Lessee   shall  ensure  that  its
Maintenance Program at all times complies in all material respects with the then
latest  revision of the Boeing  Maintenance  Planning  Document and, if Lessee's
Maintenance Program is a block maintenance  program, the then latest revision of
Appendix C Document No.  D626AO01 (or  restatement  thereof)  applicable  to the
Aircraft as the result of the Flight  Hours/Cycles  ratio that the  Aircraft has
been  operated  during the Term and with the then latest  revision of the Engine
manufacturer's  Engine  Management  Program.  All  deficiencies  revealed by any
inspection  of the  Equipment by Lessee,  Lessor or any of Lessee's  maintenance
providers shall be promptly  corrected by proper cleaning,  sealing,  repairing,
replacement, overhaul, modification and adjustment, and Lessee shall ensure that
only FAA-approved parts and materials are installed or used on the Aircraft.

         If the  Aircraft,  any  Engine  or any Part is out of  revenue  service
(except  for  the  active  performance  of  maintenance,  repair   or   overhaul
procedures), the Aircraft, such Engine or such Part shall be properly and safely
stored in accordance with accepted industry and manufacturer  specifications and
procedures.  Lessee shall notify Lessor promptly of all details  relating to any
loss, damage or destruction to the Aircraft, or any part thereof, that

                                       5-2

<PAGE>

affects  the  airworthiness  of the  Aircraft,  and any loss,  theft,  damage or
destruction  to  the  Aircraft,  or any  part  thereof,  exceeding  the  sum  of
$100,000.

         Without  limiting any of the foregoing,  Lessee will maintain and  use,
and cause the Equipment to be  maintained  and used, in the same manner and with
the  same  care as used by  Lessee with respect to similar  equipment  owned  or
operated by Lessee.  Further,  Lessee agrees that it will not nor will it permit
anyone to discriminate  against the Equipment (as compared to other equipment of
the same type owned or operated by Lessee) with respect to its use, operation or
maintenance  in  contemplation  of the  expiration or  termination of this Lease
Agreement,  other than the withdrawal of the Equipment from use and operation as
is necessary to prepare the Equipment for return to Lessor upon such  expiration
or termination. To that end, without limitation,  Lessee agrees  to  incorporate
in  the  Aircraft  all  Manufacturer,   Engine  manufacturer  and  other  vendor
optional/recommended  service bulletins that Lessee schedules,  within the Term,
to  incorporate  in at least  one-third  (1/3)  of  Lessee's  fleet  of  similar
aircraft.  For the  avoidance  of doubt,  Boeing  737-200  aircraft  will not be
considered aircraft similar to the Aircraft.

         Lessee  agrees that it will not  discriminate  against the Engines with
respect to performance restoration build standards,  and that it will not remove
any Engine or Part from the Aircraft  prior to  expiration  of the Term to avoid
overhaul,  refurbishment,  replacement,  etc.,  thereof in  connection  with the
return of the Aircraft (and such Engine or Part) at the end of the Term.

         (d) REGISTRATION AND INSIGNIA. Lessee agrees that it will, on behalf of
Lessor and at Lessee's expense,  forthwith upon delivery of the Aircraft,  cause
the Aircraft to be duly  registered,  and at all times thereafter to remain duly
registered,  in accordance  with Title 49 of the United States Code, as amended.
Lessor agrees that Lessor or any other person who owns the Aircraft from time to
time will be a "citizen of the United  States" within the meaning of Title 49 of
the United States Code, as amended (or shall  otherwise be qualified to register
the Aircraft without restricting Lessee's  operational use of the Aircraft),  so
that the Lessee will be able to comply  with the  requirements  of this  Article
5(d).

         Upon delivery of the Aircraft,  unless Lessor otherwise directs, Lessee
shall  fasten or cause to be  fastened  and  maintained  in the  cockpit  of the
Aircraft adjacent to the airworthiness  certificate for the Aircraft and on each
Engine, in a prominent location, metal nameplates satisfactory to Lessor bearing
the name of Lessor,  as owner,  and  Mortgagee,  as mortgagee,  of the Aircraft.
Except as above provided,  Lessee will not allow the name of any person, firm or
corporation  to be placed on the  Airframe or any Engine as a  designation  that
might be interpreted as a Lien thereon; provided,  however, Lessee may cause the
Airframe or any Engine to be lettered in an appropriate  manner for  convenience
of identification of the interest of Lessee therein.

                                       5-3

<PAGE>

         ARTICLE   6.   REPLACEMENT   AND,   POOLING   OF  PARTS;   ALTERATIONS,
MODIFICATIONS AND ADDITIONS.

         (a)  REPLACEMENT OF PARTS.  Lessee,  at its own cost and expense,  will
promptly  replace 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.  In addition,  in
the ordinary course of maintenance, service, repair, overhaul or testing, Lessee
may at its own cost and expense remove any Parts,  whether or not unserviceable,
lost,  stolen,  destroyed,   seized,  confiscated,   damaged  beyond  repair  or
permanently  rendered  unfit for use,  provided  that Lessee shall  replace such
Parts as promptly as  practicable  and in any event within sixty (60) days after
removal. All replacement parts shall be free and clear of all Liens and shall be
in as good operating condition as, and shall have a value, utility, modification
status and useful  life at least  equal to, the Parts  replaced,  assuming  such
replaced  Parts were in the  condition  and  repair and had the value,  utility,
modification  status and useful  life  required  to be  maintained  by the terms
hereof   Additionally,   all replacement   parts  shall  have  a  current  valid
"serviceable tag" of the manufacturer or maintenance  repair facility  providing
such parts to Lessee,  identifying the manufacturer,  vendor, part number, make,
model and serial number,  as well as the accumulated hours or cycles and whether
such parts are new,  serviceable or overhauled.  No replacement  part shall have
less hours and cycles remaining thereon until  refurbishment or replacement than
the Part to be replaced. Lessee may temporarily replace any Part that has become
unserviceable,  lost, stolen,  destroyed,  seized,  confiscated,  damaged beyond
repair or permanently  rendered unfit for use with a part that does not meet the
requirements of this paragraph if a complying part cannot be obtained within the
available   ground  time  of  the  Aircraft,   provided  the  original  Part  is
re-installed  or the  non-complying  part is removed and replaced by a complying
part as soon as practicable and in any event within 60 days or, if  earlier,  on
the  expiration  or earlier  termination of the Term.  Except as provided in the
preceding sentence, Lessee shall ensure that no part that is a life-limited part
shall be installed on  the Airframe or any Engine after the Delivery Date unless
such part is new or Lessee complete certified, back-to-birth records.

         All Parts at any time removed from the Aircraft, Airframe or any Engine
shall remain the property of Lessor, no matter where located, until such time as
such Parts  shall be  replaced  by parts  which have been paid for by Lessee and
incorporated  or  installed  in or  attached to the  Aircraft,  Airframe or such
Engine in compliance  with the  requirements  for  replacement  parts  specified
herein. Immediately upon any replacement part becoming incorporated or installed
in or attached to the Aircraft, Airframe or an Engine as above provided, without
further act: (i) title to such  replacement part shall thereupon vest in Lessor,
(ii) such replacement part shall become subject to this Lease and be deemed part
of the Aircraft,  Airframe or such Engine,  as the case may be, for all purposes
hereof to the same extent as the Part originally incorporated or installed in or
attached  to the  Aircraft,  Airframe  or such  Engine,  and (iii)  title to the
removed Part shall thereupon vest in Lessee, free and

                                       6-1

<PAGE>

clear of all  rights  of  Lessor  and the  Participants  (and  persons  lawfully
claiming  through Lessor or the  Participants),  and shall no longer be deemed a
Part hereunder.

         (b) POOLING OF PARTS.  Any Part  removed from the Airframe or an Engine
as provided in  paragraph  (a) of this  Article may be  subjected by Lessee to a
normal pooling  arrangement  customary in the airline industry  entered into  in
the ordinary course of Lessee's business with an air carrier approved by Lessor,
provided the part replacing such removed Part shall be incorporated or installed
in or attached to the Airframe or such Engine in accordance  with  paragraph (a)
of this Article as promptly as possible  after the removal of such removed Part.
In addition,  any replacement part when incorporated or installed in or attached
to the Airframe or any Engine in accordance  with  paragraph (a) of this Article
may be owned by an air  carrier  approved  by  Lessor  subject  to such a normal
pooling arrangement,  provided Lessee, at its expense, as promptly thereafter as
possible either (i) causes title to such  replacement  part to vest in Lessor in
accordance with paragraph (a) of this Article by Lessee  acquiring title thereto
for the benefit of, and transferring such title to, Lessor free and clear of all
Liens, or (ii) replaces such  replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further  replacement part owned by
Lessee  free  and  clear  of  all  Liens  and  causing  title  to  such  further
replacement  part to vest in Lessor in  accordance  with  paragraph  (a) of this
Article.

         (c)  ALTERATIONS,  MODIFICATIONS  AND  ADDITIONS.  Lessee,  at its  own
expense, shall make such alterations and modifications in and additions  to  the
Equipment,  and shall perform all alert service  bulletins and service bulletins
that are mandated by airworthiness  directives (and all service  bulletins which
are  required  to be performed to maintain the  warranties for the Equipment) as
may be issued from time to time, to meet the  requirements of the  Manufacturer,
the Engine  manufacturer  and the other  vendors in respect of the Equipment and
the standards  and  airworthiness  directives  of the FAA or other  governmental
authority having jurisdiction.

         In addition,  Lessee,  at its own  expense,  may from time to time make
such alterations and modifications in and additions to each Item of Equipment as
Lessee may deem desirable in the proper  conduct of its business,  provided that
no such  alteration,  modification  or addition:  (i)  materially  and adversely
alters  the  specification,  structure  or  performance  of the  Aircraft,  (ii)
adversely  affects the  interchangeability  or  replaceability  of Parts,  (iii)
invalidates any warranties  applicable to the Aircraft, or (iv) in any other way
diminishes the value, utility or useful life of any Item of Equipment or impairs
the condition or airworthiness  thereof below the value,  utility,  useful life,
condition  and  airworthiness  thereof  immediately  prior  to such  alteration,
modification or addition, assuming such Item of Equipment was then of the value,
utility and useful life and in the  condition and  airworthiness  required to be
maintained by the terms of this Lease.

         Title to all Parts incorporated or installed in or attached or added to
any Item of Equipment as the result of any alteration,  modification or addition
shall, without further act, vest in Lessor;  provided,  however, that so long as
no Event or Event of Default shall have occurred and be continuing,  at any time
during the Term, Lessee may remove any

                                      6-2

<PAGE>

Part from such Item of Equipment, provided that (i) such Part is in addition to,
and  not  in  replacement  of  or  in  substitution  for,  any  Part  originally
incorporated  or  installed in or attached to such Item of Equipment at the time
of the delivery  thereof  hereunder  (after giving  effect to the  modifications
referred  to  in  Article  2(h)  hereof)  or any  Part  in  replacement  of,  or
substitution  for,  any  such  Part,  (ii)  such  Part  is  not  required  to be
incorporated  or  installed  in or attached  or added to such Item of  Equipment
pursuant to the terms of Article  5(b) or 5(c)  hereof or the first  sentence of
this  paragraph  (c),  and  (iii)  such  Part can be  removed  from such Item of
Equipment without causing any material damage thereto and without diminishing or
impairing the value, utility, useful life, condition or airworthiness which such
Item of Equipment would have had at such time had such alteration,  modification
or addition not  occurred.  Upon the removal by Lessee of any such Part as above
provided, title thereto shall, without further act, vest in Lessee and such Part
shall no longer be deemed a Part  hereunder.  Any Part not  removed by Lessee as
above provided prior to the return of the Item of Equipment to Lessor  hereunder
shall remain the property of Lessor.  In addition to the  foregoing,  if  Lessee
makes  an  alteration,  modification  or  addition  to an Item of  Equipment  in
accordance  with  the  second  paragraph  of this  Article  6(c)  (an  "Original
Modification"),  Lessee,  at its own  expense,  may from time to time during the
Term,  so long as no Event  or Event  of  Default  shall  have  occurred  and be
continuing, remove such Original Modification and restore such Item of Equipment
to its condition  that it would have been in if such Original  Modification  had
not  been  made,  provided  that  (i)  after  such  restoration,  such  Item  of
Equipment shall  be in  compliance  with the  requirements  of Article  5(b) and
Article 5(c) and the first  sentence of this  paragraph,  (ii) such  restoration
shall comply with the requirements of subparagraphs (ii) and (iii) of the second
paragraph of this Article 6(c), and (iii) such restoration is performed  without
causing  any  material  damage  to the  Equipment  and  without  diminishing  or
impairing the value, utility,  useful life, condition or airworthiness which the
Equipment would have had if the Original Modification had not been made.

         In any  event,  neither  Lessor  nor any  Participant  shall  bear  any
liability  or  cost  for any  alteration,  modification,  addition,  or for  any
grounding or suspension of certification of any Item of Equipment or for loss of
revenue.

         (d) TRANSFER OF ENGINES WITHIN  LESSEE'S  FLEET. So long as no Event or
Event of Default  shall have occurred and be  continuing,  Lessee may install an
Engine on an airframe  leased to Lessee or owned by Lessee subject to a security
agreement  or mortgage or  purchased  by Lessee  subject to a  conditional  sale
agreement,  provided  that (i)  such  airframe  is  (and  only for so long as it
continues  to be) free and clear of all Liens,  except the rights of the parties
to the  lease,  security  agreement,  mortgage  or  conditional  sale  agreement
covering  such  airframe,  (ii) prior to such  installation,  Lessor  shall have
received from the lessor, secured party, mortgagee or conditional seller of such
airframe  a written  agreement  (which  may be the  lease,  security  agreement,
mortgage or conditional  sale  agreement  covering such  airframe),  in form and
substance reasonably satisfactory to Lessor, whereby such lessor, secured party,
mortgagee  or  conditional  seller  expressly  agrees that  neither  it/they nor
its/their  successors  or assigns  will  acquire  or claim any  right,  title or
interest in any Engine by reason of such Engine being installed on such airframe
at any time  while  such  Engine is subject to this Lease or is owned by Lessor,
and (iii) Lessee maintains insurance in respect of the Engine while it is

                                       6-3

<PAGE>

installed  on such  airframe  for the agreed  value  specified in paragraph 1 of
Schedule  "1"  hereto  and  otherwise  on  terms  acceptable  to  Lessor  in its
reasonable discretion.

         Lessor hereby agrees for the benefit of any lessor of any engine leased
to Lessee or any secured party or mortgagee of an engine owned by Lessee subject
to  a security interest or mortgage granted by Lessee or any conditional  seller
of an engine  purchased by Lessee  subject to a conditional  sale agreement that
neither Lessor nor its successors or assignees will acquire or claim, as against
such lessor,  secured party,  mortgagee or conditional  vendor, or its assignee,
any right, title or interest in any engine owned by such lessor under such lease
or subject to a security  interest,  mortgage or  conditional  sale  interest in
favor  of such  secured  party,  mortgagee  or  conditional  seller  under  such
security agreement, mortgage or conditional sale agreement as the result of such
engine being  installed on the Airframe at any time while such engine is subject
to such lease, security interest, mortgage or conditional sale agreement.

         Nothing in this Article 6(d) shall diminish or otherwise  affect any of
Lessee's  obligations otherwise required to be performed or observed by it under
this Lease.

                                       6-4

<PAGE>

         ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORDS.

         (a)  INFORMATION AND INSPECTION.  During the Term of this Lease, Lessee
shall furnish to Lessor such  additional  information  concerning  the location,
condition,  use and operation of each Item of Equipment as Lessor may reasonably
request in writing,  and Lessee shall permit any person  designated by Lessor in
writing, at Lessor's expense, to inspect each Item of Equipment,  its condition,
use, and operation and the records  maintained in connection  therewith,  and to
visit  and  inspect  the  facilities  and to discuss  the  business  affairs and
finances of Lessee with the principal officers of Lessee, to the extent the same
relate to Lessee's  ability to perform its  obligations  hereunder,  all at such
reasonable  times  and as often as  Lessor  may  reasonably  request;  provided,
however, if an Event of Default has occurred and is continuing or as a result of
such  inspection  Lessor  becomes  aware that an Event or Event of  Default  has
occurred and is continuing then Lessee shall reimburse Lessor for  all costs and
expenses  incurred in conducting such inspection. Any inspection of the Aircraft
shall be a visual  walkaround  inspection  that may include  going  on-board the
Aircraft, but shall not include opening any panels, bays or the like  (except at
a time during a scheduled  maintenance  visit in which such panels,  bays or the
like are scheduled to be opened). Lessee shall also provide Lessor with at least
thirty (30) days' prior written  notice of the date on which the Airframe  shall
undergo any major check (i.e.,  any "C" check or above).  Neither Lessor nor any
Participant  shall have any duty to make any such inspection and shall not incur
any liability or obligation by reason of not making such inspection.

         (b)  FINANCIAL  AND OTHER  INFORMATION.  Lessee also agrees to  furnish
Lessor with the following during the Term of this Lease:

              (i) within  sixty  (60) days after the end of each  quarter-fiscal
year of  Lessee  ending  after  the date of this  Lease,  the  consolidated  and
consolidating  financial  statements  reflecting  the  balance  sheet of Lessee,
prepared by it as of the close of the period ended,  together with statements of
income and retained earnings of Lessee for such period;

              (ii)  within one hundred  twenty  (120) days after the end of each
fiscal year of Lessee, the consolidated and consolidating  financial  statements
reflecting the balance sheet and  statements of income and retained  earnings of
Lessee,  as of the close of such fiscal year,  setting forth in comparative form
the  figures  for the  previous  fiscal  year,  as  prepared  and  certified  by
independent  public  accountants,  including their  certificate and accompanying
comments;

              (iii) together with the financial statements referred to in clause
(ii), a certificate  signed by a principal officer of Lessee, to the effect that
such  officer has reviewed  the  relevant  terms of this Lease and has made,  or
caused  to be made  under his  supervision,  a review  of the  transactions  and
condition  of Lessee  during the  accounting  period  covered by such  financial
statements,  and that such review has not disclosed  the  existence  during such
accounting period, nor does such officer have any knowledge of the existence, as
at the date of

                                       7-1

<PAGE>

such  certificate,  of any condition or event which  constitutes  an Event or an
Event of Default,  or, if such condition or event which  constitutes an Event or
an Event of  Default  existed  or  exists,  specifying  the nature and period of
existence  thereof and what action  Lessee has taken or is taking or proposes to
take with respect thereto; and

              (iv) such  other data and  information  as Lessor may from time to
time reasonably request in writing.

         (c) REPORTS  OF  AIRCRAFT USE.  Within  fifteen (15) days following the
end  of  each  calendar  month  throughout  the Term,  Lessee  shall: (i) notify
Lessor of the number of Flight Hours and Cycles which have been  accumulated  on
the Airframe,  each Engine, the Landing Gear and the APU,  respectively,  during
the  preceding  calendar  month,  and (ii)  provide  Lessor with details of: (A)
replacement  of Engine,  APU and Landing Gear (and the reason for such changes),
(B)  major  repairs,  modifications,  alterations  and  additions  to an Item of
Equipment,  and (C) service bulletins and airworthiness directives applicable to
and  accomplished  with  respect  to any Item of  Equipment,  in each  case with
respect to such preceding calendar month.

                                       7-2

<PAGE>

         ARTICLE 8. INDEMNIFICATION BY LESSEE.

         (a) GENERAL INDEMNITY. Lessee agrees to pay, and on demand to indemnify
and hold harmless,  Lessor and each Participant,  and their respective officers,
directors,  employees, servants, agents, shareholders,  affiliates,  successors,
assigns and transferees  (individually,  an "Indemnitee"),  from and against any
and all claims, damages, losses, liabilities (including, but not limited to, any
claim or liability for strict liability in tort or otherwise, including, without
limitation,  liability  arising  under  any  applicable  environment,  noise  or
pollution  control  statute,  rule or regulation),  demands,  suits,  judgments,
causes  of  action  and  all  legal  proceedings,  whether  civil  or  criminal,
penalties,  fines and other  sanctions,  and any costs and expenses  incurred in
connection   therewith,   including  attorney's  fees,  which  may  directly  or
indirectly  result  from,  relate  to or  arise  out of the  Purchase  Agreement
(excluding, for the avoidance of doubt, claims by Manufacturer: (i) for a breach
of  the Purchase  Agreement  prior to the  delivery of the Aircraft  thereunder,
(ii) based on provisions of the Purchase  Agreement that have been redacted from
the copy of the Purchase  Agreement provided to Lessee, and (iii) for payment of
the purchase price of the Aircraft) or this Lease or the  condition,  ownership,
manufacture,   purchase,  test  flight,   inspection,   delivery,   nondelivery,
acceptance,  nonacceptance,  rejection,  import,  export,  registration,  lease,
sublease, possession, control, storage, return, transportation, disposition, use
or  operation of any Item of Equipment  (except as to an  Indemnitee  for claims
that are the  result of the  gross  negligence  or  willful  misconduct  of such
Indemnitee),  or which may be caused by any malfunction or defect in any Item of
Equipment,  latent or  otherwise,  arising from the material or any article used
therein  or from the  design,  testing or use  thereof or from any  maintenance,
service,  repair,  overhaul,  improvement,  modification or alteration  thereof,
including any modification  made pursuant to Article 2(h) hereof,  regardless of
when such defect shall be  discovered,  whether or not such Item of Equipment is
at the time in the possession of Lessee and wherever located.

         Without  limiting  Lessee's  liability under this Article 8(a),  Lessee
hereby agrees to indemnify, reimburse and hold the Indemnitees harmless from any
and all  liability,  claims,  demands,  costs,  charges and expenses,  including
royalty  payments  and  counsel  fees,  in  any  manner,   whether  directly  or
indirectly,  imposed  upon or  accruing  against  an  Indemnitee  because of the
manufacture, use or operation of any Item of Equipment or any design, article or
material therein or relating thereto,  whether because of infringement of patent
or any other  right.  At  Lessor's  request,  Lessee  shall  assume and  conduct
promptly and  diligently,  at  its sole cost and expense,  the entire defense of
the Indemnitees  against any such claim, and any claim,  demand,  suit or action
for which an Indemnitee as a buyer is required to assume liability,  whether for
patent infringement or otherwise, under the Purchase Agreement.

         Notwithstanding  anything to the  contrary  contained  in this  Article
8(a), the indemnification  provided for in this Article 8(a) shall only apply to
events or circumstances which either (i) occur prior to the expiration or sooner
termination  of this  Lease and  return of the  Aircraft  pursuant  to the terms
hereof, regardless of when asserted, or (ii) are caused by or

                                       8-1

<PAGE>

attributable to acts or omissions of Lessee, or any of its officers,  directors,
employees, servants, agents, contractors or affiliates.

         (b)  GENERAL TAX  INDEMNITY.  Lessee  agrees that each  payment of Rent
shall  be free of all  withholdings  and  deductions for or on account of taxes,
duties and any other charges of any nature whatsoever, present or future, unless
Lessee is  required  by  operation  of law or  otherwise  to  withhold or deduct
amounts for or on account of any of the same,  in which  event,  Lessee will pay
such  additional  amounts as Rent as will result in the receipt by Lessor on the
due date for  payment  thereof  of the sums  which  would  otherwise  have  been
receivable on such date had there been no such  withholding  or  deduction.  All
such  withholdings  and  deductions  shall be  promptly  paid by  Lessee  to the
relevant taxing authority and Lessee shall promptly furnish Lessor with evidence
of each such payment. The preceding portion of this paragraph shall not apply to
taxes,  fees and other  charges with respect to which Lessee is not obligated to
indemnify any Indemnitee  pursuant to the remaining  portion of this paragraph.
In addition, and not by way of limiting the foregoing, Lessee agrees to pay, and
on  written  demand  to indemnify and hold harmless the  Indemnitees  from,  all
license,  recording and registration fees and all sales, use, personal property,
stamp, documentary,  customs, excise, income, consumption, value added and other
taxes, levies,  imposts,  duties,  assessments,  charges and withholdings of any
nature whatsoever,  together with any penalties,  fines,  additions and interest
thereon  (collectively,  "taxes,  fees and other  charges")  imposed  against an
Indemnitee,  Lessee  or any  Item  of  Equipment  or  any  part  thereof  by any
government  or  governmental   subdivision  or  taxing  authority  (domestic  or
foreign),  upon or with  respect to any Item of Equipment or any part thereof or
upon  or  with  respect  to  the  purchase,  ownership,   acceptance,  delivery,
registration,   leasing,  subleasing,  possession,  use,  operation,  departure,
landing, maintenance, repair, modification, location, importation,  exportation,
sale, return,  storage or other disposition  thereof, or upon or with respect to
the rentals,  receipts or earnings  arising  therefrom or received  with respect
thereto,  or upon or  with  respect  to this  Lease  or the  Purchase  Agreement
(excluding,  however, any taxes (i) based on or measured by Lessor's net income,
gross  receipts,  capital,  or excess profits which are payable by Lessor to (A)
the United States federal  government,  or (B) any state or local  government or
other taxing  jurisdiction  in the United  States  other than Hawaii  (provided,
however,  Lessee  shall be liable  for such  taxes if such  taxes are taxes that
would not have been imposed but for the use, operation, registration or location
of any Item of Equipment within the jurisdiction of such taxing  authority),  or
(C) any other  jurisdiction  solely as the result of  business  or  transactions
unrelated  to this  Lease,  E.G., such taxes  resulting  solely  from  events or
circumstances  other than the use,  operation,  registration  or location of any
Item of Equipment or part thereof,  or the location,  activities or residency of
Lessee in such jurisdiction), unless, but only so long as,  such taxes, fees and
other charges are being contested by Lessee or at Lessee's expense in good faith
and by appropriate  proceedings,  so long as, in Lessor's  reasonable  judgment,
such  proceedings  do not involve any danger of the sale,  forfeiture or loss of
any Item of Equipment, or any interest therein.

         If a claim is made against an Indemnitee or Lessee for any taxes,  fees
and other charges for which Lessee is obligated to indemnify an  Indemnitee,  or
if notice is received by an  Indemnitee or Lessee from a taxing  authority  that
such a claim is going to be

                                       8-2

<PAGE>

made, such  Indemnitee or Lessee,  as the case may be, shall promptly notify the
other.  If  requested  by Lessee in writing  within  thirty (30) days after such
notification,  Lessor  shall or shall  cause such  Indemnitee,  upon  receipt of
indemnity reasonably  satisfactory to it and at the expense of Lessee (including
without limitation,  all costs, expenses,  losses, legal and accounting fees and
disbursements,  penalties  and  interest) in good faith to contest the validity,
applicability  or amount of such  taxes,  fees and  other  charges  in the forum
selected by such Indemnitee by (A) resisting payment thereof if practicable,  or
(B) if payment is made,  using reasonable  efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings;  PROVIDED,  HOWEVER, Lessor
shall not be required to take or to cause any  Indemnitee  to take any action to
contest a claim unless (1) Lessee  provides  Lessor,  together with such written
request,  with an opinion of independent tax counsel reasonably  satisfactory to
Lessor  both  as to  counsel  and  substance,  to the  effect  that  there  is a
meritorious basis for such contest,  (2) such action to be taken will not result
in the risk of an imposition of criminal  penalties or, in  Lessor's  reasonable
judgment,  any risk of any sale,  forfeiture or loss of, or creation of any Lien
on any  Equipment,  or any  interest  therein,  (3) no Event or Event of Default
shall have occurred and be continuing, (4) if such Indemnitee shall pay such tax
and  seek a  refund,  Lessee  has  advanced  the  amount  of  such  tax  to such
Indemnitee  with  respect to such advance,  (5) the amount of the taxes at issue
exceeds  $15,000,  and (6) Lessee shall have  provided  such  Indemnitee  with a
written acknowledgment of liability if and to the extent that the contest is not
successful. Upon written  request of Lessee but subject to  compliance  with the
foregoing  provisions of this paragraph,  such Indemnitee  shall allow Lessee to
prosecute such tax contest in its name (or, if possible,  in the name of Lessee)
by granting an  appropriate  power of attorney or other  authorization  and such
other action as is reasonably  necessary  (and Lessee shall also  reimburse such
Indemnitee  for the costs and expenses,  including  reasonable  attorneys  fees,
incurred in connection with its monitoring such tax contest by Lessee), or, upon
written request of Lessee and at Lessee's expense, such Indemnitee shall consult
with Lessee regarding the tax contest and shall follow the reasonable directions
of Lessee as to the  prosecution  of the tax  contest.  If an  Indemnitee  shall
obtain a refund of all or any part of such taxes, fees and other charges paid by
Lessee,  Lessor  shall  cause such  Indemnitee  to pay Lessee the amount of such
refund,  after  deducting  all costs and  expenses  that were  incurred  by such
Indemnitee  in  connection  therewith;  provided  that such amount  shall not be
payable before such time as Lessee shall have made all payments and  indemnities
then due  hereunder.  If in  addition  to such  refund  an  amount  representing
interest  on the amount of such  refund or an amount  representing  expenses  or
attorneys fees is received,  Lessee shall be paid such expenses,  attorneys fees
and that proportion of such interest which is fairly attributable to taxes, fees
and other charges paid by Lessee prior to the receipt of such refund;  provided,
however,  that no amount shall be payable under this or the  preceding  sentence
during any period in which an Event or an Event of Default has  occurred  and is
continuing.  In case any report or return is required to be made with respect to
any obligation of Lessee under or arising out of this Article 8(b),  Lessee will
either make such report or return in such manner as will show the  interests  of
Lessor and the  Participants  in the  Aircraft and send a copy of such report or
return to Lessor, or will notify Lessor of such requirement and make such report
or return in such manner as shall be  reasonably  satisfactory  to Lessor.  Upon
written  request by Lessee and at Lessee's  expense,  Lessor and each Indemnitee
shall  furnish to Lessee such  information  and  documentation  as is reasonably
necessary for Lessee to assess or

                                       8-3

<PAGE>

prosecute a tax  contest,  or to make a report or return,  as  described  above,
provided,  however,  neither  Lessor nor any  Indemnitee  shall be  required  to
provide Lessee with information that Lessor or such Indemnitee,  in its sole and
absolute discretion, determines is confidential tax return information.

         Notwithstanding  the  foregoing,  Lessee  shall have no  obligation  to
Lessor or any Indemnitee for any of the following:

              (A) Taxes,  fees or other  charges  arising  out of any  voluntary
transfer  (including  a transfer  by way of  security  but  excluding a transfer
following an Event of Loss or pursuant to the exercise of remedies in connection
with an Event of Default) or  disposition  (including  a  disposition  by way of
security but excluding a  disposition  following an Event of Loss or pursuant to
the exercise of remedies in connection with an Event of Default);

              (B) Taxes, fees or other charges  attributable to any period after
the expiration of the Term and return of possession of the Airframe, the Engines
and the Parts to Lessor or its  designee  in  compliance  with the terms of this
Lease;

              (C) Taxes,  fees or other charges  caused solely by a breach by an
Indemnitee of any of such Indemnitee's obligations in this Article 8(b);

              (D)  Taxes,  fees or other  charges  caused  solely  by the  gross
negligence or willful misconduct of such Indemnitee; or

              (E) Taxes, fees or other charges based on or measured by the value
or  principal  amount  of any loan or  promissory  note (or  security  therefor)
entered into by Lessor or  an Indemnitee  or anyone  claiming an interest in the
Aircraft or any portion  thereof  through  Lessor or an  Indemnitee  (other than
Lessee).

         (c)  AFTER-TAX  NATURE OF  INDEMNITY.  Lessee  further  agrees that any
payment  of  indemnity  made under this Lease by Lessee shall include any amount
necessary to hold the Indemnitees harmless on an after-tax basis from all taxes,
fees and other  charges  required  to be paid with  respect  to such  payment of
indemnity  under the laws of any  domestic  or  foreign  governmental  or taxing
authority,  agency or  subdivision.  If an  Indemnitee  realizes  a tax  benefit
resulting  from any item for which it has been  indemnified  by Lessee  (whether
such tax benefit  results from a deduction,  credit,  allocation or  otherwise),
such Indemnitee  shall promptly after  realization pay to Lessee an amount equal
to the net value to such  Indemnitee of such tax benefit  (such  payments not to
exceed in the aggregate the amount of the related indemnity paid by Lessee), but
not before  Lessee shall have made all payments or provided all  indemnities  to
such Indemnitee  required  pursuant to this Article 8. If such Indemnitee  loses
such tax  benefit  subsequent  to any payment to Lessee  with  respect  thereto,
Lessee shall  indemnify  such  Indemnitee  with respect to such loss pursuant to
this  Article 8. If requested  by Lessee,  such  Indemnitee  shall  provide,  in
reasonable detail, a written explanation of the calculation  upon which it based
its  determination  of the amount of the tax benefit;  provided,  however,  such
Indemnitee  shall not be required to provide Lessee with  information  that such
Indemnitee, in its sole and absolute discretion,  determines is confidential Tax
return

                                       8-4

<PAGE>

information,  provided  that Lessee may require that an  Indemnitee  furnish all
relevant  Information  to a  nationally  recognized  firm  of  certified  public
accountants  selected  by such  Indemnitee  (which  shall keep such  information
confidential) to verify the accuracy of such Indemnitee's  calculation, and  the
determination of such firm of certified public  accountants  shall be binding on
such  Indemnitee  and Lessee as to the amount which  Indemnitee is obligated  to
pay to Lessee on account of the subject tax benefit. Lessee shall be responsible
for the fees and expenses of the firm of certified public accountants unless the
review  discloses  an error made by such  Indemnitee  exceeding  the  greater of
$15,000 or 10% of the amount of the  subject  tax  benefit,  as the case may be,
determined by such Indemnitee, in which case such Indemnitee shall pay such firm
of certified public accountants' fees and expenses.

         (d) SURVIVAL OF  INDEMNITIES.  All of the  obligations  of Lessee under
this  Article 8 shall  continue  in full  force and effect  notwithstanding  the
expiration or sooner  termination  of this Lease and are expressly  made for the
benefit of, and shall be enforceable by, the  Indemnitees  and their  successors
and assigns.

         (e) PERFORMANCE BY INDEMNITEES. For purposes of this Article 8,  Lessor
shall cause all  Indemnitees  to perform their  obligations as set forth in this
Article 8.

                                       8-5

<PAGE>

         ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION.

         (a) EVENT OF LOSS WITH RESPECT TO AIRCRAFT.  From the Delivery  Date of
the  Aircraft  until  the  return  thereof  to  Lessor  in  compliance  with the
requirements of Article 13 hereof, Lessee shall bear all risks of loss or damage
to the  Aircraft,  no  matter  how  occasioned  and from  every  source or cause
whatsoever. Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and any Engines or engines then installed thereon,  Lessee shall
give Lessor prompt  written  notice thereof and shall pay or cause to be paid to
Lessor  within  thirty  (30) days of such Event of Loss all Basic Rent  payments
payable for the Aircraft  (and all other  accrued and unpaid  Rent)  through the
date of such payment,  together with the Stipulated  Loss Value of the Aircraft.
At  such time as Lessor has received the foregoing sums: (A) the  obligation  of
Lessee  to pay  Basic  Rent  hereunder  shall  terminate,  (B) the  Term for the
Aircraft  shall end, and (C) Lessor will transfer or cause to be  transferred to
Lessee  (or  to  the   relevant   insurers,   as  the  case  may  be),   without
representation,  recourse or warranty of any kind,  express or implied (except a
warranty that the  Aircraft is free of Liens  other than Liens  which  Lessee is
required to discharge hereunder,  or defects in title resulting from Lessor's or
any Participant's acts), all of Lessor's and each Participant's right, title and
interest, if any, in and to the Aircraft.

         (b) EVENT OF LOSS WITH RESPECT TO AN ENGINE.  Upon the occurrence of an
Event of Loss with respect to an Engine not then  installed on the Airframe,  or
in the Event of Loss with respect to an Engine installed on the Airframe but not
involving  an Event of Loss with  respect  to the  Airframe,  Lessee  shall give
Lessor prompt written  notice thereof and Lessee shall,  as promptly as possible
and in any event  within  seventy-five  (75) days after the  occurrence  of such
Event of Loss,  duly  convey to Lessor,  as a  replacement  for the Engine  with
respect to which such Event of Loss occurred, title to another CFM International
Model CFM56-7B24 engine owned by Lessee free and clear of all Liens and having a
value, utility, modification status and useful life at least equal to, and being
in  as   good  operating   condition   (including  the   incorporation   of  all
airworthiness  directives  and service  bulletins in such engine) as, the Engine
with respect to which such Event of Loss  occurred,  assuming such Engine was of
the value, utility, modification status and useful life and in the condition and
repair required by the terms hereof  immediately prior to the occurrence of such
Event of Loss; and in such case,  Lessee, at its own expense,  will promptly (i)
furnish  Lessor  with a bill of sale,  in form  and  substance  satisfactory  to
Lessor,  for such replacement  engine,  (ii) execute a supplement hereto in form
and substance  satisfactory to Lessor subjecting such replacement engine to this
Lease  and   cause  the  same to be duly  recorded  pursuant  to the laws of the
Country of Registration, (iii) furnish Lessor with evidence of Lessee's title to
such  replacement  engine  (including,  if  requested,  an opinion  of  Lessee's
counsel) and of compliance  with the  insurance  provisions of Article 10 hereof
with respect to such replacement  engine as Lessor may reasonably  request,  and
(iv)  take such  other  Action as Lessor  may  reasonably  request  in order and
properly vested in Lessor and leased

                                       9-1

<PAGE>

hereunder  to the  same  extent  as  the  Engine  replaced  thereby.  Upon  full
compliance by Lessee with the terms of this paragraph (b),  Lessor will transfer
to  Lessee  (or  to  the  relevant  insurers,  as  the  case  may  be),  without
representation,  recourse or warranty of any kind,  express or implied (except a
warranty  that such Engine is free of Liens,  other than Liens  which  Lessee is
required to discharge hereunder,  or defects in title resulting from Lessor's or
the Participants'  acts), all of Lessor's and the Participants' right, title and
interest, if any, in and to the Engine with  respect to which such Event of Loss
occurred and, for all purposes hereof,  such replacement  engine shall be deemed
an "Engine" as defined herein. No Event of Loss with respect to an Engine shall,
except  as  otherwise  expressly  provided  in this  Article  9,  result  in any
reduction in Basic Rent.

         (c) APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
EVENT OF LOSS. Any payments (other than insurance  proceeds,  the application of
which is  provided  for in Article 10 hereof)  received at any time by Lessor or
Lessee from any governmental  authority or other person with respect to an Event
of Loss with respect to any Item of Equipment will be applied as follows:

              (i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or engines installed on
the  Airframe,  after  reimbursement  to  Lessor  for all  costs  and  expenses,
including  attorneys  fees,  incurred in connection  with such Event of Loss, so
much of such payment as shall not exceed the amounts due under  paragraph (a) of
this Article 9 shall be applied in reduction of Lessee's  obligation to pay such
amounts, if not already paid by Lessee, or, if already paid by Lessee,  shall be
applied to reimburse Lessee for its payment of such amounts, and the balance, if
any, of such payment  remaining  thereafter  will be paid over to or retained by
Lessor; and

              (ii) if such payments are received with respect to an Engine under
circumstances  contemplated  by paragraph (b) of this Article 9, so much of such
payments  remaining  after  reimbursement  to Lessor for all costs and expenses,
including  attorneys fees,  incurred in connection with such Event of Loss shall
be paid over to, or retained by, Lessee,  provided that Lessee shall have  fully
performed  or  concurrently  therewith  will  fully perform the terms of Article
9(b).

         (d)  APPLICATION  OF  PAYMENTS  DURING  EXISTENCE  OF EVENT OR EVENT OF
DEFAULT.  Any amount  referred to in clause (i) or (ii) of paragraph (c) of this
Article  which is  payable  to Lessee  shall  not be paid to Lessee  or, if such
amount has been previously paid to Lessee,  shall not be retained by Lessee,  if
at the time of such payment an Event or an Event of Default  shall have occurred
and be continuing.  In such event, all such amounts shall be paid to and held by
Lessor as security for the  performance by Lessee of its  obligations  hereunder
or,  at  Lessor's  option,  applied  by  Lessor  toward  payment  of any of such
obligations  of Lessee at the time due  hereunder  as Lessor may elect.  At such
time as Lessee  shall have cured all  Events  and  Events of  Default,  all such
amounts  at the time held by Lessor in  excess  of the  amounts,  if any,  which
Lessor shall have elected to apply as above provided shall be paid to Lessee.

                                       9-2

<PAGE>

         ARTICLE 10. INSURANCE.

         (a)  LIABILITY  AND PROPERTY  DAMAGE  INSURANCE.  Lessee will carry and
maintain  in effect  with  respect to the  Aircraft,  at its own  expense,  with
insurers  of  recognized   responsibility  and  substantial  financial  capacity
acceptable to Lessor in its reasonable discretion,  comprehensive aircraft third
party, passenger, baggage, cargo, products, mail and airline general third party
legal liability insurance, including war and allied perils, in amounts which are
not less than and of the types usually carried by companies  engaged in the same
or similar  business,  similarly  situated with Lessee,  and owning or operating
similar  aircraft  and engines and which  covers  risks of the kind  customarily
insured against by such companies,  including, without limitation, bodily injury
and property damage of whatever  nature;  provided,  however,  in no event shall
such  amounts of  insurance  coverage  be less than a combined  single  limit of
liability  of  $600,000,000  for any one  occurrence  and in the  aggregate  for
products  liability  (or such  higher  amounts  as Lessor  may from time to time
reasonably require).  In no event shall Lessee discriminate against the Aircraft
in  respect  of the  amount or other  aspects  of  liability  insurance  for the
Aircraft as compared to the amount or other  aspects of liability  insurance for
other similar aircraft in Lessee's fleet.

         (b) INSURANCE  AGAINST LOSS OR  DAMAGE  TO AIRCRAFT.  From the Delivery
Date of an Item of Equipment  until the return  thereof to Lessor in  compliance
with the requirements of Article 13 hereof,  Lessee shall bear all risks of loss
or damage to such Item of  Equipment,  no matter how  occasioned  and from every
source 'or cause  whatsoever.  Lessee shall carry and maintain in effect, at its
own  expense,  with  insurers  of  recognized   responsibility  and  substantial
financial capacity acceptable to Lessor in its reasonable  discretion,  all-risk
ground, flight, taxiing and ingestion aircraft hull insurance on an agreed value
basis  covering the  Aircraft,  and all-risk  insurance on an agreed value basis
with  respect to the Engines  while not  installed in the Aircraft and on a full
replacement  cost  basis  with  respect  to Parts  while  not  installed  in the
Aircraft,  in each case which is of the type and in  substantially  the  amounts
usually  carried  by  companies  engaged  in the same or  similar  business  and
similarly  situated  with Lessee,  and shall include war risk  insurance  (which
shall  not be  restricted  to  physical  loss or damage  to the  aircraft  hull)
covering the perils of:

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

              (ii) strikes, riots, civil commotions or labor disturbances;

              (iii) any act of one or more  persons,  whether or not agents of a
sovereign  power,  for  political or terrorist  purposes and whether the loss or
damage resulting therefrom is accidental or intentional;

              (iv) any malicious act or act of sabotage;

                                      10-1

<PAGE>

              (v) confiscation,  nationalization, seizure, restraint, detention,
appropriation,  requisition  for  title  or use by or  under  the  order  of any
government  (whether  civil,  military  or de  facto)  and/or  public  or  local
authority including the government of the Country of Registration; and

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

PROVIDED, HOWEVER, that all hull insurance required  by this paragraph (b) shall
at all times  while the  Aircraft  is subject to this Lease be for an amount not
less than the Stipulated Loss Value from time to time computed for the Aircraft.
Lessee may self-insure, by means of a deductible or similar clause, the aircraft
hull risk  required  to be  insured  against  pursuant  to this  paragraph  (b),
provided that the amount of  such  self-insurance shall not exceed the lesser of
$500,000    for   any    one    occurrence    or   the    lowest    amount    of
self-insurance/deductible applying to any aircraft in Lessee's fleet. All of the
foregoing  insurance  policies  required  under tins paragraph (b) shall provide
that any loss which:  (i) is less than  $500,000 may be adjusted with Lessee and
paid to  Lessee,  provided  that if  Lessor or  Mortgagee  shall  have  notified
Lessee's  insurance  brokers that an Event or Event of Default exists hereunder,
such payment  shall be made to Lessor or  Mortgagee,  whoever has provided  such
notice,  and such payment  shall be held by such party  pursuant to the terms of
this Lease,  (ii) exceeds $500,000 but is less than $3,000,000 shall be adjusted
with  Lessor and Lessee and shall be payable to the order of Lessor in  Dollars,
and (iii) exceeds $3,000,000 shall be adjusted with Lessor and Lessee and  shall
be payable in Dollars to  Mortgagee  (or is  Mortgagee  has given  notice to the
insurers of the termination of the Mortgage, to Lessor).

         (c) REQUIREMENTS IN INSURANCE POLICIES.  All insurance policies carried
in  accordance  with  paragraph  (a) or (b) of this  Article 10 and all policies
taken out in  substitution  or replacement  for any such policies,  shall (i) be
subject  to  Lessor's  approval,   (ii)  include  a  waiver  of  any  rights  of
subrogation,  set-off, counterclaim or other deduction, whether by attachment or
otherwise  as  against  Lessor  and  each  Participant,   and  their  respective
successors and  assigns (hereafter  collectively  referred to as the "Additional
Insureds"),  and the  Indemnitees  (as defined in Article 8(a)),  (iii) name the
Additional Insureds,  and in respect of the insurance carried in accordance with
Article  10(a),  the  Additional  Insureds  and the  Indemnitees  as  additional
insureds,  as their  respective  interests appear (but without imposing upon any
such Additional  Insured or Indemnitee any obligation  imposed upon the insured,
including,  without  limitation,  the  liability  to pay the  premium  for  such
policies),  (iv)  provide  that in respect of the  interests  of the  Additional
Insureds and  Indemnitees in such policies,  the insurance shall not be impaired
or  invalidated  by any action or omission of Lessee or any other person  (other
than  action of such  Additional  Insured),  and  shall  insure  the  Additional
Insureds and Indemnitees,  as their respective  interests appear,  regardless of
any  breach  or  violation  by  Lessee  or any  other  person  (other  than such
Additional Insured) of any warranties,  declarations or conditions  contained in
such policies,  (v) provide that if such insurance is canceled or terminated for
any reason  whatsoever or is changed in any material  respect in relation to the
interests of  an Additional Insured or if such insurance is allowed to lapse for

                                      10-2

<PAGE>

nonpayment of premium, such cancellation, termination, change or lapse shall not
be effective as to such Additional Insured for thirty (30) days (seven (7) days,
or such lesser period as is  customarily  available in accordance  with industry
practice,  in the case of any war risk and allied perils coverage) after receipt
by  such  Additional  Insured  of  written  notice  by  such  insurers  of  such
cancellation,  termination,  change or lapse, (vi) in the event Lessee maintains
separate  policies  to cover all risk  aircraft  hull and war risk  and  related
perils  insurances,  all such policies shall include a 50/50  provisional claims
settlement  arrangement  in the event of dispute  over which  policy  covers the
loss,  (vii) be primary without right of  contribution  from any other insurance
carried by any Additional  Insured or Indemnitee with respect to its interest as
such in the Aircraft,  (viii) be in an amount  sufficient to prevent  Lessee and
any Additional  Insured from becoming a co-insurer,  (ix) provide for  worldwide
geographical coverage,  except  for exclusions  of geographical areas reasonably
acceptable  to Lessor,  (x)  provide  satisfactory  coverage  against  the risks
associated with electronic date recognition  problems,  in the form of AVN 2000,
AVN2001 and AVN2002, or equivalent, substitute or replacement in respect thereof
in  accordance  with then  current  market  practice  (and Lessee shall make and
comply with the warranties,  representations,  and  undertakings  required to be
given in connection with  obtaining/maintaining  such clauses in accordance with
then current market  practice,  and (xi) comply to the extent necessary with the
insurance  requirements  set forth in the  Manufacturer's  product  support  and
customer  training  agreements.  Each  liability  insurance  policy  carried  in
accordance  with section (a) of this  Article  shall  contain a  cross-liability
endorsement so that each insured,  Additional  Insured and  Indemnitee  shall be
protected from claims by each other insured,  Additional  Insured or Indemnitee,
and a severability of interest  provision which shall expressly provide that all
of the  provisions  thereof  shall operate in the same manner as if there were a
separate  policy  covering  each  insured,  Additional  Insured and  Indemnitee;
provided,  however,  such  policies  shall not operate to increase the insurers'
limit of liability.  Lessee shall cause its insurers to agree that the indemnity
and hold  harmless  provisions  of Article  8(a) are  insured  as a  contractual
assumption  of  liability  by Lessee's  insurers,  but only to the extent of the
risks covered by the policy of insurance.

         (d) UNINSURED  OPERATIONS.  Lessee shall not operate or locate any Item
of Equipment, or suffer the same to be operated or located, in any recognized or
threatened  area of  hostilities  or in any area or on any route  excluded  from
coverage by any  insurance  contemplated  by this  Article 10.  Lessee shall not
operate any Item of Equipment,  or suffer the same to be operated, in any manner
or for any  purpose  which is not  covered  by the  insurance  which  Lessee  is
required to carry and maintain pursuant to this Article 10.

         (e) APPLICATION OF INSURANCE  PROCEEDS FOR EVENT OF LOSS. All insurance
payments  received  as the result of the  occurrence  of an Event of Loss (other
than an Event of Loss described in Article 9(c),  above) with respect to an Item
of Equipment, or any part thereof, will be applied as follows:

              (i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and Engines  installed on the Airframe,
so much of such payments  remaining after  reimbursement to Lessor for all costs
and expenses including  attorneys fees incurred in connection with such Event of
Loss as shall not exceed the amounts

                                      10-3

<PAGE>

due under  paragraph  (a) of Article 9 shall be applied in reduction of Lessee's
obligation  to pay such amounts,  if not already paid by Lessee,  or, if already
paid by Lessee,  shall be applied to  reimburse  Lessee for its  payment of such
amounts,  and the balance, if any, of such payment remaining  thereafter will be
paid over to or retained by, Lessee; or

              (ii) if such payments are received with respect to an Engine under
the  circumstances  contemplated  by  Article  9(b),  so much  of such  payments
remaining  after  reimbursement  to Lessor for all costs and expenses  including
attorneys fees incurred in connection with such Event of Loss shall be paid over
to, or retained by,  Lessee,  provided  that Lessee shall have  fully  performed
or, concurrently therewith, will fully perform the terms of Article 9(b).

         (f) APPLICATION OF INSURANCE PROCEEDS FOR OTHER THAN EVENT OF LOSS. The
insurance proceeds of any damage to the Airframe or any Engine, or part thereof,
not  constituting  an Event of Loss will be applied in payment (or to  reimburse
Lessee) for repairs or for replacement  property in accordance with the terms of
Articles 5 and 6 hereof,  and any balance  remaining after compliance with  such
Articles with respect to such loss shall be paid to, or retained by, Lessee.

         (g)  APPLICATION  IN DEFAULT.  Any amount  referred to in clause (i) or
(ii) of paragraph (e) or in paragraph (f) of this Article 10 which is payable to
Lessee  shall not be paid to Lessee  or, if it has been previously paid directly
to Lessee,  shall not be retained by Lessee, if  at the time  of such payment an
Event or an Event of Default  shall have  occurred  and be  continuing.  In such
event,  all such amounts shall be paid to and held by Lessor as security for the
performance  by Lessee of its  obligations  hereunder  or, at  Lessor's  option,
applied by Lessor toward  payment of any such  obligations of Lessee at the time
due  hereunder as Lessor may elect.  At such time as Lessee shall have cured all
Events and Events of  Default,  all such  amounts  at the time held by Lessor in
excess of the amounts, if any, which Lessor shall have elected to apply as above
provided shall be paid to Lessee.

         (h) REPORTS,  CERTIFICATES,  ETC. At least five (5) Business Days prior
to the Delivery Date of the Aircraft and  concurrently  with the renewal of each
insurance policy (but in no event less frequently than once each calendar year),
Lessee will furnish to Lessor and  each Additional  Insured a certificate signed
by a firm of independent  aircraft insurance brokers of recognized  standing and
responsibility in the international  aviation insurance  industry,  appointed by
Lessee and acceptable to Lessor,  describing in reasonable  detail the insurance
then carried and maintained on the Equipment and  certifying  that the insurance
then carried and maintained on the Aircraft and Engines  complies with the terms
hereof.  Lessee will advise  and will cause such firm to agree to advise  Lessor
and each Additional Insured in writing promptly of any default in the payment of
any premium and of any other act or omission on the part of Lessee or  otherwise
of  which it or they  have  knowledge  and  which  might  invalidate  or  render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine.
Lessee will also advise and will also cause such firm to agree to advise  Lessor
and each Additional  Insured in writing of the termination date of any insurance
carried and maintained on the Aircraft or any Engine pursuant to this Article at
least thirty (30) days

                                      10-4

<PAGE>

(seven  (7)  days,  or  such  lesser  period  as is  customarily  available   in
accordance  with  industry  practice,  in  the case of any war  risk and  allied
perils coverage) prior to such termination date. Upon request by Lessor,  Lessee
will  deliver to Lessor a true and complete  copy of all policies of  insurance.
carried by Lessee in accordance with the requirements of this Article 10. In the
event that Lessee shall fail to maintain  insurance as herein  provided,  Lessor
may at its option  obtain such insurance and, in such event,  Lessee shall, upon
demand, reimburse Lessor, as Supplemental Rent, for the cost thereof.

         (i) INSURANCE - GENERAL. If at any time Lessor determines that Lessor's
approval of any insurer  should be revoked in the  interests  of the  Additional
Insureds  as  the  result  of  such  insurer  no  longer  being  of   recognized
responsibility and substantial  financial  capacity  acceptable to Lessor in its
reasonable  discretion,  or if Lessor  determines that Lessor's  approval of any
insurance  should be revoked in the interests of the Additional  Insureds as the
result of a change in market practice,  Lessor agrees to consult with Lessee and
Lessee's insurance brokers regarding revocation of such approval.  If, following
such  consultation,  Lessor determines that revocation is required,  Lessee will
promptly arrange or procure  the arrangement  of alternative cover  satisfactory
to Lessor.  Lessee shall, on request,  provide Lessor with satisfactory evidence
that the premiums in respect of the  insurance  required  hereby have been paid.
Lessee shall not make, or permit to be made, any  modification  to or alteration
of the insurance coverage required hereby adverse to the interests of any of the
Additional  Insureds  or  Indemnitees.  Lessee  shall  be  responsible  for  any
deductible in respect of the insurances  required  hereby.  Lessee shall provide
any other insurance/reinsurancer-related information or assistance in respect of
the insurances required hereby, as Lessor may reasonably  request.  Lessee shall
at its own  expense  maintain  insurance  following  the  expiration  or  sooner
cancellation  or  termination  of the Term in respect of Lessee's  indemnity and
hold harmless  obligations set forth in Article 8(a) hereof,  for such period as
Lessor  may  reasonably  require  (but in any event not more than two (2) years)
naming  each  Indemnitee  (as  defined in Article 8) as an  additional  insured.
Lessee's obligation under the preceding sentence shall not be affected by Lessee
ceasing  to be the  lessee  of the  Aircraft  or by any of the  Indemnitees  (as
defined in Article 8) ceasing to have an interest in respect of the Aircraft.

         (j)  INSURANCE OF LESSEE'S  INTEREST.  Nothing  contained in this Lease
shall prevent Lessee from carrying insurance against Events of Loss with respect
to the Equipment in excess of that required hereunder,  and nothing herein shall
prevent any Additional  Insured,  at its own expense,  from carrying  additional
insurance  against  Events  of Loss with  respect  to the  Equipment;  PROVIDED,
HOWEVER,  (i) Lessee shall not procure  insurance or permit  Lessee to  be named
assured in any  insurance  with  respect to any Item of  Equipment  which  could
prejudice any Additional Insured's rights under the insurance required hereunder
or any right of recovery under any such  insurance,  and (ii) in the event there
is a limitation  on the  aggregate  amount of insurance  which may be carried or
collected by any or all parties in respect of any  Equipment,  Lessee's right to
carry and  collect  insurance  on such  Equipment  in  excess  of that  required
hereunder  shall be  subordinate to and shall not in any way prejudice the right
of any  Additional  Insured to carry and collect  insurance on such Equipment in
excess of such amounts.

                                      10-5

<PAGE>

         ARTICLE  11.  MORTGAGES,  LIENS,  ETC.  Lessee  shall not  directly  or
indirectly create, incur, assume or suffer to exist any Lien on  or with respect
to any Item of  Equipment,  any part  thereof,  title  thereto  or any  interest
therein,  except:  (i) the respective  rights of Lessor,  the  Participants  and
Lessee as herein  provided,  (ii) Liens which result from Claims  against Lessor
that are not to be paid or indemnified against by Lessee hereunder,  (iii) Liens
for taxes either not yet due or being  contested  in good  faith by  appropriate
proceedings,  but only so long as, in Lessor's judgment, such proceedings do not
involve any danger of the  sale, forfeiture or loss of any Item of Equipment, or
interest therein, and (iv) materialmen's,  mechanics',  workmen's,  repairmen's,
airport charges, employees'  or other like liens  arising  by  operation  of law
in  the  ordinary  course  of business  and for amounts the payment of which  is
either  not  delinquent  or  is  being  contested  in  good faith by appropriate
proceedings,  but only so long as, in  Lessor's  judgment,  such  proceedings do
not involve any danger of the sale, forfeiture or loss of any Item of Equipment,
or any interest therein.

                                      11-1

<PAGE>

         ARTICLE 12.  RECORDATION AND FURTHER  ASSURANCES.  Lessee shall, at its
own cost and expense,  cause this Lease, the Lease Supplement,  the Mortgage and
any and all additional instruments which shall be executed pursuant to the terms
hereof, so far as permitted by applicable law or regulation,  to be kept, filed,
registered and recorded at all times in the appropriate  offices pursuant to the
laws of the Country of Registration, and in such other places, whether within or
outside the Country of Registration, as Lessor may reasonably request to perfect
and  preserve  Lessor's  and any  Participants  title  to and  interests  in the
Equipment and rights hereunder  (including its rights to the Security  Deposit),
and Lessee shall on request furnish to Lessor an opinion of counsel satisfactory
to  Lessor  or other  evidence  satisfactory  to  Lessor  of each  such  filing,
recordation and registration.

         Without limiting the foregoing, Lessee shall do or cause to be done, at
its own cost and  expense,  any and all acts and  things  which may be  required
under the terms of the Convention for the International Recognition of Rights in
Aircraft,  signed at Geneva,  Switzerland,  on June 18,  1948,  to  perfect  and
preserve  the tide and  interests of Lessor and each  Participant  in and to the
Equipment within the jurisdiction of any signatory State which has ratified such
Convention  and in the  territories  thereof  in which  Lessee may  operate  the
Equipment,  and Lessee  shall also do or cause to be done at its own expense any
and all acts and  things  which  may be  required  under  the terms of any other
agreement,   treaty,   convention,   pact,  or  by  any  practice,   custom,  or
understanding  involving any State in which Lessee may operate,  and any and all
acts and things which Lessor may reasonably request, to perfect and preserve the
rights of Lessor and each Participant in the Equipment and hereunder.

         In  addition,  Lessee  will  promptly  and duly  execute and deliver to
Lessor such further  documents and  assurances  and take such further  action as
Lessor may from time to time  reasonably  request  in order to more  effectively
carry out the intent and purpose of this Lease and to establish  and protect the
rights  and  remedies  created  or  intended  to be  created  in favor of Lessor
hereunder.

                                      12-1

<PAGE>

     ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS.

     (a) RETURN. Except as otherwise provided herein, at the expiration of
the Term for the Aircraft or upon the sooner cancellation or termination of
this Lease, Lessee, at its own expense, shall return the Aircraft and related
documentation and records to Lessor by delivering the same to Lessor at an
airport in the western part of the United States as may be designated by
Lessor in full compliance with all Lessee's obligations hereunder. The
Aircraft, at the time of return to Lessor, shall be fully equipped with two
Engines properly installed thereon. On return of the Aircraft to Lessor, but
in no event more than thirty (30) days thereafter, Lessor or Lessee, as the
case may be, shall reimburse the other for the cost of the fuel contained in
the fuel tanks of the Aircraft on return to Lessor, to the extent such fuel
is less than (which will result in payment by Lessee) or exceeds (which will
result in payment by Lessor) the amount of fuel contained in the fuel tanks
of the Aircraft on the Delivery Date.

     (b) INSPECTION; TEST FLIGHT. Lessor shall have the right, within sixty
(60) days prior to the expiration date of the Term for the Aircraft, to
inspect the Aircraft and its records, including all maintenance, pilots and
aircraft systems functional check reports, to determine whether the Aircraft
and its records will be in compliance with the requirements for return at the
expiration of the Term, including confirmation of the full serviceability
status of each component of the Aircraft. Lessee shall make such personnel
available to Lessor for such inspection of the Aircraft and its records as
Lessor may reasonably require. Lessor's right of inspection shall include:
(i) the right to a complete and thorough inspection of all documents and
records maintained for the Equipment by or for Lessee (including the Engine
performance monitoring data), which Lessee shall make available to Lessor's
representatives and designees in one location, (ii) the right to conduct a
full systems functional and operational check, and (iii) the right to have up
to four of its representatives or designees participate as direct observers
in a test flight of the Aircraft of at least ninety (90) minutes in duration
(the cost of which shall be borne by Lessee) conducted by Lessee in
accordance with Manufacturer's standard flight operation check flight
procedures to demonstrate the airworthiness of the Aircraft and the proper
functioning of all systems and components within limits. All discrepancies
and deficiencies from the return conditions provided herein shall be
corrected by Lessee at its expense. If an additional test flight is required
after correction of discrepancies discovered on the initial test flight or
during the inspections, Lessee shall provide such additional test flight.
Lessor's right of inspection shall not include the right to open any panels
or bays that are not required to be opened in connection with the maintenance
that is required to be performed on the Aircraft pursuant to this Article 13,
unless Lessor has reasonable cause to believe that a defect likely exists
behind the closed panel or bay.

     If: (x) repairs or other work items are required to cause the Aircraft
to comply with the return requirements provided herein, or (y) Lessor,
through no fault of its own, has not been allowed a full and thorough right
to inspect the Aircraft and its records prior to the end of the Term as
contemplated herein, or (z) Lessee for any other reason fails to

                                 13-1
<PAGE>

return the Aircraft and its records to Lessor at the time or place and in the
condition required hereunder, Lessee shall forthwith take such action as may
be necessary to remedy such non-compliance to enable Lessee to return the
Aircraft and its records to Lessor in accordance with the requirements
hereof. Without waiving any other rights or remedies Lessor may have as a
result thereof, Lessee shall pay Lessor one and one-half (1-1/2) the monthly
Basic Rent for the Aircraft, prorated on a daily basis, payable weekly in
arrears, for each day following the expiration of the Term for the Aircraft
until Lessor has been allowed and has completed a full and thorough right to
inspect the Aircraft and its records prior to the end of the Term as
contemplated herein and the Aircraft is returned to Lessor in the condition
and with the supporting documentation required hereunder at the time of
return to Lessor. During the period required for Lessee to comply with the
requirements of this paragraph, Lessee shall not operate the Aircraft (other
than for maintenance, repair or return purposes) and all of Lessee's other
obligations hereunder shall remain in full force and effect. Nothing in this
paragraph shall be interpreted to give Lessee the right to retain the
Aircraft after the end of the Term.

     (c) FLIGHT HOURS/CYCLES/TIME REQUIREMENTS. At the time of return of the
Aircraft to Lessor:

         (i) The Airframe shall be fresh out of its next sequential block
"6C" systems, zonal and structural check (all as described in the latest
revision of the Boeing Maintenance Planning Document and the latest revision
of Appendix C No. D626AOOl (or restatement thereof)  applicable to the
Aircraft as the result of the hour/cycle ratio that the Aircraft has been
operated during the Term) or  equivalent  block-type  maintenance  check,
including all corresponding lower level checks (I.E , "A" and lower "C"
checks), and corrosion prevention and control and aging aircraft inspections,
if any, and all other known inspections and routine and non-routine tasks due
at such time, all with full fault rectification and interior refurbishment
and all without taking into account any sampling programs (collectively
referred to hereafter as the "6C Maintenance"). If Lessee's Maintenance
Program permits such 6C Maintenance to be performed in phases, Lessee shall
perform all phases of such 6C Maintenance immediately prior to return of the
Aircraft to Lessor in order to align such maintenance of the Aircraft with
the Boeing Maintenance Planning Document and the latest revision of Appendix
C No. D626AO01 (or restatement thereof) to the same extent as if Lessee's
Maintenance Program did not permit such maintenance to be performed in
phases. During such 6C Maintenance, Lessee shall also perform any other work
reasonably requested by Lessor and not otherwise required hereunder (provided
such other work does not increase the ground time required for Lessee to
prepare the Aircraft for return to Lessor as required hereby, or,  if it does
increase the downtime, Lessor and Lessee shall have agreed to a Basic Rent
abatement for such additional ground time), and Lessor will reimburse Lessee
for the cost of such work (including labor and materials), billed at Lessee's
most preferred customer's rates. Lessee shall give Lessor at least thirty
(30) days prior notice of the date on which such 6C Maintenance is to be
performed.

         If the Airframe is not fresh from such 6C Maintenance at the time of
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (i), Lessee shall pay Lessor a Dollar amount
determined by multiplying the then current

                                   13-2
<PAGE>

cost of such 6C Maintenance for the Airframe as quoted by an FAA-approved
overhaul facility selected by Lessee and reasonably acceptable to Lessor
(provided that if Lessor and Lessee cannot agree on the FAA-approved overhaul
facility, each shall select an FAA-approved overhaul facility and the
quotations of the two facilities shall be averaged) by (b) a fraction of
which (x) the numerator shall be the number of Flight Hours, Cycles or
calendar time (whichever is limiting) accumulated on the Airframe since the
Delivery Date or its last complete block "6C" check (or the final phase of
the phased "6C" check), as the case may be, and (y) the denominator shall be
the total number of Flight Hours, Cycles or calendar time (whichever is
limiting) between block "6C" checks for the Airframe (determined by reference
to the latest revision of the Boeing Maintenance Planning Document and the
latest revision of Appendix C No. D626AOOI (or restatement thereof)
applicable to the Aircraft as the result of the Flight Hours/Cycles ratio
that the Aircraft has been operated during the Term);

         Notwithstanding anything to the contrary in the preceding paragraph,
at the time of return of the Aircraft:

              (A) the Airframe shall be fresh out of its next sequential
     block "C" check or equivalent block-type maintenance, and the
     corresponding lower level checks, and all other inspections and tasks,
     including corrosion prevention and control and aging aircraft
     inspections, if any, and all  structural/systems/zonal  inspections  and
     out-of-sequence inspections due at that tune, and all routine and
     non-routine tasks shall have been performed, all with full fault
     rectification, sufficient to clear the Aircraft for operation until its
     next scheduled "C" check, all in accordance with the then latest
     revision of the Boeing Maintenance Planning Document and the latest
     revision of Appendix C No. D626AO01 (or restatement thereof) applicable
     to the Aircraft as the result of the hour/cycle ratio that the Aircraft
     has been operated during the Term), and all without taking into account
     any sampling programs. If Lessee's Maintenance Program permits such "C"
     check to be performed in phases, all phases of such maintenance check
     shall be performed immediately prior to return of the Aircraft to
     Lessor in order to align such maintenance of the Aircraft with the then
     latest revision of the Boeing Maintenance Planning Document and the
     latest revision of Appendix C No. D626AO01 (or restatement thereof) to
     the same extent as if Lessee's Maintenance Program did not permit such
     maintenance check to be performed in phases. During such "C" check,
     Lessee shall also perform any other work reasonably requested by Lessor
     and not otherwise required hereunder (provided such other work does not
     increase the ground time required for Lessee to prepare the Aircraft for
     return to Lessor as required hereby, or, if it does increase the
     downtime, Lessor and Lessee shall have agreed to a Basic Rent abatement
     for such additional ground time), and Lessor will reimburse Lessee for
     the cost of such work (including labor and materials), billed at
     Lessee's most preferred customer's rates. Lessee shall give Lessor at
     least thirty (30) days prior notice of the date on which such "C" check
     is to be performed; and

                                    13-3
<PAGE>

              (B) the Airframe shall have at least 4,000 Flight Hours/Cycles
     or sixteen (16) months, whichever is limiting, remaining to its next 6C
     Maintenance.

         (ii) The Landing Gear shall be fresh from overhaul or shall be new
(i.e. no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).

         Notwithstanding the preceding paragraph, if the Landing Gear is not
returned fresh from overhaul or new, at the time the Aircraft is returned to
Lessor, subject to the requirements of the last sentence of this  paragraph,
Lessee shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of overhaul of the Landing Gear as quoted by an
FAA-approved overhaul facility selected by Lessor and reasonably satisfactory
to Lessee, by (B) a fraction the numerator of which shall be the number of
Flight Hours/Cycles/calendar time (whichever is limiting) accumulated on the
Landing Gear since new or since its last overhaul and the denominator shall
be the total number of Flight Hours/Cycles/calendar time (whichever is
limiting) allowable between overhauls (determined by reference to the latest
revision of the Boeing Maintenance Planning Document). In any event, on
return of the Aircraft the Landing Gear shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining until
its next scheduled overhaul (determined by reference to the latest revision
of the Boeing Maintenance Planning Document).

         (iii) Each "hard time/life limited" component of the Aircraft,
including life-limited Parts of the Engines, the APU and the Landing Gear
(but excluding components  referred to in clause (iv), below, and excluding
the Landing Gear as a whole) shall  be fresh from overhaul or shall be new
(i.e., no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).

         Notwithstanding the preceding paragraph, if any "hard time/life
limited" component, including life-limited Parts of the Engines, the APU and
the Landing Gear (but excluding components referred to in clause (iv), below,
and excluding the Landing Gear as a whole) is not returned fresh from
overhaul or new, at the time the Aircraft is returned to Lessor, subject to
the requirements of the last sentence of this paragraph, Lessee shall pay
Lessor a Dollar amount computed by multiplying: (A) the then current
estimated cost of overhaul or purchase and replacement of such component, as
quoted by an FAA-approved overhaul facility selected by Lessor and reasonably
satisfactory to Lessee, by (B) a fraction  the  numerator  of  which  shall
be the  number  of  Flight Hours/Cycles/calendar time (whichever is limiting)
accumulated on each "hard time/life limited" component, as the case may be,
since new or since its last overhaul  and the  denominator  shall be the
total  number  of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between overhauls (determined by reference to the latest revision
of the Boeing Maintenance Planning Document). In any event, on return of the
Aircraft each "hard time/life limited" component of the Aircraft, including
Life-limited Parts of the Engines, the APU and the Landing Gear (but
excluding the components referred to in clause (iv), below, and excluding the
Landing Gear as a whole) shall have at least 4,000 Flight Hours/Cycles or
sixteen (16) months (whichever is

                                   13-4
<PAGE>

limiting) remaining until its next scheduled overhaul (determined by
reference to the latest revision of the Boeing Maintenance Planning
Document). For the avoidance of doubt, Lessor does not intend to receive
double payment for any item for which compensation if paid pursuant, to this
Article 13(c). Therefore, the provisions of this Article 13(c) shall be
construed so that if appropriate payment in respect of a Part is paid
pursuant to one clause of this Article 13(c), an equivalent payment in
respect of such Part shall not be payable pursuant to any other clause of
this Article 13(c).

         (iv) Each component of the Aircraft which has a hard time/life limit
(i.e.,  hours/cycles/calendar time) to overhaul interval/shop visit
interval/replacement of less than 4,000 Flight Hours/Cycles or sixteen (16)
months  (whichever  is  limiting)  shall  have  100%  of  its  Flight
Hours/Cycles/calendar time remaining until next overhaul interval, shop visit
interval or replacement (determined by reference to the latest revision of
the Boeing Maintenance Planning Document).

         (v) Each Engine and the APU shall be fresh out of its heavy
maintenance shop visit requiring teardown/disassembly and resulting in full
performance restoration. If an Engine or the APU is not fresh out of its
heavy maintenance shop visit requiring teardown/disassembly and resulting in
full performance restoration on return to Lessor, subject to the requirements
of the next succeeding paragraph of this clause (v), on return of the
Aircraft to Lessor Lessee shall pay Lessor a Dollar amount computed by
multiplying: (A) the then current estimated cost of such heavy maintenance
shop visit requiring teardown/disassembly and resulting in full performance
restoration for such Engine or the APU, as the case may be, as quoted by an
FAA-approved overhaul facility selected by Lessee and reasonably satisfactory
to Lessor (provided that if Lessor and Lessee cannot agree on the
FAA-approved overhaul facility, each shall select an FAA-approved overhaul
facility and the quotations of the two facilities shall be averaged), by (B)
a fraction the numerator of which shall be the number of Flight
Hours/Cycles/calendar time (whichever is limiting) accumulated on such Engine
or the APU since new or since its last heavy maintenance shop visit requiring
teardown/disassembly and resulting in full performance restoration (whichever
is later), and the denominator shall be the total number of Flight
Hours/Cycles/calendar time (whichever is limiting) allowable between heavy
maintenance shop visits requiring teardown/disassembly and resulting in full
performance restoration. The industry mean time between removals for engines
and auxiliary power units of similar age, characteristics and maintenance
histories  as such Engines and the APU, determined by Lessor from records
maintained by the manufacturer of such equipment on the basis of the average
of the industry mean time between removals over the immediately preceding two
(2) years, shall be used to determine the number of Flight
Hours/Cycles/calendar time allowable between heavy maintenance shop  visits
requiring teardown/disassembly  and resulting in full performance
restoration. The industry mean time between removals for engines and
auxiliary power units does not include removals solely for foreign object
damage or customer convenience.

         Notwithstanding anything to the contrary in the preceding paragraph,
on return of the Aircraft, each Engine and the APU shall have at least 3,000
Flight Hours/Cycles or one (1) year (whichever is limiting) remaining to the
industry mean time

                                  13-5
<PAGE>

between removals for engines and auxiliary power units of similar age,
characteristics and maintenance  histories as such Engines and the APU,
determined from records maintained by the manufacturer of such equipment on
the basis of the average of the industry mean time between removals over the
immediately preceding two (2) years.

         (vi) Each major component of the Aircraft which is "on condition" or
"condition monitored" (other than such components referred to in clause
(vii), below) shall be fresh out of its heavy maintenance shop visit. If any
such major component is not fresh out of its heavy maintenance shop visit on
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (vi), on return of the Aircraft to Lessor Lessee
shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of such heavy maintenance shop visit for such
component, as quoted by an FAA-approved overhaul facility selected by Lessor
and reasonably satisfactory to Lessee, by (B) a fraction the numerator of
which shall be the number of Flight Hours/Cycles/calendar time (whichever is
limiting) accumulated on such component since new or since its last heavy
maintenance shop visit (whichever is later), and the denominator shall be
the total number of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between heavy maintenance shop visits. The average industry mean
time between failures over the, immediately preceding twelve months for
components of similar age, characteristics and maintenance histories, as
determined by Lessor from records maintained by Manufacturer, shall be used
to determine the number of Flight Hours/Cycles/calendar time allowable
between heavy maintenance shop visits.

         Notwithstanding  anything to the contrary in the  preceding
paragraph, on return of the Aircraft, each major component of the Aircraft
which is "on condition" or "condition monitored" (other than such components
referred to in clause (vii),  below) shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining to the
industry  mean time  between  failures for  components  of similar age,
characteristics and maintenance histories, determined on the basis of the
average of the industry mean time between failures over the immediately
preceding twelve months from records maintained by Manufacturer.

         (vii) Each "on condition" or "condition monitored" major component
of the Aircraft which has an industry mean time between failures of less than
4,000 Flight Hours/Cycles or sixteen (16) Months (Whichever is limiting),
determined on the basis of the average of the industry mean time between
failures over the immediately preceding twelve months, shall have 100% of its
Flight Hours, Cycles or calendar time, whichever is limiting, remaining to
the industry mean time between failures for such component, determined on the
basis of the  average of the industry mean time between failures over the
immediately preceding twelve months from records maintained by Manufacturer.

         (viii) Except as otherwise required above, each component of the
Aircraft which has a calendar limit to removal and replacement or
refurbishment shall have at least one year remaining to operate until removal
and replacement or refurbishment (determined by reference to the latest
revision of the Boeing Maintenance Planning

                                 13-6
<PAGE>

Document), and each component of the Aircraft which has a calendar limit to
removal and replacement or refurbishment of less than one year (determined by
reference to the latest revision of the Boeing Maintenance Planning Document)
shall have 100% of its calendar time remaining until next removal and
replacement or refurbishment.

     All of the foregoing overhauls, checks, maintenance and visits shall
have been performed by an Approved Maintenance Performer and be in compliance
with Lessee's Maintenance Program (except to the extent otherwise specified
above). Lessee shall not be entitled to any adjustment or to be reimbursed or
in any way compensated if the Airframe, any Engine or any Parts are returned
in a better condition than as required under this Article 13.

     (d) GENERAL RETURN REQUIREMENTS. The Airframe, Engines and Parts shall
have been maintained, serviced and repaired throughout the Term in accordance
with (i) all the requirements of this Lease, (ii) Lessee's Maintenance
Program, and (iii) the rules, and regulations of the FAA, and shall be in
compliance with the following:

         (1) AIRWORTHINESS CERTIFICATE; REGISTRATION. The Aircraft when
returned to Lessor shall have a currently effective airworthiness certificate
(and, if required by Lessor, an airworthiness certificate for export to such
location as may be designated by Lessor) issued by the FAA, and shall be in
such condition and shall have such supporting documentation as required to
maintain the airworthiness certificate from the FAA for FAR Part 121
passenger operations with no restrictions and an FAA certificate of
registration. The Aircraft will be equipped for operation in accordance with
FAR Part 121 passenger operations.

         (2) GENERAL CONDITION. Each Item of Equipment shall be in the same
condition as when delivered to Lessee, ordinary wear and tear from normal
flight operations (subject to the obligations set forth in Article 5(c) and
alterations and modifications properly made by Lessee as permitted or
required under this Lease) excepted, shall be in good operating condition,
and shall be free and clear of all Liens, except Liens which result from acts
of Lessor or of a Participant which are not indemnified against hereunder.
The Aircraft shall be clean, internally and externally, and serviceable by
commercial passenger airline operating standards, and shall have installed
thereon and furnished therewith all Engines, Parts and equipment installed
thereon or furnished therewith (including all cabin passenger service and
loose equipment) at the commencement of the Term (after giving effect to the
modifications referred to in Article 2(h) hereof) or replacements therefor
(as herein authorized) and additions and  improvements thereto made in
accordance with the provisions of this Lease. No Part will have a total time
since new in hours, cycles or calendar time greater than 110% of the total
time since new in hours, cycles or calendar time of the Airframe.

             The Aircraft shall be capable of certificated, full-rated
performance without limitation throughout the entire operating envelope, as
defined in the Aircraft flight manual, and performance compliance will be
demonstrated at the time of the technical acceptance flight test and by
on-wing static inspection and testing of the powerplants in accordance with
the Engine maintenance manual.

                                    13-7
<PAGE>

             The Engines shall not be on "watch" for any reason requiring any
special or out-of-sequence inspection and shall comply with the operations
specification of Lessee and the Engine manufacturer (or, if such requirements
differ, whichever is the more limiting), without waiver, carryover,
deferment, restriction or exception. If the historical and technical records
and/or trend monitoring data indicate an acceleration in the rate of
deterioration in the performance of an Engine or the APU which is higher than
normal as per the recommendations of the manufacturer of such Engine or APU,
Lessee shall, prior to return, correct such conditions that are determined to
be causing such accelerated rate of deterioration or that otherwise exceed
Lessee's or the manufacturer's maintenance manual tolerances.

             Without limiting any of the foregoing, on return the Aircraft
shall comply with the following:

             (i) FUSELAGE, WINDOWS AND DOORS: The fuselage shall be free of
major dents and abrasions which are out of Manufacturer's manual limits, scab
patches which are temporary or out of Manufacturer's manual limits, and loose
or pulled rivets (reasonable wear and tear from normal flight operations
excepted); windows shall be free of delamination, distortion and blemishes
out of Manufacturer's manual limits and shall be properly sealed and free of
crazing (reasonable wear and tear from normal flight operations excepted);
and doors shall be free-moving, correctly rigged, and fitted with serviceable
seals; and all external placards and markings shall be installed and legible;

             (ii) WINGS AND EMPENNAGE: All leading edges shall be free from
damage out of Manufacturer's manual limits; all control surfaces shall be
waxed and polished and all unpainted cowlings and fairings shall be polished;
and all wings, empennage and fuel tanks shall be free of fuel leaks; all
flight controls shall be properly balanced, and all external placards and
markings shall be installed and legible;

             (iii) INTERIOR: The interior of the Aircraft shall be
deepcleaned; carpets, galleys, lavatories, ceiling, side walls, overhead,
passenger service units, bag racks and bulkhead panels shall be serviceable,
secure, clean and free of cracks and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor); all seats shall be
fully serviceable, in good condition and repainted as necessary; all signs
and decals shall be clean and legible; and all calendar-lifed emergency
equipment shall have a minimum of one year's life remaining; all carpets,
cushions and seat covers shall be in original pattern and color (unless
Lessor shall have agreed otherwise with Lessee in writing) and in good
condition and clean and the seats shall conform to FAA fire-resistance and
crash-worthiness regulations; and all placards and markings shall be
installed and legible; all galley areas shall not have any detectable cracks
or corrosion, shall meet safety and health standards, shall present a good
appearance and shall be free of food and; all galley floors shall be sealed
and reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), shall have an effective non-skid coating and shall
meet safety and health standards; all galley structures, galley inserts and
galley carts will be clean and sealed, and shall not have any detectable
leaks, cracks or other defects and shall be fully serviceable.

                              13-8
<PAGE>

             (iv) COCKPIT: All placards and markings shall be clean, secure,
and legible, all fairing panels shall be free of cracks and shall be
reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), and shall be clean, secure, and repainted as
necessary; all floor coverings shall be clean and effectively secured and
sealed; all seat covers shall be in good condition and clean and shall
conform to FAA fire resistance regulations; and all seats shall be fully
serviceable and in good condition;

             (v) CARGO COMPARTMENTS: All panels and nets shall be in good
condition; all cargo-restraint and moving mechanisms shall be serviceable;
and all compartments shall meet then current FAA fire regulations; all doors
shall be rigged and functioning properly; and the compartments shall  be
clean;

             (vi) LANDING GEAR AND WHEEL WELLS: The Landing Gear and all
wheel wells shall be clean, free of leaks, and repaired as necessary; and,
all placards and markings shall be clean, secure, and legible;

             (vii) LAVATORIES: All lavatory areas shall be clean and
reasonably free of cracks and free of detectable corrosion, meet safety and
health standards, present a good appearance and shall be free of abnormal
contamination; all lavatory floors and floor coverings shall be in good
condition and clean, shall be sealed and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor), and shall have an
effective non-skid coating; mirrors shall be free of cracks and delamination
and free of noticeable and unsightly scratches; all doors and latches shall
be properly fitted and fully functional; lavatory systems shall be clean,
free of leaks, detectable cracks and other defects and shall be properly
sealed and fully functional; and

             (viii) TIRES AND BRAKES: All tires and brakes shall be fully
serviceable and have a minimum of 75% wear-life remaining. No tire shall have
more than two recaps.

         (3) MODIFICATIONS. At Lessor's request, Lessee shall, at Lessee's
expense, remove any or all alterations or modifications in or additions to
any Item of Equipment accomplished during the Term not required to be
incorporated or installed in or  attached to such Item of Equipment to
obtain an airworthiness  certificate and registration from the FAA,
including the modifications contemplated by Article 2(h) hereof, and Lessee
shall, at Lessee's expense, restore such Item of Equipment to the value,
utility, condition and airworthiness  thereof  which would have  existed had
such  alterations, modifications or additions not been made (provided that
Lessor shall provide Lessee with the necessary Parts that were returned by
Lessee to Lessor pursuant to Article 2(h), to enable Lessee to make such
restoration). Without limiting any other obligations of Lessee under this
Lease, all modifications made to the Aircraft during the Term shall be in
accordance with FAA-approved data.

         (4) REPAIRS. All repairs performed since the Delivery Date and that
exist on the Equipment at return shall be permanent in accordance with the
Manufacturer's Structural Repair Manual, provided that if such Structural
Repair Manual authorizes as

                                  13-9
<PAGE>

permanent a non-flush structural patch repair or a flush-type structural
patch repair, or does not cover such repair, such repair shall be a
flush-type permanent repair. All repairs shall be in accordance with Lessee's
Maintenance Program and conform to the Manufacturer's Structural Repair
Manual or the Engine manufacturer's approved manual, as the case  may be,
and  shall be provided with approval by the FAA if so required. Any repair
not covered by the Manufacturer's Structural Repair Manual or the Engine
manufacturer's approved manual, as the case may be, shall be in accordance
with FAA-approved data and shall be approved by Manufacturer or the Engine
manufacturer, as the case may be.

         (5) TERMINATING ACTION. Lessee shall perform all deferred and
carryover maintenance items and clear all pilot discrepancies with respect to
the Aircraft on a terminating action basis. All airworthiness directives
issued during the Term by the FAA, all changes required by any amendments or
changes to the FAR's during the Term, and all alert service bulletins or
service bulletins that are mandated by airworthiness directives issued during
the Term by a manufacturer or vendor applicable to the Equipment having a
date for compliance that falls on or prior to twelve (12) months or 3,000
Flight Hours or Cycles, as the case may be, after the expiration of the Term
(or return of the Aircraft, if later) shall be accomplished in compliance
with the issuing entity's specific instructions without regard to any
alternate means of compliance, waiver or operator exemptions  delaying
compliance.  Without  limiting the  foregoing,  any airworthiness directives,
FAR's or manufacturer's or vendor's alert service bulletins or service
bulletins that are mandated by airworthiness directives issued during the
Term which allow temporary compliance by inspection or other action (other
than by terminating action) but require terminating compliance on or prior to
twelve (12) months or 3,000 Flight Hours or Cycles, as the case may be, after
the expiration of the Term (or return of the Aircraft, if later) shall have
such  terminating  compliance  complete  prior to return,  and all
manufacturer's and vendor's service bulletins issued during the Term which
are rendered mandatory   by the Manufacturer's then current ETOPS Compliance
Configuration and Maintenance Procedures Guide and which require a repetitive
inspection, modification or terminating compliance on or prior to twelve (12)
months or 3,000 Flight Hours or Cycles, as the case may be, after the
expiration of the Term (or return of the Aircraft, if later) shall have such
inspection, modification or terminating compliance completed at the highest
level of compliance possible prior to return. Without limiting the foregoing,
the Aircraft shall be in full compliance with the Manufacturer's then current
ETOPS Compliance Configuration and Maintenance Procedures Document for 120
(or, if applicable, 180) minutes ETOPS operation. The Aircraft shall also be
in compliance with the Manufacturer's SSI, SSID, Corrosion Prevention and
Control and Aging Aircraft Programs, and shall comply with United States and
ICAO (to the extent applicable to aircraft operated in the United States)
noise and environmental regulations.

         (6) BORESCOPE INSPECTION, ETC. Lessor shall have the right at
Lessee's expense to carry out a full video borescope inspection of the gas
path of the hot and cold sections of each Engine and the APU and undertake a
full operational check (power assurance run) of each Engine and the APU
system. Lessee shall provide evidence satisfactory to Lessor reflecting the
correction at Lessee's expense of any watch items or unserviceable or

                                 13-10
<PAGE>

reject conditions or defects or discrepancies found not to be in compliance with
manufacturer's maintenance manual limits during such inspections and checks.

         (7) KITS. Lessee shall have ordered during the Term all no-charge
kits for the Aircraft offered by Manufacturer, the Engine manufacturer and
other vendors, and, if not incorporated in the Aircraft at the time of return
hereunder (unless required to do so by the terms hereof), Lessee shall return
such kits to Lessor with the Aircraft. Lessor shall be provided with all
modification kits and other such items that are on order for the Aircraft.

         (8) LEAKS, ETC. The Airframe and Engines so returned shall be free
 of fuel leaks, and the fuel system of the Aircraft, including the Engines,
shall have been tested and free of bacteriological, fungus and other
contamination and corrosion and shall show no indication of breakdown. The
hydraulic and oil systems of the Aircraft, including the Engines, shall have
been tested and free of contamination and corrosion and shall show no
indication of breakdown. Lessee shall provide copies of the results of
laboratory tests of all such systems to Lessor and of full bacteriological
and fungus tests of all fuel tanks performed no more than thirty (30) days
prior to return of the  Aircraft.  Any bacteriological, fungus or other
contamination or corrosion revealed thereby shall be corrected or treated to
Lessor's satisfaction prior to return.

         (9) PAINTING. Lessee shall remove all special markings of Lessee,
and shall strip the paint from the Aircraft and repaint the Aircraft in a
livery specified by Lessor after application of corrosion protection and
performance of other procedures, in accordance with industry practice, with
control surfaces balanced and other procedures performed in accordance with
Manufacturer's maintenance procedures, all at Lessee's expense. Lessee shall
also weigh the Aircraft.

         (10) NOISE CREDITS. Any and all noise credits, base level rights or
any other types of rights which accrue with respect to the Aircraft shall be
deemed to be transferred to and to have accrued to the benefit of Lessor upon
the expiration or sooner cancellation or termination of this Lease for any
reason.

     (e) RECORDS. Upon the return of the Aircraft, (i) the Airframe, Engines
and all Parts shall be documented with work orders, vendor serviceable tags,
etc. to have been maintained, repaired and overhauled by FAA certified repair
stations or by those approved by the FAA through reciprocal agreements and in
a manner so that such equipment is approved by the FAA for use on United
States registered and certificated aircraft, and (ii) Lessee shall deliver
to Lessor (A) all logs, manuals, certificates, data and inspection,
modification, maintenance and overhaul records, amended to their latest
amendment revision available generally, required to be maintained with
respect thereto under applicable rules and regulations of the FAA or other
governmental authority having jurisdiction, and (B) all logs, manuals and
catalogs included with the Aircraft on the Delivery Date therefor or supplied
during the Term hereof, amended to their latest amendment revision available
generally.

         If non-computerized copies of maintenance records are not available,
then Lessee shall take action with the pertinent regulatory agencies to
insure that Lessor and

                                   13-11
<PAGE>

the FAA are provided with all requested necessary and proper guarantees of
methods of compliance, component overhaul and management, scheduling, quality
control, serial number verification, etc.

         The head of Lessee's Quality Control Department shall certify in
writing that the data and information contained in all documentation and
records returned to Lessor is true and correct. For any computerized
records, the head of Lessee's Quality Control Department shall sign or
initial each computer page.

         All Parts identified with safe-life limits shall be identified with
their back to birth service histories, accumulated Cycles or Flight Hours, as
applicable, and remaining service lives on a separate listing. All Parts
which are identified in the maintenance records by part numbers and serial
numbers, other than the manufacturer's shall be provided with interchange or
cross reference listing necessary to establish complete traceability.

         In the event of missing, incomplete or noncompliant records, Lessee
shall at its expense reaccomplish the tasks necessary to produce such records
in accordance with its Maintenance Program prior to return of the Equipment
to Lessor. Without limiting any of the foregoing, all overhaul and repair
procedures shall as to quality and documentation be such as to enable
immediate transfer to a new operator under FAR Part 121. At the time of
return of the Aircraft to Lessor hereunder, Lessee shall also provide Lessor
with evidence satisfactory to Lessor that Lessee has fully paid and
discharged all navigation charges, airport landing fees and the like which
have resulted in or could give rise to a Lien on the Aircraft or any part
thereof if the same remains unpaid.

     (f) TECHNICAL ACCEPTANCE; FERRY FLIGHT. Upon completion of the
inspection of the Aircraft and records by Lessor and, unless otherwise agreed
in writing by Lessor and Lessee, correction of any discrepancies or
deficiencies required to be corrected by Lessee prior to redelivery to
Lessor, Lessor shall execute and deliver to Lessee, a technical acceptance
certificate which shall constitute Lessor's technical acceptance of the
Aircraft, except as noted in such technical acceptance certificate.
Notwithstanding the execution and delivery of such technical acceptance
certificate by Lessor, all Lessee's obligations hereunder shall continue in
full force and effect until actual return of the Aircraft to and final
acceptance of the Aircraft by Lessor at the location specified in Article
13(a), in full compliance with all Lessee's obligations hereunder, to the
same extent as if such technical acceptance certificate had not been executed
by Lessor (it being understood, without limitation, that Lessee shall (i)
bear the full risk of damage and loss to the Aircraft and shall promptly
repair or cause to be repaired any damage to the Aircraft which may occur
prior to completion of ferry flight referred to below, and (ii) maintain
insurance in respect of the Aircraft as required by Article 10 hereof to and
including the time of redelivery of the Aircraft to Lessor); provided,
however, Lessee shall not be responsible to correct any discrepancies or
deficiencies that existed at the time of the final inspection of the Aircraft
referred to above but were not raised until completion of the ferry flight of
the Aircraft referred to below if such discrepancies or deficiencies could
have been noted on completion of the final inspection of the Aircraft (ie.,
the foregoing shall not relieve Lessee from its responsibility  to correct
discrepancies or

                                     13-12
<PAGE>

deficiencies discovered as the result of the ferry flight of the Aircraft).
Upon technical acceptance of the Aircraft by Lessor, Lessee shall promptly
ferry the Aircraft at Lessee's cost to the redelivery location referred to in
Article 13(a) hereof. Lessor shall have the right (subject to compliance with
the requirements or approval of the FAA) for up to five (5) representatives
or designees to travel on the Aircraft on such ferry flight.

     (g) AID IN DISPOSITION. Lessee agrees that during the last 180 days of
the Term it win cooperate in all reasonable respects with the efforts of
Lessor to lease or sell the Aircraft, including, without limitation,
permitting potential lessees or purchasers to inspect the Aircraft and the
records relating thereto, provided that the same shall not interfere with
Lessee's use  of the Aircraft or require Lessee to incur out-of-pocket
expenses for which it is not reimbursed.

                                  13-13
<PAGE>

     ARTICLE 14. EVENTS OF DEFAULT. The following events shall constitute
Events of Default (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):

     (a) Lessee shall fail to make any payment of Rent as and when due, and
such failure shall continue for a period of at least three (3) consecutive
days;

     (b) Lessee shall fail to carry and maintain insurance in accordance with
the provisions of Article 10 hereof,

     (c) Lessee shall fail to perform or observe any term, condition or
agreement to be performed or observed by it under Article 3(c) (as
supplemented in Schedule "1" hereto), Article 5(a), 5(b), or 5(d), Article
10(d), Article 12 or Article 13;

     (d) Lessee shall fail to perform or observe any other term, condition,
covenant or agreement to be performed or observed by it hereunder or under
any other agreement between Lessor and Lessee and such failure shall continue
unremedied for a period of thirty (30) days after actual knowledge thereof by
Lessee;

     (e) Any representation or warranty made by Lessee herein or in any
document or certificate furnished Lessor in connection herewith or pursuant
hereto shall prove to be false or misleading in any material respect;

     (f) Any obligation of Lessee for the payment or guarantee of payment of
borrowed money or the deferred purchase price of property or for the payment
or guarantee of payment of rent under any lease of aircraft shall not be paid
when due, whether by acceleration or otherwise, and such default in payment
shall continue beyond any applicable grace period or extension thereof, and
the other party to any such agreement has commenced to exercise any of its
remedies under such agreement;

     (g) Lessee shall consent to the appointment of a receiver, custodian,
administrator, trustee, liquidator or any similar official of itself or of a
substantial part of its property, or Lessee shall become insolvent or fail to
pay or admit in writing its inability to pay its debts generally as they come
due, or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition for an order for relief pursuant to
Section 301 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time, or a voluntary petition in bankruptcy
or a voluntary petition or an answer seeking reorganization in a proceeding
under any bankruptcy laws (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against Lessee for an
order for relief or in any such proceeding, or Lessee shall by voluntary
petition, answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law

                                14-1
<PAGE>

providing for the reorganization, liquidation or winding-up of corporations,
or providing for an arrangement, composition, extension or adjustment with
its creditors;

     (h) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
custodian, administrator, trustee, liquidator or similar official of Lessee
or of any substantial part of its property, or any substantial part of the
property of Lessee shall be sequestered, and any such order, judgment or
decree of appointment or sequestration shall remain in force undismissed,
unstayed or unvacated for a period of thirty (30) days after the date of
entry thereof;

     (i) A petition against Lessee for an order for relief pursuant to
Section 303 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time or an order for any proceeding under
any bankruptcy laws or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within thirty (30)
days thereafter, or, under the provisions of any law providing for
reorganization, liquidation or winding-up of corporations which 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 and
such jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated  for a period of thirty (30) days;

     (j) Final judgment for the payment of money in excess of $500,000 (or
its equivalent) shall be rendered against Lessee and the same shall remain
unpaid, unstayed or undischarged for a period of thirty (30) days;

     (k) Lessee's certificated operations shall be suspended, or Lessee shall
cease to be a certificated Air Carrier, or the franchises, concessions,
permits, certificates, licenses (including, without limitation, its air
operator certificate or air transport license), rights or privileges required
for the conduct of Lessee's airline operations are revoked, canceled,
suspended, not renewed or otherwise terminated; or

     (l) An "Event of Default" under, and as such term is defined in, the
Companion Lease shall have occurred and be continuing.

                                  14-2
<PAGE>

     ARTICLE 15. 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 this Lease to be in default and Lessor may, in addition
to any other remedies provided herein or by applicable law, exercise one or
more of the following remedies with respect to the Aircraft, or any part
thereof, as Lessor in its sole discretion shall elect:

     (a) Demand that Lessee, and Lessee shall upon the written demand of
Lessor and at Lessee's expense, return promptly to Lessor the Aircraft in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Article 13 hereof as if the Aircraft were being returned at
the end of the Term therefor; 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 (together with any engine
which is not an Engine but which is installed on the Airframe and any other
property in the Aircraft subject to all of the rights of the owner, lessor,
lienor or secured party of such engine  or other property, provided, however,
that the Airframe with an engine (which is not an Engine) installed thereon
or any property therein may be flown to a location within Europe or the
United States, and such engine or other property shall be held for the
account of any such owner, lessor, lienor or secured party or, in the case of
an engine owned by Lessee free of Liens, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the terms of Article
13 hereof) by summary proceedings or otherwise, all without liability
accruing to Lessor for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise;

     (b) Sell the Aircraft, or part thereof, at public or private sale, or
otherwise dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, or part thereof, as Lessor in its sole discretion may determine,
all free and clear of any rights of Lessee and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with
respect thereto, except to the extent required by paragraph (c) below in the
event Lessor exercises its rights under such paragraph;

     (c) In the event Lessor, pursuant to paragraph (b), above, shall have
relet the Aircraft or shall have sold the Aircraft, Lessor, in lieu of
exercising its rights under paragraph (d), below (but without limiting any of
its other rights hereunder or under law), may, if it shall so elect, demand
that Lessee pay Lessor and Lessee shall pay Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for the
Aircraft due for the period commencing as of the commencement of the term of
the reletting or the date of sale, as the case may be) any accrued but unpaid
Basic Rent for the Aircraft due up to and including the date of the
commencement of the term of the reletting or the date of sale plus the excess
of: (i) in the case of a reletting, the aggregate unpaid Basic Rent for the
Aircraft which would otherwise have become due hereunder over the Term but
for the Event of Default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, over the
aggregate basic rental payments to become due

                                    15-1
<PAGE>

under the reletting from the date of the commencement of the term of the
reletting to the date upon which the Term for the Aircraft would have expired
but for Lessee's default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, or (ii) in
the case of a sale, the Stipulated Loss Value for the Aircraft, computed as
of the Basic Rent payment date immediately preceding the date of sale, over
the net cash proceeds  of such sale. The amounts specified in this paragraph
shall continue to bear interest at the Incentive Rate from the date of the
commencement of the term of the reletting or the date of sale, as  the case
may be, until payment is made;

     (d) if Lessor shall have obtained possession of the Aircraft as
contemplated in paragraph (a), above, but shall not have relet or sold the
Aircraft as contemplated by paragraph (c), above, Lessor shall have the right
(but without limiting any of its other rights hereunder or under law), by
written notice to Lessee specifying a payment date, to demand that Lessee pay
to Lessor, and Lessee shall pay to Lessor, on the payment date specified in
such notice, all accrued but unpaid Basic Rent for the Aircraft due to and
including the payment date specified in such notice, plus the aggregate
unpaid Basic Rent for the Aircraft which would otherwise have accrued over
the remainder of the Term but for the Event of Default, discounted monthly
to present value as of the payment date specified in such notice at 6% per
annum. The amounts referred to in this paragraph shall continue to bear
interest at the Incentive Rate from the payment date specified in said notice
until payment is made;

     (e) Proceed by appropriate  court action or actions to enforce
performance by Lessee of the applicable covenants of this Lease and to
recover damages for the breach hereof;

     (f) Cancel this Lease,  which  cancellation  shall be effective
immediately upon Lessor having given notice of cancellation to Lessee,
whereupon Lessee's right to possess and use the Equipment shall immediately
cease, but such cancellation shall not relieve Lessee of any of its
obligations hereunder which accrued prior to the time of cancellation nor
shall such cancellation be deemed a release or a waiver of Lessee's
obligations for the unperformed balance of this Lease or Lessee's obligation
to compensate Lessor for all damages suffered by Lessor as a result of
Lessee's breach of this Lease, including, without limitation, damages
described in clauses (c), (d) or (e), above;

     (g) Recover from Lessee any losses, premiums, fees, costs or expense
that are paid or incurred by Lessor in connection with the repayment of funds
obtained to finance or otherwise acquire the Aircraft, if any, or in
connection with the borrowing of funds to refinance the Aircraft, if any.

     Except as otherwise specifically provided above, Lessee shall also be
liable for all unpaid Rent due hereunder before, during or after the exercise
of any of the foregoing remedies and for all legal fees and other costs and
expenses incurred by reason of the occurrence of any Event of Default or the
exercise of any of Lessor's rights or remedies with respect thereto,
including all costs and expenses incurred in connection with the repossession
or return of the Aircraft in accordance with the terms of Article 13 hereof,
in placing the

                                    15-2

<PAGE>

         ARTICLE 16. EXCUSABLE DELAY.

         (a) GENERAL. Lessor shall not be responsible for nor be deemed to be in
default under this Agreement on account of any delay in delivery of the Aircraft
or other performance  hereunder due to any of the following causes: acts of God;
war,  warlike-operations,  insurrections or riots;  fires; floods or explosions;
serious accidents;  epidemics or quarantine restrictions; any act of government,
governmental  priorities,  allocation regulations or orders affecting materials,
facilities or completed  aircraft;  strikes or labor troubles causing cessation,
slow-down or interruption of work; delay in transportation;  delay or default by
Manufacturer  under the  Purchase  Agreement  or any  manufacturer  or vendor in
respect of the modifications  referred to in Article 2(h) hereof;  or inability
after due and timely diligence to procure materials,  accessories,  equipment or
parts; or due to any other cause to the extent it is beyond Lessor's  control or
not occasioned by Lessor's fault or negligence. Delays resulting from any of the
foregoing  causes are  referred to herein as  "Excusable  Delays."  Lessor shall
promptly  notify  Lessee of any delay or  anticipated  delay in  delivery of the
Aircraft.

         (b) FOUR (4) MONTHS' EXCUSABLE DELAY.

              (i) TERMINATION FOR ACTUAL DELAY.  If, due to Excusable  Delays,
delivery  of the  Aircraft  is delayed for a period of more than four (4) months
after the end of the  calendar  month in which  delivery is  otherwise  required
hereunder in accordance with the Scheduled Aircraft  Delivery,  either Lessor or
Lessee may terminate  this Lease by giving  written notice to that effect to the
other within ten (10) days after the expiration of such four month-period.

              (ii)  TERMINATION  FOR  ANTICIPATED  DELAY.  If  the  Manufacturer
concludes  based on its  appraisal of the facts,  that due to Excusable  Delays,
delivery  of the  Aircraft  will be  delayed  for a period of more than four (4)
months after the Scheduled  Aircraft  Delivery,  and as a result thereof in good
faith and in  accordance  with its normal  scheduling  procedures,  Manufacturer
internally  reschedules delivery of the Aircraft to a date reflecting such delay
and notifies Lessor thereof, Lessor shall notify Lessee in writing of such delay
and  rescheduling,  in which event either  Lessor or Lessee may  terminate  this
Agreement by giving  written  notice to that effect to the other within ten (10)
days after receipt by Lessee of such notice of anticipated delay.

         (c) CONSEQUENCE OF TERMINATION.  Termination  under Article 16(b) shall
terminate and discharge all  obligations  and  liabilities  of Lessee and Lessor
hereunder and all undelivered items and services to be furnished hereunder which
are related  thereto,  and Lessor shall promptly return the Security Deposit and
$100,000 payment  theretofore  paid by Lessee to Lessor,  except that, if Lessee
and not Lessor  terminates  this Lease pursuant to this Article 16, Lessor shall
reduce the payment to Lessee and/or,  as the case may be, be entitled to draw on
the Letter of Credit (and for this  purpose an Event of Default  shall be deemed
to exist  hereunder  so that  Lessor may certify  the  existence  of an Event of
Default hereunder) for the

                                      16-1

<PAGE>

amount  necessary  to  compensate  Lessor for the value of any training or other
goods or services  received by Lessee in connection with this Lease and the cost
of any  modifications  to the Aircraft or equipment or other items  purchased by
Lessor at the request of Lessee in connection with this Lease.

         (d) FAILURE TO TERMINATE. If, following notice of an anticipated delay
under Article  16(b)(ii),  this Lease is not  terminated in accordance  with the
provisions  of such  Article,  then  the  Scheduled  Aircraft  Delivery  for the
Aircraft otherwise required hereunder shall be extended by a period equal to the
resulting delay.

         (e) DAMAGE TO OR DESTRUCTION OF AIRCRAFT - DELIVERY DELAY. In the event
that prior to delivery  the Aircraft  is, due to any cause,  lost,  destroyed or
damaged beyond repair (and this Agreement has not been  terminated in accordance
with this Article 16), or is damaged to the extent that it cannot be repaired to
new  condition  by  replacement  parts  and  delivered  in  accordance  with the
Scheduled  Aircraft  Delivery,   the  time  reasonably  required  to  furnish  a
replacement  for the Aircraft or to  accomplish  such repairs shall be deemed an
Excusable Delay.

         (f) TERMINATION RIGHTS EXCLUSIVE.  The termination rights of Lessee set
forth in this Article 16 are in substitution for any other rights of termination
or contract  lapse which Lessee might have arising by operation of law by virtue
of delays in  performance  for which Lessor is not deemed to be in default or to
have breached its duties hereunder.

                                      16-2

<PAGE>

         ARTICLE 17. MISCELLANEOUS.

         (a)  CONSTRUCTION AND APPLICABLE LAW. Any provision of this Lease which
is  prohibited  or  unenforceable   in  any  jurisdiction   shall,  as  to  such
jurisdiction,   be   ineffective   to  the   extent  of  such   prohibition   or
unenforceability  without invalidating the remaining such provisions hereof, and
any  such  prohibition  or   unenforceability  in  any  jurisdiction  shall  not
invalidate or render unenforceable such provision in any other jurisdiction.  To
the extent  permitted by applicable  law,  Lessee hereby waives any provision of
law which  renders any  provision  hereof  prohibited  or  unenforceable  in any
respect. No term or provision of this Lease may be changed,  waived,  discharged
or terminated  orally,  but only by an instrument in writing signed by the party
against whom the enforcement of the change, waiver,  discharge or termination is
sought.  This Lease shall  constitute an agreement of lease,  and nothing herein
shall be  construed as conveying to Lessee any right,  title or interest in the
Aircraft or any Engine  except as a lessee only.  The captions in this Lease are
for convenience of reference only and shall not define or limit any of the terms
or  provisions  hereof.  This Lease shall in all respects  be  governed by, and
construed in  accordance  with,  the internal  laws of the State of  California,
United States of America (without regard to any conflict of laws rule that might
result in the application of the laws of any other jurisdiction),  including all
matters of construction, validity and performance.

         (b) NOTICES. All notices,  demands and other communications required or
permitted  under the terms hereof shall be in writing (which shall include telex
and telecopy),  and shall be deemed given or received: (i) if sent by registered
or certified  mail, on the third Business Day after deposit in the national mail
service of the country from which it is sent,  postage  prepaid,  return receipt
requested,  (ii) if sent by any other means of  physical  delivery,  E.G.,  hand
delivery or courier service,  when delivered to the appropriate address provided
below,  (iii)  if  sent  by  telecopier,  when  transmitted  to the  appropriate
telecopier  number provided below and the sender's  telecopy  machine produces a
confirmation  report  confirming that such  transmission has been sent. All such
notices,  demands and other communications shall be addressed and/or telecopied
to the  appropriate  party at its  address  and/or  telecopier  number set forth
below, or at such other address or telecopier number as such party may from time
to time hereafter designate to such other parties in writing:

        If to Lessee:   Aloha Airlines, Inc.
                        371 Aokea Street
                        Honolulu, Hawaii 96819
                        Attention: Senior Vice President - Finance & Planning
                                   & Chief Financial Officer

                                      17-1

<PAGE>

        If to Lessor:   Wilmington Trust Company, Owner Trustee
                        Rodney Square North
                        1100 North Market Street
                        Wilmington, Delaware 19890-0001
                        Attention: Corporate Trust Administration

        With a copy to: Ansett Worldwide Aviation,  U.S.A.
                        c/o Kummer,  Kaempfer,  Bonner & Renshaw
                        3800 Howard  Hughes  Parkway, 7th Floor
                        Las Vegas,  Nevada  89109
                        Attention:  Chief Executive Officer

              and to:   Ansett Worldwide Aviation, U.S.A.
                        c/o Ansett Worldwide Aviation Services
                        TNT Plaza, Tower 1, Lawson Square
                        Redfern, NSW 2016, Australia
                        Attention: Chief Executive Officer

         Lessor's  telefax  number  is  (702)  796-7181,  with a copy to  (61-2)
9699-1349. Lessee's telefax number is (808) 833-3100.

         (c) LESSOR'S  RIGHT TO PERFORM FOR LESSEE.  If Lessee fails to make any
payment of  Supplemental  Rent  required to be made by it  hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor may itself
make such  payment or perform or comply with such  agreement,  and the amount of
such  payment and the amount of the  reasonable  expenses of Lessor  incurred in
connection  with such payment or the  performance  of or compliance  with such
agreement,  as the case may be, together with interest  thereon at the Incentive
Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.

         (d) CORPORATE EXISTENCE;  MERGER. Lessee will preserve and maintain its
corporate  existence  and all its rights,  privileges  and  franchises  in every
jurisdiction  in which  the  character  of its  property  or the  nature  of its
business makes licensing or  qualification  necessary.  Lessee will not or sell,
lease or otherwise  dispose of all or  substantially  all of its  properties nor
will it merge  with or  consolidate  with or into or be  acquired  by any  other
corporation or entity, unless:

              (i) the  corporation  formed by such  consolidation  or into which
Lessee is merged (the  "Successor"):  (a) shall be organized and existing  under
the laws of the United States of America or any State thereof or the District of
Columbia, (b) shall be a Certificated Air Carrier, (c) shall execute and deliver
to Lessor an agreement in form and substance  reasonably  satisfactory to Lessor
containing an assumption by the Successor of each covenant and condition of this
Lease, (d) immediately  after giving effect to such  transaction,  shall have at
least the tangible net worth and credit  worthiness  that Lessee had immediately
prior to giving effect to such transaction,  and (e) shall make such filings and
recordings,

                                      17-2

<PAGE>

including  any  filing  or  recording  with the FAA,  as shall be  necessary  or
desirable to evidence such consolidation or merger with the Successor; or merger
with the Successor;

              (ii)  Immediately  prior  to  and  after  giving  effect  to  such
transaction, no Event or Event of Default shall have occurred and be continuing,
and the  ability  of the  Successor  (or Lessee if Lessee is the  Successor)  to
perform its obligations under this Lease shall not be adversely affected by such
transaction; and

              (iii) the Successor (or Lessee if Lessee is the  Successor)  shall
have  delivered  to Lessee an  officer's  certificate  and an opinion of counsel
satisfactory to Lessor,  each stating that such  consolidation or merger and the
assumption  agreement  described  above  comply  with this  Article and that the
agreements  entered  into to  effect  such  consolidation  or  merger  and  such
assumption  agreement are legal, valid and binding  obligations of the Successor
(or Lessee if Lessee is the  Successor),  enforceable  in accordance  with their
respective terms.

         (e)  TRAINING  AND  CUSTOMER  SUPPORT.  Pursuant  to  Customer  Support
Document  to  the  Purchase  Agreement,  a copy of which  has  heretofore  been
provided  by Lessor to  Lessee,  Manufacturer  has  agreed to  provide  certain
training,  support services and technical data and documents.  Provided no Event
or Event of Default has occurred and is continuing  hereunder,  Lessor agrees to
assign to Lessee the  training,  support  services,  data,  documents  and other
rights  available  under  such  Customer  Support  Document  in  respect  of the
Aircraft. Lessor shall not have any liability or responsibility for the adequacy
of such  training;  support  services or  technical  data and  documents  or for
Manufacturer's  performance or nonperformance  in respect thereof,  all of which
is, as to Lessor,  without  recourse,  representation  or  warranty,  express or
implied.  Lessee hereby agrees to be bound by all the provisions of the Customer
Support Document.

         (f) SUBJECT AND SUBORDINATE. THIS LEASE AND LESSEE'S RIGHTS HEREUNDER
AND IN THE  AIRCRAFT  ARE  SUBJECT  AND  SUBORDINATE  TO ALL THE  TERMS  OF THE
MORTGAGE,  INCLUDING,  WITHOUT  LIMITATION  MORTGAGEE'S  RIGHT TO TAKE IMMEDIATE
POSSESSION OF THE AIRCRAFT UPON THE  OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE
MORTGAGE.  Without limiting the foregoing,  solely as between Lessor and Lessee,
Lessor  covenants  that if,  and so long as,  no Event  of  Default  shall  have
occurred  and be  continuing,  Lessor  shall not (and Lessor shall not provide a
basis for  Mortgagee or any other person  lawfully  claiming  through  Lessor or
Mortgagee to) disturb  Lessee's quiet  enjoyment of the Aircraft  hereunder.  If
Lessor breaches the foregoing covenant or if Mortgagee  improperly  repossesses,
seizes or attaches the  Aircraft,  Lessee  acknowledges and agrees that Lessee's
sole right and remedy  shall be the right to seek to recover  resulting  damages
from  Lessor,  but Lessee  shall have no right to recover  any  damages  from or
otherwise  sue  Mortgagee  in  connection   therewith  or  otherwise  to  retain
possession  or use of the Aircraft in  contravention  of the rights,  interests,
benefits or remedies of Mortgagee.

                                      17-3

<PAGE>

         (g) ASSIGNMENT. THIS LEASE AND ALL OR ANY PART OF LESSEE'S RIGHTS
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ITS RIGHTS IN RESPECT OF THE
SECURITY DEPOSIT AND TO THE RETURN THEREOF, SHALL NOT BE ASSIGNED, NOVATED,
HYPOTHECATED OR OTHERWISE TRANSFERRED BY LESSEE WITHOUT LESSOR'S PRIOR
WRITTEN CONSENT,  AND ANY PURPORTED ASSIGNMENT,  NOVATION,  HYPOTHECATION  OR
TRANSFER  SHALL BE VOID.  Subject  to theforegoing,  this Lease shall inure
to the benefit of and be binding  upon the respective  successors and assigns
of the parties hereto.  Lessor's  interest in this Lease  Agreement and in
the Aircraft are freely  saleable,  novateable  and assignable  by Lessor  in
whole or in part  without  restriction,  and upon such sale,  novation or
assignment  (unless the assignment is solely for collateral security
purposes),  Lessor shall be  discharged  from all further  obligations
hereunder in respect of such interest or Equipment sold or assigned and
Lessor's assignee or transferee  shall succeed to all of Lessor's  rights,
interests and obligations  in respect  thereof as though such assignee or
transferee  had been the initial owner or lessor, as the. case may be, in
respect thereof Lessor may also assign for collateral  security purposes or
otherwise mortgage its fixed or contingent rights to receive money hereunder
or its interests in this Lease or in the Aircraft,  in whole or in part.
Lessee shall comply with all  reasonable requests of Lessor, its successors,
transferees and - assigns in respect of the sale,  assignment,  novation,
hypothecation  or other transfer  (including,  if requested,  execution of a
consent  thereto,  reaffirming  its  representations, warranties and
obligations  hereunder in favor of such  assignee,  successor or transferee
or execution of a lease agreement on terms  substantially  identical to this
Lease Agreement  substituting the name of such transferee,  successor or
assignee for Lessor,  and in either case  providing the  assignee,  successor
or transferee with an insurance certificate and broker's report,  addressed
to such assignee,  successor or  transferee,  in  compliance  with the
requirements  of Article 10 hereof).  No such sale,  assignment,  novation or
other transfer by Lessor  shall   materially   expand  the   obligations
of  Lessee   hereunder. Notwithstanding any such sale,  assignment,  novation
or other transfer,  Lessor and the Participants  shall continue to be
Indemnitees  pursuant to Article 8(a) and shall continue to be named as
additional  insureds on all liability policies carried by Lessee  pursuant
to Article 10 hereof. Without  limiting  any of the foregoing,  Lessor may,
and at Lessor's  request  Lessee shall,  take any action reasonably  required
for the purpose of causing the Aircraft to be subjected to an equipment
trust,  conditional sale,  leveraged lease or other arrangement for the
financing by Lessor or Lessor's transferee or assignee of the Aircraft.

         (h) EXPENSES.  The prevailing party in any action or proceeding between
Lessor and  Lessee to  enforce  the terms of this  Lease  shall be  entitled  to
recover from the other party all its costs and  expenses,  including  reasonable
attorneys' fees incurred by such prevailing  party in such action or proceeding.
In addition,  Lessee shall also reimburse Lessor for all out-of-pocket costs and
expenses,  including reasonable attorneys fees, incurred by Lessor in connection
with any  approvals,  consents,  waivers,  modifications  or  amendments  hereto
requested by Lessee.

         (i) SURVIVAL. The representations, warranties and indemnities of Lessee
in this Lease shall  survive the delivery of the Aircraft and the  expiration or
other termination of

                                      17-4

<PAGE>

this lease and are expressly  made for the benefit of, and shall be  enforceable
by Lessor and its successors and assigns.

         (j) INTEGRATION. This Lease Agreement  contains the entire
agreement of the parties hereto  with  respect to the  subject  matter
hereof and  supersedes  all prior written and oral agreements and
understandings  between the parties hereto with respect to the subject matter
hereof.

         (k) FEDERAL  BANKRUPTCY  CODE. In accordance with Section 1110 of Title
11 of the United States Bankruptcy Code, or any superseding  statute, as amended
from time to time, Lessee hereby agrees that the title of Lessor to the Aircraft
and  Engines  and any right of Lessor to take  possession  of the  Aircraft  and
Engines in compliance with the provisions of this Lease shall not be affected by
the  provisions  of Section 105,  362, 363 or any other  Section of Title 11, as
amended and in effect from time to time.  In the event  Section 1110 is amended,
or if it is repealed and another statute is enacted in lieu thereof,  Lessor and
Lessee  agree to amend  this Lease and take such  other  action as Lessor  deems
necessary  so as to afford to Lessor the rights and  benefits as such amended or
substituted statute confers upon owners and lessors of aircraft.

         (l)   COUNTERPARTS.   This  Lease  may  be  executed  in  two  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         (m) EXECUTION BY TELECOPY. Delivery by Lessor or Lessee to the other by
telecopy  of an  executed  counterpart  of this  Lease or of any other  document
executed  pursuant  hereto  shall be  deemed  as  effective  as  delivery  of an
originally executed  counterpart  thereof.  Such party shall promptly deliver to
the other party an originally executed  counterpart  thereof, but the failure of
such party to deliver an executed counterpart shall not affect the validity or
effectiveness of this Lease or such other document.

                                      17-5

<PAGE>

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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title:          AVP
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: PRESIDENT AND CHIEF
                                               EXECUTIVE OFFICER
                                               ------------------------------

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

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: VICE PRESIDENT PLANNING
                                               & DEVELOPMENT
                                               ------------------------------

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

                                      17-6

<PAGE>

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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: PRESIDENT & CHIEF
                                               EXECUTIVE OFFICER
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: VICE PRESIDENT PLANNING
                                               & DEVELOPMENT
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

                                      17-6

<PAGE>

                                   SCHEDULE "1"

This is Schedule "1" to the Lease Agreement between  Wilmington Trust
Company, a Delaware banking  corporation,  acting not in its individual
capacity but solely as Owner Trustee (herein called "Lessor"),  and Aloha
Airlines, Inc. ("Lessee"), for the lease of a Boeing Model 737-73A  aircraft,
 MSN 28499.

[This Schedule has been omitted as confidential information and filed
separately with the Commission]

                                       S-1
<PAGE>

                                   Exhibit "A"

                                LEASE SUPPLEMENT

         THIS LEASE SUPPLEMENT,  dated _________, 1999, between Wilmington
Trust Company, a Delaware banking corporation, acting not in its individual
capacity but solely as Owner  Trustee  (herein  called  "Lessor"),  and Aloha
 Airlines,  Inc.  (the "Lessee").

         Lessor and Lessee have heretofore  entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease  Supplement,  substantially in the form hereof
for the purpose of leasing a specific  Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.

         The Lease  Agreement  relates to the  Airframe  and  Engines  described
below,  and a counterpart of the Lease  Agreement is attached  hereto and made a
part hereof and this Lease Supplement,  together with such attachment,  is being
filed  for   recordation   on  the  date  hereof   with  the  Federal   Aviation
Administration as one document.

         NOW,  THEREFORE,  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,  and Lessee  hereby
accepts  and  leases  from  Lessor,  under the Lease  Agreement,  the  following
described Boeing Model 737-73A aircraft and engines  (hereafter,  the "Delivered
Equipment"):

              (i)  Airframe:  Identification  Number ________; Manufacturer's
Serial No. ______; and

              (ii) Engines:  Two CFM International  Model CFM56-7B20 engines
(to be upgraded to  CFM56-7B24  engines  prior to or  promptly  following
delivery) bearing, respectively,  manufacturer's serial numbers _________ and
_______ (each of which engines has 750 or more rated takeoff horsepower or
the equivalent of such horsepower).

         (2) The Delivery  Date of the  Delivered  Equipment is the date of this
Lease supplement set forth in the opening paragraph hereof.

         (3) The Term for the Delivered  Equipment shall commence on the
Delivery Date therefor and shall end on ________________ 2009.

         (4) Lessee  hereby  confirms  its  agreement  to pay  Lessor  Rent with
respect to the Delivered  Equipment  throughout  the Term therefor in accordance
with the terms of the Lease Agreement.

                                       A-1

<PAGE>

         (5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
_________.

         (6) Lessee hereby  confirms to Lessor that the  Airframe  and
Engines described above have been duly marked as showing  Lessor's  title
thereto and Mortgagee interest  therein in accordance  with the terms of the
Lease Agreement and that Lessee mortgage has accepted the Delivered
Equipment for all purposes of the Lease Agreement,  including its being
airworthy,  in accordance with  specifications,  in good  working  order and
repair and without  defect or inherent vice in title, condition, design,
operation or fitness for use, whether or not discoverable by Lessee as of the
date hereof,  and free. and clear of all Liens;  provided,  however,  that
nothing  contained  herein  or in  the  Lease Agreement  shall in any way
diminish or  otherwise  affect any right  Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other
person, whether under the Purchase Agreement or otherwise.

         (7) All of the terms and provisions of this Lease Supplement are
hereby incorporated  by reference into the Lease  Agreement to the same
extent as if fully set forth therein.

         (8) This.  Lease  Supplement  shall in all respects be governed by, and
construed in accordance with, the laws of the State of California  including all
matters of construction, validity and performance.

                                       A-2

<PAGE>

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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

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

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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

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

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

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

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

                                       A-3
<PAGE>

                                LEASE SUPPLEMENT

         THIS LEASE SUPPLEMENT, dated October 18, 1999, between Wilmington Trust
Company, a Delaware banking  corporation,  acting not in its individual capacity
but solely as Owner Trustee (herein called "Lessor"),  and Aloha Airlines,  Inc.
(the "Lessee").

         Lessor and Lessee have heretofore  entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease  Supplement,  substantially in the form hereof
for the purpose of leasing a specific  Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.

         The Lease  Agreement  relates to the  Airframe  and  Engines  described
below,  and a counterpart of the Lease  Agreement is attached  hereto and made a
part hereof and this Lease Supplement,  together with such attachment,  is being
filed  for   recordation   on  the  date  hereof   with  the  Federal   Aviation
Administration as one document.

         NOW,  THEREFORE,  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,  and Lessee  hereby
accepts  and  leases  from  Lessor,  under the Lease  Agreement,  the  following
described Boeing Model 737-73A aircraft and engines  (hereafter,  the "Delivered
Equipment"):

              (i) Airframe:  U.S.  Registration  Number  N738AL;  Manufacturer's
Serial No. 28499; and

              (ii)  Engines:  Two CFM  International  Model  CFM56-7B24  engines
bearing, respectively,  manufacturer's serial numbers 874938 and 874945 (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).

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

         (3) The Term for the Delivered Equipment shall commence on the Delivery
Date therefor and shall end on October 17, 2009.

         (4) Lessee  hereby  confirms  its  agreement  to pay  Lessor  Rent with
respect to the Delivered  Equipment  throughout  the Term therefor in accordance
with the terms of the Lease Agreement.

<PAGE>

         (5) The fuel in the fuel tanks of the Aircraft on the Delivery  Date is
5,700 lbs.

         (6) The Lease  Agreement is amended and  supplemented  in the following
respects:

              (i) The "Mortgage"  referred to in Article 1 is more  specifically
defined  as the  Mortgage  Agreement  dated  October  1999  between  Lessor  and
Mortgagee;

              (ii) The "Mortgagee" referred to in Article 1 is more specifically
defined as Citibank  International  Plc,  and its  successors,  transferees  and
assigns; and

              (iii) Citibank International Plc and Citibank, N.A. are lenders in
connection  with the Mortgage and are  therefore  included in the  definition of
"Participants" in Article 1.

         (7) Lessee  hereby  confirm to Lessor  that the  Airframe  and  Engines
described  above have been duly  marked as showing  Lessor's  title  thereto and
Mortgagee's  mortgage interest therein in accordance with the terms of the Lease
Agreement and that Lessee has accepted the Delivered  Equipment for all purposes
of the Lease  Agreement,  including  its being  airworthy,  in  accordance  with
specifications,  in good working order and repair and without defect or inherent
vice in title, condition,  design,  operation or fitness for use, whether or not
discoverable  by Lessee as of the date hereof,  and free and clear of all Liens;
provided, however, that nothing contained herein or in the Lease Agreement shall
in any way diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against  Manufacturer or any other person,
whether under the Purchase Agreement or otherwise.

         (8) All of the terms and provisions of this Lease Supplement are hereby
incorporated  by  reference  into the Lease  Agreement  to the same extent as if
fully set forth therein.

         (9) This Lease Supplement may be executed in two or more  counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

         (9) This Lease  Supplement  shall in all  respects be governed  by, and
construed in accordance with, the laws of the State of California  including all
matters of construction, validity and performance.

                                        2

<PAGE>

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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By: /s/ Patricia A. Evans
                                           ----------------------------------
                                        Title: Financial Services Officer
                                               ------------------------------

         [ILLEGIBLE]
---------------------------------

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

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

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

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

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

                                      3

<PAGE>

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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

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

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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By: /s/ Brenda F. Cutwright
                                           ----------------------------------
                                        Title: SR. VICE PRESIDENT FINANCE &
                                               PLANNING AND CFO
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

WITNESS:                                By: /s/ James M. King
                                           ----------------------------------
                                        Title: VICE PRESIDENT
                                               PLANNING & DEVELOPMENT
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

                                      3
<PAGE>
                                             (CERTIFIED COPY TO BE RETURNED)
                                                         RECORDED
                                             Federal Aviation Administration

                                            Date   1-24-02      Time   am 8:28
                                                 --------------      ----------
                                             Conveyance Number     QQ024259
                                                              -----------------
                                            By     /s/ L. Kelley
                                               ---------------------

                                 AMENDMENT NO. 1
                               TO LEASE AGREEMENT

     This Amendment No. 1 to Lease Agreement ("Amendment No. 1"), dated as of
November 29, 2001, is entered into by and between Wilmington Trust Company not
in its individual capacity but solely as Owner Trustee (herein called "Lessor"),
and Aloha Airlines, Inc., a Delaware corporation (herein called "Lessee").

                                    RECITALS

     A. Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999*, as supplemented to the date hereof (collectively referred
to as the "Lease"), pursuant to which Lessor has leased to Lessee one Boeing
Model 737-73A aircraft bearing manufacturer's serial number 28499 and United
States Registration Marks N738AL, equipped with two CFM 56-7B24 engines
bearing, respectively, manufacturer's serial numbers 874938 and 874945.

     B. Lessor and Lessee wish to amend certain terms of the Lease and to extend
the Term of the Lease all on the terms and conditions set forth below.

     C. Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Lease and reference to
"Articles" herein shall be construed to refer to Articles of the Lease.

                              TERMS AND CONDITIONS

     Therefore, in consideration of the premises, and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Article 3(a) of the Lease is hereby amended and restated in its entirety
as follows:

     "(a) TERM. Except as otherwise provided herein, the Aircraft shall be
     leased to Lessee hereunder for a Term that commences on the Delivery Date
     and ends on October 17, 2010."

     2. Schedule 1 to the Lease Agreement shall be amended in accordance
with the Amendment to Schedule 1 attached hereto.

* as more particularly described in Annex I attached hereto (the "Lease"),

<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of 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.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.

                                 WILMINGTON TRUST COMPANY, not in its
                                 individual capacity but solely as Owner Trustee

                                 By:    /s/            [ILLEGIBLE]
                                        ----------------------------------------
                                 Title:                    AVP
                                        ----------------------------------------

                                 ALOHA AIRLINES, INC.

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

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

                                     2
<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of 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.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.

                                 WILMINGTON TRUST COMPANY, not in its
                                 individual capacity but solely as Owner Trustee

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

                                 ALOHA AIRLINES, INC.

                                 By:    /s/ Brenda F. Cutwright
                                        ----------------------------------------
                                 Title: EXECUTIVE VICE PRESIDENT & CFO
                                        ----------------------------------------

                                 By:    /s/ James M. King
                                        ----------------------------------------
                                 Title: SENIOR VICE PRESIDENT PLANNING
                                        AND BUSINESS DEVELOPMENT
                                        ----------------------------------------

<PAGE>

                                                                         Annex I
                                           to Amendment No. 1 to Lease Agreement

                              DESCRIPTION OF LEASE

     Lease Agreement dated as of August 4, 1999 between Wilmington Trust
Company, as owner trustee under Amended and Restated Trust Agreement dated as of
September 29, 1999, as lessor, and Aloha Airlines, Inc., as lessee, which was
recorded by the Federal Aviation Administration on November 8, 1999 and assigned
Conveyance No. HH023936, as supplemented by the following described instrument:

<Table>
<Caption>
                              Date of              FAA                 FAA
        Instrument           Instrument       Recording Date      Conveyance No.
        ----------           ----------       --------------      --------------
<S>                          <C>              <C>                 <C>
Lease Supplement              10/18/99           11/08/99            HH023936
</Table>

<PAGE>

                           AMENDMENTS TO SCHEDULE "1"

This Amendment to Schedule 1 of the Lease Agreement between Wilmington Trust
Company as Owner Trustee ("Lessor") and Aloha Airlines Inc. ("Lessee") has been
intentionally omitted from the FAA filing counterpart as containing confidential
financial information but Lessor and Lessee agree that this Schedule forms a
part of and is incorporated into the Lease as if fully set forth therein.

Lessor and Lessee agree as follows:

[These provisions have been omitted as confidential information and filed
separately with the Commission]

                                       3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]