Document:

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                                                                   EXHIBIT 10.53

                            AIRCRAFT LEASE AGREEMENT

                                     BETWEEN

                             AIRCRAFT NO. 1, L.L.C.

                                       AND

                              ALOHA AIRLINES, INC.

                   Counterpart No. 3 of 3 serially numbered manually
           executed counterparts. To the extent, if any that this Lease
           constitutes chattel paper under the UCC, no security interest
           in this Lease may be created through the transfer and
           possession of any counterpart other than Counterpart No. 1

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                                TABLE OF CONTENTS

<TABLE>
<S>       <C>
 1.       LEASE AND TERM; NET LEASE

 2.       DELIVERY AND RETURN OF AIRCRAFT

 3.       CHARGES

 4.       LIMITED WARRANTY; DISCLAIMER

 5.       SET-OFF; ABATEMENT

 6.       OPERATION, MAINTENANCE, REGISTRATION, and RECORDS

 7.       MODIFICATION OF THE AIRCRAFT

 8.       INSPECTION AND RECORDS

 9.       TAXES

10.       INDEMNITY

11.       LOSS OF OR DAMAGE TO AIRCRAFT; AGREED VALUE

12.       INSURANCE

13.       COMPLIANCE WITH LAWS

14.       TITLE TO AIRCRAFT

15.       ASSIGNMENT OR SUBLEASE; POSSESSION AND USE

16.       EVENTS OF DEFAULT

17.       REMEDIES

18.       EXCUSABLE DELAY

19.       DELAY IN RETURN OF AIRCRAFT

20.       APPLICABLE LAW AND JURISDICTION

21.       NOTICES
</TABLE>

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<TABLE>
<S>       <C>
22.       HEADINGS

23.       CONFIDENTIALITY

24.       REPRESENTATIONS, WARRANTIES AND COVENANTS

25.       ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

26.       ENTIRE AGREEMENT

27.       MISCELLANEOUS

28.       BROKERS/FINDERS

29.       SECURITY DEPOSIT

30.       NO PURCHASE OPTION. NO HUSH KIT FINANCING

31.       AUTHORIZATION; LESSEE'S CONDITIONS PRECEDENT

32.       AUTHORIZATION; LESSOR'S CONDITIONS PRECEDENT

          EXHIBIT A  DESCRIPTION OF AIRCRAFT

          EXHIBIT B  RECORDS

          EXHIBIT C  REDELIVERY CONDITIONS

          EXHIBIT D  DELIVERY RECEIPT

          EXHIBIT E  REDELIVERY RECORDS

          EXHIBIT F  FORM OF LETTER OF CREDIT

          EXHIBIT G  PERMITTED SUBLESSEES

          EXHIBIT H  FINANCIAL TERMS

          EXHIBIT I  FORM OF LEASE SUPPLEMENT

          EXHIBIT J  ADDITIONAL BILL OF WORK
</TABLE>

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1A.      Summary of Transaction

         The following is a summary of the lease transaction between Lessee and
Lessor. It is set forth for the convenience of the parties only and will not be
deemed in any way to amend, detract from or simplify the other provisions of
this Lease.

         A.       Description of Aircraft

                  One Boeing 737-282C, SN 2305 1, U.S. Reg N826AL

         B.       Scheduled Delivery Date and Location

                  On or Before August 31, 1998; over International Waters near
Christchurch Base, New Zealand

         C.       Basic Lease Term

                  96 Months from the Basic Lease Term Commencement Date

         D.       Security Deposit

                  As set forth in Exhibit H

         E.       Rent during the Basic Lease Term

                  See Exhibit H

         F.       Country of Aircraft Registration

                  United States

         G.       Initial Agreed Value of Aircraft

                  U.S. $11,000,000

         H.       Lessor's Bank Account

                  Barnett Bank

                  Miami Lakes, FL
                  Acct # 1596591387
                  ABA # 063000047

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                            AIRCRAFT LEASE AGREEMENT

               THIS AGREEMENT, made and entered into as of the
               11th day of August, 1997, by and between AIRCRAFT NO.
               1, L.L.C., (hereinafter referred to as "Lessor") and
               ALOHA AIRLINES, INC., a Delaware corporation
               (hereinafter referred to as "Lessee" ).

                                  WITNESSETH:

         WHEREAS, Lessor is the owner of the aircraft described in Exhibit A.
The aircraft, together with the engines, parts and equipment installed thereon,
including any replacements or substitutions therefor and (where the context
permits) the Records furnished herewith and required to be maintained hereunder,
are hereinafter collectively referred to as the "Aircraft"; and

         WHEREAS, Lessee desires to hire and take from Lessor for OPERATION AND
Lessor is willing to lease to Lessee the Aircraft under the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements herein contained, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

1.       LEASE AND TERM, NET LEASE

         A. Subject to the provisions of this Agreement, Lessor agrees to and
does hereby lease to Lessee and Lessee agrees to and does hereby hire and take
from Lessor the Aircraft for a term commencing on the Delivery Date and ending
ninety-six (96) months after the Basic Lease Term Commencement Date (the
"Expiration Date"). The Term shall consist of (i) the Interim Term (which means
the period commencing on the Delivery Date of the Aircraft and ending on the.
date immediately prior to the Basic Lease Term Commencement Date), (ii) the
Basic Lease Term (the ninety-six (96) month period referenced above), and (iii)
if actually entered into, any Renewal Term, as hereinafter defined. The Basic
Lease Term Commencement Date means the first day of the month following the
month in which the Delivery Date occurs. The Delivery Date means the date on
which Lessor delivers the Aircraft to Lessee and the Lease Supplement is
executed by Lessor and Lessee ("Delivery"). Lessor will furnish Lessee with 72
hours notice of intended delivery. Lessor and Lessee anticipate that the
Delivery Date will be on or before August 31, 1998 provided, however that Lessor
will have no responsibility or liability for any delay in delivering the
Aircraft or failure to deliver the Aircraft for reasons other than willful
default of Lessor, including but not limited to, the failure of the current
lessee, Transportes Aeros Portugueses, S.A. ("TAP"), to redeliver the Aircraft
to Lessor at the time and in the condition required by Lessor's lease with TAP.
The delivery to and acceptance of the Aircraft by Lessee will be confirmed by
execution of a lease supplement in the form of Exhibit I hereto. The Aircraft
shall be used by Lessee for the carriage of passengers, mail and freight in its
operations as an air carrier certified by the Federal Aviation Administration
("FAA") and for no other purposes whatsoever except for flight crew training;
provided however, any training or check flights

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performed with the Aircraft shall not exceed the average training/check flights
performed in other aircraft in Lessee's fleet. In no event shall the Aircraft be
operated in any area excluded from coverage by any insurance policy required to
be in effect with respect to the Aircraft under Section 12 hereof

         B. At Delivery the Aircraft will be equipped with two (2) Pratt and
Whitney model JT8D-9A engines each of which has 750 or more rated take off
horsepower, or the equivalent thereof (individually, an "Engine" and
collectively the "Engines"), and with the major components as described in
Exhibit A. Lessor will perform at its expense all necessary conversions from
metric to US measurements for manuals, supplements and any other documents, in
order for the Aircraft to be operated. Lessor will retain all parts removed from
the Aircraft as a result of such conversion.

         C. Lessor shall deliver and Lessee shall accept the Aircraft on the
Delivery Date in the following condition:

            a. The Aircraft will have a U.S. Certificate of Airworthiness, a
fresh TAP "C" Check (Lessee shall be entitled to observe and will be notified by
Lessor of the performance of the C Check), TCAS and windshear installed, Hexcel
Interiors 737-200 QC Quikbin Interior Kit, and having all Airworthiness
Directives ("ADs") requiring compliance by the FAA complied with.

            b. The Aircraft will be painted in Lessee's livery. Lessee shall
supply the paint and the Pounce Pattern.

            c. The Aircraft will have at least 3,000 hours remaining on the
Airframe's structural inspection.

            d. Intentionally Omitted.

            e. The APU, landing gear and time controlled components shall be in
a condition as delivered by TAP to Lessor.

            f. The Lessor will perform the work set forth in Exhibit J on the
Aircraft prior to delivery to Lessee (the "Additional Bill of Work"). Lessee
will reimburse Lessor for the Additional Bill of Work by means of Supplemental
Rental.

            g. The Aircraft otherwise shall be delivered to Lessee in an "AS IS,
WHERE IS". condition over International Waters near Air New Zealand's
maintenance facility located in Christchurch Base, New Zealand (or another
location as agreed by the parties, if required to reduce tax liability).

            h. All SI inspection items required to be performed through 22,400
flight hours will be performed (compliance without sampling) prior to delivery
and no individual SI items will fall due within the next 4000 flight hours.

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            i. All Engineering Orders that have been applied to the Aircraft and
maintenance records required for issuance of the U.S. Certificate of
Airworthiness and U.S. Registration will have been translated into English.
These will include AD'S, major repairs and major alterations.

            j. The Aircraft will be delivered without seats or galleys.

            k. The Aircraft will have no maintenance deferrals, all non-routine
maintenance items discovered during the TAP C check will have been performed,
(upon completion of such C check, the Aircraft will have no required maintenance
items in a deferred status, including but not limited to, any structural
repairs, corrosion, skin replacement requirements, or crack propagation).

            l. All AD's will either be terminated or cleared for inspection
for a minimum of eighteen (18) months from the delivery date except for those
inspections required more frequently than every eighteen months in which case
that AD will be cleared for inspection for the applicable maximum period between
inspections.

         D. Provided Lessee is not in default hereunder, Lessee may extend the
term of the lease for a one (1) year period ("Renewal Term") following
expiration of the Basic Lease Term stated in Section 1.A. hereof. Lessee shall
notify Lessor of its desire to extend said term not less than one hundred eighty
(180) days prior to expiration. of the Basic Lease Term. Base Rental and
Variable Rental, as hereinafter defined, during the Renewal Term will be at the
greater of the then Fair Market Rental Value as hereinafter defined or the Base
Rental rates. Fair Market Rental Value means the amount agreed by Lessor and
Lessee as the price at which an aircraft of the type, age and condition of the
Aircraft could be leased in an orderly transaction under prevailing market
conditions between a willing Lessee and a willing Lessor on the date of such
determination. If Lessor and Lessee are unable to agree on such amount then the
Lessor and Lessee shall each select an independent appraiser skilled in
evaluating aircraft, who shall jointly make the determination of such amount. If
Lessor's and Lessee's appraisers are unable to agree on the Fair Market Rental
Value of the Aircraft, then such appraisers shall select a third appraiser who
shall make the determination. The determination of the independent appraiser(s)
shall be binding and conclusive on Lessor and Lessee. In all cases, Lessor and
Lessee shall bear the cost of the appraiser selected by them and shall share
equally in the cost of retaining the third independent appraiser, if required,
to make such determination.

         E. The Lease is net to Lessor. Lessee will pay all Base Rental,
Variable Rental, Supplemental Rental, costs, charges, fees and expenses in
connection with the delivery of Hexcel Interiors 737-200 QC Quikbin Interior
Kit, use, possession and operation of the Aircraft, including maintenance,
insurance, state and local taxes (except for taxes with respect to which Lessee
is not obligated to indemnify Lessor under Section 9), and risk of loss or other
casualty. Such obligations of Lessee will be absolute and unconditional under
any and all circumstances and regardless of other events, including any of the
following:

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            (a) Any right of set-off, counterclaim, recoupment, defense or other
fight (including any right of reimbursement) which Lessee may have against
Lessor, or any other person for any reason whatsoever, including any claim
Lessee may have for the foregoing.

            (b) Unavailability or interruption in use of the Aircraft for any
reason, including a requisition thereof or any prohibition or interference with
or other restriction against Lessee's use, operation or possession of the
Aircraft (whether by Law, as hereinafter defined, or otherwise); any defect in
airworthiness, merchantability, fitness for any purpose, condition, design,
specification or operation of any kind or nature of the Aircraft; the
ineligibility of the Aircraft for any particular use or trade or for
registration or documentation under the Laws of any jurisdiction; or Total Loss
of the Aircraft; however, Lessee's obligation to pay Base Rental in the event of
Total Loss of the Aircraft shall terminate upon Lessor's receipt of the Agreed
Value of the. Aircraft in accordance with Article I I hereof

            (c) Insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership, administration or
similar proceedings by or against Lessor, Lessee or any other person.

            (d) Invalidity or unenforceability or lack of due authorization of
or other defect in this Lease.

            (e) Failure or delay on the part of any party to perform its
obligations under

 this Lease.

            (f) Other cause which but for this provision would or might have the
effect of terminating or in any other way affecting any obligation of Lessee
hereunder.

         F. Nothing in the foregoing Section 1E is intended as a waiver of any
rights of Lessee to bring a separate action for default by Lessor of any of its
obligations hereunder.

2.       DELIVERY AND RETURN OF AIRCRAFT

         A. The Aircraft, together with all pertinent log books, flight manuals
and other documents as described in Exhibit B, attached hereto and made a part
hereof (the "Records"), shall be delivered by Lessor to Lessee on the Delivery
Date of this lease over International Waters near Christchurch Base, New
Zealand or at such other location as is determined pursuant to Section 1.C.g.
(hereinafter referred to as the "Delivery Point").

            (a) Upon request by Lessee, Lessor will provide Lessee with a
demonstration flight of at least one hour, but less than two hours, duration,
prior to delivery of the Aircraft. If a demonstration flight is required prior
to delivery, it will be performed by and under the control of Lessor, with
Lessee's flight crew and/or other authorized personnel (not to exceed 3) on
board as observers if desired by Lessee. Lessor's captain will be the pilot in
command and will have the authority to cancel or terminate any flight at his
discretion short of one hour's duration without

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incurring any liability for Lessor. If any such flight is canceled or terminated
short of one hour's duration, it will be rescheduled at a mutually agreeable
time.

            (b) Lessor will bear the costs of the demonstration Right including
but not limited to costs of crew, special insurance for such flight, fuel and
take off and landing rights.

            (c) The demonstration flight will be for the sole purpose of
demonstrating to the Lessee the satisfactory operation of the Aircraft and its
equipment and systems. The demonstration flight will be conducted in accordance
with mutually acceptable procedures. Lessor will at its expense correct
Discrepancies (conditions exceeding manufacturer's specifications) revealed
during the demonstration flight.

            (d) The Engines shall undergo a video borescope inspection and power
assurance run at or immediately prior to time of the demonstration flight
performed at Lessor's expense with Lessee as an observer. Any Discrepancies
found not to be in compliance with the manufacturer's maintenance manual shall
be corrected at Lessor's expense.

         B. Upon expiration or termination of this Lease, Lessee will redeliver
the Aircraft at a mutually agreeable location in the continental United States
(the "Redelivery Location"). Subject to Section 6, upon redelivery of the
Aircraft, the Aircraft shall be in an airworthy condition in accordance with FAA
standards, without any maintenance deferrals, with a valid FAA certificate of
airworthiness in effect with respect thereto, in conformance with Federal
Aviation Regulations ("FAR") Part 121, and otherwise with the same equipment and
in the same condition and configuration as when delivered to Lessee, except for
reasonable wear and tear due to ordinary use. Notwithstanding anything herein to
the contrary, upon return the Aircraft will not be in compliance with FAR Part
36 and ICAO 16 Chapter 3. In addition, the Aircraft upon completion of the
redelivery acceptance inspection (i) will be free and clear of all Liens, as
hereinafter defined, which result from Lessee's actions or inactions, (ii) will
be fresh from a full "C" check performed by Lessee, under Lessee's FAA approved
maintenance and structural programs including CPCP and all required non-routine
maintenance items discovered during such "C" check, without any deferrals will
have been performed, (upon completion of the "C" check, the Aircraft shall have
no required maintenance items in a deferred status, including but not limited to
any structural repairs, corrosion, skin replacement requirements, or crack
propagation discovered prior to or during the "C" check in accordance with
Lessee's Maintenance Program, and FAA Requirements), (iii) will have the same
paint scheme as when delivered to Lessee, except that Lessee's logo will be
removed, and (iv) will meet the conditions listed in Exhibit C. Upon Redelivery,
all AD's will either be terminated or cleared for inspection for a minimum of
eighteen (18) months from the redelivery date except for those inspections
required more frequently than every eighteen (18) months, in which case that AD
will be cleared for inspection for the applicable maximum period between
inspections. If the Aircraft is not returned in the condition required under
this Agreement upon expiration or termination of this Lease, unless lost,
destroyed or so damaged as to constitute a constructive total loss for insurance
purposes, the provisions of this Agreement shall continue in full force and
effect with respect to the rights of Lessor and the obligations of Lessee,
including, without limitation, Lessee's obligation to pay rental at 150% of the
monthly rate and other charges set forth in Section 19 and

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to maintain insurance as set forth herein, without prejudice to any other rights
or remedies of Lessor.

         C. At least fourteen (14) days prior to redelivery of the Aircraft,
Lessee, at its expense, will make the Aircraft available to Lessor for
inspection and at least twenty-one (21) days prior to such redelivery, Lessee
will make the Records available to Lessor for inspection ("Final Inspection") to
permit Lessor to verify that the condition of the Aircraft and Records complies
with the terms hereof. The period allowed for the Final Inspection shall be of
such duration as to permit the conduct by Lessor of the following:

            (a) Inspection of Records;

            (b) Inspection of the Aircraft, Engines (including a full video
engine borescope inspection) and Parts;

            (c) A test flight of at least one hour but not more than two hours
(at Lessor's option, the first hour of the redelivery flight will constitute the
test flight) duration. The test flight will be performed by and under the
control of Lessee, with up to three of Lessor's authorized personnel on board as
observers. Lessee will bear the cost of the test flight including but not
limited to costs of crew, insurance, fuel, takeoff and landing rights. Lessee
will at its expense correct Discrepancies revealed during the test flight.

            (d) The Engines shall undergo a video borescope inspection and power
assurance run at or before time of the redelivery test flight performed at
Lessee's expense with Lessor as an observer. Any Discrepancies found not to be
in compliance with the manufacturer's maintenance manual shall be corrected at
Lessee's expense.

         If the condition of the Aircraft upon such Final Inspection does not
conform to the terms hereof, Lessee at its own expense will bring the Aircraft
into compliance. To the extent the time for such rectification extends beyond
the expiration date of the Lease, the term hereof shall be deemed automatically
extended, except that Lessee will pay monthly rental at 150% of the Base Rental
and 150% of the Variable Rental and the provisions hereof shall remain in force
until such rectification has been accomplished, unless Lessor terminates the
Lease in writing at its sole option.

         D. Each transfer of possession of the Aircraft between the parties
shall be accompanied by the delivery to the transferring party of a receipt in
the form of Exhibit D attached hereto, executed by an authorized representative
of the receiving party.

         E. Redelivery of the Aircraft under this Agreement will occur upon
physical redelivery of the Aircraft to Lessor at the Redelivery Location upon
execution and delivery by Lessor to Lessee of an aircraft redelivery receipt in
the form of Exhibit D. Lessor shall sign and deliver such receipt to Lessee upon
tender of delivery of the Aircraft to Lessor at the Redelivery Location in
compliance with all of the terms and conditions hereof.

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         F. Lessee will ensure that at return of the Aircraft any and all
airport, navigation and other charges, including but not limited to Eurocontrol
charges, which give rise or may if unpaid give rise to any lien, claim, charge
or encumbrance, right of detention, right of sale or other security interest in
relation to the Aircraft, any Engine or any Part, whether incurred in respect of
the Aircraft or any other aircraft operated by Lessee, have been paid and
discharged in full (whether or not due) and will at Lessor's request produce
evidence thereof satisfactory to Lessor.

3.       CHARGES

         See Exhibit H.

4.       LIMITED WARRANTY; DISCLAIMER

         A. Lessor warrants that it will have good title to the Aircraft, free
and clear of all liens and encumbrances other than the lien of Lessor's Lender,
at the time of delivery to Lessee.

         B. THE AIRCRAFT IS LEASED TO AND ACCEPTED BY LESSEE IN "AS IS"
CONDITION AND WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES WHATSOEVER WITH
RESPECT TO THE AIRCRAFT, EXPRESS OR IMPLIED, EXCEPT THE WARRANTY AS TO TITLE
APPEARING IN SECTION 4A ABOVE.

         C. THE WARRANTIES SET FORTH IN THIS SECTION 4 AND THE OBLIGATIONS AND
LIABILITIES OF LESSOR THEREUNDER, ARE EXPRESSLY IN LIEU OF AND LESSEE HEREBY
WAIVES AND RELEASES LESSOR FROM ANY AND ALL OTHER WARRANTIES, AGREEMENTS,
GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR LIABILITIES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY
OF MERCHANTABILITY AND FITNESS FOR INTENDED USE OR LOSS OF USE OR STRICT
LIABILITY IN TORT, WITH RESPECT TO ANY EQUIPMENT LEASED HEREUNDER OR LESSOR'S
PERFORMANCE HEREUNDER. NO AGREEMENT OR UNDERSTANDING VARYING, ALTERING OR
EXTENDING LESSOR'S LIABILITY WILL BE BINDING ON LESSOR UNLESS IN WRITING AND
SIGNED BY LESSEE'S AND LESSOR'S DULY AUTHORIZED OFFICER OR REPRESENTATIVE.

         D. Lessor will assign to Lessee any assignable warranties of overhaul
agencies performing any predelivery work for Lessor on the Aircraft and/or
Engines. In the event that Lessor contracts for performance of work on the
Aircraft or Engines prior to delivery, Lessor will use good faith efforts to
obtain industry standard warranties for that work and to assign such warranties
to Lessee.

5.       SET-OFF; ABATEMENT

         All payments provided for herein shall be paid without set-off,
defense, counterclaim or deduction of any nature whatsoever arising from this or
any other transaction or relationship, direct or indirect, which may exist
between the parties, except for taxes imposed on Lessee as a

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result of this Lease with respect to which Lessee is not obligated to indemnify
Lessor under Section 9. There shall be no abatement of Base Rental, Variable
Rental, Supplemental Rental, or other charges payable hereunder for any period
that the Aircraft shall be out of use or unserviceable for any reason
whatsoever, including by way of illustration but not by way of limitation, while
undergoing maintenance, suspension of certification or grounding of the Aircraft
resulting from fire, casualty, or administrative action or revocation or
limitation of government approval, license or permit. If Lessee is prohibited by
Law from making payment in full to Lessor, Lessee will gross up the payment
amount such that the net payment received by Lessor after any deduction or
withholding equals the amounts called for under this Lease. "Law" means any (i)
statute, decree, constitution, regulation, order or any directive of any
government entity, (ii) treaty, pact, compact or other agreement to which any
government entity is a signatory or party and (iii) judicial or administrative
interpretation or application. Nothing in this Section 5 is intended as a waiver
of any rights of Lessee to bring a separate action for default by Lessor of any
of its obligations hereunder.

6.       OPERATION, MAINTENANCE, REGISTRATION, AND RECORDS

         A. Lessee shall conduct all flight operations of the Aircraft only with
properly qualified and properly certified flight crews and in accordance with
(i) the manufacturers recommended operating procedures and manuals and
instructions in effect from time to time, (ii) applicable rules, regulations and
requirements of the government of the United States of America, including
specifically, the FAA, and (iii) the applicable rules, regulations and
requirements of any other jurisdiction in which the Aircraft may be operated.

         B. During the Term, Lessee, at its sole cost and expense, will service,
repair, overhaul and maintain the Aircraft in accordance with applicable
requirements of all U.S. governmental agencies including the FAA. In addition,
Lessee will (i) keep the Aircraft in as good operating condition as when
delivered to Lessee, reasonable wear and tear from ordinary use excepted, (ii)
keep the Aircraft in such condition as may be necessary to enable the
airworthiness certification for the Aircraft to be maintained in good standing
at all times under the laws of the United States, and (iii) maintain the
Aircraft in at least the same manner as Lessee maintains, services, repairs or
overhauls similar aircraft operated by Lessee without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise;
provided however, that nothing in the foregoing shall be deemed to expand
Lessee's obligations or return of the Aircraft beyond the return provisions
expressly set forth herein. The Aircraft shall be maintained in accordance with
Lessee's FAA approved maintenance program. Such maintenance will include without
limitation all scheduled and unscheduled overhaul and maintenance, including
line maintenance, and replacement of components, parts, and Engines as may be
required. In addition, Lessee will replace or repair any loss or damage to the
Aircraft, regardless of cause. Lessee will fully comply, at its sole cost and
expense, with all instructions and Airworthiness Directives of the FAA falling
due during the Term ("AD") and will comply at its sole cost and expense with all
Alert Service Bulletins (service bulletins issued by the manufacturer requiring
compliance) falling due during the Term, all in accordance with the terms
thereof in the same manner as Lessee complies with such AD's and Alert Service
Bulletins on similar aircraft operated by

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Lessee without in any way discriminating against the Aircraft, whether by reason
of its leased status or otherwise.

         C. Lessee, at its own cost and expense, will promptly replace or cause
to be replaced all Parts which may from time to time become unserviceable, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. All replacement Parts shall be
owned by Lessee free and clear of all Liens, except replacement Parts
temporarily installed on an emergency basis (Lessee will notify Lessor of any
such emergency replacement involving a Lien or Liens in excess of Ten Thousand
Dollars ($10,000.00)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, and be in a modification status and
part number equal or greater than, the Parts replaced assuming such replaced
Parts were in the condition and repair required to be maintained by the terms
hereof. All Parts at any time removed from the Aircraft or any Engine shall
remain the property of the Lessor, no matter where located, until such time as
such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the Aircraft or any Engine,
without further act, except replacement Parts temporarily installed on an
emergency basis, (i) such replacement Part shall become the property of Lessor
and shall become subject to this Lease and be deemed a Part for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Aircraft or such Engine, and (ii) the replaced Part shall no
longer be the property of Lessor and shall no longer be deemed a Part hereunder
and provided Lessee is not in default, title to such removed Part shall transfer
to Lessee free and clear of Liens, except for Liens created by or through
Lessee. "Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engine or Engines, which are from time to time incorporated or
installed in or attached to the Aircraft or any Engine. Lessee, at its own
expense, may from time to time make such alterations and modifications in and
additions to the Aircraft or any Engine as Lessee may deem desirable in the
proper conduct of its business, including removal of parts which Lessee deems to
be obsolete or no longer suitable or appropriate for use on the Aircraft or such
Engine ("Obsolete Parts"); provided that no such alteration, modification,
removal or addition impairs the condition or airworthiness of the Aircraft or
such Engine, or diminishes the value, utility or remaining useful life of the
Aircraft or such Engine below the value, utility or remaining useful life
thereof immediately prior to such alteration, modification, removal or addition
assuming the Aircraft or such Engine was then in the condition required to be
maintained by the terms of this Lease. All Parts incorporated or installed in or
attached or added to the Aircraft or an Engine as the result of such or addition
(except those parts which Lessee has leased from others and which may be removed
by Lessee pursuant to the next sentence) (the "Additional Parts") shall, without
further act, become the property of Lessor. Notwithstanding the foregoing
sentence, Lessee may, at any time during the Term, so long as no Event of
Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that such Additional Part (i) is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to such Aircraft or any Engine at the time of
delivery thereof hereunder or any Part in replacement of or substitution for any
such Part, (ii) is not required to be incorporated or installed in or attached
or added to the Aircraft or any Engine pursuant to the terms of Section 6 hereof
and (iii) can be removed from

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the Aircraft or such Engine without impairing airworthiness or diminishing the
value, utility or remaining useful life of the Aircraft or such Engine which the
Aircraft or such engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Aircraft or Engine from which it was removed. Any Additional Part
not removed as above provided prior to the return of the Aircraft or Engine to
Lessor hereunder shall remain the property of Lessor. Notwithstanding the above,
Lessee shall be permitted to install leased galleys and seats (the "Special
Equipment") on the Aircraft. Lessor agrees that it will claim no interest in the
Special Equipment.

         D. Lessor will cause the Aircraft to be registered in the name of
Lessor under regulations of the United States throughout the Term. Lessee will
assist Lessor in maintaining such registration during the Term. Lessee shall at
its own expense and responsibility cause this Agreement or appropriate
financing statements, so far as permitted by applicable law or regulation, to be
kept filed and recorded at all times during the Term, in such office or offices
for the registration of aircraft in the United States and in such other offices
as may be necessary, or as Lessor may reasonably request, to protect and
preserve Lessor's rights hereunder, and shall on request furnish to Lessor an
opinion of counsel or other evidence satisfactory to Lessor of such filing and
recording.

         E. (i) Lessee will maintain complete and accurate records, logs and
other materials required to be maintained in respect of the Aircraft by the FAA
and will provide them to Lessor on reasonable request. In addition, the Records
will include, but not be limited to, records of accomplishment of AD's, service
bulletins, and any modifications. In addition, all overhaul/maintenance Records
for the airframe, engines, APU and components required by Lessor will be
maintained and supplied by Lessee. All such Records shall be the property of
Lessor and will be deemed Records at the time generated. Lessee will report
hours and cycles of operation, and location of operation, to Lessor upon
request. If the Lessee is required pursuant to the terms hereof to pay Variable
Rent at the time a D Check is being performed on the Aircraft, Lessee will
obtain Lessor's prior written approval, which approval will not be unreasonably
withheld, of the "D" Check Vendor if Lessor has notified Lessee of such
requirement.

            (ii) Upon redelivery of the Aircraft to Lessor, Lessee will return
all Records delivered to Lessee by Lessor as well as all Records generated by
Lessee. See Exhibit E; provided, however, Lessee shall not be responsible for
records and documentation with respect to the Aircraft (as the Aircraft was
delivered to Lessee) prior to the commencement of this Lease unless such records
were delivered to Lessee by Lessor. Lessee's obligation is to redeliver
originals of all such Records.

            (iii) With respect to any Part installed by the Lessee during the
Lease and not removed prior to the return of the Aircraft, the Records returned
to Lessor will include:

                  (a) Part number, description, and serial number (if Part is
serialized); and

                                       11

<PAGE>

                  (b) Historical records, including but not limited to (i)
serviceability status of the Part at installation, (ii) for a time-controlled
Part, total time and cycles, time and cycles since overhaul as may be
applicable, and total time and cycles of the Aircraft or engine at the time of
Part installation, (iii) for a life-limited Part, documentation tracing usage of
the Part since new and all appropriate on-off logs, and (iv) past history,
modification status and overhaul records for components.

7.       MODIFICATION OF THE AIRCRAFT

         A. Except as provided in Section 6C and modifications relating to
seats, and galleys, Lessee shall not make any optional modifications to the
Aircraft, including but not limited to additions, alterations or improvements
without Lessor's prior written consent.

         B. Upon termination of this Lease Agreement, Lessee shall return the
Aircraft to Lessor in its original configuration as delivered to Lessee, or as
otherwise agreed in writing between Lessor and Lessee.

8.       INSPECTION AND RECORDS

         A. While the Aircraft is leased to Lessee, Lessor shall have the right
to inspect the Aircraft and the required maintenance records at any reasonable
time and on reasonable notice (except in the case of an Event of Default where
no notice is required) so as not to delay Lessee's flights or unreasonably
interfere with Lessee's or any permitted Sublessee's operations, including
periods during which the Aircraft is undergoing maintenance. Subject to the
preceding sentence, such inspection shall not restrict Lessor from opening any
panels, bays, doors, etc., which are normally opened during such maintenance.
Upon request, Lessee will advise Lessor of the maintenance schedule of the
Aircraft for the following year and Lessor shall be entitled to have a
representative present at the location of any "C" check or "D" check at all
times during which the work is being performed.

         B. Lessee agrees to furnish Lessor information in such form as Lessor
may reasonably request regarding Lessee's use and operation of the Aircraft
during the term of this Lease as may be necessary to permit Lessor to maintain
its records in accordance with the requirements of all applicable United States
governmental agencies.

9.       TAXES

         A. All payments to be made by Lessee under the Lease shall be paid
without deduction for, or on account of, any present or future taxes, levies,
imposts, value added type charges or taxes, customs, duties, charges, currency
surcharges, fees, assessments, deductions or withholdings of any nature
(collectively, together with interest and penalties thereon, called "Taxes")
imposed, levied, collected, withheld or assessed by any country or any political
subdivision or taxing authority thereof or therein, or by any group or
organization of which such country at the time of payment may be a member,
unless Lessee is compelled by law to make

                                       12

<PAGE>

payment after deducting any of such Taxes, in which event Lessee shall pay to
Lessor such additional amounts as may be necessary to ensure that Lessor
receives an amount in U.S. Dollars equal to the full amount which it would have
received had payment not been made subject to any such taxes. Lessee shall pay
or cause to be paid, and shall indemnify and hold harmless Lessor from and
against, any and all Taxes imposed, levied, collected, withheld or assessed
against Lessee or Lessor by any country or political subdivision or taxing
authority thereof or therein, if and to the extent that such Taxes are payable
as a result of this Lease Agreement, the work performed as set forth in Exhibit
J, the delivery and installation of Hexcel Interiors 737-200 QC Quikbin Interior
Kits, or the possession, use, operation or repair of the Aircraft.
Notwithstanding the provisions of the above paragraph, Lessee's obligations
under this Section 9 in respect of Taxes shall not include:

            (i) Taxes on, based on, or measured by, net income of Lessor, or
United States federal value added or consumption type charges or taxes imposed
on Lessor, imposed by the United States of America or any United States federal,
state or local political subdivision or taxing authority;

            (ii) Taxes imposed in a taxing jurisdiction (other than by the
United States federal government or by the jurisdiction in which Lessor is
incorporated in or maintains its principal place of business) for a tax period
during which neither the Aircraft nor any part thereof has been located or
operated in that taxing jurisdiction.

            (iii) Any Taxes imposed as a result of a sale, transfer of title,
mortgaging, pledging, financing, voluntary transfer of other voluntary
disposition by Lessor of the Aircraft or part thereof or interest therein, or
any interest in the Rent or part thereof or any interest in the Lease or part
thereof, unless such sale, transfer, mortgage, pledge or disposition occurs by
reason of the exercise of Lessor's remedies under this Lease upon an Event of
Default, provided however, that Lessor shall comply with any reasonable request
as Lessee shall make concerning the appropriate jurisdiction in which such sale,
transfer or disposition shall be made (with Lessee bearing any costs associated
therewith) unless Lessor determines (and advises Lessee) that such compliance
with Lessee's request would generate an adverse consequence to Lessor.

            (iv) Any penalties or interest caused solely by the negligence or
willful misconduct of Lessor in connection with its obligations under this
Section 9.

            (v) Any Taxes caused solely by a failure by Lessor to furnish in a
timely manner notice or information which Lessor is required to furnish to
Lessee by the terms of this Section;

            (vi) Taxes relating to the Aircraft or any part thereof, or interest
therein, for any taxable period or portion thereof, relating to events occurring
prior to commencement of the Term of this Lease with the exception of work
performed as set forth in Exhibit J and delivery and installation of Hexcel
Interiors 737-200 QC Quikbin Interior Kit or after the expiration of the Term of
this Lease and the redelivery of the Aircraft in accordance with this Lease;

                                       13

<PAGE>

            (vii) Taxes based on or measured by the value or principal amount
of any loan or promissory note (or security therefore) entered into by Lessor
or anyone claiming an interest in the Aircraft or any portion thereof through
Lessor.

         B. In the event any report or return is required to be made with
respect to any obligation of the Lessee, under or arising out of this Section 9
(including but not limited to personal property tax returns), the Lessee shall
(a) to the extent required or permitted by law, make and file in its own name
such return, statement or report, and (b) in the case of any other such return,
statement or report required to be made in the name of Lessor advise Lessor of
such fact and prepare such return, statement or report for filing by Lessor or,
where such return, statement or report shall be required to reflect items in
addition to any obligation of the Lessee under or arising out of this Section 9,
provide Lessor with information sufficient to permit such return, statement or
report to be properly made with respect to any obligation of the Lessee under or
arising out of this Section 9. Lessee shall indemnify and hold Lessor harmless
from and against any liabilities, obligations, losses, damages, penalties,
interest, claims, actions, suits and costs arising out of any late or inadequate
payment of any such Taxes, or any failure to file, or insufficiency or
inaccuracy in any such return, statement, report or information, except to the
extent that the same is attributable to Lessor's failure to timely and properly
file returns which have been timely prepared by Lessee and delivered to Lessor.
If actual notice is given by any taxing authority to Lessor that a report or
return is required to be filed with respect to any such Taxes referred to in
this Section 9, Lessor shall promptly notify Lessee of such required report or
return. Lessor agrees to respond to any reasonable request of Lessee for
information within the control of Lessor with respect to the filing of any such
report or return, but Lessee agrees to pay any reasonable costs, fees or other
charges of independent counsel or independent accountants incurred by Lessor in
connection with such response or request.

         C. If claim is made against Lessor for any Taxes with respect to which
Lessee has an obligation under this Section 9, Lessor shall promptly notify the
Lessee. If reasonably requested by the Lessee in writing and provided no Event
of Default shall have occurred and is continuing, Lessor, at the sole expense of
the Lessee, shall in good faith and diligently contest (and not settle without
Lessee's written consent) or shall permit the Lessee, if desired by the Lessee,
to contest in the name of the Lessee the validity, applicability or amount of
such Taxes. Lessee may contest, or require that Lessor contest, by (a) resisting
payment thereof if practicable, (b) not paying the same except under protest
with funds advanced by Lessee on an interest-free basis, if protest is necessary
and proper, and (c) if payments be made, using reasonable efforts to obtain a
refund thereof in appropriate administrative and judicial proceedings; provided,
however, that, in each such instance, the Lessor shall not be required to
undertake any contest unless:

            (i) Lessee shall have provided Lessor with an opinion of legal
counsel reasonably acceptable to Lessor to the effect that a reasonable basis
exists to contest such claim (provided, however, that no such opinion shall be
necessary in order to contest such claim in meetings with auditors, revenue
agents, or in other informal meetings with staff members of the applicable tax
authority) and, prior to the commencement of any appeal of an adverse judicial
decision, with an opinion of such tax counsel to the effect that a reasonable
basis exists to appeal

                                       14

<PAGE>

such adverse judicial decision (which opinions shall be obtained at Lessee's
sole cost and expense);

            (ii) Such proceedings do not involve any material risk or danger of
the sale, forfeiture or loss of the Aircraft or any part thereof or interest
therein or the imposition of criminal penalties or sanctions against Lessor or
the creation of any Lien other than a Lien for taxes not yet due or being
contested in good faith by appropriate proceedings, and for payment of which
such reserves if any, as are required to be provided under generally accepted
accounting principals have been made unless Lessee has provided to Lessor a bond
or other security reasonably satisfactory to Lessor (provided that in the case
of criminal penalties or sanctions such bond or other security shall be
satisfactory to Lessor in its sole discretion) to protect against such risk or
danger;

            (iii) in the event that the subject matter of the contest is of a
continuing nature and has previously been decided adversely pursuant to the
contest provisions of this Section 9 by the highest court to which an appeal
could be taken (other than the U.S. Supreme Court), there has been a change in
the law (including, without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim shall have been so
previously decided and Lessor shall have received an opinion of independent tax
counsel selected by the Lessee and reasonably acceptable to Lessor, which
opinion shall be obtained at the Lessee's sole expense, to the effect that, as a
result of such change, it is more likely than not that the position which Lessor
or the Lessee, as the case may be, had asserted in such previous contest would
prevail;

            (iv) No Event of Default shall have occurred and be continuing;

            (v) Prior to the commencement of any contest undertaken by the
Lessee or any contest undertaken by Lessor with respect to which Lessor is
required to follow the direction of the Lessee, the Lessee shall have delivered
to Lessor a written acknowledgment of its obligation to indemnify fully Lessor
to the extent that the contest is not successful;

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

         Lessee shall not be deemed to be in default under any of the above
indemnification provisions of this Section 9 so long as Lessee shall diligently
prosecute a contest in conformity with the requirements of this Section 9C, or
in the case where the Lessor shall be prosecuting such contest pursuant to this
Section 9C, Lessee has fulfilled all of its obligations under this Section 9C
with respect to such contest. Notwithstanding the foregoing, if a claim is made
against Lessor which, if successful, would result in the imposition of Taxes
under circumstances which would require the Lessee to indemnify Lessor, Lessor
shall be released from its responsibility to contest such claim, or part
thereof, if it agrees in writing with Lessee not to seek indemnification from
Lessee in respect of the claim, or such part thereof to be contested. In the

                                       15

<PAGE>

event Lessor fails diligently to contest, or refuses to permit the Lessee to
contest, a claim or part thereof which Lessor has the obligation to contest or
to permit Lessee to contest under this Section 9, then Lessee shall not be
obligated to indemnify Lessor for such claim or such part thereof and Lessor
shall refund to Lessee any amounts paid or advanced by Lessee in connection with
such Taxes that were the sub ject of such claim (plus interest from the date
payment is due at the rate established for refunds by the taxing authority
imposing such taxes).

         D. If Lessor shall obtain a refund of all or any part of such tax, fee
or other charge paid by Lessee, Lessor shall pay the Lessee the amount of such
refund less the amount of any Taxes payable by Lessor in respect of the receipt
of such refund; provided that such amount shall not be payable (x) before such
time as the Lessee shall have made all payments or indemnities then due to
Lessor under the Lease, or (y) while any Event of Default is outstanding and
continues unremedied. If in addition to such refund, Lessor shall receive an
amount representing attorneys fees, interest or other amount with respect to
such refund, the Lessee shall be paid that proportion of such amounts which is
fairly attributable to Taxes paid by the Lessee prior to the receipt of such
refund.

10.      INDEMNITY

         A. LESSEE HEREBY RELEASES AND AGREES TO INDEMNIFY, DEFEND AND SAVE
HARMLESS LESSOR, AND ITS DIRECTORS, OFFICERS, AGENTS, MEMBERS AND EMPLOYEES
(COLLECTIVELY THE "INDEMNITEES"), FROM ANY AND ALL LIABILITIES, DAMAGES, LOSSES,
EXPENSES, DEMANDS, CLAIMS, SUITS OR JUDGMENTS, INCLUDING ALL REASONABLE
ATTORNEYS' FEES, COSTS AND EXPENSES IN CONNECTION THEREWITH OR INCIDENT THERETO,
FOR THE DEATH OF OR INJURIES TO ANY PERSONS WHOMSOEVER (EXCLUDING EMPLOYEES OF
THE INDEMNITEES IN THEIR CAPACITY AS EMPLOYEES), AND FOR THE LOSS OF, DAMAGE TO
OR DESTRUCTION OF OR DELAY IN DELIVERY OF ANY PROPERTY WHATSOEVER, INCLUDING
PROPERTY OF THE PARTIES HERETO OR THAT OF THEIR DIRECTORS, OFFICERS, AGENTS,
MEMBERS AND EMPLOYEES, INCLUDING BUT NOT LIMITED TO THE AIRCRAFT, IN ANY MANNER
ARISING OUT OF POSSESSION, USE, MAINTENANCE, REPAIR OR OPERATION OF THE AIRCRAFT
DURING THE TERM HEREOF, (REGARDLESS OF NEGLIGENCE ON THE PART OF ANY INDEMNITEE,
WHETHER ACTIVE, PASSIVE OR OTHERWISE), PROVIDED, HOWEVER, THAT LESSEE'S
INDEMNITY OBLIGATION HEREUNDER SHALL NOT BE APPLICABLE TO ANY DEATH, INJURY,
LOSS, DAMAGE OR DESTRUCTION TO THE EXTENT CAUSED BY (1) THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF AN INDEMNITEE OR (2) BY ANY INDEPENDENT ACT OF NEGLIGENCE
ON THE PART OF ANY INDEMNITEE NOT RELATED TO THE PERFORMANCE OF THIS AGREEMENT.

         Lessee shall be entitled, at its sole cost and expense, acting through
counsel reasonably acceptable to the respective Indemnitee, (i) in any judicial
or administrative proceeding that involves solely a claim for which payment or
indemnity is sought under this Section 10, to assume responsibility for and
control thereof, (ii) in any judicial or administrative proceeding

                                       16

<PAGE>

involving a claim for which payment or indemnity is sought under this Section
10, and other claims related to the transactions contemplated by this Lease, to
assume responsibility for the control of such claim for which payment or
indemnity is sought under this Section 10, to the extent that the same may be
and is severed from such other claim, and (iii) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to the
control of such Indemnitee. Notwithstanding any of the foregoing to the
contrary, Lessee shall not be entitled to assume responsibility for and control
of any such judicial or administrative proceedings (1) while an Event of Default
shall have occurred and be continuing, or (2) if such proceedings will involve
the sale, forfeiture or loss of, or the creation of any Lien on the Aircraft. An
Indemnitee may participate at its own expense and with its own counsel in any
judicial proceeding controlled by Lessee pursuant to the preceding provisions of
this Section 10.

         An Indemnitee shall supply Lessee with such information reasonably
requested by Lessee as is necessary or advisable for Lessee to control or
participate in any proceeding to the extent permitted by this Section 10. Lessee
shall not enter into a settlement or other compromise with respect to any claim
without the prior written consent of any Indemnitees affected thereby, which
consent shall not be unreasonably withheld or delayed provided that Lessee is
solely responsible for any recoveries or awards pursuant to such settlement or
other compromise.

         B. Lessee shall be liable for and shall indemnify and save harmless
Lessor from any amounts payable by Lessor to any third party as a result of any
breach by Lessee of the terms and conditions of use of the Aircraft set forth in
this Agreement, together with any costs and expenses incurred by Lessor in
connection therewith.

         C. The indemnities contained in this Section 10 will continue in full
force and effect notwithstanding the expiration or other termination of this
Agreement or the letting of the Aircraft hereunder.

11.      LOSS OF OR DAMAGE TO AIRCRAFT; AGREED VALUE

         A. Except to the extent that any loss or damage is caused by the
willful misconduct of Lessor, Lessee shall be liable to Lessor for, and shall
indemnify and save Lessor harmless from, any loss of or damage to the Aircraft
(including Engines, Parts, assemblies and components) occurring while leased to
Lessee hereunder or while in the possession, custody or control of Lessee and
arising from any cause whatsoever.

         B. Total Loss with respect to the Aircraft, or any Engine means any of
the following with respect to such property: (i) the loss of such property or of
the use thereof due to the destruction of or damage to such property which
renders repair uneconomic or which renders such property permanently unfit for
the uses permitted in Section 1A above for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive total loss; (iii)
the theft or disappearance of such property, or the confiscation, condemnation,
or seizure of, or requisition of title to, or loss of such property by any
governmental authority which shall have resulted in the loss of title or
possession of such property by Lessee for a period in excess of sixty (60) days.

                                       17

<PAGE>

         C. Lessor and Lessee hereby agree and fix the Agreed Value of the
Aircraft (together with all assorted equipment installed therein) to be
$11,000,000. The Agreed Value will decrease by 5% on each annual anniversary of
the Delivery Date. In the event the Aircraft shall become a Total Loss, Lessee
shall immediately notify Lessor thereof and Lessee shall within sixty (60) days
of such loss pay to Lessor in cash the Agreed Value of the Aircraft less any
hull insurance proceeds paid to Lessor in accordance with Section 12.B. below,
and Lessee shall further continue to pay Lessor the Base Rental for each day
between the day the Aircraft is lost or damaged as provided above and the day
Lessor receives the full Agreed Value for the Aircraft.

         D. Upon the Total Loss of an Engine not then installed in the Aircraft,
or a Total Loss of an Engine installed in the Aircraft not involving a Total
Loss of the Aircraft, Lessee shall give Lessor prompt written notice thereof and
Lessee shall replace such Engine within a reasonable time period but not to
exceed thirty (30) days of such Total Loss by duly conveying or causing to be
conveyed to Lessor as a replacement for such Engine, good and marketable title
to another engine reasonably acceptable to Lessor, which engine shall be free
and clear of all liens and encumbrances, shall have a value and utility at least
equal to and be in as good operating condition, as the Engine which sustained
the Total Loss, assuming such Engine was in the condition required to be
maintained hereunder. Such replacement engine, after reasonable approval and
acceptance by Lessor, shall be deemed an "Engine" as defined herein. Provided
Lessee is not in default hereunder, Lessor will then convey to Lessee title,
free and clear of all Liens, except for Liens created by or through Lessee, to
the Engine that sustained the Total Loss. Lessee's obligation to pay the Base
Rental, Variable Rental, Supplemental Rental, and other charges shall continue
in full force and effect, but Lessee shall be entitled to be reimbursed by
Lessor by the amount of insurance proceeds, if any, received by Lessor on
account of the insurance required to be carried by Lessee with respect to such
replaced Engine.

12.      INSURANCE

         Lessee will, at its own expense, procure and maintain in full force and
effect during the term of this Agreement (covering the Aircraft and the Engines
anywhere in the world where Lessee operates), a policy or policies of insurance,
with a responsible insurance company or companies active in the airline
industry, of the types and in the minimum amounts set forth below:

         A. (i) Comprehensive Airline Insurance in an amount which will produce
single limit per occurrence coverage of at least Three Hundred Million Dollars
($300,000,000), provided that if Lessee carries a higher liability limit fleet
wide, then Lessee will furnish such higher limits hereunder.

            (ii) Lessee shall cause the aforesaid insurance policies to be duly
and properly endorsed by Lessee's insurance underwriters:

                  (a) To name Lessor and its directors, officers, agents,
members and employees as additional insureds thereunder;

                                       18

<PAGE>

                  (b) To provide said insurance shall be primary insurance and
any other insurance policy or policies of Lessor shall be excess insurance;

                  (c) To cover the contractual liability assumed by Lessee under
this Agreement including, but not limited to, any liabilities and indemnities
assumed by Lessee under any supplements to this Lease hereafter executed by
Lessor and Lessee, however, such coverage is only to the extent of coverage
afforded under the policies;

                  (d) The policies will contain cross liability and severability
of interest clauses.

         B. (i) Aircraft Hull Insurance -- All-Risk, in the amount designated in
Section 11.C., as the Agreed Value of the Aircraft.

            (ii) Lessee shall cause said Aircraft hull insurance policy to be
duly and properly endorsed by Lessee's insurance underwriters:

                  (a) To provide that all physical damage losses with respect to
the Aircraft will be adjusted with Lessee (subject to the approval of Lessor).
In the event of a Total Loss of the Aircraft, Lessor is named as sole loss payee
for all insurance proceeds up to the Agreed Value. With respect to damage or
loss not constituting a Total Loss of the Aircraft, the Lessor is named as sole
loss payee in respect of all insurance proceeds where such insurance proceeds
exceed US $500,000.00. Said proceeds will be applied by Lessor toward payment of
repairs of damage claimed unless Lessor waives this provision and permits
payment of insurance proceeds directly to Lessee or the facility effecting
repairs. Such insurance proceeds which are not in excess of US $500,000.00 shall
be payable solely to Lessee; provided that upon receipt by Insurers and the
insurance broker of written notice from Lessor that a Default or an Event of
Default on the part of Lessee has occurred and is continuing, all payments up to
the Agreed Value will be made to Lessor. In all cases, any insurance proceeds,
as a result of policies carried by Lessee, in excess of the Agreed Value will be
payable solely to Lessee.

                  (b) To waive any and all rights to subrogation that insurers
may or could have against Lessor and its directors, officers, agents and
employees by virtue of such insurance policy, regardless of any negligence
(whether active, passive or otherwise) on the part of Lessor its directors,
officers, agents or employees in connection with the leasing of the Aircraft
hereunder or in the performance of this Lease, but such waiver of rights of
subrogation shall only be to the same extent Lessee has waived its rights of
recovery against or agreed to indemnify Lessor, its directors, officers, agents
and employees elsewhere in this Lease.

            (iii) All Risk Property Insurance (including in-transit coverage on
any Engine covering any damage which may occur while in Lessee's care, custody
or control but not then attached to an aircraft) on a replacement value basis
during all periods from their delivery to Lessee by Lessor until their
redelivery to Lessor by Lessee.

                                       19

<PAGE>

         C. Lessee shall cause the aforesaid insurance policies to be duly and
properly endorsed by Lessee's insurance underwriters to provide that Lessor be
given not less than thirty (30) days prior written notice in the event that
either Lessee or Lessee's insurance underwriters desire to amend, materially
change the policies in a manner adverse to Lessor, cancel or terminate said
policy or policies or any part or parts thereof, except war risk coverages, in
which case notice of cancellation shall not be less then seven (7) days or such
lesser period as may be customary in the industry from time to time.

         D. Lessee shall, with respect to any losses payable in connection with
the Aircraft, Engines or any of its Parts, cause its insurers promptly to adjust
the same with Lessee, subject to Lessor's approval and shall be payable directly
to Lessor; provided, however: (i) final decision with respect to any adjusted
claim shall be made solely by Lessor, and (ii) the insurance proceeds of any
adjusted claim will be applied by Lessor toward payment of repairs of damage
claimed.

         E. Lessee shall furnish Lessor with acceptable certificates of
insurance evidencing the coverage and endorsements as required herein. Such
certificates shall be delivered to Lessor not less than five days prior to the
delivery of the Aircraft. Renewal certificates shall be provided to Lessor not
less than 10 days prior to any policy expiration.

         F. All policies shall contain a "Breach of Warranty" clause in behalf
of Lessor.

         G. All insurance coverages listed in Section 12B above will include war
risk, hijack, terrorism and confiscation coverage in the amounts listed therein.

         H. Lessee will not operate the Aircraft or any Engine in an area or on
any route excluded from coverage by any insurance required under this Section
12.

         I. Lessor and Lessee shall each be permitted to carry insurance with
coverage limits which are in addition to/excess over what is required by
Sections 12A, 12B and 12G, provided such insurance does not adversely affect
and/or prejudice the insurance required by those sections.

13.      COMPLIANCE WITH LAWS

         Lessee agrees that the Aircraft leased hereunder shall not be used in
any manner which shall violate any law or regulation of any government or
governmental agency having jurisdiction and that any fine, penalty, or
forfeiture resulting from any such violation shall be the sole responsibility of
Lessee and Lessee agrees to indemnify and save Lessor harmless from all
liability therefor. Lessee agrees that it shall procure and maintain at its own
expense all certificates, permits and licenses, as may be required, and shall
give all notices required in connection with such possession, operation or use.
Lessee shall furnish Lessor with such documentary evidence of the procurement of
such certificates, permits and licenses as may be requested by Lessor. Lessee
agrees that while the Aircraft is leased hereunder, the Aircraft shall be
retained by Lessee in its possession, custody and control, unless otherwise
provided herein.

                                       20

<PAGE>

14.      TITLE TO AIRCRAFT

         A. Except as otherwise expressly provided herein, title to the
Aircraft, including Engines, accessories and other equipment of every nature
which are physically attached to or in operation on the Aircraft and title to
any other engines and personal property furnished or supplied by Lessor to
Lessee hereunder shall be and remain in Lessor's name at all times. Lessee
shall have no right, title or interest in the Aircraft except as provided in
this Lease. Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien (any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim) on or with respect to
the Aircraft or any Engine, title thereto or any interest therein, except (i)
the respective rights of Lessor and Lessee as herein provided; (ii) Lessor's
Liens (Liens arising as a result of (a) claims against Lessor not related to
the transactions contemplated by this Lease; (b) acts of Lessor, not
contemplated and expressly permitted under this Lease; or (b) taxes imposed
against Lessor which are not indemnified against by Lessee pursuant to
Article 9) with respect to the Aircraft or any Engine; (iii) Liens for Taxes
either not yet due or being contested in accordance with Section 9 hereof and
so long as adequate reserves are maintained with respect to such Liens; and
(iv) inchoate materialmen's, mechanics', workmen's, repairmen's, employees'
or other like Liens arising in the ordinary course of business, which either
are not delinquent or are begin contested in good faith by Lessee, so long as
the Aircraft or such Engine is not in danger of being lost, sold,
confiscated, forfeited or seized as a result of any such Lien provided,
however, that Lessee has established cash reserves in an amount necessary to
discharge any such Lien. Lessee shall promptly, at its own expense, take such
action as may be necessary to duly discharge any Lien (except for the Liens
referred to in clauses (i) and (ii) of this Section 14) if the same shall
arise at any time with respect to the Aircraft or any Engine. Lessee shall
promptly pay and discharge when due, or make adequate provision (by way of
security or otherwise) for, or procure that the same are paid and discharged,
all debts, claims, liabilities or obligations whatsoever created by it or any
other Person, or arising as a result of any matter concerning it or any other
Person, which may give rise to any Lien on the Aircraft or any Engine,
including, without limitation, any landing fee, air navigation or similar
charges. Lessee agrees to indemnify and save Lessor harmless from and against
all damages suffered by Lessor including costs and expenses incident thereto,
as the result of Lessee's failure to perform the undertaking herein in this
paragraph provided for.

         B. Lessee shall attach a permanent placard, to be furnished by Lessor,
to the forward side of the cockpit and cabin door adjacent to the Certificate of
Aircraft Registration in the interior of the Aircraft indicating that the
Aircraft is being operated by Lessee in accordance with a Lease Agreement
between Lessee and Lessor and Lessee shall not remove same nor permit it to be
removed and shall immediately replace such placard if it should become lost,
illegible, damaged or destroyed. The placard shall state:

                "Aircraft Serial No. 23051 is owned by Aircraft No.
                1, L.L.C. ("Lessor") subject to a mortgage in favor
                of Barnett Bank, N.A. It is being operated by Aloha
                Airlines, Inc., pursuant to a Lease Agreement between
                Lessor and Aloha Airlines, Inc., as Lessee.

                                       21

<PAGE>

                Owner's Address: 1100 N. WOOD DALE ROAD, WOOD DALE,
                ILLINOIS 60191"

         C. Lessee shall also cause a placard, to be furnished by Lessor, to be
attached to each Engine at all times during the Lease Term and until redelivery
to Lessor pursuant to the Lease, as follows:

                "This Engine is owned by Aircraft No. 1, L.L.C, 1100
                N. Wood Dale Road, Wood Dale, Illinois 60191, subject
                to a mortgage in favor of Barnett Bank, N.A."

15.      ASSIGNMENT OR SUBLEASE, POSSESSION AND USE

         A. Lessee shall neither assign this Agreement in whole or in part nor
sublease the Aircraft or transfer the custody or possession thereof to any third
party, except with the prior written consent of Lessor; provided, however,
Lessee may sublease the Aircraft to a commercial air carrier from the list
attached as Exhibit G or such other commercial air carrier as is approved in
writing by Lessor, such approval not to be unreasonably withheld (a "Permitted
Sublessee"); provided further, that at any time during the Term Lessor may, by
notice to Lessee, notify Lessee that any entity on said Exhibit G no longer
constitutes a Permitted Sublessee (which determination shall be made on a
reasonable basis by the Lessor) whereupon such entity shall no longer constitute
a Permitted Sublessee, provided that Lessor may not remove an entity from such
list during a lease to such Permitted Sublessee.

         The following conditions must be met in connection with any such
sublease:

         (i) the sublease agreement is assigned to Lessor as security on or
before its effective date pursuant to documentation in form and content
reasonably acceptable to Lessor;

         (ii) all rent payable by the sublessee under such sublease agreement
shall be payable directly by the sublessee to Lessor, provided that so long as
no Event of Default has occurred and is continuing hereunder, Lessor shall pay
to Lessee out of each payment received from sublessee, the excess of the
sublease rental over the amounts due hereunder.

         Further, with respect to any such sublease:

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

         (b) the rights of the sublessee shall be subject and subordinate to all
the terms of this Lease, including without limitation the right of repossession
pursuant to Section 17 and to avoid such sublessee's right to possession upon
such repossession;

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

                                       22

<PAGE>

         (d) any sublease permitted by Section 15.A. shall provide that (i) the
Aircraft, Airframe or Engine may not be operated or used other than as provided
in Sections 6 and 15 hereof, (ii) Lessor may avoid or terminate such sublease
following an Event of Default hereunder, and (iii) to the extent not
accomplished by an assignment of sublease, upon an Event of Default such
sublease shall automatically be deemed assigned to Lessor until such time as the
event of default has been cured;

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

         (f) with respect to any sublease permitted by Section 15.A., at least
ten (10) Business Days prior to such sublease becoming effective Lessee shall
furnish a copy of such sublease to Lessor for Lessor's review to determine that
the sublease is in compliance with the provisions hereof. Lessee shall reimburse
Lessor for Lessor's out-of-pocket costs and legal fees in connection with its
review of such document;

         (g) any sublease permitted by Section 15.A. shall expressly provide (x)
that such sublessee will not transfer possession or control of the Aircraft,
Airframe or Engine to anyone other than Lessee or Lessor, except to the extent
permitted pursuant to Section 15B of this Lease, and (y) that all rights of the
sublessee are subject and subordinate to all the terms of this Lease including,
without limitation, in each instance, Lessor's rights to repossession pursuant
to Section 17 and Lessor's rights to avoid such sublessee's right to possession
upon such repossession;

         (h) such sublease shall include appropriate provisions (whether by
requiring such obligations to be performed by the sublessee, Lessee, or both)
for the operation, maintenance and insurance of the Aircraft and the Engines
subleased thereby which are comparable to, or more restrictive than, the
provisions of this Lease; provided the foregoing conditions are met, sublessee
will be permitted to operate the Aircraft under the maintenance program of the
sublessee and in accordance with applicable laws governing sublessee's
operations and, provided, that Lessor and Lessor's lender have received an
opinion of counsel satisfactory to Lessor and Lessor's lender with respect to
title and perfection of security interests, sublessee will be permitted to
operate the Aircraft on the registry and with a certificate of airworthiness
where the sublessee is located; and

         (i) any such sublease shall expressly prohibit any assignment or
further sublease of the Aircraft, the Airframe or any Engine and any of the
rights under such sublease.

         B. Lessee shall not transfer possession of the Aircraft to any person
provided that, so long as no Event of Default or event which could constitute an
Event of Default (as defined herein), but for the lapse of time or the giving of
notice or both, shall have occurred and be continuing, Lessee may, without the
prior written consent of Lessor:

                                       23

<PAGE>

            (i) subject any Engine to, in each case, agreements (customary in
the airline industry and entered into in the ordinary course of its business)
with an FAA certified licensed engine overhaul agency, provided that: (a) no
such agreement or arrangement results in or requires the transfer of title to
such Engine; or (b) if Lessor's title to such Engine shall be divested under any
such agreement or arrangement, such divestiture shall be deemed to be a Total
Loss with respect to such Engine and Lessee shall comply with Section 11 hereof
in respect thereof;

            (ii) deliver possession of the Aircraft, the Airframe (Airframe
shall mean (i) the aircraft described on Exhibit A, but not including any Engine
installed thereon, and (ii) any and all Parts so long as the same shall be
incorporated or installed on or attached to the Airframe, or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 6,
after removal from the Airframe) or any Engine or any Part to the manufacturer
thereof for testing or other similar purposes or to any organization for
service, repair, maintenance, testing or overhaul work on such Aircraft,
Airframe or Engine or any Part thereof or for alterations or modifications in or
additions to such Aircraft, Airframe or Engine to the extent required or
permitted by the terms of Sections 6 and 7 hereof;

            (iii) install an Engine on an airframe (other than the Airframe)
owned by Lessee during the term hereof free and clear of all Liens except: (a)
those Liens of the type permitted under Section 14 hereof and those which apply
only to the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety; and (b) the
rights of United States participants under normal interchange agreements which
are customary in the airline industry and do not contemplate, permit, result in
or require the transfer of title to the Airframe, Engines or Parts installed
thereon;

            (iv) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided that:
(a) such airframe is free and clear of all Liens except the right of the parties
to the lease or conditional sale or other security agreement covering such
airframe and except Liens of the type permitted by Section 14 hereof which
insofar as they relate to such Engine are subordinate to the rights of the
Lessor hereunder, and the Lien of any mortgage which either by its terms does
not apply to the Engine or which effectively provides that each Engine leased to
Lessee hereby shall not become subject to the Lien thereof or to any rights of
any party thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of such Engine on
any airframe subject to the Lien of such mortgage, unless and until Lessee shall
become the owner of such Engine and Lessor shall have no further interest
therein, all pursuant to the express terms of this Lease; and (b) there shall be
in effect a written agreement of the lessor or secured party of such airframe
(which may be the lease or conditional sale or other security agreement covering
such airframe) substantially similar in effect to the agreement of Lessor in
Section D below whereby such lessor or secured party effectively and expressly
agrees that neither it nor its successors or assigns will acquire or claim any
right, title or interest in any Engine or any Part thereof by reason of such
Engine being installed on such airframe at any time while such Engine is subject
to this Lease or owned by Lessor, and a copy of such agreement shall be provided
to

                                       24

<PAGE>

Lessor upon written request of Lessor. In the event Lessee installs on the
Airframe an engine that is leased by Lessee from a lessor, or is owned by Lessee
subject to a conditional sale agreement or other security agreement held by a
secured party, Lessor hereby agrees for the benefit of such lessor or secured
party that Lessor will not acquire or claim, as against such lessor or secured
party, any right, title or interest in any such engine as the result of such
engine being installed on the Airframe at any time while such engine is subject
to such lease or conditional sale or other security agreement and owned by such
lessor or subject to a security interest in favor of such secured party;

            (v) subject (i) any Engine or Part to normal interchange agreements
or other similar agreement customary in the airline industry and entered into by
Lessee in the ordinary course of its business and (ii) any Engine or Part to
short-term pooling or borrowing, reciprocal leasing or other arrangement
customarily entered into by major U.S. air carriers and entered into by Lessee
in the ordinary course of its business; provided that no transfer of the
registration of the Aircraft shall be effected in connection therewith and
Lessor's title to and interest in the Aircraft, such Engine or Part shall not be
divested or impaired and that if Lessor's title or interest shall be divested or
impaired, such event shall be deemed to be a Total Loss with respect thereto;
and further provided that the foregoing shall be subject to approval by Lessor
of the air carriers who participate with Lessee in such interchange, pooling or
other similar agreements; and

            (vi) transfer possession of the Aircraft, Airframe or any Engine to
the United States Government pursuant to a contract not extending beyond the
Term of this Lease or to the Civil Reserve Air Fleet Program or any similar or
substitute programs so long as Lessee shall promptly notify Lessor upon
transferring possession of the Aircraft, Airframe or any Engine pursuant to such
program or contract.

         C. With respect to any transfer pursuant to Section 15 A or 15 B:

            (i) the rights of any transferee that received possession by reason
of a transfer permitted by Section 15B shall be subject and subordinate to all
the terms of this Lease, including but not limited to, Lessor's rights to
repossession pursuant to Section 17 and to terminate and avoid such transfer
upon such repossession and to require such transferee forthwith to deliver the
item which is subject to such transfer upon repossession;

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

            (iii) no relinquishment of possession pursuant to the terms of
Section 15B shall in any way discharge or diminish any of Lessee's obligations
to Lessor hereunder.

         D. In the event Lessee shall have received from the lessor or secured
party of any airframe leased to Lessee or owned by Lessee or subject to a
conditional sale or other security agreement, a written agreement complying with
Section 15 B iv hereof (which agreement may be contained in the lease,
conditional sale agreement or security agreement relating to such airframe), and
such lease or conditional sale or other security agreement covering such
airframe

                                       25

<PAGE>

also covers an engine or engines owned by the lessor under such lease or subject
to a security interest in favor of the secured party under such conditional sale
or other security agreement, Lessor hereby agrees for the benefit of such lessor
or secured party that Lessor will not acquire or claim, as against such lessor
or secured party, any right, title or interest in any such engine as the result
of such engine being installed on the Airframe at any time while such engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor or subject to a security interest in favor of such secured party.
Lessor also hereby agrees for the benefit of the mortgagee under any mortgage
complying with clause (a) of Section 15 B iv hereof, relating to installation of
an Engine on airframe leased to Lessee, that Lessor will not acquire or claim,
as against such mortgagee, any right, title or interest in any engine subject to
the lien of such mortgage as the result of such engine being installed on the
Airframe at any time while such engine is subject to the lien of such mortgage.

         E. Notwithstanding anything herein to the contrary, in the event of any
sublease hereunder, Lessee shall be obligated to return the Aircraft to Lessor
in the condition required hereunder as if the sublease had not occurred.

16.      EVENTS OF DEFAULT

         Each of the following events shall constitute an "Event of Default":

         A. If default shall be made by Lessee in the making of any payment of
Base Rental, Variable Rental, Supplemental Rental or other charges when due and
payable under this Agreement and such default shall continue for a period of
five (5) Business Days;

         B. If default shall be made by Lessee at any time in the procurement or
maintenance of any insurance coverage prescribed herein;

         C. If default shall be made by Lessee in a material respect in the
observance or performance, of any of the other obligations of Lessee contained
in this Agreement and such default shall continue for a period of fifteen (15)
days after notice from Lessor to Lessee specifying the default and requiring
that the same be remedied, provided that if such default cannot be cured within
fifteen (15) days that Lessee has been exercising due diligence to effect such
cure; then such cure must be effected within thirty (30) days;

         D. If Lessee shall become insolvent or go into liquidation or cease
paying its debts as they mature or make an assignment for the benefit of
creditors, or file for protection from its creditors under any applicable law
relating to bankruptcy or insolvency, or a trustee or receiver or liquidator
shall be appointed for Lessee, for a substantial part of its property, or
bankruptcy, or liquidation, reorganization arrangements, insolvency or similar
proceedings shall be instituted by or against Lessee under the laws of any
jurisdiction, unless in the instance of any involuntary proceedings, the
petition or appointment is set aside, withdrawn or ceases within ten (10)
Business Days of its effective date;

                                       26

<PAGE>

         E. If any representation or warranty made by Lessee in or pursuant to
this Agreement proves to be incorrect in any material respect;

         F. If Lessee shall suspend, for a period in excess of thirty (30) days
for reasons other than war, insurrections, strikes, riots, fire, flood,
explosions, earthquakes, serious accidents, any act of government, acts of God
or the public enemy, failure of transportation, cancellation of schedules, or
labor troubles, all or substantially all of its operations or shall cease to
hold all permits, licenses and authorizations necessary for the conduct of its
business or the same shall be revoked or varied in a manner which materially
adversely affects the financial situation of Lessee;

         G. If any order of any Court shall be made, or any process of Law shall
take effect, either in a preliminary manner or otherwise at the behest of any
creditor or obligor of Lessee which shall have the effect of impounding or
attaching the Aircraft or restraining its removal from any airport for any time
whatsoever, and said order or process shall not be set aside, withdrawn, vacated
or cease to be effective within ten (10) Business Days of its effective date.

         H. Lessee shall default in the payment of any unsecured obligation for
the payment of borrowed money which has a principal amount of $1,000,000 or more
or any secured obligation for the payment of borrowed money, for the deferred
purchase price of property or for the payment of rent under any aircraft lease
or other agreement when the same becomes due if such non payment results in an
acceleration of such indebtedness;

         I. If an Event of Default shall occur and be continuing under that
certain Lease Agreement between Aircraft No. 2, L.L.C. and Lessee of even date
herewith in respect of aircraft with manufacturer's serial number 23045.

17.      REMEDIES

         Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, Lessor may, at its option, declare by
written notice to Lessee this Agreement to be in default; and at any time
thereafter, so long as any such Event of Default shall not have been remedied,
Lessor may do one or more of the following with respect to all or any part of
the Aircraft and any or all of the Engines as Lessor in its sole discretion
shall elect, to the extent permitted by and subject to compliance with any
mandatory requirements of, applicable law then in effect.

         A. Upon the written demand of Lessor and at Lessee's expense, cause
Lessee to return promptly, and Lessee shall return promptly, the Aircraft or any
Engine as Lessor may so demand, to Lessor or its order, in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Sections 2, 6, Exhibit C, Exhibit E and other provisions of this Agreement as if
such Aircraft or Engine were being returned at the end of the Lease Term, or
Lessor, at its option, may enter upon the premises where all or any part of the
Aircraft or any Engine is located and take immediate possession of and remove
the same by summary proceedings or otherwise (and, at Lessor's option, store the
same at Lessee's premises until

                                       27

<PAGE>

disposal thereof by Lessor), all without trespass or liability accruing to
Lessor for or by reason of such entry or taking of possession or removing
whether for the restoration of damage to property caused by such action or
otherwise;

         B. Whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) above with respect to
the Aircraft, Lessor by written notice to Lessee specifying a payment date not
earlier than five (5) days from the date of such notice, may demand that the
Lessee pay to Lessor, and Lessee shall pay Lessor, in addition to such other
remedies, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to any Base Rental, Variable Rental, Supplemental Rental and other
charges unpaid as of the date of such notice, plus an amount equal to the entire
remaining Base Rental for the duration of the unexpired period remaining of the
initial stated term of the Agreement, plus any extension exercised discounted to
present value at nine percent (9%) per annum, it being acknowledged and agreed
that actual damages under such circumstances would be difficult or impossible to
determine.

         C. Lessor may terminate this Agreement, and/or may exercise any other
right or remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
breach hereof. In addition, Lessee shall be liable, for any and all amounts due
hereunder, including all costs and expenses reasonably incurred by reason of the
occurrence of any Event of Default and the exercise of Lessor's remedies with
respect thereto, including but not limited to reasonable attorneys fees and
costs and expenses incurred by Lessor in connection with the return of the
Aircraft or any Engine in accordance with the terms hereof, or in placing such
Aircraft or Engine in the condition and airworthiness required hereby.

18.      EXCUSABLE DELAY

         Lessor shall use reasonable efforts to deliver the Aircraft and to
perform its obligations in a timely manner; provided, however, Lessor shall not
be responsible nor deemed to be in default on account of delays in the
performance of this Agreement or for delays or failure in delivering the
Aircraft to Lessee due to causes beyond Lessor's control, including, but not
limited to, failure of TAP to timely deliver the Aircraft to Lessor in the
condition required under the TAP Lease, war, insurrections, strikes or labor
disputes, inability or failure of suppliers to deliver parts or materials,
riots, fires, floods, explosions, earthquakes, serious accidents, any act of
government, acts of God or the public enemy, failure of transportation,
cancellation of schedules, or labor troubles causing cessation, slowdown or
interruption of work, actions or inactions of Lessee; provided, however, Lessee
shall not be required to accept delivery of the Aircraft if the excusable delay
extends beyond October 15, 1998, except if such excusable delay was caused by
Lessee.

                                       28

<PAGE>

19.      DELAY IN RETURN OF AIRCRAFT

         In the event Lessee is unable or fails to return the Aircraft to Lessor
upon the expiration of this Agreement, Lessor shall have the right to repossess
the Aircraft wherever it may be. In addition, all obligations of Lessee under
this Agreement shall continue until the Aircraft is redelivered or repossessed
by Lessor and the Aircraft is put into the condition required hereunder. Base
Rental and Variable Rental will accrue and be paid by Lessee from and after a
failure to return the Aircraft at the time and in the condition required
hereunder at 150% of the Base Rental and Variable Rental.

20.      APPLICABLE LAW AND JURISDICTION

         A. This Agreement is being delivered in the State of New York and shall
be deemed to be a contract made under the laws of the State of New York, U.S.A.,
and for all purposes shall be construed in accordance with the laws of said
State.

         B. The parties agree that any state or federal court located in the
State of New York shall have jurisdiction to hear any suit, action or proceeding
arising out of or in connection with this Lease. Each party hereby acknowledges
and irrevocably consents and submits to the jurisdiction of any such court in
any such suit, action or proceeding. Service of process may be made against a
party either in person, wherever such party may be found, or by notice as
permitted herein to the address of the party set forth in this Lease.

         C. Lessee covenants and agrees that any suit, action or proceeding
arising out of or relating to this Lease or the matters dealt with herein shall
only be instituted by it or its permitted successors or assigns, if at all, in a
state or federal court located in New York.

21.      NOTICES

         Except as otherwise specified in this Agreement, notices required or
permitted hereunder shall be deemed sufficient if delivered personally or sent
by certified mail, return receipt requested, facsimile, telegram, or telex, or
any other customary means of communication addressed as follows or to any other
address which either party may designate in writing to the other party hereto:

Lessor:           Aircraft No. 1, L.L.C.
                  1100 North Wood Dale Road
                  Wood Dale, Illinois 60191
                  Attention: Manager
                  Telex No.: 630-227-2046
                  Fax No.: 630-227-2058

                                       29

<PAGE>

With a copy to:

                  Andrew Schreer, Senior Counsel
                  AAR Corp.
                  One AAR Place
                  1100 N. Wood Dale Road
                  Wood Dale, Illinois 60191
                  Facsimile 630-227-2058

                  Robert D. Crane, President
                  CRANE 737-200 L.L.C.
                  610 Anacapa Street
                  Santa Barbara, California 93101
                  Facsimile 805-966-6693

Lessee:

                  Aloha Airlines, Inc.
                  Senior Vice President Finance and Planning
                  P.O. Box 30028                        371 Aokea Street
                  Honolulu, Hawaii 96820                Honolulu, Hawaii 96819
                  Facsimile No.: 808-833-3100

Notices sent by certified mail shall be deemed effective four (4) days after
mailing and notices sent by any other means shall be effective upon receipt, and
in the case of facsimile confirmed.

22.      HEADINGS

         The paragraph headings herein have been inserted solely for convenience
and in the event of any conflict between such headings and the provisions of
that paragraph, the provisions of the paragraph shall supersede and control.

23.      CONFIDENTIALITY

         A. Lessee expressly covenants and agrees that it will keep confidential
the terms of this Agreement and all information, material, documents and data
furnished by Lessor hereunder other than as may be in any filings with the FAA,
that no part of said items shall be voluntarily furnished or disclosed by Lessee
to any other person, firm or corporation (except any U.S. governmental agency
that may require submission thereof, as required by law, to comply with lender
requirements, to satisfy existing and potential investor due diligence and
requirements, and to Lessee's accountants and attorneys) without Lessor's prior
written consent, that Lessee shall not reproduce the same except for essential
copies for its own internal usage and that Lessee shall return all said items to
Lessor promptly after return of the Aircraft.

         B. Lessor expressly covenants and agrees that it will keep confidential
the terms of this Agreement and all information, material, documents and data
furnished by Lessee hereunder

                                       30

<PAGE>

other than as may be in any filings with the FAA, that no part of said items
shall be voluntarily furnished or disclosed by Lessor to any other person, firm
or corporation (except any U.S. governmental agency that may require submission
thereof, as required by law, to comply with lender requirements, to satisfy
existing and potential investor due diligence and requirements, and to Lessor's
accountants and attorneys) without Lessee's prior written consent, that Lessor
shall not reproduce the same except for essential copies for its own internal
usage and that Lessor shall return all said items to Lessee promptly after
return of the Aircraft.

24.      REPRESENTATIONS, WARRANTIES AND COVENANTS

         A. Lessee represents and warrants that:

            (i) Lessee is a corporation organized and existing under the Laws of
Delaware and has the corporate power and authority to carry on its business as
presently conducted and to perform its obligations under this Agreement and is
the holder of all necessary licenses issued by all governmental authorities
having jurisdiction to authorize or permit Lessee to engage in air
transportation;

            (ii) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the execution and delivery
hereof nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with any terms and provisions hereof will contravene any
law applicable to Lessee or result in any breach of, or constitute any default
under or result in the creation of any lien, charge or encumbrance upon any
property of Lessee under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, corporate
charter, by-law, or other agreement or instrument to which Lessee is a party or
by which Lessee or its properties or assets may be bound or affected;

            (iii) The execution and delivery by Lessee of this Agreement, and
any of the transactions by Lessee contemplated hereby, have received, and Lessee
has complied with, every necessary consent, approval, order, or authorization
of, or registration with, or the giving or prior notice to, any government
authority having jurisdiction with respect to the execution and delivery of this
Agreement or the validity and enforceability hereof or the satisfaction of all
monetary and other obligations hereunder.

            (iv) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding obligation of Lessee,
enforceable in accordance with its terms.

            (v) It is not necessary under the laws of the United States and/or
Hawaii in order to ensure the validity, effectiveness and enforceability of this
Agreement or to protect the property rights of Lessor in the Aircraft that this
Agreement or any other instrument relating thereto be filed, registered or
recorded or that any other action be taken, except for recording in the FAA
Aircraft Registry in Oklahoma City, and a notice filing with the Secretary of
State of

                                       31

<PAGE>

Hawaii and that under the laws of the United States and Hawaii, the property
rights of Lessor in the Aircraft will have priority in all respects over the
claims of all creditors of Lessee;

            (vi) There are no suits or legal proceedings pending or threatened
against Lessee which, if adversely determined, would have a material adverse
effect upon its financial condition or business or its ability to perform its
obligations hereunder, other than as heretofore disclosed in writing by Lessee
to Lessor.

         B. Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term hereof it will:

            (i) duly pay and discharge all Taxes, assessments and governmental
charges upon it or against its properties prior to the date on which penalties
are attached thereto, unless and to the extent only that the same be contested
in good faith and by appropriate proceedings by Lessee. In particular, Lessee
shall pay all airport charges in respect of the Aircraft according as the same
may be incurred;

            (ii) remain in and continue to operate substantially the same line
of business as presently engaged in, preserve its corporate existence, conduct
its business in an orderly efficient and customary manner, satisfy its debts and
obligations as they fall due and keep and maintain all of its properties in good
working order and condition;

            (iii) maintain insurance in respect of its liabilities and
properties in accordance with good airline practice;

            (iv) comply with all laws and regulations for the time being in
force in the State of Hawaii and in any country, to, from, in or over which the
Aircraft is flown;

            (v) within sixty (60) days following the end of each quarter,
furnish to Lessor an unaudited balance sheet of Lessee prepared by it as of the
period ended, together with the related profit and loss statement for such
period;

            (vi) within one hundred twenty (120) days after the close of each
fiscal year of Lessee, furnish Lessor an audited balance sheet, and profit and
loss statement of Lessee (and an unaudited balance sheet); and

            (vii) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all other further instruments
as may be required by Law or reasonably requested by Lessor to establish,
maintain and protect the respective rights and remedies of Lessor and to carry
out and give effect to the intents and purposes of this Agreement and the
parties hereto provided, however, Lessee will be reimbursed for actual costs
associated with any transfer of Lessor's interest in the Aircraft.

         C. To the extent permitted by law, Lessee hereby agrees, in accordance
with Section 1110 of Title 11 of the United States Code, or any superseding
statutes, as amended from time to

                                       32

<PAGE>

time, that the title of Lessor to the Aircraft, and any right of Lessor to take
possession of such Aircraft in compliance with the provisions of this Lease will
not be affected by the provisions of Section 362 or 363 of such Title 11, or
other analogous part of any superseding statutes, as amended from time to time.

         D. The Lessor represents and warrants to the Lessee that:

            (i) The Lessor is a limited liability company formed under the laws
of Illinois and has the power to own its assets and carry on its business as it
is now being conducted.

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

            (iii) This Agreement constitutes the Lessor's legal, valid and
binding obligation, enforceable against Lessor in accordance with its terms.

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

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

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

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

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

            (vi) On the Delivery Date, the Lessor shall have the right to lease
the Aircraft to the Lessee under this Agreement.

         E. The representations and warranties in Sections A and D above will
survive the execution of this Agreement. The representations and warranties
contained in Sections A and D above will be deemed to be repeated by the Lessee
and Lessor on delivery and on each subsequent Rent Date as if made with
reference to the facts and circumstances then existing.

                                       33

<PAGE>

25.      ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

         A. Subject to Lessee's rights pursuant to the Lease, Lessor may grant
security interests over the Aircraft and the benefit of this Lease to Lessor's
lender as security for Lessor's obligations to Lessor's lender in connection
with Lessor's financing of the Aircraft. Lessor shall also have the right, at
its sole cost and expense, to assign or sell any interest of Lessor in the
Aircraft or this Lease and/or the proceeds thereof, subject to the rights of
Lessee hereunder.

         B. On request by Lessor or Lessor's lender, Lessee will sign and
execute all such documents as Lessor or Lessor's lender may reasonably require
to confirm Lessee's obligations under this Lease. Lessee undertakes to provide
all other reasonable assistance and cooperation to Lessor and Lessor's lender in
connection with the perfection and maintenance of such security interest,
including (without limitation) the effecting of all necessary filings and
registrations at Lessor's sole cost and expense.

         C. Wherever the term "Lessor" is used in this Lease in relation to any
of the provisions relating to disclaimer, title and registration, operational
interest, indemnity and insurance, the term "Lessor" will be deemed to include
any Lessor's lender notified to Lessee by Lessor.

         D. Any such sale or transfer will not expand Lessee's obligations
hereunder.

26.      ENTIRE AGREEMENT

         This Lease and the Exhibits and Appendices attached hereto, and made a
part hereof, embody the entire agreement and understanding of the parties and,
as of its effective date, terminate and supersede all prior or independent
agreements and understandings between the parties covering the same subject
matter. No amendment to this Lease shall be binding on either party unless
confirmed in writing and signed by the duly authorized officers or
representatives of both parties.

27.      MISCELLANEOUS

         A. This Lease may be executed in counterparts. Such counterpart
documents, when taken together, will constitute one and the same instrument. A
facsimile signature on any counterpart will be deemed an original for all
purposes.

         B. Any reference to the payment of money will refer to U.S. Dollars.

         C. So long as no Event of Default has occurred and is continuing
hereunder, Lessee shall have the peaceful and quiet enjoyment of the Aircraft
free from all claims or interference of Lessor or anyone claiming by, through or
under Lessor, except as otherwise provided herein.

         D. If any legal action or other proceeding is brought in connection
with any provisions in this Lease, the prevailing party will be entitled to
recover reasonable attorneys' fees

                                       34

<PAGE>

and other costs incurred in such action or proceedings. The prevailing party
will also, to the extent permissible by Law, be entitled to receive pre- and
post-judgment Interest.

         E. The rights of the parties hereunder are cumulative, not exclusive,
may be exercised as often as each party considers appropriate and are in
addition to its rights under general Law. The rights of one party against the
other party are not capable of being waived or amended except by an express
waiver or amendment in writing. Any failure to exercise or any delay in
exercising any of such rights will not operate as a waiver or amendment of that
or any other such right; any defective or partial exercise of any such rights
will not preclude any other or further exercise of that or any other such right;
and no act or course of conduct or negotiation on a party's part or on its
behalf will in any way preclude such party from exercising any such right or
constitute a suspension or any amendment of any such right.

         F. Each party agrees from time to time to do and perform such other and
further acts and execute and deliver any and all such other instruments as may
be required by Law or reasonably requested by the other party to establish,
maintain or protect the rights and remedies of the requesting party or to carry
out and effect the intent and purpose of this Lease.

         G. The Lease Agreement dated as of August 11, 1997 between Lessee and
Fleet National Bank, a national banking association, not in its individual
capacity, but solely as Trustee for the benefit of Aircraft No. 1, L.L.C. shall
be null and void upon execution hereof by the parties.

28.      BROKERS/FINDERS

         Lessor and Lessee each represent to the other that there are and will
be no third parties involved as brokers or finders with respect to this Lease
and each party indemnifies the other from liability for fees, commissions or
other intermediary's claims arising as a result of actions of the indemnifying
party.

29.      SECURITY DEPOSIT; LETTER OF CREDIT

         A. Security Deposit

            (a) Prior to delivery of the Aircraft to Lessee, Lessee shall pay
Lessor a security deposit of $500,000 (the "Security Deposit") as follows:
$250,000 upon execution hereof and $125,000 on April 1, 1998, and $125,000 upon
delivery of the Aircraft to Lessee. The initial $250,000 security deposit can be
accomplished by appropriately amending the Letter of Credit dated May 7, 1997
issued by First Hawaiian Bank with respect to the Aircraft. The Security Deposit
shall constitute additional security for performance by Lessee of its
obligations under this Agreement, and the following provisions shall apply:

                  (i) if an Event of Default occurs and for as long as it
continues, the Lessor (or, if a mortgage shall be in effect, the Lessor's
lender) may (but shall not be obligated to) apply all or any portion of the
Security Deposit in or towards satisfaction of any sums due

                                       35

<PAGE>

and payable to the Lessor under this Agreement or to compensate the Lessor or,
if applicable, the Lessor's lender for any sums which it may, in its discretion,
advance or expend as a result of any such Event of Default. Notwithstanding any
such use or application by the Lessor or the Lessor's lender, the Lessee shall
remain in default under this Agreement until the full amount owed by the Lessee,
including interest accrued thereon pursuant to Exhibit H, Paragraph H, shall
have been paid to the Lessor. If the Lessor or, if applicable, the Lessor's
lender so uses or applies all or any portion of the Security Deposit, the Lessee
shall immediately, on demand of the Lessor or Lessor's lender] replenish the
Security Deposit in an amount equal to the amount so used or applied within five
(5) Business Days after Lessor's or Lessor's lender's demand therefor.

            (b) Provided Lessee is not then in default hereunder, the first
$250,000 of the Security Deposit shall be reduced by $62,500 on each anniversary
of the Delivery Date.

            (c) If Lessor fails to tender delivery of the Aircraft by October
15, 1998, other than by reason of default of Lessee or delay caused by Lessee,
then Lessor will return the Security Deposit to Lessee.

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

                  (iii) The Security Deposit shall be returned to the Lessee
within five (5) Business Days of (1) redelivery of the Aircraft to the Lessor in
the condition required by Section 2 and Exhibit C to this Agreement, (2) receipt
by the Lessor of the Agreed Value following a Total Loss and all other amounts
due under Section 11 C or at such later time as the Lessor is satisfied that the
Lessee has irrevocably paid to the Lessor all amounts which are at the time
outstanding under this Agreement; provided always that the Lessor shall not be
obliged to return the Security Deposit if, at the relevant time, a Default shall
have occurred and be continuing.

         B. Letter of Credit. The Lessee shall be entitled, instead of paying
the Security Deposit in cash in accordance with sub-clause A above, to provide
the Lessor with Letters of Credit in the amounts of the cash Security Deposit.
In the event that the Lessee elects to provide the Letters of Credit, the
following provisions shall apply:

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

            (ii) If an Event of Default occurs and for as long as it continues,
the Lessor or, so long as a mortgage shall remain in effect, the Lessor's lender
may (but shall not be obliged to) call on the Letter of Credit and use or apply
the proceeds in or towards satisfaction of any sums due and payable to the
Lessor under this Agreement or to compensate the Lessor or lender for any sums
which it may, in its discretion, advance or expend as a result of any such Event
of

                                       36

<PAGE>

Default. Notwithstanding any such use or application by the Lessor or the
lender, the Lessee shall remain in default under this Agreement until the full
amount owed by the Lessee, including interest accrued thereon pursuant to
Exhibit H, Section H, shall have been paid to the Lessor and the Lessor's
lender. If the Lessor or, if applicable, the Lessor's lender so uses or applies
all or any portion of the amount available under the Letters of Credit, the
Lessee shall immediately, on demand of the Lessor or the lender, procure the
issue of a new Letter of Credit acceptable to the Lessor and the lender for an
amount equal to the amount so used or applied, or shall pay to the Lessor an
amount in cash equal to the amount so used or applied to be held pursuant to
this Section 29.

            (iii) The Letters of Credit shall be returned to the Lessee within
five (5) Business Days of

                  (a) redelivery of the Aircraft to the Lessor in the condition
required by Section 2 and Exhibit C to this Agreement;

                  (b) receipt by the lessor of the Agreed Value following a
Total Loss and all other amounts due under Section 11C; or

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

                  (c) Lessor's failure to deliver the Aircraft by October 15,
1998 other than by reason of default of Lessee or delay caused by Lessee.

30.      NO PURCHASE OPTION; NO HUSH KIT FINANCING

         Lessee shall have no option to purchase the Aircraft. Lessor shall have
no obligations with respect to HUSH KITS (those parts that are required to be
affixed to the Engines and Airframe in order that the Aircraft complies with all
requirements of US FAR Part 36, Stage III and ICAO Annex 16, Chapter 3),
including but not limited to financing thereof.

31.      AUTHORIZATION, LESSEE'S CONDITIONS PRECEDENT

         A. Upon execution hereof, Lessor will deliver to Lessee:

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

            (b) a certificate of a duly authorized officer of the Lessor;

                                       37

<PAGE>

                  i. setting out a specimen of each signature referred to in
Section (a) above;

and

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

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

         That the representations and warranties of the Lessor under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery; and

            i.  The Aircraft is in the condition required pursuant to
Section 1C and Section 2A;

            ii. The Aircraft is U.S. registered;

            iii. The Aircraft is substantially in the same condition as when
inspected by Lessee in May, 1997, normal wear and tear excepted;

            iv. The Aircraft shall have been delivered prior to October 15,
1998; subject to Article 18, and

            v. Lessor shall have executed the Lease Supplement in the form of

Exhibit I.

         C. The conditions specified in Section 31 are for the sole benefit of
the Lessee and may be waived or deferred in whole or in part and with or without
conditions by the Lessee. If any of those conditions are not satisfied on or
before Delivery and the Lessee (in its absolute discretion) nonetheless agrees
to lease the Aircraft from the Lessor, the Lessor will ensure that those
conditions are fulfilled within one month after the Delivery Date.

32.      AUTHORIZATION, LESSOR'S CONDITIONS PRECEDENT

         A. Upon execution hereof, Lessee will deliver to Lessor:

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

            (b) a certificate of a duly authorized officer of the Lessee;

                  i. setting out a specimen of each signature referred to in
Section a above; and

                                       38

<PAGE>

                  ii. certifying that the copy of the resolutions referred to in
Section a above is correct, complete and in full force and effect;

         B. The Lessor's obligation to deliver the Aircraft to the Lessee under
this Agreement is subject to the satisfaction by the Lessee of the following
conditions precedent:

         That the representations and warranties of the Lessee under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery. Lessee shall have executed the Lease Supplement in the
form of Exhibit I.

         D. The conditions specified in Section 32 are for the sole benefit of
the Lessor and may be waived or deferred in whole or in part and with or without
conditions by the Lessor. If any of those conditions are not satisfied on or
before Delivery and the Lessor (in its absolute discretion) nonetheless agrees
to lease the Aircraft to the Lessee, the Lessee will ensure that those
conditions are fulfilled within one month after the Delivery Date.

         IN WITNESS WHEREOF, the parties hereto have executed this Aircraft
Lease Agreement by their duly authorized officers the day and year first above
written.

Aircraft No. 1, L.L.C.,                       Aloha Airlines, Inc.,
Lessor                                        Lessee

AAR Corp., Manager

By:       /s/ Timothy J. Romenesko            By:
      --------------------------------              --------------------------
Name:       TIMOTHY J. ROMENESKO              Name:
      --------------------------------              --------------------------
         Vice President
Title:   Chief Financial Officer              Title:
      --------------------------------              --------------------------

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

                                       39

<PAGE>

                  ii. certifying that the copy of the resolutions referred to in
Section a above is correct, complete and in full force and effect;

         B. The Lessor's obligation to deliver the Aircraft to the Lessee under
this Agreement is subject to the satisfaction by the Lessee of the following
conditions precedent:

         That the representations and warranties of the Lessee under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery. Lessee shall have executed the Lease Supplement in the
form of Exhibit I.

         D. The conditions specified in Section 32 are for the sole benefit of
the Lessor and may be waived or deferred in whole or in part and with or without
conditions by the Lessor. If any of those conditions are not satisfied on or
before Delivery and the Lessor (in its absolute discretion) nonetheless agrees
to lease the Aircraft to the Lessee, the Lessee will ensure that those
conditions are fulfilled within one month after the Delivery Date,

         IN WITNESS WHEREOF, the parties hereto have executed this Aircraft
Lease Agreement by their duly authorized officers the day and year first above
written.

Aircraft No. 1, L.L.C.,                      Aloha Airlines, Inc.,
Lessor                                       Lessee

AAR Corp., Manager

By:                                             By:   /s/ Brenda F. Cutwright
      --------------------------------              --------------------------
Name:                                         Name:     BRENDA F. CUTWRIGHT
      --------------------------------              --------------------------
                                                       Sr. Vice President
Title:                                       Title: Finance & Planning and CFO
      --------------------------------              --------------------------

                                              By:       /s/ James M. King
                                                    --------------------------
                                              Name:       JAMES M. KING
                                                    --------------------------
                                                          Vice President
                                              Title:  Planning & Development
                                                    --------------------------

                                       39

<PAGE>

                                    EXHIBIT A

                             DESCRIPTION OF AIRCRAFT
<TABLE>
<CAPTION>

MANUFACTURER                  MODEL          SERIAL NO.        US REGISTRATION

<S>                           <C>            <C>               <C>
Boeing                        737-282C       23051             N826AL

Total Time Since New:                                            376426 hrs
                                                               ---------------
Total Cycles Since New:                                             23626
                                                               ---------------
Time Since Last D Check:                                          16804 hrs
                                                               ---------------
Cycles Since Last D Check:                                            9
                                                               ---------------
Time Since Last C Check:                                           32.3 hrs
                                                               ---------------
Cycles Since Last C Check:                                            9
                                                               ---------------

</TABLE>

                                     ENGINES
<TABLE>
           <S>                                          <C>
           Pratt & Whitney JT8D-9A                      SN 674248
           Pratt & Whitney JT8D-9A                      SN666147
</TABLE>

       Lessor shall have the right to substitute another Engine for one of
          the listed Engines provided that such substitute engine meets
                the build specifications set forth in the letter
                from Brian Olds to Jim King dated June 27, 1997.

                     AIRCRAFT COMPONENTS ON THE AIRCRAFT ARE
                      LISTED ON THE ATTACHED EQUIPMENT LIST
                             DATED: OCTOBER 25, 1998
                                    ----------------

                          (To Be Furnished At Delivery)

                                       40

<PAGE>

                                    EXHIBIT B

                                     RECORDS

         All logs, manuals and data, and inspection, modification and overhaul
records required to be maintained with respect to the Aircraft under applicable
rules and regulations of the Federal Aviation Administration of the United
States to the extent required for registration of the Aircraft in the United
States, and the Republic of Portugal and the agencies and instrumentalities
thereof, and if any such logs, manuals, data or records are not in English,
English translations thereof

                                       41

<PAGE>

                                    EXHIBIT C

                              REDELIVERY CONDITIONS

1.   ENGINE CONDITION AT REDELIVERY

          Upon return of the Aircraft to Lessor under this Lease, each Engine
          (or replacement engine, as the case may be) shall have remaining as
          many hours or cycles on the Engine's most limiting disk (with no
          single Engine having fewer than 3,000 hours or cycles (whichever is
          more limiting)) until its next Scheduled Engine Shop Visit as when the
          Aircraft was delivered to Lessee. In the event an Engine upon such
          return (or replacement Engine) shall have less hours or cycles
          remaining on its most limiting disk than on delivery, Lessee shall pay
          lessor for the difference at the Adjusted L.L.P. rate at redelivery
          (i.e. the payment shall equal the Adjusted LLP rate at redelivery
          times the excess of the hours/cycles at Delivery over the hours/cycles
          at redelivery); provided, however, in the event one Engine (or
          replacement Engine) upon such return shall have more hours or cycles
          on its most limiting disk than on Delivery, such excess times the
          Adjusted LLP Rate at Redelivery shall be applied as a credit against
          amounts owed by Lessee pursuant to the preceding phrase; provided
          further, that the foregoing credit shall be applicable only if each
          Engine (or replacement engine) has at least 3,000 hours/cycles
          remaining as set forth in the first sentence above. The foregoing
          calculation shall be made as to the Engine condition at delivery prior
          to any build up of the Engine condition by Lessee. In addition, upon
          return of the Aircraft to Lessor, Lessee will pay Lessor with respect
          to each Engine, an amount equal to the Adjusted Engine Shop Rate at
          redelivery times the excess, if any, of the number of flight hours
          elapsed on each such Engine since its last Engine Shop Visit at
          Redelivery over the number of flight hours elapsed on such Engine
          since its last Engine Shop Visit at Delivery. In the event an Engine
          (or replacement Engine) upon such Redelivery shall have fewer flight
          hours elapsed since its last Engine Shop Visit than at Delivery, the
          excess amount multiplied by the Adjusted Engine Shop Rate at
          Redelivery shall be applied as a credit against the amount owed by
          Lessee for the other Engine, pursuant to the preceding phrase. The
          foregoing credit is applicable only if each Engine (or replacement
          engine) is returned with at least 3,000 hours/cycles remaining until
          its next Scheduled Engine Shop Visit. Lessor shall have no obligation
          for betterment of the Engines upon redelivery. The foregoing
          calculation shall be made with reference to the Engine condition at
          delivery prior to any build up of the Engine condition by Lessee.

          If Lessee is unable to return an Engine at the expiration or earlier
          termination of this Lease, because of damage, overhaul or repair,
          Lessee shall replace such Engine prior to such expiration or earlier
          termination by duly conveying or causing to be conveyed to Lessor as a
          replacement for such Engine, good and marketable title to another
          engine acceptable to Lessor, which Engine shall be free and clear of
          all liens and encumbrances, shall have a value and utility at least
          equal to and be in

                                       42

<PAGE>

          as good operating condition as the Engine replaced, assuming such
          Engine was in the condition required to be maintained hereunder.
          Lessee shall have no right to substitute an engine for an Engine upon
          return of the aircraft except for damage thereto. Provided, however,
          Lessee may substitute an engine for an Engine if the Engine at
          redelivery has twenty percent (20%) or more hours/cycles remaining
          until its next Scheduled Engine Shop Visit at redelivery than on
          delivery. The substitute engine will be free and clear of all liens
          and encumbrances, shall have a value and utility at least equal to and
          be in as good operating condition as the Engine replaced, assuming
          such Engine was in the condition required hereunder. All financial
          adjustments will be made with respect to the substitute engine.

2.   AIRCRAFT CONDITION AT REDELIVERY

          The number of hours remaining until the next scheduled TAP heavy "C"
          check (C-7) at delivery is the "Beginning Hours". The number of hours
          remaining until the next scheduled Aloha check that is the equivalent
          of the TAP heavy C check at redelivery is the "Ending Hours". At
          Redelivery, the Aircraft shall have been maintained in accordance with
          Section 6 of the Lease with the same care and consideration for the
          technical condition of the Aircraft as if it were to have been kept in
          continued regular service by Lessee. At redelivery, Lessee will pay
          Lessor an amount equal to the excess of the Beginning Hours over the
          Ending Hours times the Adjusted Airframe Rate. The foregoing
          calculation shall be made as to the Beginning Hours prior to any
          predelivery work performed by or at Lessee's expense and any Exhibit J
          maintenance performed. The foregoing calculation is premised on the
          Lessee continuing its current maintenance program with "Block" checks
          at current intervals. If Lessee changes its maintenance program such
          that the intervals for major maintenance ("D" checks) changes or is
          modified then Lessor and Lessee will negotiate appropriate changes to
          the foregoing financial adjustment and/or the return condition of the
          Aircraft, it being the intent of the parties that the Aircraft be
          redelivered to Lessor in the same status as when delivered to Lessee,
          or if not so redelivered, that the financial adjustment is intended to
          compensate Lessor so that it can place the Aircraft in such condition.
          Under no circumstances will the Lessor be obligated to the Lessee for
          betterment of Aircraft condition.

          -    All cabin emergency equipment in serviceable condition (i.e.
               megaphones, fire extinguishers, portable oxygen cylinders, etc.)

          -    All outstanding AD's and mandatory orders affecting such model of
               aircraft issued by manufacturer which require compliance during
               the term of the lease shall have been accomplished

          -    All Time Controlled Parts will have at least the same
               hours/cycles, or calendar time (whichever is the more limiting
               factor) remaining to operate until the Time Controlled Parts'
               next scheduled overhaul in accordance with the Lessee's
               Maintenance Program and manufacturer's recommendations as at
               Delivery.

                                       43

<PAGE>

          -    If the Lessor's inspection prior to return of the Aircraft
               uncovers a Time Controlled Part which has less hours, cycles or
               calendar time remaining (whichever is the more limiting factor)
               Lessee shall make payments in accordance with the terms of this
               Exhibit. The Lessee shall make a payment to the lessor by the
               amount in which the value assigned to each Time Controlled Part
               which has less hours/cycles/calendar time remaining at redelivery
               exceeds the value assigned to such Time Controlled Parts as at
               Delivery. The value assigned to each Time Controlled Part for the
               purposes of the payment referred to herein shall be the product
               obtained by multiplying (i) the Part Overhaul Price per hour, day
               or cycle (whichever is the more limiting factor) calculated as
               set forth in this Exhibit, times (ii) the difference between (a)
               the number of hours, calendar time or cycle (whichever is the
               more limiting factor) consumed since the last Overhaul at
               Redelivery and (b) the number of hours, calendar time or cycles
               (whichever is the more limiting factor) since the last overhaul
               at Delivery. The only Time Controlled Parts which shall be taken
               into consideration for the purposes of the calculation of the
               payment referred to herein are those Time Controlled Parts which
               have a manufacturer's new list price of USD $1000 or more. Time
               Controlled Part means any Part (other than an Engine, landing
               gear, APU or airframe) which has a useful life measured in
               accordance with the applicable Manufacturer's guidelines and
               recommendations, the FARs or the Lessee's Maintenance Program by
               hours, cycles or calendar time (whichever is the more limiting
               factor). The foregoing calculation shall be made with reference
               to the hours/cycles/calendar time status at delivery prior to any
               predelivery work performed by or at Lessee's expense and any
               Exhibit J maintenance performed.

          -    Calculation of Part Overhaul Price.

         (i) The Part Overhaul Price per hour, cycles or calendar time
(whichever is the more limiting factor) will be the quotient obtained by
dividing (x) the expected cost of the next Overhaul by (y) the full allotment of
hours, cycles or calendar time (whichever is the more limiting factor) between
Overhauls as approved by the Lessee's Maintenance Program.

         (ii) If the Lessee and the Lessor are unable to agree on the expected
cost of the next Time Controlled Part Overhaul, such costs will be established
by taking the average of the price quotes submitted by two (2) reputable
FAA-approved overhaul facilities, one selected by the Lessor and the other by
the Lessee.

         (iii) The foregoing calculation shall be made with reference to the
hours/cycles/calendar time status at delivery prior to any predelivery work
performed by or at Lessee's expense and Exhibit J maintenance performed.

3.       LANDING GEAR AND APU

         The landing gear and APU will be returned in the same status with
         respect to overhaul as at delivery, provided that the delivery shall
         refer to the hours/cycles/calendar time status at

                                       44

<PAGE>

         delivery prior to any predelivery work performed by or at Lessee's
         expense and any Exhibit J maintenance performed.

                                       45

<PAGE>

                                    EXHIBIT D

                                DELIVERY RECEIPT

         Receipt is hereby acknowledged on behalf of ________________________ of
the delivery to it by ______________________ at __________ o'clock, this ___ day
of _______, at the following described Aircraft together with the parts and
equipment attached thereto and included therewith, in accordance with the terms
of the Lease Agreement between Aircraft No. 1, L.L.C. and Aloha Airlines, Inc.,
dated _____________, 1998.

<TABLE>
<S>                                                    <C>
(a)      One (1) __________ Aircraft
                 FAA Registration No.                  _______________
                 Manufacturer's Serial No.             _______________
(b)      Fuel in Tanks
(c)      Additional Equipment listed on Exhibits ____, _____ and _____ attached hereto [must be
         generated and attached]
(d)      Total Time Since New:
                Total Cycles Since New:                _______________
                Time Since Last D Check:               _______________
                Cycles Since Last D Check:             _______________
                Time Since Last C Check:               _______________
                Cycles Since Last C Check:             _______________
(e) Engine Status:
ENGINE No. 1: Serial Number:_______________
Total Time Since New:                                  _______________
Total Cycles Since New:                                _______________
Time Since Last Overhaul:                              _______________
Cycles Since Last Overhaul:                            _______________
Time Since Last Shop Visit:                            _______________
Cycles Since Last Shop Visit:                          _______________
ENGINE No. 2: Serial Number:_______________            _______________
Total Time Since New:                                  _______________
Total Cycles Since New:                                _______________
Time Since Last Overhaul:                              _______________
Cycles Since Last Overhaul:                            _______________
Time Since Last Shop Visit:                            _______________
Cycles Since Last Shop Visit:                          _______________

By:___________________________________________________

Date:_________________________________________________

</TABLE>

                                       46

<PAGE>

                                    EXHIBIT E

                               REDELIVERY RECORDS

         Upon redelivery, Lessee will deliver to Lessor all of the records,
manuals, logs, etc., delivered to Lessor at the commencement of the Lease plus
all records, manuals, logs, etc., generated by Lessee during the term of the
Lease.

                                       47

<PAGE>

                                    EXHIBIT F

                   [Form of Letter of Credit to be furnished]

                                       48

<PAGE>

                                    EXHIBIT G

                          LIST OF PERMITTED SUBLESSEES

                                   Aer Lingus
                              Aerolineas Argentinas
                                   Aeropostale
                                   Air Canada
                                   Air France
                                    Air-Inter
                                    Air Malta
                                 Air New Zealand
                                   Air Nippon
                                  Air Portugal
                                    Alitalia
                               All Nippon Airways
                                     Ansett
                                Austrian Airlines
                                    Aviateca
                                   Bahamas Air
                                    Braathens
                                 British Airways
                             British Midland Airways
                         Canadian Airlines International
                                 Cathay Pacific
                                 China Airlines
                                     Condor
                                   COPA Panama
                                     Iberia
                                 Japan Airlines
                                Japan Air System
                               Japan Asia Airways
                              Japan Transocean Air
                                   Korean Air
                                    Lan Chile
                                    Lufthansa
                            Malaysian Airlines System
                                Martinair Holland
                              Northwest Territorial
                                     Qantas
                              Royal Dutch Airlines
                                    Ryan Air
                                     Sabena
                          Scandinavian Airlines System
                               Singapore Airlines

                                       49

<PAGE>

                              South African Airways
                                    SwissAir
                               TACA International
                           Thai Airways International
                                 Alaska Airlines
                              Continental Airlines
                                 Delta Airlines
                               Southwest Airlines
                                United Air Lines
                                      USAir

                                       50

<PAGE>

                                    EXHIBIT H

                                 FINANCIAL TERMS

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

<PAGE>

                                    EXHIBIT I

                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. _______, dated _______________, 19__, between
Aircraft No. 1, L.L.C., a limited liability company incorporated under the laws
of Illinois ("Lessor"), and Aloha Airlines, Inc., a Delaware corporation
("Lessee").

     Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and
the defined terms therein being hereinafter used with the same meaning). The
Lease provides for the execution and delivery from time to time of a Lease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Lease as and when delivered by Lessor to
lessee in accordance with the terms thereof

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

     In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

     1.   Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain
used Boeing 737-282C Advanced commercial jet Aircraft, Airframe and the two
(2) Pratt & Whitney Engines (each of which Engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower) described in
Schedule 1 herewith ("Aircraft").

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

     3.   The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be ___________________, subject
to extension as contemplated by Section 1D of the Lease.

     4.   The amount of Rent for the Aircraft is set forth in the Lease, and
is payable as provided in the Lease. The Last Basic Rent Payment Date shall
be subject to revision as contemplated by Section 1D and Exhibit H of the
Lease. The Supplemental Rental is set forth on Schedule 2 hereto.

     5.   Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has
accepted the Aircraft for all purposes hereof and of the Lease, and

                                       56

<PAGE>

(iii) except as otherwise expressly agreed in writing by Lessor and Lessee,
Lessee has inspected the Aircraft and the Aircraft satisfies the conditions set
forth in the Lease.

     6.   All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 1, L.L.C., Lessor

AAR Corp., Manager

By:____________________________________
Name: _________________________________
Title: ________________________________

Aloha Airlines, Inc., Lessee

By:____________________________________
Name: _________________________________
Title: ________________________________

By:____________________________________
Name: _________________________________
Title: ________________________________

                                       57

<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                    One Used
                            Boeing 737-282C Advanced
                                    Airframe

FAA Registration No.    Manufacturer's Serial No.   Total Time*   Total Cycles*
--------------------    -------------------------   -----------   -------------
N826AL                  23051

                               Installed Pratt & Whitney
                                        Engines

Model No.               Serial No.                  Total Time*   Total Cycles*
--------------------    ----------                  -----------   -------------
JT8D-9A                 674248
JT8D-9A                 666147

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

*The total time and total cycles referred to above are as of _________ time,
_____________, 1998. Such times and cycles are the actual hours and cycles at
the time of this Lease Supplement.

                                       58

<PAGE>

                                    EXHIBIT J

                             ADDITIONAL BILL OF WORK

       [One page of confidential information has been omitted and filed
       separately with the Commission]

                                       60

<PAGE>

                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated October 25, 1998, between aircraft No. 1,
L.L.C., a limited liability company incorporated under the laws of Illinois
("Lessor"), and Aloha Airlines, Inc., a Delaware corporation ("Lessee").

     Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and
the defined terms therein being hereinafter used with the same meaning). The
Lease provides for the execution and delivery from time to time of a Lease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.

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

     In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

     1.   Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain
used Boeing 737-282C Advanced commercial jet Aircraft, Airframe and the two
(2) Pratt & Whitney Engines (each of which Engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower) described in
Schedule 1 herewith ("Aircraft").

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

     3.   The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be October 31, 2006, subject to
extension as contemplated by Section 1 D of the Lease.

     4.   The amount of Rent for the Aircraft is set forth in the Lease, and
is payable as provided in the Lease. The Last Basic Rent Payment Date shall
be subject to revision as contemplated by Section 1 D and Exhibit H of the
Lease. The Supplemental Rental is set forth on Schedule 2 hereto.

     5.   Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has
accepted the Aircraft for all purposes hereof and of the Lease, and

<PAGE>

(iii) except as otherwise expressly agreed in writing by Lessor and Lessee,
Lessee has inspected the Aircraft and the Aircraft satisfies the conditions set
forth in the Lease.

     6.   All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 1, L.L.C., Lessor

AAR Corp., Manager

By: /s/ Timothy J. Romenesko
    ------------------------------
Name:  TIMOTHY J. ROMENESKO
Title: Vice President
       Chief Financial Officer

Aloha Airlines, Inc., Lessee

By:_______________________________
Name:_____________________________
Title:____________________________

By:_______________________________
Name:_____________________________
Title:____________________________

<PAGE>

(iii) except as otherwise expressly agreed in writing by Lessor and Lessee,
Lessee has inspected the Aircraft and the Aircraft satisfies the conditions set
forth in the Lease.

     6.   All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 1, L.L.C., Lessor

AAR Corp., Manager

By:_______________________________
Name:_____________________________
Title:____________________________

Aloha Airlines, Inc., Lessee

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

By: /s/ James M. King
    ------------------------------
Name:  JAMES M. KING
Title: VICE PRESIDENT PLANNING &
       DEVELOPMENT

                                       57

<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                    One Used
                            Boeing 737-282C Advanced
                                    Airframe

FAA Registration No.    Manufacturer's Serial No.   Total Time*   Total Cycles*
--------------------    -------------------------   -----------   -------------
N826AL                  23051                       37642.6       23620

                            Installed Pratt & Whitney
                                     Engines

Model No.               Serial No.                  Total Time*   Total Cycles*
--------------------    ----------                  -----------   -------------
JT8D-9A                 674248                      66770         56469
JT8D-9A                 666147                      43421         29865

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

* The total time and total cycles referred to above are as of 12:00 p.m.
C.D.T. time, October 20, 1998. Such times and cycles are the actual hours and
cycles at the time of this Lease Supplement.

<PAGE>

                                   SCHEDULE 2

                                       TO

                             LEASE SUPPLEMENT NO. 1

     [This confidential information is omitted and filed separately with
     the Commission]

<PAGE>

              NON-DISTURBANCE, ATTORNMENT AND RECOGNITION AGREEMENT
                                (Aircraft 23051)

         AGREEMENT dated as of July ___, 1998, among BARNETT BANK, N.A., a
national banking association having its principal office at 701 Brickell
Avenue, Miami, Florida 33131 (hereinafter the "Lender"), AIRCRAFT NO. 1,
L.L.C., an Illinois limited liability company, having an office at 1100 North
Wood Dale Road, Wood Dale, Illinois 60191 (the "Borrower"), and ALOHA
AIRLINES, INC., having an address at 371 Aokea Street, Honolulu, Hawaii 96819
(hereinafter the "Lessee").

RECITALS:

         A. The Borrower holds legal and record title to a certain Boeing
737-282C aircraft bearing manufacturer's serial number 23051 and FAA
Registration Number N826AL (the "Airframe") and its two Pratt & Whitney JT8D-17A
jet engines bearing manufacturer's serial numbers P709446D and P709447B
(collectively, the "Engines"; the Airframe and the Engines, together with all
avionics, appliances, radio and radar devices, accessories, and equipment
installed on the Airframe, being hereinafter referred to as the "Aircraft").

         B. Lessee is the lessee of the Aircraft pursuant to an Aircraft Lease
Agreement dated as of August 11, 1997 as supplemented and amended from time to
time (hereinafter the "Lease") with the Borrower, as lessor.

         C. The Lender has advanced to the Borrower a term loan (the "Loan")
pursuant to a Term Loan Agreement dated as of May 30, 1997 between the Borrower
and the Lender (the "Loan Agreement").

         D. As security for Borrower's obligation to repay the Loan, Borrower
has granted to the Lender a (i) first priority lien and security interest
(hereinafter the "Aircraft Lien") in the Aircraft (including a separate lien and
security interest in each Engine) pursuant to an Aircraft Security Agreement of
even date herewith between the Lender and the Borrower (the "Aircraft Security
Agreement"), and (ii) an assignment of all of Borrower's rights and interest in,
to and under the Lease and all rents, proceeds and other payments due
thereunder.

         E. The Lender, as a condition of making the Term Loan, has required
that the Lessee enter into this Agreement.

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, the parties hereto hereby
agree as follows:

         1. Lender agrees that during the term of the Lease and any extended
term thereof, so long as no Event of Default (as defined in the Lease) as to the
Lessee has occurred or is

<PAGE>

continuing and the Lessee is not in default hereunder: (i) Lessee's possession
of and right to use the Aircraft shall not be disturbed, (ii) Lessee's rights
and privileges under the Lease shall not be diminished or interfered with by the
Lender upon any proceeding to foreclose the Aircraft Lien, and (iii) Lender will
not join Lessee as a party defendant in any proceeding to foreclose the Aircraft
Lien for the purpose of terminating the Lease or for any other purpose;
PROVIDED, HOWEVER, that Lender shall be entitled to join Lessee as a nominal
party thereto if required under applicable law in order to effect such
foreclosure of the Aircraft Lien and will reimburse Lessee for all reasonable
legal fees incurred by Lessee by reason of being so joined.

         2. Lessee acknowledges the assignment of the Lease from the Borrower to
the Lender as security for the Loan. Lessee agrees that upon its receipt of
notice from the Lender that an Event of Default (as defined in the Loan
Agreement) has occurred and is continuing, and regardless of any contrary
notice, demand or instruction from the Borrower or anyone on Borrower's behalf,
Lessee will cease making payments of rent and other payments under the Lease to
the Borrower and will thereafter make all payments of rent and other payments
under the Lease directly to the Lender, until such time, if ever, that Lender
notifies Lessee to resume making such payments to the Borrower. By its signature
at the end of this Agreement, the Borrower consents to the foregoing provision
and agrees that Lessee's payment in accordance therewith shall constitute
compliance with the rent and other payment provisions of the Lease.

         3. In the event that, by reason of the foreclosure of the Aircraft Lien
for any reason, Lender succeeds to the interest of the lessor under the Lease,
then upon receipt of notice from Lender that it has succeeded to the rights of
the lessor under the Lease and Lender's written agreement to comply with all of
the Lessor's obligations under the Lease which arise after the date of such
succession, Lessee hereby agrees to recognize Lender as Lessee's lessor under
the Lease and to execute a written agreement of attornment if so requested;
PROVIDED, HOWEVER, that nothing herein shall deprive Lessee from any right of
offset against payment of rent under the Lease which Lessee may have pursuant to
the terms of the Lease whether such right arises prior to or after Lender's
succession as lessor under the Lease and further provided that nothing herein
shall expand Lessee's obligations under the Lease beyond such obligations had
Borrower remained the lessor pursuant to the Lease.

         4. Lender agrees that if the Aircraft or any part of the Aircraft is
damaged or destroyed by fire or other casualty or by the exercise of any right
of eminent domain, the proceeds of any insurance or partial condemnation awards
thereon which are paid to the Lender pursuant to the Lease shall be promptly
made available for the purpose of repair or restoration as provided in the
Lease.

                                       -2-

<PAGE>

         5. The term "Lender" shall be deemed to mean the holder of the Aircraft
Lien from time to time or as the same may be renewed, amended, modified or
extended.

         6. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; PROVIDED, HOWEVER,
no assignment of its rights hereunder shall be effective as to Lessee unless
Lender delivers to Lessee an agreement executed by Lender's assignee agreeing to
be bound by all of the provisions of this Agreement applicable to Lender.

         7. Lessee certifies that there are no defaults on the part of the
lessor under the Lease which are known to Lessee, that the Lease, together with
that certain letter agreement dated August 22, 1997 between Borrower and Lessee,
are a complete statement of the agreement of the parties thereto with respect to
the leasing of the Aircraft, that the Lease is in full force and effect and that
all conditions to the effectiveness or continuing effectiveness thereof required
to be satisfied at the date hereof have been satisfied.

         8. Lessee and Borrower agree that Lender shall not be required to make
any investigation as to the existence or nonexistence of a default by Lessee or
Borrower under the Lease and shall not be obligated to notify Lessee or Borrower
of the existence thereof.

         9. All notices, consents and other communications permitted or required
by this Agreement to be given by a party hereto shall be in writing and, to be
effective hereunder, shall be hand delivered or sent by certified or registered
first class mail, return receipt requested, and addressed to the party to whom
directed at such party's address first above written or to such other address as
such party shall specify in a written notice to the other parties hereto.

         10. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York in effect from time to time.
This Agreement may be executed in counterparts and each such counterpart taken
together shall constitute one and the same document.

                                       -3-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                  LENDER:

                                  BARNETT BANK, N.A.,
                                  a national banking association

                                  By:_________________________________________
                                        Brian Mormile, Vice President

                                  BORROWER:

                                  Aircraft No. 1, L.L.C., an Illinois
                                  limited liability company

                                  By:    AAR Corp., a Delaware
                                         corporation, as manager

                                  By:_________________________________________
                                      Timothy Romenesko, Vice President

                                  LESSEE:

                                  ALOHA AIRLINES, INC.

                                  By:        /s/ Brenda F. Cutwright
                                        --------------------------------------
                                  Name:         BRENDA F. CUTWRIGHT
                                        --------------------------------------
                                             Sr. Vice President Finance &
                                  Title:            Planning and CFO
                                        --------------------------------------

                                  and

                                  By:           /s/ James M. King
                                     -----------------------------------------
                                  Name:          JAMES M. KING
                                        --------------------------------------
                                  Title: Vice President Planning & Development
                                        --------------------------------------

                                       -4-

<PAGE>

STATE OF HAWAII        )
                       )  SS:
COUNTY OF HONOLULU     )

         The foregoing instrument was acknowledged before me this 5th day of
OCTOBER, 1998 by BRENDA F. CUTWRIGHT, as SR. VICE PRESIDENT FINANCE & PLANNING
AND CFO of ALOHA AIRLINES, INC. She is personally known to me or has produced a
driver's license as identification.

                                             /s/ Frances Y. Yamaguchi
                                     -----------------------------------------
                                     Print or Stamp Name: FRANCES Y. YAMAGUCHI
                                                          --------------------
                                     Notary Public, State of Hawaii
                                                             -----------------
                                     Commission No.:          87-572
                                                    --------------------------
                                     My Commission Expires: October 20, 1999
                                                            ------------------

STATE OF HAWAII        )
                       )  SS:
COUNTY OF HONOLULU     )

         The foregoing instrument was acknowledged before me this 5th day of
OCTOBER, 1998 by JAMES M. KING, as VICE PRESIDENT PLANNING & DEVELOPMENT of
ALOHA AIRLINES, INC. He is personally known to me or has produced a driver's
license as identification.

                                             /s/ Frances Y. Yamaguchi
                                     -----------------------------------------
                                     Print or Stamp Name: FRANCES Y. YAMAGUCHI
                                                          --------------------
                                     Notary Public, State of Hawaii
                                                             -----------------
                                     Commission No.:          87-572
                                                    --------------------------
                                     My Commission Expires: October 20, 1999
                                                            ------------------

                                       -6-

<PAGE>

STATE OF HAWAII        )
                       )  SS:
COUNTY OF HONOLULU     )

         The foregoing instrument was acknowledged before me this ___ day of
July, 1998 by ________________________, as _____________________ of Aloha
Airlines, Inc. He/She is personally known to me or has produced a driver's
license as identification.

                                     _________________________________________
                                     Print or Stamp Name: ____________________
                                     Notary Public, State of _________________
                                     Commission No.:
                                     My Commission Expires:

STATE OF HAWAII        )
                       )  SS:
COUNTY OF HONOLULU     )

         The foregoing instrument was acknowledged before me this ___ day of
July, 1998 by ________________________ , as ___________________ of Aloha
Airlines, Inc. He/She is personally known to me or has produced a driver's
license as identification.

                                     _________________________________________
                                     Print or Stamp Name: ____________________
                                     Notary Public, State of _________________
                                     Commission No.:
                                     My Commission Expires:

                                       -6-

<PAGE>

STATE OF FLORIDA       )
                       )  SS:
COUNTY OF DADE         )

         The foregoing instrument was acknowledged before me this ___ day of
July, 1998 by Brian Mormile, as Vice President of Barnett Bank, N.A., a national
banking association, on behalf of the association. He is personally known to me
or has produced a driver's license as identification.

                                     _________________________________________
                                     Print or Stamp Name: ____________________
                                     Notary Public, State of _________________
                                     Commission No.:
                                     My Commission Expires:

STATE OF ILLINOIS      )
                       )  SS:
COUNTY OF ________     )

         The foregoing instrument was acknowledged before me this ___ day of
July, 1998 by Timothy Romenesko, as Vice President of AAR Corp., a Delaware
corporation, the manger of Aircraft No. 1, L.L.C., an Illinois limited liability
company, on behalf of the corporation and the limited liability company. He is
personally known to me or has produced a driver's license as identification.

                                     _________________________________________
                                     Print or Stamp Name: ____________________
                                     Notary Public, State of _________________
                                     Commission No.:
                                     My Commission Expires:

                  [ACKNOWLEDGMENTS CONTINUE ON FOLLOWING PAGE]

                                       -5-

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

                                                                        VV015833

                               0 0 0 0 0 0 0 0 3 9 9
                                                                            16-9

                            ASSIGNMENT OF AIRCRAFT LEASE
                                  (Aircraft 23051)

     INSTRUMENT OF ASSIGNMENT ("Assignment") dated as of August 31, 1999,
between BCI Aircraft Leasing 1999, L.L.C., an Illinois limited liability
company ("Assignor"), and Aircraft No. 1, L.L.C., an Illinois limited
liability company ("Assignee").

RECITALS:

     A.   The Assignor holds legal and record title to a Boeing 737-282C
aircraft bearing manufacturer's serial number 23051 and FAA Registration
Number N826AL (the "Airframe") and its two Pratt & Whitney JT8D-9A jet
engines bearing manufacturer's serial numbers 647248 and 666147
(collectively, the "Engines"; the Airframe and the Engines, together with all
avionics, appliances, radio and radar devices, accessories, and equipment
installed on the Airframe, being referred to herein as the "Aircraft").

     B.   The Assignor has leased the Aircraft to Aloha Airlines, Inc.
("Lessee"), pursuant to an Aircraft Lease Agreement dated as of August 11,
1997 (the "Lease") as supplemented by Lease Supplement No. 1, dated October
25, 1998, and as collaterally assigned by the Assignment of Aircraft Lease,
dated as of October 1, 1998 between Assignor and Barnett Bank, N.A. now Bank
of America, N.A., formerly NationsBank, N.A. (recorded by the Federal
Aviation Administration on December 7, 1998, as Conveyance No. EE017932).

     C.   The Assignee has agreed to advance to the Assignor $1,618,273
($U.S.) as a term loan (the "Loan") pursuant to a Term Note dated as of
August 31, 1999, between the Assignor and the Assignee (such Term Note as the
same may be amended or modified from time to time being hereinafter referred
to as the "Term Note").

     D.   The Borrower is indebted to NationsBank, N.A. (the "Senior Bank
Lender") in connection with financing of the Aircraft (the "Senior Debt").

     E.   Any lien granted herein to Lender is junior and subordinated to the
liens granted to the Senior Bank Lender securing the Senior Debt.

     F.   As a condition of its making the Term Loan and in consideration
thereof and as security for the repayment thereof, the Assignee has required,
among other things, that the Assignor enter into this Agreement.

     NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the parties hereto hereby agree as follows:

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

                                                                            16-8

                                        FILED WITH FAA
                                     --------------------

                                      99 OCT 14 AM 7 45

                                        OKLAHOMA CITY
                                          OKLAHOMA

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

                               0 0 0 0 0 0 0 0 4 0 0                        16-7

     1.   Capitalized terms used but not defined in this Assignment shall
have the respective meanings set forth in the Term Note. In the event of a
conflict between the terms of this Assignment and the Term Note, the terms of
the Term Note or this Assignment which provide the Assignee with the greatest
rights and remedies shall be controlling.

     2.   In order to secure the due and punctual performance by Assignor of
each and every obligation of Assignor under, and compliance by Assignor with
each and every provision of, the Term Note and the other Loan Documents,
Assignor hereby irrevocably assigns, transfers and sets over to Assignee, all
of Assignor's estate, right, title, interest, claim and demand in, to and
under the Lease and all payments due or to become due thereunder and damages
and other moneys from time to time payable to or receivable by Assignor
thereunder (said sums being herein called the "Moneys").

     3.   Notwithstanding the provisions of Section 2 hereof, unless and
until an Event of Default shall have occurred, and thereafter provided that
Assignor has remedied all Events of Default, Assignor shall be entitled to
exercise all of the Assignor's rights under the Lease, except (a) the right,
if any, to assign or grant a security interest in any such right, including
the right to receive Moneys, to any Person other than Assignee, (b) to the
extent that such exercise would violate any provision of the Lease, and (c)
as otherwise provided herein. Upon the occurrence of an Event of Default and
for as long as the same shall be continuing, all rights and interest of the
Assignor in, to and under the Lease and the proceeds thereof, including,
without limitation, all rights to receive Moneys thereunder, shall be
exercisable solely by and shall inure solely and exclusively to the benefit
of Assignee. Accordingly, upon such occurrence of an Event of Default for as
long as the same shall be continuing in addition to any right or remedy
Assignee may have under the Term Note, the Aircraft Security Agreement and
the other Loan Documents, Assignee shall have the all rights, but shall not
be obligated, to enforce the Lease as if Assignee were a party thereto.

     4.   Any Moneys which would have been required to be paid to Assignor by
Lessee but for the existence of an Event of Default and which have been paid
to Assignee shall be held by Assignee and may be applied by Assignee to cure
any Event of Default or applied in reduction of the obligations under the
Term Note. Any Moneys remaining in the possession of Assignee after the
payment in full of all obligations under the Term Note shall be promptly paid
over to Assignor without interest.

     5.   The obligations of Assignee owing to Lessee under the Lease shall
continue to be obligations of Assignor, and Assignee shall have no
obligations or liability under the Lease by

                                      -2-

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

                               0 0 0 0 0 0 0 0 4 0 1
                                                                            16-5

reason of, or arising out of, this Assignment, and shall not be obligated to
make any inquiry as to the sufficiency of any payment received by it or to
present or file any claim or to take any action to collect or enforce any
claim for any payment assigned hereunder. Notwithstanding the foregoing
sentence, in the event that an Event of Default (as defined in the Lease)
shall have occurred, Assignee, in its sole discretion, shall have the right,
but not the obligation, to undertake to assume and perform the obligations of
Assignor under the Lease and to have the Lessee deem and treat Assignee as
possessing all the rights granted Assignor under the Lease for all purposes
thereunder. Any performance by Assignee shall not constitute a waiver or
release of any obligation or any Event of Default (under the Term Note) which
may arise out of Assignor's non-performance of its obligations under the
Lease nor an election or waiver by Assignee of any remedy or right available
to Assignee under the Term Note or the other Loan Documents.

     6.   This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

     7.   All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to
be effective hereunder, shall be hand delivered or sent by certified or
registered first class mail, return receipt requested, and addressed to the
party to whom directed at such party's address first above written or to such
other address as such party shall specify in a written notice to the other
party hereto.

     8.   This Assignment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois in effect from time to
time.

                                      -3-

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

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                                                                            16-3

     IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                      AIRCRAFT NO. 1, L.L.C., an Illinois
                                      limited liability company

                                      By: AAR Corp., a Delaware corporation,
                                          as manager

                                             /s/ Philip C. Slapke          By:
                                      -------------------------------------
                                            Philip C. Slapke
                                            Executive Vice President

                                      BCI AIRCRAFT LEASING 1999, L.L.C., an
                                      Illinois limited liability company

                                             /s/ Brian N. Hollnagel         By:
                                      -------------------------------------
                                            BRIAN N. HOLLNAGEL
                                            MANAGER

                        (Acknowledgments appear on following page)

                                      -4-

<Page>

FAA AIRCRAFT REGISTRY
CAMERA NO. 2N  DATE: 11-30-99

                               0 0 0 0 0 0 0 0 4 0 3
                                                                            16-1

STATE OF ILLINOIS     )
                      )SS:
COUNTY OF DuPage      )

     The foregoing instrument was acknowledged before me this 22nd day of
September, 1999 by Philip C. Slapke as Executive V.P. of AAR Corp., a
Delaware corporation, as manager of Aircraft No. 1, L.L.C., an Illinois
limited liability company, on behalf of the corporation and the limited
liability company. He is personally known to me or has produced a driver's
license as identification.

                      Print or Stamp Name:  /s/ Deborah J. Schwartz
                                            -------------------------
                      Notary Public, State of
                                             -------------------------
                      Commission No.:
                      My Commission Expires:

                                                   OFFICIAL SEAL
                                                DEBORAH J. SCHWARTZ
                                         NOTARY PUBLIC, STATE OF ILLINOIS
                                          MY COMMISSION EXPIRES: 09/06/00

STATE OF ILLINOIS     )
                      )SS:
COUNTY OF DuPage      )

     The foregoing instrument was acknowledged before me this 22nd day of
September, 1999 by Brian N. Hollnagel as Manager of BCI Aircraft Leasing
1999, L.L.C., an Illinois limited liability company, on behalf of the
corporation and the limited liability company. He is personally known to me
or has produced a driver's license as identification.

                      Print or Stamp Name:  /s/ Deborah J. Schwartz
                                            -------------------------
                      Notary Public, State of
                                             -------------------------
                      Commission No.:
                      My Commission Expires:

                                                   OFFICIAL SEAL
                                                DEBORAH J. SCHWARTZ
                                         NOTARY PUBLIC, STATE OF ILLINOIS
                                          MY COMMISSION EXPIRES: 09/06/00

                                      -5-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 5 6             D D 0 1 8 7 8 7

                                                              EXECUTION VERSION
                                                     CONVEYANCE
                                                      PROVIDED

                ASSIGNMENT OF LEASE 826 AND LETTER OF CREDIT
                                             [ILLEGIBLE] 11 08

                                             FEDERAL AVIATION
                                               [ILLEGIBLE]

         This ASSIGNMENT OF LEASE 826 AND LETTER OF CREDIT dated as of March
31, 2000 (this "Agreement"), is between FIRST SECURITY BANK, NATIONAL
ASSOCIATION ("FSB"), a national banking association, 79 South Main Street,
Salt Lake City, Utah 84111, as owner trustee under the Trust Agreement, dated
as of March 28, 2000, between BCI AIRCRAFT LEASING 1999, L.L.C. (the
"Benefactor") and FSB ("Debtor"), and  COAST BUSINESS CREDIT, a division of
Southern Pacific Bank, a California corporation, 12121 Wilshire Boulevard,
Suite 1400, Los Angeles, California 90025 (the "Secured Party").

                            W I T N E S S E T H:

         WHEREAS, Debtor is the Lessor (as transferee of Aircraft No. 1,
L.L.C.) under that certain Aircraft Lease Agreement 826 dated as of August
11, 1997, between Aircraft No. 1, L.L.C. and Aloha Airlines Inc., a Delaware
corporation (the "Lessee"), as supplemented by Lease Supplement No. 1 dated
October 25, 1998, between Aircraft No. 1, L.L.C. and Lessee, recorded by the
Federal Aviation Administration (the "FAA") on December 7, 1998, as
Conveyance No. [ILLEGIBLE] as further described on Schedule 1 (together with
all amendments, modifications, supplements, addenda and extensions thereto
from time to time, the "Lease 826"), covering one Boeing model 737-282C
airframe, manufacturer's serial number 23051, United States registration
number N826AL, together with two (2) Pratt & Whitney model JT8D-9A aircraft
engines, manufacturer's serial numbers 674348 and 666147 (the "Engines" and,
collectively, the "Aircraft 826").

         WHEREAS, the Letter of Credit has been furnished by the Lessee as
security for the performance of the obligations of the Lessee under the Lease
826, and has been amended to name the Secured Party as beneficiary;

         WHEREAS, in connection with financing from the Secured Party, Debtor
has entered into (i) the Loan Agreement 826, dated as of March 31, 2000 (the
"Loan Agreement") among the Debtor, as Borrower, the Beneficiary, as
Beneficiary and Secured Party, as Lender, pursuant to which Secured Party
has advanced some or all of the Loan 826 (as defined therein) to the Debtor,
(ii) the Aircraft Security Agreement 826 dated as of the date hereof between
Debtor and Secured Party (the "Aircraft Security Agreement 826"), (iii) the
Loan Agreement 824, dated as of March 31, 2000 (the "Loan Agreement") among
the Debtor, as Borrower, the Beneficiary, as Beneficiary and Secured Party,
as Lender, pursuant to which Secured Party has advanced some or all of the
Loan 824 (as defined therein) to the Debtor and (ii) the Aircraft Security
Agreement 824 dated as of the date hereof between Debtor and Secured Party
(the "Aircraft Security Agreement 824"); and

                                      -1-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                               FILED WITH FAA
                         [ILLEGIBLE] REGISTRATION BR

                             '00 APR 3 PM 3:42

                                OKLAHOMA CITY
                                  OKLAHOMA

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 5 7

         WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have the meanings provided therefor in the Lease 826 or the Loan
Agreement 826, PROVIDED FURTHER, that any definition of a document used
herein shall refer to such document as it may now or later be amended or
supplemented;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as
follows:

         1.   As security for the payment and performance of the Liabilities
(whether as scheduled, upon acceleration or otherwise, including, without
limitation, repayment of the Loans made or to be made by the Secured Party
under the Loan Agreement 824 and Loan Agreement 826 as they may be
outstanding from time to time, accrued interest thereon, the Prepayment Fee
and all other interest, fees and expenses payable by the Debtor pursuant to
the Loan Agreement 824 and Loan Agreement 826 and the other Operative
Documents) and of all costs of collection and enforcement of the Liabilities,
the Debtor hereby collaterally assigns, transfers, conveys and sets over to
the Secured Party all of its right, title and interest in, to and under, the
Lease 826 and the Letter of Credit and any replacements or renewals thereof
furnished under the terms of Section 29 of the Lease 826 (but none of
Debtor's obligations thereunder), including, without limitation, the right
under the Lease 826 (i) to collect all Base Rental, Supplemental Rental,
Variable Rental, and other income, proceeds (including, but not limited to
insurance proceeds); awards, revenues and other sums payable by Lessee to
Debtor pursuant to the Lease, and (ii) after the occurrence and during the
continuance of a Lease Event of Default, to enforce all of Debtor's other
rights and remedies under the Lease 826 and the Letter of Credit, but not
limited to the right to apply any of the Lease 826 payments in accordance
with the terms of the Lease 826.

         2.   All notices, demands and other communications made by one party
to the other party in connection with this Agreement shall be in writing and
given to or made upon such party as provided in Section 11.01 of the Loan
Agreement 826.

         3.   This Agreement shall be binding upon and inure to the benefit
of the Debtor and the Secured Party and their respective successors and
permitted assigns. This Agreement may not be assigned by the Debtor, in whole
or in part, without the prior written consent of the Secured Party. The
parties hereto acknowledge and agree that the Secured Party may assign its
rights hereunder to a Transferee (as defined in the Loan Agreement 826) as
provided in Section 11.08 of the Loan Agreement 826.

         4.   This Agreement may be executed in one or more counterparts,
each of which shall constitute an original and all of such counterparts shall
constitute one and the same Agreement.

         5.   This Agreement has been delivered in the State of New York.
Each party hereto agrees that, to the maximum extent permitted by the law of
the State of New York, this Agreement, and the rights and duties of the
parties hereunder, shall be governed by, and construed in accordance with,
the laws of the State of New York (including sections 5-1401 and 5-1402 of
the New York

                                      -2-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 5 8

General Obligations Law) in all respects, including in respect of all matters
of construction, validity and performance but without giving effect to any
provision thereof that may require application of the laws of another
jurisdiction.

         6.   ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN NEW YORK SUPREME COURT,
MANHATTAN COUNTY OR THE UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, DEBTOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT (SUBJECT TO ANY RIGHT OF
APPEAL BY A HIGHER COURT). Debtor hereby agrees that service of all process
upon it may be made by registered or certified mail, return receipt
requested, to the Debtor at its address for notices specified or determined
in accordance with Section 11.01 of the Loan Agreement, such service being
hereby acknowledged by the Debtor to be sufficient for personal jurisdiction
in any action against the Debtor in connection with this Agreement and to be
otherwise effective and binding service in every respect. Debtor hereby
confirms that service of process to it should be sent to Superintendent of
Banking of the State of New York, State of New York Banking Department, 2
Rector Street, 19th Floor, New York, New York 10006 or any successor agent
for service of process located in New York, New York reasonably acceptable to
Secured Party (the "Process Agent") and agrees that service of process upon
such Process Agent shall be deemed to be service of process upon the Debtor,
with respect to any proceeding related to this Agreement. Nothing herein
shall affect the right to serve process in any other manner permitted by law
or shall limit the right of Secured Party to bring proceedings against the
Debtor in the courts of any other jurisdiction, including, but limited to,
where some or all of the Aircraft is located.

         7.   EACH OF DEBTOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE LOAN AGREEMENT AND MAKING
THE LOAN TO DEBTOR TO FINANCE THE AIRCRAFT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each of Debtor and
Secured Party further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO

                                      -3-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 5 9

THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as written
consent to a trial by the court.

                                      -4-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 6 0

         IN WITNESS WHEREOF, the parties hereto have caused this Assignment
of Lease 826 to be executed by their duly Authorized Officers as of the day
first above written.

             Debtor:            FIRST SECURITY BANK, NATIONAL
                                ASSOCIATION, not in its individual capacity but
                                solely as Owner Trustee

                                By: /s/ Greg A. Hawley
                                    -------------------------------------------
                                    Name:  Greg A. Hawley
                                    Title: Vice President

             Secured Party:     COAST BUSINESS CREDIT,
                                a division of Southern Pacific Bank

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

Assignment of Lease and Letter of Credit 826
Boeing Model 737-282C Aircraft
U.S. Registration No. N826AL

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 6 1

         IN WITNESS WHEREOF, the parties have caused this Assignment of Lease
826 to be executed by their duly Authorized Officers as of the day first
above written.

             Debtor:            FIRST       SECURITY       BANK,       NATIONAL
                                ASSOCIATION, not in its individual capacity but
                                solely as Owner Trustee

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

             Secured Party:     COAST BUSINESS CREDIT,
                                a division of Southern Pacific Bank

                                By: /s/ Joseph M. Simmons
                                    -------------------------------------------
                                    Name:  Joseph M. Simmons
                                    Title: Vice President / Underwriter

Assignment of Lease and Letter of Credit 826
Boeing Model 737-282C Aircraft
U.S. Registration No. N826AL

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                    0 0 0 0 0 0 0 2 0 6 2

                                                                     SCHEDULE I

                             DESCRIPTION OF LEASE

Aircraft Lease Agreement dated as of August 11, 1997, between Aircraft No. 1,
L.L.C. as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Lease
Supplement No. 1 dated October 25, 1998, recorded by the Federal Aviation
Administration on December 7, 1998, as Conveyance No. EE017932 as assigned by
the Lease Agreement Assignment dated as of August 31, 1999, between Aircraft
No. 1, L.L.C. as assignor and BCI Aircraft Leasing 1999, L.L.C. as assignee,
recorded November 24, 1999, as Conveyance No. VV015832 and the Lease
Agreement Assignment dated as of March 31, 2000, between BCI Aircraft Leasing
1999, L.L.C. as assignor and First Security Bank, National Association, as
Owner Trustee, assignee, which is being filed simultaneously herewith.

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 5 6
                                      D D 1 8 7 8 7

                                              Execution Version

                                              CONVEYANCE
                                               RECORDED

                                            2000 MAY 8 AM 11 08

                                             FEDERAL AVIATION
                                              ADMINISTRATION

      ASSIGNMENT OF LEASE 826 AND LETTER OF CREDIT

     This ASSIGNMENT OF LEASE 826 AND LETTER OF CREDIT, dated as of March 31,
2000 (this "Agreement"), is between FIRST SECURITY BANK, NATIONAL ASSOCIATION
("FSB"), a national banking association, 79 South Main Street, Salt Lake City,
Utah 84111, as owner trustee under the Trust Agreement, dated as of March 28,
2000, between BCI AIRCRAFT LEASING 1999, L.L.C. (the "Beneficiary") and FSB
("Debtor"), and COAST BUSINESS CREDIT, a division of Southern Pacific Bank, a
California corporation, 12121 Wilshire Boulevard, Suite 1400, Los Angeles,
California 90025 (the "Secured Party").

                           W I T N E S S E T H:

     WHEREAS, Debtor is the Lessor (as transferee of Aircraft No. 1, L.L.C.)
under that certain Aircraft Lease Agreement 826 dated as of August 11, 1997,
between Aircraft No. 1, L.L.C. and Aloha Airlines Inc., a Delaware
corporation (the "Lessee"), as supplemented by Lease Supplement No. 1 dated
October 25, 1998, between Aircraft No. 1, L.L.C. and Lessee, recorded by the
Federal Aviation Administration (the "FAA") on December 7, 1998, as Conveyance
No. 017932 as further described on Schedule I (together with all amendments,
modifications, supplements, addenda and extensions thereto from time to time,
the "Lease 826"), covering one Boeing model 737-282C airframe, manufacturer's
serial number 23051, United States registration number N826AL, together with
two (2) Pratt & Whitney model JT8D-9A aircraft engines, manufacturer's serial
numbers 674248 and 666147 (the "Engines" and, collectively, the "Aircraft
826");

     WHEREAS, the Letter of Credit has been furnished by the Lessee as
security for the performance of the obligations of the Lessee under the Lease
826, and has been amended to name the Secured Party as beneficiary;

     WHEREAS, in connection with financing from the Secured Party, Debtor has
entered into (i) the Loan Agreement 826, dated as of March 31, 2000 (the
"Loan Agreement") among the Debtor, as Borrower, the Beneficiary, as
Beneficiary and Secured Party, as Lender, pursuant to which Secured Party has
advanced some or all of the Loan 826 (as defined therein) to the Debtor, (ii)
the Aircraft Security Agreement 826 dated as of the date hereof between
Debtor and Secured Party (the "Aircraft Security Agreement 826"), (iii) the
Loan Agreement 824, dated as of March 31, 2000 (the "Loan Agreement") among
the Debtor, as Borrower, the Beneficiary, as Beneficiary and Secured Party,
as Lender, pursuant to which Secured Party has advanced some or all of the
Loan 824 (as defined therein) to the Debtor and (ii) the Aircraft Security
Agreement 824 dated as of the date hereof between Debtor and Secured Party
(the "Aircraft Security Agreement 824"); and

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

                                    FILED WITH FAA
                              AIRCRAFT REGISTRATION BR

                                 '00 APR 3 PM 3 42

                                     OKLAHOMA CITY
                                       OKLAHOMA

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 5 7

     WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have the meanings provided therefor in the Lease 826 or the Loan
Agreement 826, PROVIDED, FURTHER, that any definition of a document used
herein shall refer to such document used herein shall refer to such document
as it may now or later be amended or supplemented;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as
follows:

     1.   As security for the payment and performance of the Liabilities
(whether as scheduled, upon acceleration or otherwise, including, without
limitation, repayment of the Loans made or to be made by the Secured Party
under the Loan Agreement 824 and Loan Agreement 826 as they may be
outstanding from time to time, accrued interest thereon, the Prepayment Fee
and all other interest, fees and expenses payable by the Debtor pursuant to
the Loan Agreement 824 and Loan Agreement 826 and the other Operative
Documents) and of all costs of collection and enforcement of the Liabilities,
the Debtor hereby collaterally assigns, transfers, conveys and sets over to
the Secured Party all of its right, title and interest in, to and under, the
Lease 826 and the Letter of Credit and any replacements of renewals thereof
furnished under the terms of Section 29 of the Lease 826 (but none of
Debtor's obligations thereunder), including, without limitation, the right
under the Lease 826 (i) to collect all Base Rental, Supplemental Rental,
Variable Rental, and other income, proceeds (including, but not limited to
insurance proceeds), awards, revenues and other sums payable by Lessee to
Debtor pursuant to the Lease, and (ii) after the occurrence and during the
continuance of a Lease Event of Default, to enforce all of Debtor's other
rights and remedies under the Lease 826 and the Letter of Credit, but not
limited to the right to apply any of the Lease 826 payments in accordance
with the terms of the Lease 826.

     2.   All notices, demands and other communications made by one party to
the other party in connection with this Agreement shall be in writing and
given to or made upon such party as provided in Section 11.01 of the Loan
Agreement 826.

     3.   This Agreement shall be binding upon and inure to the benefit of
the Debtor and the Secured Party and their respective successors and
permitted assigns. This Agreement may not be assigned by the Debtor, in whole
or in part, without the prior written consent of the Secured Party. The
parties hereto acknowledge and agree that the Secured Party may assign its
rights hereunder to a Transferee (as defined in the Loan Agreement 826) as
provided in Section 11.08 of the Loan Agreement 826.

     4.   This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and all of such counterparts shall
constitute one and the same Agreement.

     5.   This Agreement has been delivered in the State of New York. Each
party hereto agrees that, to the maximum extent permitted by the law of the
State of New York, this Agreement, and the rights and duties of the parties
hereunder, shall be governed by, and construed in accordance with, the laws
of the State of New York (including sections 5-1401 and 5-1402 of the New York

                                      -2-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 5 8

General Obligations Law) in all respects, including in respect of all matters
of construction, validity and performance but without giving effect to any
provision thereof that may require application of the laws of another
jurisdiction.

     6.   ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN NEW YORK SUPREME COURT,
MANHATTAN COUNTY OR THE UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, DEBTOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OR FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT (SUBJECT TO ANY RIGHT OF
APPEAL BY A HIGHER COURT). Debtor hereby agrees that service of all process
upon it may be made by registered or certified mail, return receipt
requested, to the Debtor at its address for notices specified or determined
in accordance with Section 11.01 of the Loan Agreement, such service being
hereby acknowledged by the Debtor to be sufficient for personal jurisdiction
in any action against the Debtor in connection with this Agreement and to be
otherwise effective and binding service in every respect. Debtor hereby
confirms that service of process to its should be sent to Superintendent of
Banking of the State of New York, State of New York Banking Department, 2
Rector Street, 19th Floor, New York, New York 10006 or any successor agent
for service of process located in New York, New York reasonably acceptable to
Secured Party (the "Process Agent") and agrees that service of process upon
such Process Agent shall be deemed to be service of process upon the Debtor,
with respect to any proceeding related to this Agreement. Nothing herein
shall affect the right to serve process in any other manner permitted by law
or shall limit the right of Secured Party to bring proceedings against the
Debtor in the courts of any other jurisdiction, including, but limited to,
where some or all of the Aircraft is located.

     7.   EACH OF DEBTOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE LOAN AGREEMENT AND MAKING
THE LOAN TO DEBTOR TO FINANCE THE AIRCRAFT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each of Debtor and
Secured Party further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO

                                      -3-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 5 9

THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as written
consent to a trial by the court.

                                      -4-

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 6 0

    IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease
826 to be executed by their duly Authorized Officers as of the day first
above written.

         Debtor:             FIRST SECURITY BANK, NATIONAL
                             ASSOCIATION, not in its individual capacity but
                             solely as Owner Trustee

                             By:  /s/ Greg A. Hawley
                                  ________________________
                                  Name: Greg A. Hawley
                                  Title: Vice President

         Secured Party:      COAST BUSINESS CREDIT,
                             a division of Southern Pacific Bank

                             By:
                                  ________________________
                                  Name:
                                  Title:

Assignment of Lease and Letter of Credit 826
Boeing Model 737-282C Aircraft
U.S. Registration No. N826AL

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

       0 0 0 0 0 0 0 2 0 6 1

    IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease
826 to be executed by their duly Authorized Officers as of the day first
above written.

         Debtor:             FIRST SECURITY BANK, NATIONAL
                             ASSOCIATION, not in its individual capacity but
                             solely as Owner Trustee

                             By:
                                  ________________________
                                  Name:
                                  Title:

         Secured Party:      COAST BUSINESS CREDIT,
                             a division of Southern Pacific Bank

                             By:  /s/ Joseph M. Sammons
                                  ________________________
                                  Name: Joseph M. Sammons
                                  Title: Vice President/ Underwriter

Assignment of Lease and Letter of Credit 826
Boeing Model 737-282C Aircraft
U.S. Registration No. N826AL

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3N  DATE: 5-10-2000

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                                                                    SCHEDULE I

                                  DESCRIPTION OF LEASE

Aircraft Lease Agreement dated as of August 11, 1997, between Aircraft No. 1,
L.L.C as lessor and Aloha Airlines, Inc., as lessee, as supplemented by Lease
Supplement No. I dated October 25, 1998, recorded by the Federal Aviation
Administration on December 7, 1998, as Conveyance No. 1 EE017932 as assigned by
the Lease Agreement Assignment dated as of August 31, 1999, between Aircraft
No. 1, L.L.C. as assignor and BCI Aircraft Leasing 1999, L.L.C. as assignee,
recorded November 24, 1999, as Conveyance No. W015832 and the Lease Agreement
Assignment dated as of March 31, 2000, between BCI Aircraft Leasing 1999,
L.L.C. as assignor and First Security Bank, National Association, as Owner
Trustee, assignee, which is being filed simultaneously herewith.

<PAGE>

                                                               EXECUTION VERSION

                                  AGREEMENT 826

     THIS AGREEMENT 826 (this "Agreement") dated the 7th day of November, 2001,
is by and among Aloha Airlines, Inc. (the "Lessee"), Wells Fargo Bank Northwest,
National Association (formerly known as First Security Bank, National
Association), as Owner Trustee (the "Lessor") and Coast Business Credit, a
division of Southern Pacific Bank (the "Secured Party"), and consented to by BCI
Aircraft Leasing 1999, L.L.C. (the "Beneficiary") and BCI Aircraft Leasing 1999,
L.L.C. (the "Guarantor"). Capitalized terms used herein and not otherwise
defined are used as defined in Appendix A to the Loan Agreement (as defined
below).

     WHEREAS, Lessee and Lessor (as assignee of Aircraft No. 1, L.L.C.) are
parties to Aircraft Lease Agreement dated August 11, 1997 (as extended, amended
and supplemented from time to time, the "Lease"), as collaterally assigned by
Lessor to Secured Party pursuant to the Assignment of Lease 826 and Letter of
Credit dated as of April 3, 2000 between Lessor and Secured Party (the "Lease
Assignment") which Lease Assignment has been consented to by Lessee pursuant to
the Consent and Agreement 826 dated as of April 3, 2000 among Lessee, Lessor and
Secured Party (the "Lessee Consent"), each such document relates to one Boeing
model 737-282C Aircraft bearing manufacturer's serial number 23051 and United
States Registration No. N826AL together with two Pratt & Whitney model JT8D-9A
aircraft engines bearing manufacturer's serial numbers 674248 and 666147
(collectively, the "Aircraft");

     WHEREAS, Lessor, Beneficiary and Secured Party are parties to Loan
Agreement 826 dated as of April 3, 2000 (the "Loan Agreement"), pursuant to
which Secured Party provided financing for Lessor's purchase of the Aircraft;

     WHEREAS, Guarantor executed and delivered in favor of the Secured Party a
Guaranty dated April 3, 2000 (the "Guaranty") with respect to certain
obligations of the Lessor under the Loan Agreement;

     WHEREAS, an Event of Default (as defined in the Lease) has occurred and is
continuing under Clause A of Section 16 of the Lease by reason of Lessee's
failure to make payment of Basic Rental on October 1, 2001 (a Rent Date)
pursuant to Clause A(i)(a) of Exhibit H of the Lease; and

     WHEREAS, an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing under each of Sections 9.01(a) and 9.01(f) of the
Loan Agreement by reason of, among other things, Borrower's failure to make
payment of principal and interest (including, but not limited to, Interest
Deficiency) on October 1, 2001 (a Payment Date) pursuant to Section 2.04

                                        1

<PAGE>

of Loan Agreement, Guarantor's failure to make payment of Interest Deficiency on
October 1, 2001 (a Payment Date) pursuant to Section 1.1(A) of the Guaranty
and Lessee's failure to make payment of Basic Rental on October 1, 2001 (a Rent
Date) pursuant to Clause A(i)(a) of Exhibit H of the Lease.

     NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     [These provisions have been omitted as confidential information and
filed separately with the Commission]

                                        2

<PAGE>

     6. Lessee and Lessor hereby expressly agree that any default by Lessee in
the performance of its obligations under this Agreement shall constitute an
Event of Default under the Lease.

     7. By countersigning this Agreement, Beneficiary hereby directs the Lessor
under the Trust Agreement to execute and deliver this Agreement.

     8. By countersigning this Agreement, each of Beneficiary and Guarantor
hereby consents to all the terms of this Agreement and agrees to be bound by all
such terms in all respects.

                                        3

<PAGE>

     9. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.

     10. This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York.

                            [Signature Pages Follow]

                                       4
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 826 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

                                    By: /s/ Brenda F. Cutwright
                                        ------------------------------------
                                        Name:  Brenda F. Cutwright
                                        Title: Executive Vice President & CFO

                                    By: /s/ James M. King
                                        ------------------------------------
                                        Name:  James M. King
                                        Title: Senior Vice President Planning
                                               and Business Development

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

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

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

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

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 826 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

                                    By: /s/ Michael D. Hoggan
                                        ------------------------------------
                                        Name:  Michael D. Hoggan
                                        Title: Assistant Vice President

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

                                    By:
                                        ------------------------------------
                                        Name:
                                        Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 826 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

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

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

                                    By: /s/ Ernest Oon
                                        ------------------------------------
                                        Name:  Ernest Oon
                                        Title: Vice President

<PAGE>

EACH OF THE UNDERSIGNED BENEFICIARY AND GUARANTOR HEREBY CONSENTS TO ALL THE
TERMS OF THE FOREGOING AGREEMENT AND AGREES TO BE BOUND BY ALL SUCH TERMS IN ALL
RESPECTS.

BCI AIRCRAFT LEASING 1999, L.L.C., as Beneficiary
by BCI Aircraft Leasing, Inc., as Manager

By: /s/ Brian N. Hollnagel
    ------------------------------------
    Name:  Brian N. Hollnagel
    Title: President

BCI AIRCRAFT LEASING 1999, L.L.C., as Guarantor
by BCI Aircraft Leasing, Inc., as Manager

By: /s/ Brian N. Hollnagel
    ------------------------------------
    Name:  Brian N. Hollnagel
    Title: President<PAGE>
                                                                  EXHIBIT 10.54

                                                                 EXECUTION COPY

                             AMENDED AND RESTATED
                                LEASE AGREEMENT

                                    between

                  FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                not individually, but solely as Owner Trustee,
                                   as Lessor

                                      and

                             ALOHA AIRLINES, INC.,
                                   as Lessee

                 Relating to one (1) Boeing B737-2Y5 Aircraft
                       Manufacturer's Serial No.: 24031
                         U.S. Registration No. N810AL

                           Dated as of June 1, 2000

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

This Amended and Restated Lease Agreement has been executed in several
counterparts. To the extent, if any, that this Amended and Restated 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 Amended and Restated Lease Agreement may be created through
the transfer or possession of any counterpart other than the original executed
counterpart containing the receipt executed by Lessor or, if Lessor has
assigned its rights to a third party in accordance with this Amended and
Restated Lease Agreement, such third party on the signature page of this
Amended and Restated Lease Agreement.

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

                       VEDDER, PRICE, KAUFMAN & KAMMHOLZ
                               CHICAGO, ILLINOIS

<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
SECTION 1. Definitions; Construction of Terms................................ 1
    (a) General Definitions ................................................. 1
    (b) Construction ........................................................13

SECTION 2. Lease of Aircraft.................................................14

SECTION 3. Lease Term; Rent; Payments........................................14
    (a) Lease Term ..........................................................14
    (b) Basic Rent ..........................................................14
    (c) Supplemental Rent ...................................................15
    (d) Security Deposit ....................................................15
    (e) Payments in General .................................................16
    (f) No Deductions or Withholdings........................................16

SECTION 4. Conditions Precedent .............................................17
    (a) Due Diligence .......................................................17
    (b) Agreements and Documents ............................................17

SECTION 5. Representations and Warranties ...................................19
    (a) Disclaimer; Lessor's Representations, Warranties and Covenants ......19
    (b) Lessee's Representations and Warranties..............................19

SECTION 6. Certain Covenants of Lessee ......................................25
    (a) Maintenance of Corporate Existence; Duly Qualified; Certificated
        Air Carrier .........................................................25
    (b) Merger or Consolidation .............................................25
    (c) Reporting Requirements ..............................................25
    (d) Government Approvals ................................................26
    (e) Taxes ...............................................................27
    (f) Place of Business ...................................................27
    (g) Filings .............................................................27
    (h) Approved Maintenance Program ........................................27

SECTION 7. Return of the Aircraft ...........................................28
    (a) Date and Location of Return .........................................28
    (b) Condition of Aircraft ...............................................28
    (c) Final Inspection ....................................................28
    (d) Operational Ground Check.............................................29
    (e) Demonstration Flight ................................................29
    (f) Technical Acceptance ................................................30
    (g) Failure to Return Aircraft...........................................30
</Table>

                                      ii

<PAGE>

<Table>
<S>                                                                        <C>
    (h) Transition ..........................................................31
    (i) Security Deposit ....................................................31
SECTION 8. Liens ............................................................31
    (a) No Liens.............................................................31
    (b) Removal of Liens.....................................................32
    (c) No Adverse Action....................................................32

SECTION 9. Indemnities ......................................................33
    (a) General Indemnity ...................................................33
    (b) Exceptions to General Indemnity .....................................33
    (c) Taxes ...............................................................34
    (d) [Intentionally reserved] ............................................41
    (e) Scope, Survival, Etc ................................................41
    (f) Gross-Up for Taxes on Indemnity Payments ............................42

SECTION 10. Title; Registration; Maintenance and Operation; Insignia.........43
    (a) Title to the Aircraft................................................43
    (b) Registration ........................................................43
    (c) Maintenance .........................................................44
    (d) Operation ...........................................................47
    (e) Insignia ............................................................48
    (f) Costs of Operation ..................................................49
    (g) Payment of Flight Charges............................................49
    (h) Loss or Damage ......................................................49

SECTION 11. Possession ......................................................50
    (a) Maintenance, Etc ....................................................50
    (b) Installation of Engines on Other Airframes ..........................50
    (c) Sublease ............................................................50
    (d) Transfers of Possession in General ..................................51
    (e) Maintenance Reserves ................................................51

SECTION 12. Replacement of Parts, Alterations, Modifications and Additions ..52
    (a) Replacement of Parts.................................................52
    (b) Modifications .......................................................53

SECTION 13. Risk of Loss, Destruction, Requisition, Etc .....................55
    (a) Risk of Loss.........................................................55
    (b) Event of Loss With Respect to the Aircraft...........................55
    (c) Event of Loss With Respect to an Engine .............................56
    (d) Application of Payments From any Government Entity for Requisition
        of Title, Etc .......................................................57
    (e) Application of Payments During Existence of Default .................58
</Table>

                                      iii

<PAGE>

<Table>
<S>                                                                        <C>
SECTION 14. Intentionally Reserved...........................................58

SECTION 15. Insurance .......................................................58
    (a) Requirements ........................................................58
    (b) Application of Proceeds of Hull Insurance ...........................58
    (c) Insurance for Indemnities; Continuation of Liability Insurance.......59
    (d) Reports, Etc ........................................................59
    (e) Self-Insurance ......................................................59
    (f) Additional Insurance by Lessor ......................................60
    (g) Application of Payments during Existence of a Default................60

SECTION 16. Inspection.......................................................61
    (a) Maintenance Schedule.................................................61
    (b) Reasonable Inspections...............................................61
    (c) No Duty to Inspect ..................................................61
    (d) Follow-On Lease .....................................................61
    (e) Absolute Right ......................................................62

SECTION 17. Assignment ......................................................62
    (a) Assignment by Lessee.................................................62
    (e) Collateral Assignment................................................64
    (f) Successors and Assigns...............................................64

SECTION 18. Early Termination ...............................................65

SECTION 19. Events of Default ...............................................65
    (a) Failure to Pay Basic Rent ...........................................65
    (b) Failure to Pay Supplemental Rent.....................................65
    (c) Insurance ...........................................................65
    (d) Return ..............................................................65
    (e) Unauthorized Transfer ...............................................66
    (f) Certain Covenants ...................................................66
    (g) Other Covenants .....................................................66
    (h) Representations and Warranties ......................................66
    (i) Authorizations ......................................................66
    (j) Voluntary Bankruptcy, Etc ...........................................66
    (k) Involuntary Bankruptcy, Etc .........................................67
    (1) Government Action ...................................................67
    (m) Cross Default .......................................................67
    (n) Change of Ownership .................................................68
    (o) Letter of Credit ....................................................68

SECTION 20. Remedies ........................................................68
    (a) Retake Possession ...................................................68
    (b) Termination or Enforcement . ........................................69
</Table>

                                      iv

<PAGE>

<Table>
<S>                                                                        <C>
    (c) Application of Funds ................................................69
    (d) Damages .............................................................69

SECTION 21. Transaction Expenses ............................................70

SECTION 22. No Setoff, Counterclaim, Etc.....................................70

SECTION 23. Further Assurances, Etc .........................................72
    (a) Further Assurances ..................................................72
    (b) Lessor's Performance of Lessee's Obligations ........................72
    (c) No Implied Waivers; Rights Cumulative................................73
    (d) Warranties ..........................................................73

SECTION 25. Governing Law and Jurisdiction...................................74
    (a) Governing Law .......................................................74

SECTION 26. Miscellaneous....................................................75
    (a) Amendments ..........................................................75
    (b) Severability ........................................................75
    (c) Counterparts ........................................................75
    (d) Chattel Paper .......................................................75
    (e) Time of the Essence .................................................75
    (f) Notices .............................................................75
    (g) Entire Agreement ....................................................76
</Table>

EXHIBITS AND SCHEDULES

Exhibit A          Intentionally Omitted
Exhibit B          Basic Rent
Exhibit C          Intentionally Omitted
Exhibit D          Form of Lease Supplement
Exhibit E          Intentionally Omitted
Exhibit F          Insurance Requirements
Exhibit G          Intentionally Reserved
Exhibit H          Form of Letter of Credit
Exhibit I          Approved Maintenance Providers
Exhibit J          Form of Opinion of Lessee Counsel
Exhibit K          Form of Opinion of Lessor's Special Counsel
Exhibit L          Form of Aircraft Status Report
Exhibit M          Terms of Hush Kitting Financing
Exhibit N          AD-Sharing
Exhibit O          Potential Sublessees

                                       v

<PAGE>

Schedule 1         Permitted Jurisdictions
Schedule 2         Intentionally Omitted
Schedule 3         Addresses and Accounts
Schedule 4         Filings and Recordings
Schedule 5         Return Conditions
Schedule 6         Filing Requirements

                                      vi

<PAGE>

                      AMENDED AND RESTATED LEASE AGREEMENT

         THIS AMENDED AND RESTATED LEASE AGREEMENT, dated as of June 1, 2000
(this "AGREEMENT" or this "LEASE"), amends and restates that certain Lease
Agreement dated as of March 22, 1995 (the "Original Lease"), in each case
between Aloha Airlines, Inc., a Delaware corporation having its principal place
of business at 371 Aokea Street, Honolulu, Hawaii 96819 ("LESSEE") and First
Security Bank, National Association, not individually, but solely as trustee
under that certain Trust Agreement dated as of March 22, 1995 between itself
and Fleet Business Credit Corporation (formerly known as Sanwa Business Credit
Corporation) ("Lessor").

                                  WITNESSETH:

         WHEREAS, Lessee and Lessor have entered into the Original Lease;

         WHEREAS, the Original Lease was recorded with the Federal Aviation
Administration on March 31, 1995 and was assigned Conveyance No. QQ008875;

         WHEREAS, the Original Lease was amended by (i) Lease Amendment No. 1
dated as of November 17, 1995, recorded January 22, 1996 as Conveyance No.
DD009376, (ii) Lease Amendment No. 2 dated as of January 12, 1996, recorded
January 23, 1996 as Conveyance No. BB23026, (iii) Amendment No. 3 to Aircraft
Lease Agreement dated March 27, 1997, recorded May 17, 1997 as Conveyance No.
UUO18757 ("Lease Amendment No. 3") and (iv) that certain letter agreement dated
March 22, 1995;

         WHEREAS, Lessee and Lessor desire by this Agreement, among other
things, to (i) amend and restate the Original Lease, (ii) provide for an
extension of the term of the Original Lease and (iii) modify the return
condition requirements, all as more particularly set forth herein; and

         WHEREAS, all things necessary to make this Agreement the legal, valid
and binding obligation of Lessor and Lessee, for the uses and purposes herein
set forth, in accordance with its terms, have been done and performed and have
happened;

                                  AGREEMENT:

         NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

         SECTION 1. DEFINITIONS; CONSTRUCTION OF TERMS.

         (a) GENERAL DEFINITIONS. The following terms shall have the following
meanings for all purposes of this Agreement

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "AD" shall mean any airworthiness directive or other requirement of
the Aviation Authority.

         "ADDITIONAL PARTS" shall mean any or all Parts incorporated or
installed in or attached or added to he Airframe or an Engine as the result of a
Modification, which may be removed pursuant to Section 12(b)(iii).

         "ADDITIONAL RENT" shall mean the rent payable during the Lease Term
with respect to the Aircraft pursuant to Section 3(g).

         "AFFILIATE" shall mean, in relation to a Person, any other Person
directly or indirectly controlling, controlled by or under common control with
that Person.

         "AIRCRAFT" shall mean, collectively, the Airframe (including the APU)
and the Engines and, unless the context does not permit, the Aircraft
Documentation.

         "AIRCRAFT DOCUMENTATION" shall mean, collectively, any and all log,
books, records, manuals and other data or documents relating to the Aircraft
which are delivered to Lessee in connection with the delivery of the Aircraft
and/or set forth in the Original Lease and such additional log books, records,
manuals and other data or documents relating to the Aircraft which are
maintained by Lessee as required by the Aviation Authority.

         "AIRFRAME" shall mean, collectively, (i) the Airframe Manufacturer
model 737-2Y5 airframe (except only Engines or engines from time to time
installed thereon), bearing the Airframe Manufacturer's serial number and the
registration mark specified in Lease Supplement No. 1, leased hereunder by
Lessor to Lessee and (ii) any and all Parts so long as the same shall be
incorporated or installed in or attached to such airframe, and any and all Parts
removed therefrom so long as title to such removed Parts shall remain vested in
Lessor in accordance with the terms of Section 12.

         "AIRFRAME CYCLE" shall mean, with respect to the Airframe, one takeoff
and landing thereof.

         "AIRFRAME FLIGHT HOUR" shall mean each hour or part thereof elapsing
from the moment the wheels of the Airframe leave the ground on takeoff until the
wheels of the Airframe touch the ground on landing following such flight. For
purposes of all calculations under this Agreement measured in Airframe Flight
Hours, such Airframe Flight Hours (and parts thereof) shall be rounded to the
nearest minute.

         "AIRFRAME MANUFACTURER" shall mean The Boeing Company, a Delaware
corporation.

                                       2

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "AIRWORTHINESS CERTIFICATE" shall mean a valid, current transport
category airworthiness certificate issued in respect of the Aircraft by the
Aviation Authority.

         "APPROVED MAINTENANCE PERFORM" shall mean Lessee or such other
maintenance performer, if any, which (x) shall have a repair station license and
approval by the Aviation Authority and (y) with respect to maintenance
performers who are to accomplish Heavy Checks, Basic Shop Visits and/or Landing
Gear Overhauls, are either listed on Exhibit I hereto or are otherwise approved
by the Lessor.

         "APPROVED MAINTENANCE PROGRAM" shall mean Lessee's Aviation
Authority-approved written maintenance, inspection and repair program and
schedule for Boeing Model 737-200 aircraft, including Lessee's current approved
maintenance schedule, and the CPCP approved by the Aviation Authority.

         "APU" shall mean (i) the auxiliary power unit identified by
manufacturer's serial number in Lease Supplement No. 1 and (ii) any auxiliary
power unit substituted for such auxiliary power unit in accordance with this
Agreement.

         "AUTHORIZATIONS" shall mean each and every approval, waiver,
authorization, consent, license, certificate or order of, or registration with,
or requirement for the giving of prior notice to, or the taking of any action in
respect of, the Aviation Authority, or any other Government Entity having
jurisdiction over Lessee, the operation of the Aircraft or any transactions
contemplated hereby or by any Operative Document.

         "AVIATION AUTHORITY" shall mean the United States Federal Aviation
Administration, and any person, governmental department, bureau, commission or
agency succeeding, to all or any of such authority's functions, or such other
aviation authority as may be approved by the Lessor, such approval not to be
unreasonably withheld.

         "BASE RATE" means the Prime Rate of interest published from time to
time by The Wall Street Journal, or in the event such rate is no longer
published, a reasonable equivalent as determined by the Secured Party in the
Secured Party's sole but reasonable discretion.

         "BASIC RENT" shall mean the rent payable during the Lease Term with
respect to the Aircraft pursuant to Section 3(b).

         "BASIC RENT DATE" shall mean each date specified on Exhibit B on which
Basic Rent is payable during the Lease Term.

         "BASIC SHOP VISIT" shall mean, with respect to any Engine or the APU,
any shop visit, as defined by the Engine Manufacturer or the APU manufacturer,
as the case may be, that is based on an approved program of condition monitoring
and trend monitoring of performance

                                       3

<PAGE>

                                          [Amended and Restated Lease Agreement]

deterioration that results in an Engine or APU, as the case may be, being
restored to full performance standard.

         "BASIS POINT shall mean 1/100 of 1%.

         "BREAK AMOUNT" shall mean, with respect to any termination of the
Lease prior to the Expiry Date, an amount equal to the loss, cost or expense
which Lessor sustains or incurs (Including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds utilized by Lessor to fund or finance the Aircraft and/or the
transactions contemplated hereby) in connection therewith.

         "BUSINESS DAY" shall mean a day (other than a Saturday or Sunday) on
which banks are not required or authorized to close in Hawaii, Hartford,
Connecticut or Chicago, Illinois.

         "CABIN" shall mean the passenger compartment and all doors, windows,
interior panels, storage bins, lights, seats, seat covers, carpets, lavatories,
galleys, galley equipment, closets, flight attendant seats, passenger
communications and entertainment systems, emergency and miscellaneous equipment,
seat tracks and floor areas.

         "CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance sheet.

         "CASH FLOW" means, with respect to the Consolidated Group, the sum of
(a) the net income of the Consolidate Group (excluding non-recurring gains and
losses), PLUS (b) the sum of the following, to the extent deducted in
determining net income: (i) depreciation and amortization allowances, (ii)
interest expense (including payments in kind and imputed interest on Capital
Leases), and (iii) deferred taxes, and less (c) the change in the excess of
non-cash current assets over current liabilities (other than those pertaining to
unearned transportation revenue and payment of principal, interest or taxes)
calculated on a rolling four quarters basis and computed at the end of each
fiscal quarter.

         "CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the United States Bankruptcy Code.

         "CERTIFICATE OF REGISTRATION" shall mean the certificate of
registration issued by the Aviation Authority in respect of the Aircraft.

                                       4

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "CONSOLIDATED GROUP" means Aloha Airgroup, Inc., a Hawaii corporation;
Aloha Airlines, Inc., a Delaware corporation and Aloha IslandAir, Inc., a
Delaware corporation.

         "CPCP" shall mean a Corrosion Prevention and Control Program that
establishes minimum requirements for the Aircraft, incorporating, among other
things, the recommendations of the Airframe Manufacturer and the mandatory
requirements established by the Approved Maintenance Program.

         "CYCLE" shall mean an Airframe Cycle or an Engine Cycle, as indicated
by the context.

         ""D" CHECK" means a "D" Check, as such term is defined in the Approved
Maintenance Program relating to the Aircraft or an equivalent check that meets
the requirements of a "7C" Check as defined in the Boeing 737 Maintenance
Planning Document (MPD); or such other structural check which shall then be the
most significant maintenance check under the MPD.

         "DEBT SERVICE" means the sum of regularly scheduled principal
payments, interest payments, payments under Capital Leases and dividends
declared and payable (if permitted under the provisions of this Agreement) made
by the Lessee, or by the Lessee's parent on a consolidated basis, calculated
on a rolling, four quarters basis and computed at the end of each fiscal
quarter.

         "DEFAULT" shall mean any Event of Default or any condition,
circumstance, act or event which, upon the giving of notice, the passage of time
and/or the fulfillment of any other condition would constitute or give rise to
an Event of Default.

         "DELIVERY" shall have the meaning set forth in Section 2(b).

         "DELIVERY CONDITIONS" shall mean the requirement for the condition of
the Aircraft on delivery, as set forth in Schedule 2.

         "DELIVERY DATE" shall mean March 30, 1995.

         "DELIVERY LOCATION" shall mean Malta.

         "DOLLARS" and "US$" mean the lawful currency of the United States of
America.

         "EFFECTIVE DATE" shall mean the date upon which this Agreement is
executed and delivered.

                                       5

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "ENGINE" SHALL mean (i)(y) either of the Engine Manufacturer Model
JT8D-9A engines bearing manufacturer's serial numbers 665196 and 656020, whether
or not from time to time thereafter installed on the Airframe or installed on
any other airframe and (z) any Replacement Engine which may from time to time be
substituted, pursuant to the terms hereof, for either of such engines, and (ii)
in each case, 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 12 after removal from
such Engine, provided that at such time as an engine shall be deemed part of the
property leased hereunder in substitution for an Engine, pursuant to the
applicable provisions hereof, the replaced Engine shall cease to be an Engine
hereunder. The term "Engines" shall mean, as of any date of determination, all
Engines then leased hereunder.

         "ENGINE CYCLE" shall mean, with respect to any Engine, one takeoff and
landing of the airframe (including, without limitation, the Airframe) on which
such Engine is from time to time installed.

         "ENGINE FLIGHT HOUR" shall mean each hour or part thereof elapsing
from the moment the wheels of the airframe (including, without limitation, the
Airframe) on which such Engine is from time to time installed leave the ground
on takeoff until the wheels of such airframe touch the ground on landing
following such flight. For purposes of all calculations under this Agreement
measured in Engine Flight Hours, such Engine Flight Hours (and parts thereof)
shall be rounded to the nearest minute.

         "ENGINE MANUFACTURE" shall mean Pratt & Whitney Engines Group, a
division of United Technologies.

         "EVENT OF DEFAULT" has the meaning specified in Section 19.

         "EVENT OF LOSS" shall mean, with respect to the Aircraft, the Airframe
or any Engine, any of the following events, conditions or circumstances with
respect to such property:

              (i) the actual or constructive loss of such property or the use
         thereof due to the destruction of or damage to such property which
         renders repair uneconomical or which renders such property permanently
         unfit for normal use by Lessee or Lessor;

              (ii) any damage to such property or other occurrence which
         results in an insurance settlement with respect to such property on
         the basis of a total loss or a constructive, compromised, arranged or
         agreed total loss;

              (iii) the confiscation, condemnation, seizure, forfeiture or
         requisition of the title to such property (for any reason whatsoever
         and whether de jure or de facto), other than as set forth in clause
         (v) below);

                                       6

<PAGE>

                                          [Amended and Restated Lease Agreement]

              (iv) the disappearance, hijacking or theft (including a seizure
         of title or use not otherwise included in this definition) of such
         property for a continuous period in excess of thirty (30) days (or, if
         less, the remaining Lease Term); and

              (v) the confiscation, condemnation or seizure of, or requisition
         by any Government Entity or purported Government Entity of use or hire
         of such property which shall have resulted in the loss of possession
         or use of such property by Lessee for a continuous period in excess of
         sixty (60) days (or, if less, the remaining Lease Term).

An Event of Loss with respect to the Aircraft shall be deemed to have occurred
if an Event of Loss occurs with respect to the Airframe. An Event of Loss with
respect to one or more Engines without loss of the Airframe shall not be deemed
an Event of Loss with respect to the Aircraft.

         "EVENT OF LOSS DATE" shall mean (i) with respect to any Event of Loss
set forth in clause (i) or (ii) of the definition of "Event of Loss," the
earliest of (x) the date of actual loss, (y) the date on which the loss is
agreed, arranged or compromised by the insurers and (z) thirty (30) days after
the date of notice to Lessee's brokers or insurers claiming the loss, (ii) with
respect to any Event of Loss set forth in clause (iii) of the definition of
Event of Loss, the date such event, condition or circumstance occurs, or (iii)
with respect to any Event of Loss set forth in clause (iv) or (v) of the
definition of Event of Loss, the earlier of (y) the date on which insurers make
payment on the basis of a total loss or (z) the expiration of the period, if
any, and the continuation of the condition or circumstance beyond the date,
described in the applicable clause of such definition.

         "EXPENSE" shall mean any liabilities, obligations, losses, damages
(including, without limitation, damages for loss of life, injury to persons or
damage to any property), penalties, fines, sanctions, claims (whether
fraudulent, groundless, false or not), actions, suits, judgments, legal
proceedings (whether civil or criminal), costs, disbursements and expenses
(including reasonable legal fees and expenses, costs of investigation and
related expenses), in each case, of every kind and nature whatsoever (including,
without limitation any liability, obligation or claim arising in contract or
tort, whether or not arising from the negligence, actual, implied or imputed,
active or passive, or absolute or strict liability of an Indemnified Party or
any other Person or under any other theory).

         "EXPIRY DATE" shall mean March 29, 2006.

         "FINAL INSPECTION" shall mean the inspection of the Aircraft by Lessor
and any other Inspecting Parties during any part of the inspections, checks, and
test flights required pursuant to Sections 7(c), 7(d) and 7(e) or otherwise
performed in connection with the Return.

         "FINAL MAINTENANCE" shall mean prior to the return of the Aircraft on
the last day of the Lease Term, the completion of the next scheduled heavy
maintenance check ("C" Check

                                       7

<PAGE>

                                          [Amended and Restated Lease Agreement]

or above and, if applicable, multiples of such checks falling due within a "C"
Check maintenance interval) in respect of the Aircraft under the Approved
Maintenance Program (which check shall incorporate all lower-level checks and
any special repair items or special inspections (including, without limitation,
all applicable AD's that are required to be accomplished in accordance with the
terms of this Lease, Required SB's and CPCP items) as well as inspections that
have a frequency less than a "C" Check and all cleaning, and refurbishment that
would be a normal part of the Approved Maintenance Program were the Aircraft to
continue in commercial passenger service by Lessee.

         "FIXED CHARGE COVERAGE RATIO" means, with respect to the Consolidated
Group, Cash Flow divided by Debt Service.

         "FLIGHT CHARGES" shall mean all flight charges, route navigation
charges, navigation service charges and all other fees, charges or Taxes payable
for the use of or for services provided at any airport or otherwise payable to
any airport, airport authority, navigation or flight authority or other similar
entity or for any services provided in connection with the operation, landing or
navigation of aircraft.

         "FOLLOW-ON OPERATOR" shall mean any Person acquiring title to or the
right to use the Aircraft after the end of the Lease Term (whether or not such
Person is an airline or other operator).

         "FORCE MAJEURE" shall mean delay or nonperformance due to or arising
out of acts of God or public enemy, civil war, insurrection or riot, fire,
flood, explosion, earthquake, accident, epidemic, quarantine restriction, any
act of government, governmental priority, allocation, regulation or order
affecting, directly or indirectly, the Aircraft, Lessor or Lessee or any
materials or facilities, strike or labor dispute causing cessation, slowdown or
interruption of work, inability after due and timely diligence to procure
equipment, data or materials from suppliers in a timely manner, or any other
cause (including unforeseen maintenance) to the extent that such cause is beyond
the control of Lessor or Lessee whether above mentioned or not and whether or
not similar to the foregoing.

         "GAAP" shall mean generally accepted accounting principles as shall
from time to time be in effect in the Lessee Jurisdiction, as such principles
may at any time or from time to time be varied by any applicable financial
accounting rules and, with respect to any Person, shall mean such principles
applied on a basis consistent with prior periods.

         "GOVERNMENT ENTITY" shall mean (i) any national, state or local
government of any country, any territory or possession of any country, or any
international authority (including, without limitation, in each case, any
central bank or fiscal, tax or monetary authority), (ii) any board, commission,
department, division, instrumentality, court, agency, territory, possession or
political subdivision of any entity described in clause (i) above, however
constituted, (iii) any association, organization or institution of which any
entity described in clause (i) or (ii) above is

                                       8

<PAGE>

                                          [Amended and Restated Lease Agreement]

a member or to whose jurisdiction any thereof is subject or in whose activities
any thereof is a participant and (iv) any taxing authority of any entity
described in clause (i), (ii) or (iii) above.

         "HOUR" shall mean an Airframe Flight Hour or an Engine Flight Hour, as
indicated by the context.

         "INDEBTEDNESS" means all obligations of Lessee that would, in
accordance with GAAP, be shown as a liability on Lessee's balance sheet, and in
any footnotes or notations thereto, including, without limitation, (i)
obligations for the repayment of monies borrowed or raised, (ii) obligations
under finance leases, hire-purchase arrangements, conditional sale agreements
and other obligations for the deferred purchase price of property, (iii)
guarantees, direct or indirect, of the obligations of any other Person,
including, any such obligations secured by a Lien on any property of Lessee,
(iv) indemnity and reimbursement obligations, including any such obligations
arising to any issuer of a letter of credit or similar instrument, and (v)
obligations to purchase or otherwise acquire any indebtedness of, or to advance
monies to or on behalf of, or make any investment in any other Person.

         "INDEMNIFIED PARTY" shall mean Lessor, in its individual and trust
capacities, Owner Participant, ALL and each of their respective Affiliates, and
the successors and permitted assigns of each of the foregoing and the directors,
officers, corporate stockholders, partners, employees, servants and agents of
each of the foregoing.

         "INSPECTING PARTY" shall have the meaning specified in Section
7(c)(i).

         "INSURANCE BROKERS" shall mean any independent firm of internationally
recognized insurance brokers.

         "INSURED PARTY" shall mean each Indemnified Party.

         "LANDING CLEAR" shall mean (i) each landing gear assembly of the
Aircraft identified by serial number in Lease Supplement No. 1 and (ii) any
landing gear assembly substituted for any such identified landing gear assembly
in accordance with this Agreement.

         "LEASE SUPPLEMENT" shall mean any lease supplement entered into in
accordance with the terms hereof to this Agreement substantially in the form of
Exhibit D.

         "LEASE TERM" shall mean the period described in Section 3(a).

         "LENDER" means each of (a) any person or persons as the Lessor may
from time to time advise Lessee in writing to be the person or persons providing
finance to the Lessor to assist it in purchasing, funding or refinancing the
purchase by the Lessor of the Aircraft and including, where the context so
admits or requires, any agent or trustee for any one or more of such persons;

                                       9

<PAGE>

                                          [Amended and Restated Lease Agreement]

and (b) any of the respective successors, permitted assigns or permitted
transferees of any one or more of any such persons.

         "LETTER OF CREDIT" shall mean any letter of credit issued by a U.S.
bank reasonably acceptable to Lessor delivered by Lessee to Lessor pursuant to
this Agreement as security for Lessee's performance hereunder.

         "LESSEE JURISDICTION" shall mean the United States.

         "LESSOR LIEN" shall mean any Lien of any Person claiming by,
through or under Lessor which arises from any act or omission of Lessor, other
than any Lien created or permitted hereby or by any other Operative Document.

         "LIEN" means any mortgage, pledge, lien, charge, encumbrance,
hypothecation, lease, sublease, seizure, exercise of rights, security interest,
judgment, writ, order or other claim or right of possession of any kind or
nature whatsoever, however and wherever created or arising and whether or not
consensual (including, without limitation, any agreement or arrangement to give
or effect any of the foregoing and any conditional sale or other title retention
agreement).

         "LIFE LIMITED COMPONENT" shall mean any part or component on the
Aircraft for which the manufacturer has specified a certain life in either
calendar time, Cycles or Hours accumulated after which such part or component
must be replaced.

         "MAINTENANCE PLANNING DOCUMENT" or "MPD" shall mean the Boeing 737
maintenance planning document.

         "MAJOR CHECKS" shall mean any "D" check, "C" check, multiple "C" check
(including all lower checks and all other items that are due before the next "C"
check), heavy structural inspection (or equivalent), structural inspection or
annual heavy maintenance visit or segment thereof for commercial aircraft of the
same model as the Aircraft as set out in the Approved Maintenance Program.

         "MAJOR MODIFICATIONS" includes, but shall not be limited to: (i)
changes that alter the fundamental nature of the Aircraft as a passenger and
cargo carrying aircraft or Cabin modifications that materially change the
interior layout of the Aircraft (excluding changes to the seats or galleys),
(ii) changes to the Aircraft structure or performance of the Aircraft, (iii)
changes that adversely affect interchangeability or replaceability of Parts,
(iv) substitution of different types of equipment or accessories which are not
equivalent in cost, value, remaining useful life and/or operational capability
to the equipment or accessories being replaced, (v) changes that invalidate or
impair any warranty with respect to the Aircraft or any Engine or Part, (vi)
changes that adversely affect the eligibility of the Aircraft to obtain an
Airworthiness Certificate from the Aviation Authority or (vii) any changes that
result in a variation from the original type certificate for the Aircraft, but
shall exclude changes pursuant to ADs and SBs

                                      10

<PAGE>

                                          [Amended and Restated Lease Agreement]

provided by the Airframe Manufacturer which have Aviation Authority approval,
all Required Modifications and changes which are estimated to cost less than
100,000 Dollars.

         "MODIFICATION" shall mean any modification, addition, alteration,
removal or other change, including, without limitation, ADs and SBs, to the
Airframe, any Engine or any Part.

         "OPERATIVE DOCUMENTS" shall mean this Agreement, each Lease Supplement
and any other document, agreement or instrument to which Lessee is a party, or
to which it consents in writing, or which is delivered by or on behalf of Lessee
and which is entered into or delivered in connection with any of the foregoing
or with any of the transactions contemplated by the foregoing.

         "OWNER PARTICIPANT" means Fleet Business Credit Corporation, formerly
known as Sanwa Business Credit Corporation, a Delaware corporation.

         "OWNER TRUSTEE" means First Security Bank, National Association, in
its capacity as trustee under the Trust Agreement.

         "PARTS" shall mean any and all appliances, parts, components, modules,
communications equipment, computers, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (including the APU, the
Landing Gear but excluding complete Engines or engines) which may from time to
time be incorporated or installed in or attached to the Airframe or any Engine,
so long, as title thereto shall remain vested in Lessor, in accordance with the
terms hereof.

         "PAST DUE RATE" shall mean a rate per annum equal to 3% over the Base
Rate.

         "PERMITTED JURISDICTION" shall mean any country listed in Schedule 1.

         "PERMITTED LIEN" shall mean any Lien referred to in clauses (i)
through (vi) of Section 8(a).

         "PERSON" shall mean any individual, corporation, trust, partnership,
unincorporated association, joint venture, association, joint-stock company,
government or Government Entity.

         "RELATED INDEMNITEE" shall mean, with respect to any Indemnified
Party, any Affiliate, successor, assign, director, officer, corporate
stockholder, partner, employee, servant or agent of such Indemnified Party.

         "RENT" shall mean, collectively, Basic Rent and Supplemental Rent.

                                      11

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "REPLACEMENT ENGINE" shall mean an Engine Manufacturer model JT8D-9A
engine (or an improved model having a modification status, value and utility at
least equal to such an Engine Manufacturer model JT8D-9A engine) (including,
without limitation, all warranty rights with respect to such engine) suitable
for installation and use on the Airframe without impairing the value or utility
of the Aircraft, and which has a value and utility at least equal to the Engine
it is replacing (assuming such Engine was in the modification status, condition
and repair required by the terms hereof immediately prior to being replaced) and
which has been maintained, serviced, repaired and overhauled in substantially
the same manner as is required under this Agreement as to "Engines", title to
which shall have been conveyed to Lessor pursuant to the terms hereof, together
with all Parts relating to such Engine so long as the same shall be incorporated
or installed in or attached to such Engine leased hereunder, and any and all
Parts removed therefrom so long as title to such removed Parts shall remain
vested in Lessor in accordance with the terms hereof

         "REQUIRED MODIFICATIONS" has the meaning specified in Section
10(c)(ii)(B).

         "REQUIRED SBs" shall mean all alert SBs and any other SBs which have
been accomplished on 50% of Lessee's fleet prior to the Return Date.

         "RETURN" shall mean the return of the Aircraft by Lessee to Lessor at
the Return Location in the condition and manner required by Section 7 and the
other provisions of this Agreement and the other Operative Documents, as
evidenced by the execution by Lessor, and the delivery to Lessee, of the Return
Receipt referred to in Section 7(f).

         "RETURN DATE" shall mean the date upon which the Aircraft is returned
to Lessor pursuant to and in accordance with Section 7 hereof.

         "RETURN LOCATION" shall mean such location in the western United
States, western Canada or Mexico as may be designated by Lessor, or such other
location as shall be mutually agreed between Lessor and Lessee.

         "RETURN RECEIPT" shall have the meaning specified in Section 7(f).

         "SB" shall mean any service bulletin as issued by the Airframe
Manufacturer, Engine Manufacturer or the manufacturer of any appliances or
Parts.

         "SECURITY DEPOSIT" shall have the meaning specified in Section
3(d)(i).

         "SHOPVISIT" shall mean, with respect to an Engine, scheduled
maintenance of such Engine which requires the Engine to be removed from the
airframe to which it is attached (or, if the Engine is not attached to an
airframe, scheduled maintenance that would require such removal if the Engine
were so attached).

                                      12

<PAGE>

                                          [Amended and Restated Lease Agreement]

         "STATE OF REGISTRATION" shall mean the United States.

         "STIPULATED LOSS VALUE" shall mean US$8,000,000.

         "SUPPLEMENTAL RENT" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes, agrees or otherwise
becomes liable to pay to Lessor, any Indemnified Party or any other Person
hereunder or under any of the other Operative Documents, including, without
limitation, payments of or in respect of the Stipulated Loss Value, Expenses,
Taxes, Break Amount or other amounts payable under any indemnities.

         "SURETY BOND" shall have the meaning specified in Section 3(d)(i).

         "TAXES" shall mean any and all present or future fees (including,
without limitation, license, documentation and registration fees), taxes
(including, without limitation, income, receipts, sales, rental, use, turnover,
value-added, property (tangible or intangible), excise, franchise, capital,
user, transfer, doing business and stamp taxes or duties), licenses, levies,
imposts, duties, recording charges or fees, or other charges, assessments,
deductions or withholdings of any nature whatsoever, together with any
assessments, penalties, late payment charges, notary charges, fines, additions
to tax or other similar liabilities with respect to any of the foregoing and
interest on any of the foregoing.

         "TAX INDEMNITEE" shall mean Lessor, in its individual and trust
capacities, Owner Participant, each of their respective Affiliates, any
successor or permitted assign of either of the foregoing and the directors,
officers, employees, servants and agents of each of the foregoing.

         "TIME CONTROLLED COMPONENT" shall mean any component that Lessee
monitors with an interval pursuant to which action is taken to inspect, replace
and/or overhaul such component and that is limited by Airframe Cycles, Airframe
Flight Hours and/or calendar time.

         "TRUST AGREEMENT" means that certain Trust Agreement dated as of March
22, 1995 between Owner Participant and Owner Trustee.

         (b) CONSTRUCTION.

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

                  (u) Each of "Lessor," "Lessee" or any other Person includes,
              without prejudice to the provisions of this Agreement, any
              successor in interest to it and any permitted assignee and, in
              the case of any Government Entity, any Government Entity
              succeeding to all or any of its functions;

                  (v) Words importing the plural include the singular and vice
              versa;

                                      13

<PAGE>

                                          [Amended and Restated Lease Agreement]

                  (w) Any document or any law includes that document or that
              law, as the case may be, as amended, modified or supplemented
              from time to time in accordance with its terms, and any document
              entered into or any law enacted or promulgated, as the case may
              be, in substitution or replacement therefor;

                  (x) A "Law" (1) includes any statute, decree, constitution,
              regulation, decision, finding, order, rule, judgment or directive
              of any Government Entity, (2) includes any treaty, pact, compact
              or other agreement to which any Government Entity is a signatory
              or party, (3) includes any judicial or administrative
              interpretation or application thereof, and (4) is a reference to
              any of the foregoing as amended, substituted, reissued or
              reenacted;

                  (y) The words "this Lease," "this Agreement," "hereby,"
              "herein," "hereto," "hereof" and "hereunder" and words of similar
              import when used in this Agreement refer to this Agreement as a
              whole including, without limitation, the Schedules and Exhibits,
              and all Annexes thereto, and not to any particular provisions of
              this Agreement; and

                  (z) A Section or an Exhibit or a Schedule is a reference to a
              section of, or an exhibit or schedule to, this Agreement.

              (ii) Headings used in this Agreement are for convenience only and
         shall not in any way affect the construction of, or be taken into
         consideration in the interpretation of, this Agreement.

     SECTION 2. LEASE OF AIRCRAFT.

     Lessor and Lessee acknowledge that Lessor delivered, and Lessee took
delivery of, the Aircraft on March 30, 1995 at the Delivery Location pursuant
to and in accordance with Article 3 of the Original Lease.

     SECTION 3. LEASE TERM; RENT; PAYMENTS.

         (a) LEASE TERM. The term of this Lease (the "Lease Term") commenced on
the Delivery Date and, unless this Agreement is terminated earlier pursuant to
the provisions hereof, shall end on the Expiry Date.

         (b) BASIC RENT. During the Lease Term, from and including the Delivery
Date to, but not including, the Effective Date, Lessee paid Basic Rent in
accordance with Section 5.3 of the Original Lease. From and including the
Effective Date, Lessee shall pay rent for the Aircraft in advance on each Basic
Rent Date occurring on and after the Effective Date during the remaining Lease
Term in advance in immediately available Dollars, in the amounts and on the

                                      14

<PAGE>

                                          [Amended and Restated Lease Agreement]

dates set forth in Exhibit B hereto. Each payment of Basic Rent includes the
Additional Rent specified in Section 3(g) below.

         (c) SUPPLEMENTAL RENT. Lessee shall pay, or cause to be paid, promptly
to Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting or in respect of the Stipulated Loss Value, Break Amount and
all other amounts of Supplemental Rent when and as the same shall become due and
owing. In the event of any failure on the part of Lessee to pay any Supplemental
Rent when due, Lessor and each other Indemnified Party shall have all rights,
powers and remedies provided for herein or in any other Operative Document, or
at law or in equity or otherwise, in the case of nonpayment of Basic Rent.
Lessee also shall pay to Lessor, or to whomsoever shall be entitled thereto, on
demand, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Past Due Rate on any part of any installment of Basic Rent not
paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent (to the extent permitted by applicable law) not
paid when due for the period until the same shall be paid.

         (d) SECURITY DEPOSIT

         (i) Lessee has delivered to Lessor a security deposit consisting of a
$150,000 cash portion (the "Cash Deposit") and a $150,000 surety bond (the
"Surety Bond") (collectively with the Cash Deposit, the "Security Deposit"). The
Cash Deposit may be commingled with Lessor's general funds and any interest
earned thereon will be for Lessor's Account. $25,000 of the Cash Deposit is
completely and absolutely non-refundable (the "Non-Refundable Deposit") and, if
otherwise unused by Lessor upon termination of this Lease, shall be retained by
Lessor.

         (ii) The Security Deposit shall be held by Lessor during the Lease
Term as security for the full and punctual performance of all of Lessee's
obligations to Lessor under this Agreement including, without limitation,
satisfaction of the requirements of the condition of the Aircraft at the end of
the Lease Term as set forth in Section 7. Lessee acknowledges that Lessor may
commingle the Security Deposit with its general funds. Lessee hereby grants to
Lessor a security interest by way of first priority perfected security interest
in its interest, if any, in the Security Deposit and the proceeds thereof and
hereby grants to Lessor any and all of Lessee's right, title and interest
therein, if any, as security for Lessee's obligations hereunder. No interest
shall accrue in favor of Lessee in respect of the Security Deposit held by
Lessor. At the end of the Lease Term, upon performance by Lessee, satisfactory
to Lessor, of all of Lessee's obligations hereunder (other than potential
contingent obligations (of which Lessor has no knowledge) under the indemnity
provisions of this Agreement), Lessor shall promptly refund any remaining
Security Deposit to Lessee. Lessor's obligations in respect, of the return of
the Security Deposit shall be that of a debtor of Lessee, not as a trustee or
other fiduciary.

         (iii) If a Default shall have occurred and be continuing, Lessor may,
but shall not be obliged to, apply the Security Deposit in whole or in part for
the payment of any Rent, indemnities, legal fees and other expenses, insurance
and other casualty payments and any other

                                      15

<PAGE>

                                          [Amended and Restated Lease Agreement]

amount owing from time to time by Lessee under this Agreement, for the payment
of any loss or damage suffered by Lessor as a result of any Default or utilize
the Security Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or to otherwise remedy any circumstance giving rise to a
Default, including the redelivery condition of the Aircraft, without prejudice
to any other remedy of Lessor (it being understood that an application of the
Security Deposit shall not constitute a cure of any Default unless and until
Lessee shall have complied with the following sentence). In any such event
Lessee shall, on demand, restore the full amount of the Security Deposit by
payment to Lessor of an amount in immediately available Dollars equal to the
amount by which the balance of the Security Deposit has been reduced under this
clause (iii).

         (iv) Surety Bond shall provide for payments to be made thereunder at
sight, in dollars, and for drawings to be made (by advice, confirmation or
otherwise) in Honolulu, Hawaii. In the event that the long-term unsecured
debt rating of the issuing entity is reduced to a level below A- (as rated by
Standard & Poor's) or if the Lessor shall have received a Non-renewal Notice
(a "Substitution Event"), Lessor shall have the right to draw down the entire
amount of the Surety Bond, if Lessee shall not, within ten days of the
occurrence of such Substitution Event, have caused such Surety Bond to be
replaced with a substitute Surety Bond issued by an issuing entity reasonably
acceptable to Lessor which complies with the required minimum rating
specified above.

         (e) PAYMENTS IN GENERAL.

         (i) All payments of Rent shall be made directly by Lessee in Dollars
by wire transfer of immediately available funds on the date for payment to the
account for Lessor specified in column (2) of Schedule 3, or to such account as
Lessor shall otherwise direct by notice to Lessee.

         (ii) If the due date for any payment of Basic Rent, Break Amount or
Stipulated Loss Value is not a Business Day, then, unless otherwise provided
herein, such payment shall be made on the Business Day next succeeding such due
date with the same force and effect as if made on such due date and without
adjustment in the amount due.

         (iii) All amounts of interest or amounts calculated by reference to
interest payable under any of the provisions of this Agreement shall be
calculated on the basis of the actual number of days elapsed and a 365-day or
366-day year, as applicable.

         (f) NO DEDUCTIONS OR WITHHOLDINGS. All payments by Lessee under this
Agreement or any other Operative Document to Lessor or any other Indemnified
Party, including payments in respect of Basic Rent, Supplemental Rent, interest,
fees, indemnities or any other item, shall be made in full without any
counterclaim, delay, deduction or withholding of any kind or nature whatsoever
(including, without limitation, in respect of any setoff, counterclaim, Taxes,
insurance charges, monetary transfer fees or any costs and expenses arising in
connection with

                                      16

<PAGE>

                                          [Amended and Restated Lease Agreement]

the use and operation of the Aircraft) but excluding deduction or withholding
required by law with respect to Taxes for which Lessee is not required to
indemnify Lessor or a Tax Indemnitee under Section 9(c).

         (g) Lessee shall repay to Lessor the Engine Reserve Claim (as defined
in Lease Amendment No. 3) by paying monthly installments (the "Additional Rent")
sufficient to repay the Engine Reserve Claim in full during the Lease Term. The
Additional Rent shall be considered part of the Basic Rent. Upon the Effective
Date, Lessor shall have no further claim under Lease Amendment No. 3.

     SECTION 4. CONDITIONS PRECEDENT. This Agreement shall be effective as
of the Effective Date, but shall be subject to the fulfillment to the
satisfaction of Lessor and Lessee of the following conditions precedent:

         (a) DUE DILIGENCE. Lessor shall have completed, in a manner
satisfactory to it, its due diligence review with respect to the Lessee's
financial condition and statements, including review of the legal and regulatory
framework applicable to this transaction, including, without limitation,
resolution to the reasonable satisfaction of Lessor of all legal and tax related
matters.

         (b) AGREEMENTS AND DOCUMENTS. The following documents, agreements,
instruments or certificates shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall each be satisfactory
in form and substance to Lessor and Lessee and shall be in full force and effect
and in the English language and executed counterparts shall have been delivered
to Lessor and/or to its respective counsel:

         (i) this Agreement; and

         (ii) (y) a Certificate of Insurance in the form of Exhibit F and which
    otherwise complies with the requirements of Section 15 and (z) a Broker's
    Letter in the form of Exhibit G from the Insurance Brokers and which
    otherwise complies with the requirements of Section 15, together with such
    other evidence as Lessor shall request as to the due compliance by Lessee
    with Section 15;

         (iii) an opinion of Char, Sakamoto, Ishii, Lum & Ching, special
    counsel to Lessee in the form of Exhibit K and covering such other matters
    as Lessor may reasonably request;

         (iv) copies of documents where available evidencing the issuance of
    each Authorization that may be required in connection with the remittance
    to Lessor and any other intended recipient of any amount payable under this
    Agreement, or any other Operative Document, the performance by Lessee of
    any of its respective obligations hereunder or thereunder;

                                      17

<PAGE>

                                          [Amended and Restated Lease Agreement]

         (v) certificate signed by a duly authorized officer of Lessee:

              (u) certifying the incumbency, and the accuracy of the
         signatures, of the Person or Persons authorized to execute and deliver
         the Operative Documents on behalf of Lessee;

              (v) stating that Lessee's representations and warranties
         contained in this Agreement and each other Operative Document are and
         shall be true and correct on and as of the Effective Date as though
         made on and as of such date (unless made as of a specified date, in
         which case such representations and warranties shall be true and
         correct as of such specified date); and

              (w) stating that no Default or Event of Default has occurred and
         is continuing or will result from the lease of the Aircraft under this
         Agreement;

         (viii) such other documents, agreements, certificates and evidence
    with respect to the Aircraft, Lessee, any Persons acting for Lessee or
    otherwise as Lessor may reasonably request in connection with the
    consummation of the transactions contemplated by this Agreement, the taking
    of all proceedings (corporate or otherwise) in connection therewith or
    compliance with all the conditions set forth in this Section 4;

         (ix) Lessee shall have paid in full (or delivered) (x) the first
    installment of Basic Rent due on the Effective Date and (y) the Security
    Deposit;

         (x) all representations and warranties of Lessee hereunder and under
    the other Operative Documents shall be true and correct on and as of the
    Effective Date as though made on and as of such date (unless made as of a
    specified date, in which case such representations and warranties shall be
    true and correct as of such specified date);

         (xi) Lessee shall have performed, complied with and observed all its
    obligations, covenants and agreements set forth herein and in each other
    Operative Document which it is required to perform, comply with or observe
    prior to or on the Effective Date;

         (xii) no Default, Event of Default or Event of Loss, or event,
    condition or circumstance that would with the giving of notice or passage
    of time or both become or give rise to an Event of Loss, shall have
    occurred;

         (xiii) NECESSARY GOVERNMENT ACTIONS. All appropriate action required
    to have been taken prior to the Effective Date by the Aviation Authority or
    any governmental or political agency, subdivision or instrumentality of the
    United States in connection with the transactions contemplated hereby shall
    have been taken, and all orders, permits, licenses, waivers,
    authorizations, exemptions and approvals of such

                                      18

<PAGE>

                                          [Amended and Restated Lease Agreement]

    entities required to be in effect on the Effective Date in connection
    with the transactions contemplated hereby shall have been issued, and all
    such orders, permits, licenses, waivers, authorizations, exemptions and
    approvals shall be in full force and effect on the date hereof and on the
    Effective Date (no such orders, permits, licenses, waivers, authorizations,
    exemptions and approvals shall be issued on a temporary basis pending
    further review by the entity requiring such to be in effect).

         (xiv) NO GOVERNMENT ACTIONS. No action or proceeding, shall have been
    instituted nor shall governmental action be threatened before any United
    States or foreign court or governmental agency, nor shall any order,
    judgment or decree have been issued or proposed to be issued by any United
    States or foreign court or governmental agency at the time of the Effective
    Date to set aside, restrain, enjoin or prevent the completion and
    consummation of this Lease or the transactions contemplated hereby and
    thereby.

         (xv) NO CHANGE IN LAW. No change shall have occurred after the date of
    execution and delivery of this Lease in applicable law or regulations
    thereunder or interpretations thereof by appropriate regulatory authorities
    which, in the reasonable opinion of Lessor, would make it a violation of a
    law or regulations for Lessor to execute, deliver and perform its
    obligations hereunder or under any other Operative Document to which it is
    a party.

         (xvi) all representations and warranties of Lessor hereunder and under
    the other Operative Documents shall be true and correct on and as of the
    Effective Date as though made on and as of such date (unless made as of a
    specified date, in which case such representations and warranties shall be
    true and correct as of such specified date); and

         (xvii) Lessor shall have performed, complied with and observed all its
    obligations, covenants and agreements set forth herein and in each other
    Operative Document which it is required to perform, comply with or observe
    prior to or on the Effective Date.

    SECTION 5. REPRESENTATIONS AND WARRANTIES.

         (a) DISCLAIMER; LESSOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS

            (i) THE AIRCRAFT HAS BEEN DELIVERED UNDER THIS LEASE "AS IS, WHERE
    IS" AND LESSEE AGREES, ACKNOWLEDGES AND ACCEPTS THAT, NEITHER LESSOR NOR
    ANY OTHER INDEMNIFIED PARTY MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER
    CONCERNING THE AIRCRAFT OR OTHERWISE. LESSEE, FOR THE BENEFIT OF LESSOR AND
    EACH INDEMNIFIED PARTY, HEREBY WAIVES, RELEASES AND RENOUNCES ALL
    WARRANTIES, REPRESENTATIONS AND OTHER INDEMNITIES,

                                      19

<PAGE>

                                          [Amended and Restated Lease Agreement]

    OBLIGATIONS AND LIABILITIES OF LESSOR AND ANY OTHER INDEMNIFIED PARTY
    AND ANY RIGHTS, CLAIMS AND REMEDIES OF LESSEE, EXPRESS OR IMPLIED, ARISING
    BY LAW OR OTHERWISE, IN EACH CASE, WITH RESPECT TO ANY NONCONFORMANCE OR
    DEFECT IN THE AIRCRAFT, ANY PART THEREOF OR ANY OTHER THING DELIVERED,
    LEASED, CHARTERED OR TRANSFERRED UNDER THIS LEASE, OR OTHERWISE INCLUDING,
    WITHOUT LIMITATION:

         (A) ANY WARRANTY AS TO THE AIRWORTHINESS, VALUE, CONDITION, DESIGN,
    OPERATION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, OR ANY
    DEFECT IN, THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA, ANY
    AIRCRAFT DOCUMENTATION OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED
    HEREUNDER;

         (B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A
    PARTICULAR PURPOSE;

         (C) ANY EXPRESS OR IMPLIED WARRANTY AS TO TITLE;

         (D) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
    DEALING OR USAGE OF TRADE;

         (E) ANY OBLIGATION OR LIABILITY WITH RESPECT TO ANY ACTUAL OR ALLEGED
    PATENT OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT;

         (F) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
    OR NOT IN STRICT OR ABSOLUTE LIABILITY OR ARISING FROM THE NEGLIGENCE OF
    LESSOR OR ANY INDEMNIFIED PARTY, ACTUAL OR IMPUTED, ACTIVE OR PASSIVE; AND

         (G) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR
    DAMAGE TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA OR ANY
    OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT OR FOR ANY OTHER
    DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

              (ii) DELIVERY BY LESSEE TO LESSOR OF LEASE SUPPLEMENT NO. 1 WILL
         BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE (BUT WITHOUT
         PREJUDICE TO ANY CLAIMS LESSOR OR LESSEE MAY HAVE AGAINST THE AIRFRAME
         MANUFACTURER, ENGINE MANUFACTURER OR ANY VENDOR WITH RESPECT TO THE
         AIRCRAFT) THAT LESSEE HAS EXAMINED AND INSPECTED THE

                                      20

<PAGE>

                                          [Amended and Restated Lease Agreement]

         AIRCRAFT, THAT THE AIRCRAFT AND THE AIRCRAFT DOCUMENTATION ARE
         SATISFACTORY TO LESSEE AND THAT LESSEE HAS IRREVOCABLY AND
         UNCONDITIONALLY ACCEPTED THE AIRCRAFT FOR LEASE HEREUNDER WITHOUT ANY
         RESERVATIONS WHATSOEVER.

              (iii) Lessor represents and warrants that (i) on the Delivery
         Date and throughout the Lease Term, so long as no Event of Default
         shall have occurred and be continuing, except as may be expressly
         provided in this Agreement or in any other Operative Document to which
         Lessee is a party or consents, Lessor shall not take or cause to be
         taken any action inconsistent with Lessee's right of quiet enjoyment
         of, or otherwise in any way interfere with or interrupt, the
         continuing use, operation and possession of the Aircraft, the Airframe
         or any Engine by Lessee or any permitted sublessee or assignee thereof
         and (ii) Lessor and Owner Participant are organized under the laws of
         the United States, or a state thereof, and the trust created by the
         Trust Agreement is a grantor trust for federal income tax purposes.

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

              No engine, part or Lessee Installed Part shall be installed on
         the Airframe or any Engine unless either (i) Lessee owns such item of
         equipment free and clear of all Liens other than Permitted Liens or
         (ii) the mortgagee, owner, lessor, conditional vendor or other
         lienholder in respect of such item of equipment has agreed that it
         shall not acquire, exercise or assert any interest over the Aircraft,
         the Airframe, any Engine or any Part.

              Lessee may install TCAS, a windshear detection system, seats and
         galleys, which shall upon installation become part of the Airframe and
         shall remain on the Aircraft upon expiration of this Agreement.
         Such TCAS, windshear detection system, seats and galleys are not
         considered Additional Parts.

        (b) LESSEE'S REPRESENTATIONS AND WARRANTIES. In order to induce Lessor
to enter into this Agreement, Lessee hereby represents and warrants to Lessor as
of the date hereof and as

                                      21

<PAGE>

                                          [Amended and Restated Lease Agreement]

of the Effective Date (unless, in each case, such representation and warranty
is expressly applicable on and as of another date or dates) that:

         (i) ORGANIZATION, QUALIFICATION, ETC. Lessee (w) is a company
    incorporated under the laws of the State of Delaware, (x) holds all
    Authorizations necessary to authorize Lessee to engage in air transport and
    to carry on scheduled passenger and cargo service in each case as presently
    conducted, (y) has the corporate power and authority to own or hold under
    lease its properties wherever located or used and to enter into and perform
    its obligations under each Operative Document to which it is a party, (z)
    is duly qualified and authorized to do business, and is in good standing,
    in each jurisdiction in which the nature of its business makes such
    qualification necessary, except where the absence of such qualification
    would not materially adversely affect its ability to perform its
    obligations under the Operative Documents and (aa) is a Certificated Air
    Carrier.

         (ii) CORPORATE AUTHORITY. The execution, delivery and performance by
    Lessee of this Agreement and each other Operative Document to which Lessee
    is a party have been duly authorized by all necessary corporate action on
    the part of Lessee, do not require any stockholder or shareholder approval,
    or approval or consent of any trustee or holders of any indebtedness or
    obligations of Lessee, except such as have been duly obtained or, by the
    Effective Date, will have been duly obtained, and copies of which shall
    have been delivered to Lessor on or before the Effective Date.

         (iii) GOVERNMENT APPROVALS. Neither the execution and delivery by
    Lessee of this Agreement or any other Operative Document to which Lessee is
    a party nor the performance by Lessee of its obligations hereunder or
    thereunder (including, without limitation, Lessee's payment of Rent in
    Dollars to Lessor or any other Indemnified Party) requires any
    Authorization (including, without limitation, any import, customs, foreign
    exchange or other licenses or permits), except for (y) Authorizations that
    have been duly obtained and are in fall force and effect, and copies of
    which shall have been delivered to Lessor on or before the Effective Date,
    and (z) any normal periodic and other reporting requirements under the
    applicable rules and regulations of the Aviation Authority (but only to the
    extent required to be observed or performed after the Effective Date).

         (iv) NO BREACH. Neither the execution and delivery of this Agreement
    or any other Operative Document by Lessee nor the consummation by Lessee of
    the transactions contemplated hereby or thereby nor compliance by Lessee
    with any of the terms or provisions hereof or thereof will (x) violate any
    of the provisions of the organizational or charter documents or bylaws of
    Lessee, (y) conflict with or contravene, or result in the creation,
    perfection or enforcement of any lien under, any law applicable to or
    binding upon the Aircraft, Lessee or any property of Lessee or (z) conflict
    with or result in any breach of any of the terms or provisions of, or
    constitute any default under, or result in or require the creation of any
    Lien upon any property of Lessee under, any

                                      22

<PAGE>

                                          [Amended and Restated Lease Agreement]

    indenture, mortgage, deed of trust, conditional sales contract, note,
    loan, credit agreement or other agreement or instrument to which Lessee is
    a party or by which Lessee or its properties or assets may be bound or
    affected.

         (v) LEGAL, VALID AND BINDING AGREEMENTS. This Lease and each other
    Operative Document to which Lessee is a party, in each case, as and when
    entered into, have been, or will be, duly executed and delivered by Lessee
    and constitute, or will constitute, legal, valid, binding and
    enforceable obligations of Lessee.

         (vi) LITIGATION. There are no pending or threatened actions or
    proceedings before any court or administrative agency (y) in respect of
    this Agreement or any other Operative Document or the Aircraft or the
    performance by Lessee of its obligations hereunder or under any other
    Operative Document or (z) which would, if adversely determined, materially
    adversely affect the ability of Lessee to perform its obligations under the
    Operative Documents.

         (vii) FILING. Except for the registration of the Aircraft with the FAA
    and the filings or recordings described in Schedule 4, no further action,
    including the filing or recording of any instrument or document
    (including the filing of any Uniform Commercial Code financing statement)
    is necessary or advisable under the laws of the State of Registration or
    the Lessee Jurisdiction (x) in order for this Agreement to constitute a
    valid and perfected lease of record relating to the Aircraft, (y) to
    authorize or permit Lessee to perform its obligations under each Operative
    Document (including, without limitation, Lessee's obligation to pay Rent)
    or (z) fully to protect, establish, perfect and preserve Lessor's title to,
    and Lessor's rights and interests in, the Aircraft as against Lessee and
    any other Person.

         (viii) NO WITHHOLDING. Lessee will not be required to deduct from any
    Rent payment made or to be made hereunder any withholding or other Tax
    under the laws of the State of Registration, the Lessee Jurisdiction or any
    other jurisdiction, either (y) on or by virtue of the execution or delivery
    by Lessee of this Agreement or any other Operative Document or (z) on or by
    virtue of the performance by Lessee of this Agreement or any other
    Operative Document, including, without limitation, payment of Rent or any
    other amount made, or to be made, by Lessee pursuant to this Agreement or
    any other Operative Document.

         (ix) NO DEFAULT OR EVENT OF DEFAULT. There has not occurred any event
    which is presently continuing and which would constitute a Default or
    Event of Default under this Agreement or any of the other Operative
    Documents.

         (x) FINANCIAL CONDITION. The statements of financial position of
    Lessee as of December 31, 1999 and the related statements of earnings and
    cash flows of Lessee for the year then ended, fairly present the financial
    condition of Lessee as at such date and

                                      23

<PAGE>

                                          [Amended and Restated Lease Agreement]

    the results of operations and cash flow of Lessee for the period ended
    on such date, in accordance with generally accepted accounting principles
    consistently applied (except as may be stated in the notes thereto), and,
    since December 31, 1999, there has been no material adverse change in such
    condition or operations, except as disclosed in press releases issued by
    Lessee.

         (xi) TAXES. Lessee has paid or caused to be paid all Taxes when due
    and payable or has made adequate provision by way of security for all Taxes
    payable by Lessee (except to the extent being contested in good faith and
    by appropriate proceedings, and for the payment of which adequate reserves
    have been provided, so long as such contest does not involve a material
    danger of the sale, forfeiture, confiscation, seizure or loss of the
    Aircraft, any Engine or Part thereof). No Taxes (including, without
    limitation, any stamp or value-added taxes), levies, imposts, duties or
    similar charges may be imposed by the government of the Lessee
    Jurisdiction, or any Government Entity or political or taxing subdivision
    therein, upon or with respect to the execution or delivery of this
    Agreement or any other Operative Document or the delivery of the Aircraft
    hereunder.

         (xii) NO MATERIAL ADVERSE CHANGE. No event has occurred or state of
    affairs exists that has or may have a material adverse effect on (i) the
    ability of Lessee to carry on its business or to perform its obligations
    under any Operative Document to which it is or will be a party or (ii) the
    rights or interests of Lessor under any Operative Document to which it is
    or will be a party.

         (xiii) PARI PASSU. The obligations of Lessee under this Agreement and
    the other Operative Documents are direct, general and unconditional
    obligations of Lessee and rank at least pari passu with all other present
    and future unsecured and unsubordinated obligations (including contingent
    obligations) of Lessee with the exception of such obligations as are
    mandatorily preferred by law and not by virtue of any contract.

         (xiv) SECTION 1110. Lessor is entitled to the protection of Section
    1110 of Chapter 11 of Title 11 of the United States Code in connection with
    its right to take possession of the Aircraft, Airframe and Engines in the
    event of a case under such Chapter 11 in which Lessee is a debtor.

         The rights and remedies of Lessor in relation to any
misrepresentation or breach of warranty on the part of Lessee shall not be
prejudiced by any investigation by or on behalf of Lessor into the affairs of
Lessee, by the performance of this Agreement or by any other act or thing
which may be done or omitted to be done by Lessor and which would or might,
but for this provision, prejudice such rights and remedies.

                                      24

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 6. CERTAIN COVENANTS OF LESSEE. Lessee covenants and agrees with
Lessor at Lessee's sole cost and expense, as  follows:

         (a) MAINTENANCE OF CORPORATE EXISTENCE- DULY QUALIFIED; CERTIFICATED
AIR CARRIER. Subject to Section 6(b), at all times during the Lease Term,
Lessee shall (i) exist as a company incorporated under the laws of the State of
Delaware, (ii) hold all Authorizations necessary to authorize Lessee to engage
in air transport and to carry on passenger and cargo service in each case as
presently conducted by Lessee, (iii) have the corporate power and authority to
own or hold under lease its properties wherever located or used and to enter
into and perform its obligations under each Operative Document to which it is a
party, (iv) be duly qualified and authorized to do business, and be in good
standing, in each jurisdiction in which the nature of its business makes such
qualification necessary, except where the absence of such qualification would
not materially or adversely affect its ability to perform its obligations under
the Operative Documents and (v) at all times be a Certificated Air Carrier.

         (b) MERGER OR CONSOLIDATION. Lessee shall preserve its corporate
existence, and will not merge or consolidate with any person unless the
successor person resulting from such merger or consolidation (the "Successor"):

             (i) is the Lessee or an entity incorporated or organized in the
        State of Delaware or another State of the United States;

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

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

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

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

         (c) REPORTING REQUIREMENTS. The Lessee shall furnish to the Lessor and
the Lender:

             (i) within 60 days after the last day of the first three fiscal
        quarters of each fiscal year of Aloha Airgroup, Inc., unaudited
        consolidated quarterly financial statements

                                      25

<PAGE>

                                          [Amended and Restated Lease Agreement]

        of the Aloha Airgroup, Inc. prepared for such quarter as of the
        last day of such quarter and statements of income and retained earnings
        for such fiscal quarter and on a comparative basis figures for the
        corresponding period of the immediately preceding fiscal year, all in
        reasonable detail, each such statement to be certified in a certificate
        of Aloha Airgroup, Inc.'s chief financial officer or chief accounting
        officer as fairly presenting the financial position and the results of
        operations of Aloha Airgroup, Inc. as at its date and for such quarter
        (subject to year-end audit adjustments) and as having been prepared in
        accordance with GAAP;

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

             (iii) concurrently with the financial statements furnished
        pursuant to Clauses 6(c)(1) and (ii) above, an officer's certificate
        signed by the chief financial officer or chief accounting, officer of
        Lessee certifying to the best knowledge after due inquiry of such
        officer that no Default occurred during the period covered by such
        financial statements and no Default exists on the date of such
        officer's certificate or, if a Default occurred or exists, stating that
        fact and specifying the nature and period of existence of such Default
        and the actions Lessee took or proposes to take with respect to such
        Default;

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

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

             (vi) all such other reports as are noted in Schedule 6.

         (d) GOVERNMENT APPROVALS. Lessee shall maintain, or cause to be
maintained, in full force and effect all Authorizations obtained or effected in
connection with this Agreement and every document or instrument contemplated
hereby as are required to be maintained and

                                      26

<PAGE>

                                          [Amended and Restated Lease Agreement]

shall take all such additional action as may be necessary or advisable in
connection therewith. Lessee further undertakes to obtain or effect any new or
additional Authorizations as may become necessary for the performance of any of
the terms and conditions hereof or any other document or instrument
contemplated hereby.

         (e) TAXES. Lessee shall file or cause to be filed all tax returns
which are required to be filed and shall pay or cause to be paid all Taxes when
due and payable (except to the extent being contested in good faith and by
appropriate proceedings, and for the payment of which adequate reserves have
been provided but only as long as such proceedings do not involve any material
danger of the sale, forfeiture, confiscation, seizure or loss of the Aircraft or
any interest therein).

         (f) PLACE OF BUSINESS. Lessee shall provide to Lessor written notice
of any change in its principal place of business as set forth in Schedule 3
within 30 days thereafter.

         (g) FILINGS. Lessee shall promptly take all such action, including the
filing or recording of any instrument or document as may, from time to time, be
necessary or advisable under the laws of the State of Registration, the Lessee
Jurisdiction or any jurisdiction in which the Aircraft is or will be operated
(x) in order for this Agreement to constitute a valid and perfected lease of
record relating to the Aircraft, (y) to authorize or permit Lessee to perform
its obligations under each Operative Document (including, without limitation,
its obligation to pay Rent) or (z) to fully protect, establish, perfect and
preserve Lessor's title to, and Lessor's rights and interests in, the Aircraft
as against Lessee, and any other Persons, excluding any third party claims
arising prior to Delivery, Lessor Liens and Liens granted by Lessor to Lessor's
lenders. For the avoidance of doubt, the cost of all filings and related
notarizations, required by this Agreement or any other Operative Document shall
be borne by Lessee.

         (h) APPROVED MAINTENANCE PROGRAM. Lessee shall not make any
substantive changes to the Approved Maintenance Program unless Lessor shall have
reviewed and approved such substantive changes to the Approved Maintenance
Program which Lessee proposes to make during the Lease Term, provided that (i)
substantive changes shall mean changes specifically related to the intervals
between maintenance actions or replacements, and (ii) Lessor's
approval/disapproval of such substantive changes shall be reasonable and
consistent with industry standards. Written notice, as specified in Section
23(f), of a proposed substantive change to the Approved Maintenance Program may
be given by Lessee independently or as part of a quarterly report delivered
pursuant to Section 10(d)(vii) hereof. If Lessor has not notified Lessee that
Lessor is unwilling to approve a proposed substantive change within ten (10)
Business Days of Lessor's receipt of written notice thereof, Lessor shall be
deemed to have approved of such change.

                                      27

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 7. RETURN OF THE AIRCRAFT.

         (a) DATE AND LOCATION OF RETURN. Upon any expiration or termination of
the Lease Term, subject only to Section 13(b)(ii)(x), Lessee, at its own risk,
cost and expense, shall return the Aircraft, including the Airframe, the
Engines, all Parts thereof and the Aircraft Documentation to Lessor or its
designee in accordance with the provisions of this Agreement and Lessee and
Lessor shall perform the elements of the Final Inspection as required hereby,
all prior to the end of the Lease Term (the "Return"). Not later than the end of
the Lease Term, the Aircraft shall be returned to Lessor or its designee at the
Return Location.

         (b) CONDITION OF AIRCRAFT. At Return, Lessee shall, at its sole risk,
cost and expense, procure that the Aircraft is free and clear of all Liens
(other than liens which existed prior to Delivery of the Aircraft to Lessee,
Lessor Liens and Liens granted by Lessor to Lessor's lenders) and that the
Aircraft complies in all respects with the conditions and requirements set forth
in Schedule 5.

         (c) FINAL INSPECTION.

             (1) No less than 30 days prior to commencement of the Return,
        Lessee shall provide Lessor with written notice of the date (which
        shall be not less than fifteen (15) days prior to the Expiry Date) of,
        and a reasonably complete plan for the content of, the Final
        Maintenance and shall give Lessor further written notice of the date
        of, and any changes to the plan for, the Final Maintenance. During the
        entire period of such Final Maintenance, the Aircraft, shall be made
        available to Lessor and/or Lessor's agents, representatives and
        designees (each, an "Inspecting Party") for ground inspection by the
        Inspecting Parties at the location of Final Maintenance. The Aircraft
        Documentation shall be made available for review at the then current
        operator's principal place of business. So long as no Event of Default
        has occurred and is continuing, no such inspection shall unreasonably
        interfere in the business operations of Lessee except to the extent
        such interference is reasonably necessary to enable an Inspecting Party
        to exercise its rights set forth in this Section 7(c)(i).

             Lessee shall make available to the Inspecting Parties such
        documentation regarding the condition, use, maintenance, operation and
        history of the Aircraft during the Lease Term as Lessor may reasonably
        request. During the Final Inspection, any Inspecting Party shall have
        the right to reasonably request that additional panels or areas be
        opened in order to allow further inspection by any Inspecting Party so
        long as either (i) such panels are ordinarily opened during "C" Checks
        or (ii) there are indications of damage found by Lessor during its
        inspection that reasonably warrant opening such panels. Lessee shall
        remove the Aircraft from service and open the areas of the Aircraft as
        required to perform the Final Maintenance and the other inspections and
        checks as contemplated in this Section 7 and Schedule 5 that are
        reasonably requested by Lessor in accordance with the terms hereof and
        otherwise permit Lessor to determine, and assist

                                      28

<PAGE>

                                          [Amended and Restated Lease Agreement]

        Lessor in determining that the Aircraft, including the Aircraft
        Documentation, is in the condition required herein.

             (ii) Promptly after such inspections, except as otherwise agreed
        in writing by Lessor and Lessee, any discrepancies from the Aircraft
        return condition requirements set forth in this Section 7, and any
        discrepancies that must be corrected in order to comply with the
        Approved Maintenance Program, which shall include clearing of all
        deferred maintenance items, shall be corrected by Lessee at its cost
        prior to the operational ground check described in Section 7(d).

         (d) OPERATIONAL GROUND CHECK.

             (i) In connection with the Return (and following, the inspection
        referred to in Section 7(c)), Lessee shall conduct an operational
        ground check of the Aircraft in accordance with the procedures set
        forth in the Airframe Manufacturer's maintenance manual, for the
        purpose of demonstrating to the reasonable satisfaction of Lessor the
        operation of all Aircraft systems that can be verified on the ground,
        including, if required by Lessor and at Lessee's cost, a full fuel tank
        visual leak check, audible ignition check (both systems), pitot and
        static systems check and hydraulic system external visual leak check.

             (ii) Promptly after the operational ground check, except as
        otherwise agreed in writing by Lessor and Lessee, any discrepancies
        from the Aircraft return condition requirements set forth in this
        Section 7, and any discrepancies that must be corrected in order to
        comply with the Approved Maintenance Program and the Airframe
        Manufacturer's maintenance manual criteria, shall be corrected by
        Lessee at its cost prior to the demonstration flight described in
        Section 7(e).

         (e) DEMONSTRATION FLIGHT.

             (i) Immediately following the operational ground check pursuant to
        Section 7(d), but prior to Lessor's technical acceptance of the
        Aircraft, Lessee shall, using, its own pilots and at its own cost,
        carry out for the Inspecting Parties a demonstration flight in the
        Aircraft in accordance with Lessee's specifications and the Lessee's
        Aviation Authority-approved flight manual to demonstrate the proper
        functioning of Aircraft systems and components, as requested by Lessor
        within limits and/or guidelines established by the relevant
        manufacturers and the Aviation Authority. Such flight shall continue
        for the duration necessary to perform such check flight procedures, but
        for a period not exceeding two (2) hours. Lessor shall be allowed at
        least two representatives on-board as observers during such flight and
        Lessee shall comply with all reasonable requests made by such
        representatives during such flight.

                                      29

<PAGE>

                                          [Amended and Restated Lease Agreement]

             (ii) Except as otherwise agreed in writing by the Lessor and
        Lessee, promptly following such demonstration flight, any deficiencies
        from the Aircraft return condition requirements set forth in this
        Section 7 and Schedule 5, and any discrepancies that must be corrected
        in order to comply with the Approved Maintenance Program and the
        Airframe Manufacturer's maintenance manual and to achieve the proper
        functioning of the Aircraft systems and components, shall be corrected
        by Lessee at its cost prior to Return.

             (iii) Lessor shall defend, indemnify and hold harmless Lessee from
        and against all claims, liabilities, damages, losses and judgments,
        which may be asserted against, suffered by, charged to or recoverable
        from Lessee by reason of injury to or death of any Person or
        Persons, or loss of or damage to any property, including, the Aircraft,
        arising out of or in any way connected with such ground inspection,
        operational ground check and test flights except to the extent
        occasioned in whole or in part by the fault or negligence of Lessee or
        such Person or Persons.

         (f) TECHNICAL ACCEPTANCE. Upon satisfactory completion of the Final
Inspection and, unless otherwise agreed in writing by Lessor and Lessee,
satisfactory correction of any discrepancies or deficiencies required to be
corrected by Lessee prior to Return, Lessor shall execute and deliver to Lessee,
a delivery receipt in the form of Annex A to Schedule 5 (the "Return Receipt")
which shall, for all purposes hereof, constitute complete, irrevocable and
absolute evidence of Lessor's technical acceptance of the Aircraft, except as
validly noted in such Return Receipt. To the extent technical acceptance occurs
prior to Return, Lessee shall remain liable for the performance of all of its
payments and other obligations hereunder, and for any damage to or loss of the
Aircraft occurring between the date thereof and Return (it being understood and
agreed that Lessee shall maintain insurance as required by Section 15 to and
including such date).

         (g) FAILURE TO RETURN AIRCRAFT. If Lessee shall, due to reasons of
Force Majeure or for any other reason whatsoever, fail to return the Aircraft at
the time or in the condition specified herein or return of the Aircraft is not
accepted by Lessor because of Lessee's failure to meet the requirements of this
Section 7 and Schedule 5, the obligations of Lessee provided in this Agreement
and each other Operative Document to which Lessee is a party (including the
obligation to pay Rent, on a per them basis based upon a pro rata application of
125% of the monthly Rent in force, during the last month of the Lease Term)
shall continue in effect with respect to the Aircraft, and the Lease Term shall
be deemed to be extended until Return of the Aircraft to Lessor; provided that,
this Section 7(g) (i) shall not be construed as permitting or authorizing Lessee
to fail to meet, or consenting to or waiving any failure by Lessee to perform,
Lessee's obligation to return the Aircraft in accordance with the requirements
of this Agreement and (11) shall not apply if Lessee's failure to return in a
timely fashion is due to (x) a reasonable good faith dispute between Lessee and
Lessor as to the meanin of one or more provisions of this Lease Agreement, (y)
Lessor's failure to diligently and responsibly cooperate to accomplish

                                      30

<PAGE>

                                          [Amended and Restated Lease Agreement]

Return of the Aircraft in a timely fashion or (z) Lessee's cooperation under
Section 7(h)(iv) or (v) hereof.

         (h) TRANSITION. Lessee acknowledges that Lessor intends to lease or
sell the Aircraft to another Person at the end of the Lease Term. In order to
facilitate such lease or sale of the Aircraft, Lessee agrees to cooperate with
Lessor and to otherwise assist Lessor, at Lessor's cost, in such matters by, for
example:

             (i) allowing reasonable inspections of the Aircraft by the
        Follow-On Operator (without interrupting any commercial operation of
        the Aircraft);

             (ii) using reasonable endeavors to schedule the Return of the
        Aircraft and the Final Inspection in a manner that will allow for a
        simultaneous delivery of the Aircraft to the Follow-On Operator;

             (iii) assisting with exporting the Aircraft from the State of
        Registration and arranging for the notice of deregistration of the
        Aircraft to be sent to the aviation authority in the country where the
        Aircraft will be registered by the Follow-On Operator;

             (iv) assisting; with the transition of the Aircraft from the
        Approved Maintenance Program to the maintenance program of the
        Follow-On Operator by providing access to the relevant technical data;
        and

             (v) performing or procuring the maintenance or modifications to
        the Aircraft as reasonably requested by Lessor, at Lessor's cost.

         (i) SECURITY DEPOSIT. Following expiration of this Lease and return of
the Aircraft to Lessor, and subject to no Defaults outstanding hereunder, the
Security Deposit (except for the Non-Refundable Deposit) will be promptly
returned to Lessee subject to Lessor's satisfaction with Lessee's compliance
with this Section 7.

         (j) REPLACEMENT ENGINES. Prior to commencement of the return
procedures under this Section 7, Lessee may replace one or both Engines then
subject to this Lease with Replacement Engines; provided that such replacement
shall not alter Lessee's obligations with respect to the Return Conditions set
forth in Schedule 5.

     SECTION 8. Liens.

         (a) NO LIENS. Lessee will not directly or indirectly create, incur,
assume or suffer to exist, or agree to create or assume, any Lien on or with
respect to the Aircraft, any Engine or any Part or in this Agreement, or in any
right, title or interest in any of the foregoing, except:

                                      31

<PAGE>

                                          [Amended and Restated Lease Agreement]

             (i) the rights of Lessor provided in this Agreement;

             (ii) the rights of others under agreements or arrangements to the
        extent permitted by the terms of Section 11;

             (iii) Lessor Liens, Liens arising a prior to filing of this Lease
        with the Aviation Authority;

             (iv) Liens for Taxes of Lessee arising in the ordinary course of
        business either not yet due or being contested in good faith by
        appropriate proceedings (and for the payment of which adequate reserves
        have been provided) so long as such contest does not involve any
        material danger of the sale, forfeiture, seizure or loss of the
        Airframe, any Engine or any Part or any interest therein;

             (v) materialmen's, mechanics', workmen's, repairmen's, employees'
        or other like Liens arising by operation of law in the ordinary course
        of Lessee's business (including those arising under maintenance
        agreements entered into in the ordinary course of business) securing
        obligations that are not yet due or are being contested in good faith
        by appropriate proceedings (and for the payment of which adequate
        reserves have been provided) so long as such contest does not involve
        any material dangler of the sale, forfeiture, seizure or loss of the
        Airframe, any Engine or any Part or any interest therein; and

             (vi) Liens, other than Liens for Taxes, in respect only of
        Lessee's interest as Lessee under this Agreement and arising out of any
        judgment or award against Lessee (and for the payment of which adequate
        reserves have been provided), but only if the judgment secured shall
        have been discharged, vacated, reversed or execution thereof stayed
        pending a good faith appeal or shall have been discharged, vacated or
        reversed upon expiration of such stay.

         (b) REMOVAL OF LIENS. Lessee will promptly, at its own expense, take,
or cause to be taken, such actions as may be necessary duly to discharge any
Lien not excepted under Section 8(a) that may at any time arise, exist or be
levied upon the Aircraft, any Engine, any Part or in this Agreement, or in any
right, title or interest in any of the foregoing, and Lessee shall indemnify and
hold harmless Lessor and each other Indemnified Party from any Expenses arising
therefrom.

         (c) NO ADVERSE ACTION. Without limiting the foregoing or any other
provision of this Agreement or any other Operative Document, Lessee will not do
or permit to be done anything which may expose the Aircraft or any part thereof
to penalty, forfeiture, seizure, arrest, impoundment, detention, confiscation,
taking in execution, attachment, appropriation or destruction, nor abandon the
Aircraft or any Part.

                                      32

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 9. INDEMNITIES.

         (a) GENERAL INDEMNITY. Subject only to the exceptions set forth in
Section 9(b), Lessee hereby assumes liability for and hereby agrees to indemnify
Lessor and each other Indemnified Party against, and agrees to protect, save and
keep harmless each thereof from, any and all Expenses of whatsoever kind and
nature from time to time imposed on, incurred by or asserted against any
Indemnified Party in any way relating to or arising out of.

             (i) the Operative Documents, any of the transactions contemplated
        thereby or the enforcement of any of the terms thereof, including,
        without limitation, the enforcement of this Section 9;

             (ii) the Aircraft, the Airframe, any Engine or engine or Part or
        any other thing delivered under this Agreement;

             (iii) the acceptance, delivery, lease, sublease, charter,
        subcharter, registration, deregistration, reregistration, possession,
        repossession, use, presence, operation, condition, storage (unless
        otherwise expressly provided herein), installation, testing,
        modification, alteration, maintenance, repair, release, return,
        transportation, transfer, exportation, importation, abandonment or
        other disposition of the Aircraft, the Airframe, any Engine or engine
        or Part or any other thing delivered under this Agreement (including,
        without limitation, any claim for patent, trademark or copyright
        infringement in respect of any Part of the Aircraft which was not
        delivered to Lessee hereunder, any liability for any injury to or death
        of any Person or loss of or damage to any property, latent or other
        defects, whether or not discoverable and whether or not any of the
        foregoing shall arise as a result of the action or inaction of Lessee
        or any other Person); and

             (iv) any breach or noncompliance by Lessee with any covenant,
        term, agreement, condition, undertaking or obligation under this
        Agreement or under any other Operative Document or agreement entered
        into or furnished by Lessee in connection herewith or therewith, or the
        falsity or inaccuracy of any representation or warranty of Lessee set
        forth herein or therein, or the occurrence of any other Default,
        including, without limitation, any Expenses incurred, assumed or
        suffered by Lessor or any other Indemnified Party as a consequence of
        Lessee's failure to Return the Aircraft in accordance with this
        Agreement on any date specified or required herein.

         (b) EXCEPTIONS TO GENERAL INDEMNITY. The indemnity provided for in
Section 9(a) will not extend to any of the following Expenses of any Indemnified
Party:

             (i) Expenses caused by the gross negligence or willful misconduct
        of such Indemnified Party or a Related Indemnitee (other than
        negligence imputed to such

                                      33

<PAGE>

                                          [Amended and Restated Lease Agreement]

        Indemnified Party or Related Indemnitee by reason of its interest
        in the Aircraft solely and by virtue of law);

             (ii) Expenses caused by a breach by such Indemnified Party or a
        Related Indemnitee of any covenant or inaccuracy or falsity of a
        representation or warranty made by such Indemnified Party or a Related
        Indemnitee in this Agreement or the documents and agreements delivered
        by such party to Lessee on or prior to the Delivery Date;

             (iii) Expenses that are Taxes (it being agreed that Lessee's sole
        responsibility for Taxes is as set out in Section 9(c) hereof);

             (iv) Expenses attributable to the period (x) prior to the Delivery
        Date and (y) after the return of possession of the Airframe, the
        Engines and the Parts to Lessor or its designee pursuant to and in
        accordance with the terms of this Lease (other than pursuant to Section
        20 hereof, in which case (and other than with respect to Taxes)
        Lessee's liability under this Section 9(b) shall survive for so long as
        Lessor shall be entitled to exercise remedies under such Section 20);

             (v) Expenses caused by any voluntary transfer or disposition
        (other than any transfer pursuant to any exercise of remedies in
        connection with an Event of Default, pooling arrangement or Event of
        Loss) by Lessor of its interest in the Aircraft, Airframe or Engines;
        or

             (vi) Expenses to the extent covered by such Indemnified Party's
        worker's compensation insurance.

        (c) TAXES.

             (i) LESSEE LIABILITY. Except as provided in Section 9(c)(ii),
        Lessee shall pay or cause to be paid when due, and shall indemnify and
        hold harmless each Tax Indemnitee for, from and against, any and all
        Taxes howsoever imposed or levied on or asserted against, from time to
        time, any Tax Indemnitee, Lessee, the Aircraft, Airframe or any Engine
        or any Parts or any interest therein by any Government Entity on, with
        respect to, based on or measured by:

                  (A) the acceptance, delivery, redelivery, transport,
             registration, reregistration, deregistration, possession,
             operation, location, use, presence, condition, alteration by or on
             behalf of Lessee, maintenance, repair, return, storage (unless
             otherwise expressly provided herein), repossession, disposition,
             abandonment, installation, storage, charter, leasing, subleasing,
             modification, transfer by or on behalf of Lessee, importation,
             exportation or other disposition of, or the imposition of any

                                      34

<PAGE>

                                          [Amended and Restated Lease Agreement]

             Lien on, the Aircraft, Airframe or any Engine or any Part or
             interest therein (or the incurrence of any liability to refund or
             pay over any amount as the result of any such Lien);.

                  (B) the rentals or receipts from the Aircraft, Airframe or
             any Engine or Parts thereof or interest therein;

                  (C) the Aircraft, Airframe or any Engine or any Parts thereof
             or interest therein (including, without limitation, title or a
             security interest therein), this Lease, any other Operative
             Document or any data or any other thing delivered or to be
             delivered under the Operative Documents; or

                  (D) otherwise with respect to or in connection with the
             execution, delivery, enforcement, amendment or supplement to the
             Operative Documents or the transactions contemplated by the
             Operative Documents.

             (ii) EXCLUSIONS FROM LESSEE'S LIABILITY. The provisions of Section
        9(c)(i) shall not apply to:

                  (A) Taxes on the income, profits or gains of a Tax Indemnitee
             by any Government Entity or Taxes in the nature of a value-added
             tax or consumption tax to the extent such value-added tax or
             consumption tax is enacted by a Government Entity as a substitute
             for or replacement of a Tax on income, profits or gains income as
             a revenue source for that Government Entity; PROVIDED, HOWEVER,
             that the exclusion contained in this clause (A) shall not apply to
             any Taxes imposed by any Government Entity (other than the United
             States, a United States federal entity, or a Government Entity
             with jurisdiction over the place of a Tax Indemnitee's principle
             place of business or residence or place of organization; except in
             the case of a United Stated federal withholding tax on gross
             income ("U.S. Withholding Tax"), U.S. Withholding Tax imposed
             solely as a result of (A) the enactment after the date of
             execution and delivery of this Agreement of an amendment to the
             Internal Revenue Code (as in effect on the Delivery Date), (B)
             ratification after the Delivery Date of any protocol or other
             amendment to any United States income tax convention in effect on
             the Delivery Date or (C) the ratification after the Delivery Date
             of any new United States income tax convention if and to the
             extent that such Tax results (i.e., to the extent that such Tax
             would not have been imposed but for the existence of one or more
             of the following, factors) from (i) the use, operation, presence
             or registration of the Aircraft, the Airframe, any Engine or any
             Part within the taxing jurisdiction of that Government Entity; or
             (ii) the situs of organization, any place of business or any

                                      35

<PAGE>

                                          [Amended and Restated Lease Agreement]

             activity of Lessee or any other Person having use, possession
             or custody of the Aircraft, the Airframe, any Engine or any Part
             within the taxing jurisdiction of that Government Entity; or (iii)
             any payment (actual or constructive) by or on behalf of Lessee
             from the taxing jurisdiction of that Government Entity; PROVIDED,
             FURTHER, however, if the Delivery Location is in Malaysia,
             Lessee will not be responsible for any taxes, duties, charges or
             fees levied by any Malaysian taxing authority or if the Delivery
             Location is in New Zealand, Lessee will not be responsible for any
             taxes, duties, charges or fees levied by any New Zealand taxing
             authority;

                  (B) Sales, use or similar transfer Taxes imposed on a Tax
             Indemnitee upon any voluntary transfer (including a transfer by
             way of security but excluding a transfer pursuant to the exercise
             of remedies in connection with an Event of Default, a
             Modification, a pooling arrangement or an Event of Loss) or
             disposition (including a disposition by way of security but
             excluding a disposition pursuant to any exercise of remedies in
             connection with an Event of Default; provided, however, that
             Lessor shall in connection with an Event of Default comply with
             any reasonable request as Lessee shall make concerning the
             appropriate jurisdiction in which such disposition shall be made
             unless Lessor reasonably determines in cooperation with any Tax
             Indemnitee (and advises Lessee) that such compliance with Lessee's
             request would generate an adverse consequence to Lessor or such
             Tax Indemnitee) by such Tax Indemnitee of any equitable or legal
             interest in the Aircraft, Airframe, any Engine or any Part or this
             Agreement to any Person;

                  (C) Taxes attributable solely to any period (a) prior to the
             Delivery Date; or (b) after the return of possession of the
             Airframe, the Engines and the Parts to Lessor or its designee
             pursuant to the terms of this Lease (other than pursuant to
             Section 20 hereof, in which case Lessee's liability under this
             Section 9(c) shall survive for so long, as Lessor shall be
             entitled to exercise remedies under such Section 20); provided,
             however, that the exclusions set forth in this subparagraph (C)
             shall not apply to Taxes to the extent such Taxes relate to events
             occurring or matters arising prior to or simultaneously with such
             return of possession;

                  (D) Taxes caused solely by a breach by such Tax Indemnitee of
             any covenant or inaccuracy or falsity of any representation or
             warranty made by such Tax Indemnitee in this Agreement or the
             documents and agreements delivered by such Tax Indemnitee to
             Lessee pursuant to this Agreement;

                                      36

<PAGE>

                                         (Amended and Restated Lease Agreement]

                  (E) Taxes caused solely by the gross negligence or wilful
             misconduct of any Tax Indemnitee; and

                  (F) Taxes based on or measured by the value or principal
             amount of any loan or promissory note (or security therefore)
             entered into by Lessor or a Tax Indemnitee or anyone claiming an
             interest in the Aircraft or any portion thereof through Lessor or
             a Tax Indemnitee.

             (iii) NO REDUCTION FOR WITHHOLDING, ETC. Notwithstanding anything
        that may be contained herein, all payments by Lessee under this
        Agreement or any other Operative Document, whether in respect of Rent,
        interest, fees or any other item, shall be made in full without any
        deduction or withholding (whether in respect of setoff, counterclaim,
        duties, Taxes, charges, wages or otherwise whatsoever), unless:

                  (A) the withholding or deduction is with respect to Taxes for
             which Lessee is not required under Section 9(c) to indemnify
             Lessor or any Tax Indemnitee, or

                  (B) the withholding or deduction is required by law, in which
             event Lessee shall:

                       (1) forthwith pay the recipient such additional amount
                  so that the net amount received by such recipient after the
                  deduction or withholding will equal the full amount which
                  would have been received by it had no such deduction or
                  withholding been made;

                       (2) pay to the relevant taxing authorities within the
                  period for payment permitted by applicable law the full
                  amount of the deduction or withholding (including, but
                  without prejudice to the generality of the foregoing, the
                  full amount of any deduction or withholding from any
                  additional amount paid pursuant to this clause (iii)); and

                       (3) furnish to Lessor, within the period for payment
                  permitted by applicable law, an official receipt of the
                  relevant taxation or other authorities involved for all
                  amounts deducted or withheld as aforesaid or, if no such
                  receipt is issued, a certificate of deduction or equivalent
                  evidence thereof.

             (iv) REPORTS. Lessee will provide, promptly upon request, such
        information as may be reasonably requested by a Tax Indemnitee or
        required to enable a Tax Indemnitee to timely and properly fulfill its
        tax filing requirements with respect to the transactions

                                      37

<PAGE>

                                          [Amended and Restated Lease Agreement]

        contemplated by the Operative Documents, including, without
        limitation, those requirements that relate to Taxes based on or
        measured by the total time the Aircraft is located in a particular
        place irrespective of whether the Aircraft is there for revenue,
        maintenance or storage purposes. If any report, return or statement is
        required to be filed with respect to any Tax which is subject to
        indemnification under this Section 9(c), Lessee shall timely file the
        same (except for any such report, return or statement which such Tax
        Indemnitee intends to file itself (and so notifies Lessee in writing)
        or for income tax returns or any other return, report or statement
        which the Tax Indemnitee is required by law to file in its own name);
        PROVIDED, HOWEVER, that Lessee shall have no obligation under this
        sentence to the extent such Tax Indemnitee, after receipt of Lessee's
        written request, shall have failed to furnish Lessee with such
        information (including instructions) as is peculiarly within such Tax
        Indemnitee's control and which is necessary to file such report, return
        or statement and provided, further, that Lessee shall have no
        obligation under this Section 9(c) with respect to any Taxes in the
        nature of penalties, additions to tax or interest or expenses which
        could have been avoided if such Tax Indemnitee had not failed to so
        furnish Lessee with such information. Lessee shall either file such
        report, return or statement and send a copy of such report, return or
        statement to the Tax Indemnitee or, where Lessee is not permitted to
        file such report, return or statement, it shall notify such Tax
        Indemnitee of such requirement and prepare and deliver such report,
        return or statement to such Tax Indemnitee in a manner satisfactory to
        such Tax Indemnitee no later than 30 Business Days prior to the time
        such report, return or statement is to be filed. Lessee shall not have
        any right to examine the tax returns or books of any Tax Indemnitee.
        Lessee agrees to use reasonable endeavors to obtain official receipts
        indicating the payment by it of all foreign income and withholding
        Taxes that are subject to indemnification under this Section 9 and
        shall promptly deliver to the relevant Tax Indemnitee each such receipt
        obtained by Lessee. If actual notice is given by any Government Entity
        to a Tax Indemnitee that a report or return is required to be filed
        with respect to any Taxes with respect to which Lessee has an
        indemnification obligation under this Section 9(c), Lessor shall cause
        that Tax Indemnitee to promptly notify Lessee of such required report
        or return. Further, Lessor agrees to cause each Tax Indemnitee to
        respond to any reasonable request of Lessee for information within the
        control of such Tax Indemnitee with respect to the filing of any such
        report or return. Notwithstanding the foregoing, nothing in this
        Section 9(c)(iv) shall (x) require Lessor or Lessee to divulge to the
        other any information which Lessor or Lessee, as the case may be,
        considers confidential, PROVIDED, HOWEVER, that Lessor and Lessee, as
        the case may be, shall be so required if required by applicable law or
        reasonably related to a matter indemnified hereunder; or (y) prevent
        Lessor or Lessee from arranging its tax affairs in such manner as it
        sees fit, unless to do so would increase the obligations of the other
        under this Agreement.

             (v) PAYMENT. Lessee shall pay any Tax for which it is liable
        pursuant to this Section 9(c) in immediately available funds directly
        to the appropriate Government Entity or, upon written demand of the Tax
        Indemnitee, to such Tax Indemnitee, but in no event

                                      38

<PAGE>

                                          [Amended and Restated Lease Agreement]

        shall such payment be required more than five (5) Business Days
        prior to the date such Tax is due. Any such demand for payment from a
        Tax Indemnitee shall specify, in reasonable detail, the calculation of
        the amount of the payment and the facts upon which the right to payment
        is based and shall be verified upon the request and at the expense of
        Lessee by a nationally recognized firm of independent accountants for
        such Tax Indemnitee. Each Tax Indemnitee shall promptly forward to
        Lessee any notice, bill or advice in the nature of a notice or bill
        received by it concerning any Tax; provided, however, failure to
        provide any such notice or bill shall not relieve Lessee of its
        obligations hereunder. As soon as practical after each payment of any
        Tax by Lessee directly to any Government Entity, Lessee shall furnish
        the appropriate ate Tax Indemnitee with the original or a certified
        copy of a receipt for Lessee's payment of such Tax or such other
        evidence of payment of such Tax as is reasonably acceptable to such Tax
        Indemnitee. Lessee shall also furnish promptly upon request such data
        as any Tax Indemnitee may reasonably require to enable such Tax
        Indemnitee to comply with the requirements of any Government Entity.

             (vi) CONTESTS. If claim is made against a Tax Indemnitee for any
        Tax with respect to which Lessee has an obligation under this Section
        9(c), Lessor shall cause Tax Indemnitee to promptly notify the Lessee;
        provided, however, that the failure to so notify Lessee shall not
        diminish Lessee's obligations to indemnify under this Section 9(c). If
        reasonably requested by the Lessee in writing and provided no Event of
        Default shall have occurred and is continuing, Lessor, at the sole
        expense of the Lessee, shall itself (or shall cause such Tax Indemnitee
        to) in good faith and diligently contest (and not settle without
        Lessee's written consent) or shall (or shall cause such Tax 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 Tax. Lessor
        shall cause such Tax Indemnitee to contest, or shall permit the Lessee
        to 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 Tax
        Indemnitee shall not be required to undertake any contest or permit the
        Lessee to contest unless:

                  (A) Lessee shall have provided Lessor and the Tax Indemnitee
             with an opinion of legal counsel reasonably acceptable to Lessor
             and the Tax Indemnitee to the effect that a reasonable basis
             exists to contest such claim (provided, however, that no such
             opinion shall be necessary in order to contest such claim in
             meetings with auditors, revenue agents, or in other informal
             meetings with staff members of the applicable tax authority) and,
             prior to the commencement of any appeal of an adverse judicial
             decision, with an opinion of such legal counsel to the effect that
             a reasonable basis exists to appeal such adverse judicial decision
             (which opinions shall be obtained at Lessee's sole cost and
             expense);

                                      39

<PAGE>

                                          [Amended and Restated Lease Agreement]

                  (B) such proceedings, in the sole reasonable discretion of
             Lessor and the Tax Indemnitee, do not involve any material risk or
             danger of the sale, forfeiture or loss of the Aircraft or any part
             thereof or interest therein or the imposition of criminal
             penalties or sanctions against Lessor or such Tax Indemnitee or
             the creation of any Lien other than a Lien for Taxes not yet due
             or being, contested in good faith by appropriate proceedings, and
             for payment of which such reserves if any, as are required to be
             provided under generally accepted accounting principles have been
             made unless Lessee has provided to the Tax Indemnitee a bond or
             other security reasonably satisfactory to the Tax Indemnitee
             (provided that in the case of criminal penalties or sanctions such
             bond or other security shall be satisfactory to the Tax Indemnitee
             in its sole discretion) to protect against such risk or danger;

                  (C) in the event that the subject matter of the contest is of
             a continuing nature and has previously been decided adversely
             pursuant to the contest provisions of this Section 9(c) 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 the Tax
             Indemnitee shall have received an opinion of independent tax
             counsel selected by the Lessee and reasonably acceptable to the
             Tax Indemnitee, 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 the Tax Indemnitee
             or the Lessee, as the case may be, had asserted in such previous
             contest would prevail.

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

                  (E) prior to the commencement of any contest undertaken by
             the Lessee or any contest undertaken by any Tax Indemnitee, the
             Lessee shall have delivered to such Tax Indemnitee a written
             acknowledgment of its obligation to indemnify fully Lessor and
             such Tax Indemnitee to the extent that the contest is not
             successful;

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

             Lessee shall not be deemed to be in default under any of the above
       indemnification provisions of this Section 9(c) so long as Lessee shall
       diligently prosecute a contest in conformity with the requirements of
       this Section 9(c)(vi), or in the case where the Lessor or a Tax
       Indemnitee shall be  prosecuting such contest pursuant to

                                      40

<PAGE>

                                          [Amended and Restated Lease Agreement]

        this Section 9(c)(vi), Lessee has fulfilled all of its obligations
        under this Section 9(c)(vi) with respect to such contest.
        Notwithstanding the foregoing, if a claim is made against a Tax
        Indemnitee which, if successful, would result in a Tax under
        circumstances which would require the Lessee to indemnify such Tax
        Indemnitee, such Tax 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 a Tax
        Indemnitee fails diligently to contest, or refuses to permit the Lessee
        to contest, a claim or part thereof which such Tax Indemnitee has the
        obligation to contest or to permit Lessee to contest under this Section
        9(c), then Lessee shall not be obligated to indemnify such Tax
        Indemnitee for such claim or such part thereof and such Tax Indemnitee
        shall refund to Lessee any amounts paid or advanced by Lessee in
        connection with such Tax 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 Tax); provided, however, that
        this sentence shall not apply where a Tax Indemnitee permits the Lessee
        to contest and the Lessee falls to diligently contest.

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

             (viii) Tax Savings. If as a result of the payment or accrual of
        Taxes paid or indemnified by the Lessee a Tax Indemnitee shall realize
        and recognize any savings with respect to Taxes, such Lessor shall
        cause such Tax Indemnitee to, and such tax Indemnitee shall, promptly
        notify the Lessee that it has realized and recognized such savings and
        pay to the Lessee within thirty (30) days of the realization of such
        savings an amount equal to (i) the net reduction in Taxes realized and
        recognized by such Tax Indemnitee and (ii) the amount of any further
        net reduction in taxes realized and recognized under such tax laws as a
        result of payments pursuant to this sentence; provided, however, that
        the aggregate amount of all sums payable pursuant to this claim (viii)
        shall not exceed the aggregate amount of all prior or payments made by
        Lessee pursuant to this Section 9(c).

          (d) [INTENTIONALLY RESERVED].

          (e) SCOPE, SURVIVAL, ETC.

                                      41

<PAGE>

                                          [Amended and Restated Lease Agreement]

             (i) Lessee shall be obligated under this Section 9 as a primary
        obligor irrespective of whether an Indemnified Party or Tax Indemnitee
        shall also be indemnified, guaranteed or insured with respect to the
        same matter under any of the Operative Documents or otherwise by any
        other Person, and such Indemnified Party may proceed directly against
        Lessee under this Section 9 without first resorting to any such other
        rights of indemnification, guarantee or insurance.

             (ii) All indemnities, obligations, adjustments and payments
        provided for in this Section 9 shall survive and remain in full force
        and effect, notwithstanding the expiration or termination of the Lease
        Term or of this Agreement or any other Operative Documents and the
        payment in full of all sums payable under the Operative Documents. The
        obligations of Lessee in respect to all such indemnities, obligations,
        adjustments and payments are expressly made for the benefit of, and
        shall be enforceable by, the Indemnified Party or Tax Indemnitee
        entitled thereto, without declaring this Agreement to be in default or
        taking other action under this Agreement.

             (iii) Lessee acknowledges that the Indemnified Parties or Tax
        Indemnitees, or any of them, may authorize Lessor, by notice in writing
        to Lessor and Lessee, to make claims and demands under any indemnity
        hereunder or under any other Operative Document on behalf of such
        Indemnified Parties or Tax Indemnitees, and Lessee shall be obligated
        to make all payments pursuant to any such indemnity to Lessor, to the
        extent claimed by Lessor on behalf of such Indemnified Parties or Tax
        Indemnitees (it being understood that Lessee is entitled to
        conclusively rely upon the instructions of Lessor with respect to the
        payment of amounts owing, to any Indemnified Party or Tax Indemnitee
        under the indemnities).

             (iv) Each Indemnified Party and Lessee will give prompt written
        notice one to the other of any liability of which such party has
        knowledge for which Lessee is, or may be, liable under Section 9(a),
        provided that failure to give such notice will not prejudice or
        otherwise affect any of the rights of the Indemnified Parties under
        this Section 9.

         (f) GROSS-UP FOR TAXES ON INDEMNITY PAYMENTS. If and to the extent any
sums payable to an Indemnified Party or Tax Indemnitee under this Section 9 are
subject to any Taxes (including any payments made pursuant to this Section
9(f)), Lessee shall pay to such Indemnified Party or Tax Indemnitee such sum as
will, after the obligation in respect of such Taxes has been fully satisfied
with respect to all sums payable by Lessee under this Section 9, leave the
Indemnified Party or Tax Indemnitee with the same amount as it would have been
entitled to receive in the absence of the imposition of any such obligation in
respect of such Taxes.

                                      42

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 10. TITLE; REGISTRATION; MAINTENANCE AND OPERATION; INSIGNIA.

       (a) TITLE TO THE AIRCRAFT.

             (i) Lessee acknowledges that title to the Aircraft shall at all
        times be and remain solely and exclusively vested in Lessor and that
        this Agreement and the other Operative Documents constitute an
        agreement to lease the Aircraft from Lessor to Lessee and, accordingly,
        Lessee shall have no right, title or interest in the Aircraft except
        the right to use the Aircraft as provided herein.

             (ii) Lessee will not at any time represent or hold out Lessor or
        any Indemnified Party as carrying goods or passengers on the Aircraft
        or as being in any way connected or associated with any operation of
        the Aircraft or attempt, or hold itself out as having any power, to
        sell, charge, lease or otherwise dispose of or encumber the Aircraft,
        the Engines or any Part, nor create, incur or suffer to exist any Lien
        over the Aircraft, the Engines or any Part. On all occasions when the
        ownership of the Aircraft or any part of it is relevant, Lessee will
        make clear to third parties that title to the same is held by Lessor.

       (b) REGISTRATION.

             (i) Upon Delivery of the Aircraft, Lessee shall, at its own cost
        and expense, procure that the Aircraft will be duly registered with the
        Aviation Authority in the name of Lessor on the register (except that
        Lessor and Owner Participant shall be responsible for ensuring that the
        Trust Agreement, and all other documents necessary for filing with the
        Aviation Authority to effect registration of the Aircraft in Lessor's
        name, are in due form for filing with the Aviation Authority), and
        thereafter shall maintain, or procure the maintenance of, such
        registration throughout the Lease Term and shall promptly deliver to
        Lessor a certified copy of the Certificate of Registration when issued
        by the Aviation Authority and at all times during the Lease Term,
        Lessee shall neither cause nor permit the Aircraft to be registered
        under the laws of any other jurisdiction.

             (i) Upon the Delivery Date of the Aircraft, Lessee shall, at its
        own cost and expense, procure that, if required by applicable
        regulations, any Operative Document as is required (including, without
        limitation, the Original Lease and the Trust Agreement) shall be filed
        for recording with the Aviation Authority, and shall promptly (and in
        any event within five (5) days) after such registration deliver
        evidence of such registration to Lessor. Lessee shall, at its own cost
        and expense, cause such recordation to be maintained in good standing
        at all times during the Lease Term. Upon the Effective Date, Lessee and
        Lessor shall procure that this Agreement shall be filed for recording
        with the Aviation Authority.

                                      43

<PAGE>

                                          [Amended and Restated Lease Agreement]

             (iii) Lessee will take, or cause to be taken, such action with
        respect to the recording, filing, rerecording and refiling of this
        Agreement or other documents or instruments (including, without
        limitation, Uniform Commercial Code financing statements) as necessary
        or advisable in order to establish, protect, preserve and perfect, as
        against Lessee and any third party (excluding Lessor Liens, Liens
        arising prior to Delivery of the Aircraft to Lessee and Liens granted
        by Lessor to Lessor's lenders), Lessor's interest in the Aircraft and
        this Agreement and each other Operative Document and shall furnish to
        Lessor timely notice of the necessity of such action, together with
        such documents and instruments, in execution form, and such other
        information as may be necessary or advisable to take such action.
        Lessee shall cooperate fully with Lessor, if, notwithstanding the
        foregoing, Lessor notifies Lessee that Lessor wishes to take any of the
        foregoing actions, in lieu of Lessee taking any of the foregoing
        actions.

             (iv) Without limiting the effect of the foregoing, 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 agreement, treaty,
        convention, pact or by any practice, custom or understanding involving
        any jurisdiction in which Lessee may operate, and any and all acts and
        things which Lessor may reasonably request, to establish, perfect,
        preserve and protect the respective rights of Lessor in the Aircraft
        and in this Agreement and each other Operative Document (excluding
        Lessor Liens, Liens arising prior to Delivery of the Aircraft to Lessee
        and Liens granted by Lessor to Lessor's lenders).

             (v) Lessee shall procure that, at all times during the Lease Term,
        the Aircraft possesses a current, legal and valid Airworthiness
        Certificate, and all such other certificates, licenses, permits and
        authorizations as are from time to time required for the use and
        operation of the Aircraft for the public transport of passengers or
        cargo by any Government Entity having jurisdiction in any country,
        state, province or other political subdivision in or over which the
        Aircraft is flown, including, without limitation, any aviation
        authority.

       (c) MAINTENANCE. Lessee, at its own cost and expense, shall,
at all times during the Lease Term and until the Aircraft is returned in the
condition and manner required by this Agreement:

             (i) maintain, service, repair, test, inspect and overhaul, or
        cause to be maintained, serviced, repaired, tested, inspected and
        overhauled, the Aircraft in accordance with the Approved Maintenance
        Program, the structural repair manual and the rules and regulations of
        the Aviation Authority, including, without limitation, FAR Part 121,
        subject to the special exemptions permitted Lessee regarding compliance
        with Airport Noise and Capacity Act of 1990, as amended, and the
        regulations promulgated by the Aviation Authority thereunder, (x) so as
        to

                                      44

<PAGE>

                                          [Amended and Restated Lease Agreement]

        keep the Aircraft in as good condition (operating and otherwise)
        as when delivered on the Delivery Date, ordinary wear and tear
        excepted, and in at least the same manner and with at least
        substantially the same care and diligence as other aircraft owned or
        operated by Lessee (provided, however, that the foregoing shall not be
        deemed to expand or otherwise alter Lessee's obligations pursuant to
        the express requirements of any maintenance, repair, modification or
        return provision hereunder), (y) so as to keep the Aircraft free of, or
        so as to promptly correct, physical damage to the Airframe, any Engine
        or any Part which may have resulted from foreign object damage, from
        damage caused by ramp equipment, ramp personnel, operational
        mishandling, Lessee staff or passengers or from other means or sources
        and (z) so as to keep the Aircraft in such condition as may be
        necessary to enable the applicable airworthiness certification for the
        Aircraft to be maintained in good standing at all times under
        applicable law;

             (ii) without limiting Lessee's obligations under Section 10(c)(i),
        agree that such maintenance and repairs will include, but will
        not be limited to, each of the following specific items:

                  (A) to perform in accordance with the Approved Maintenance
             Program, and all applicable rules and regulations of the Aviation
             Authority, and, except to the extent in conflict with. the rules
             and regulations of the Aviation Authority, all routine and
             nonroutine maintenance work, including, without limitation, line
             maintenance to be done upon the Aircraft;

                  (B) without prejudice to the provisions of Section 7, but
             subject to the terms of Exhibit N, to comply with all applicable
             ADs and all Required SBs that are due for compliance on such basis
             at any time during the Lease Tenn and within 90 days after the end
             of the Lease Term ("Required Modifications");

                  (C) to incorporate and retain in the Approved Maintenance
             Program for the Aircraft an applicable CPCP, and to carry out such
             work as may be required to comply therewith, including periodic
             inspection, testing and corrosion inhibiting treatment to or of
             fuel tanks, periodic inspection, cleanup and resealing under
             galleys and lavatories, the cleaning and treating of all mild and
             moderate corrosion and the correcting of all severe and exfoliated
             corrosion, and the application of corrosion inhibition compounds
             to all areas of the Aircraft recommended by the Airframe
             Manufacturer that are manufactured from aluminum or other metals,
             in accordance with the recommendations of the Airframe
             Manufacturer, the CPCP, the Airframe Manufacturer structural
             repair manual and the Approved Maintenance Program;

                                      45

<PAGE>

                                          [Amended and Restated Lease Agreement]

                  (D) to effect any required repair to the Airframe or any
             Engine, and any Parts installed therein or thereon, only (w) by
             an Aviation Authority-approved repair station, (x) by Aviation
             Authority-licensed mechanics and (y) in accordance with Lessee's
             Approved Maintenance Program, the Airframe Manufacturer's
             structural repair manual, the Airframe Manufacturer's component
             repair manual, Engine Manufacturer's repair manuals and the other
             repair and overhaul manuals related to the Aircraft or any Part
             thereof, in each case, as approved by the Aviation Authority, and
             (z) the relevant, if any, engineering change orders (which shall
             be approved by the Aviation Authority);

                  (E) to maintain, in the English language, the Aircraft
             Documentation and to keep the Aircraft Documentation current and
             up to date (with all documents and records unique to the Aircraft
             to be maintained unique to the Aircraft, which Aircraft
             Documentation shall (i) conform with the laws of any Government
             Entity having jurisdiction over the Aircraft, (ii) accurately
             record the amount of time consumed and/or the cycles of use (as
             appropriate) by each operation of the Airframe, each Engine and
             all Parts and all work performed thereon, and (ill) accurately
             maintain complete back-to-birth records (as defined by HBAW 92-04
             Current FAA Policy Regarding Aircraft Records, Order 8300.10,
             excluding, to the extent applicable, any records with respect to
             the period prior to Delivery which were not delivered to Lessee)
             of all Life Limited Components, made available for review by
             Lessor or Lessor's designees on reasonable notice in order to
             facilitate Lessor's ability periodically to inspect the Aircraft
             and monitor the maintenance of the Aircraft); provided, that
             Lessee shall not be responsible for defects in the Aircraft
             Documentation that exist and are documented in writing, signed by
             Lessor on the Delivery Date;

                  (F) to make available for review by Lessor or Lessor's
             designees copies of any written communications with the Aviation
             Authority, Airframe Manufacturer, Engine Manufacturer or other
             vendors with respect to incidents, defects or malfunctions of the
             Aircraft;

                  (G) to diligently correct any and all deficiencies revealed
             by any inspection of Lessor by proper cleaning, sealing, repair,
             replacement, overhaul and adjustment as required pursuant to the
             Approved Maintenance Program;

                  (H) to ensure that only an Approved Maintenance Performer
             services, maintains, overhauls, repairs or performs any
             Modifications on or to the Aircraft or any installed engine or
             part;

                                      46

<PAGE>

                                          [Amended and Restated Lease Agreement]

                  (I) all parts or materials installed or used on the Aircraft
             shall have a current valid Aviation Authority "serviceable tag" of
             the manufacturer or maintenance facility providing such item to
             Lessee; and

                  (J) notwithstanding anything to the contrary contained
             herein, to maintain any engine which is not an Engine but which
             is installed on the Airframe as if it were an Engine;

             (iii) furnish or cause to be furnished to Lessor as soon as
        reasonably practicable and at no cost to Lessee such information as may
        be required to enable Lessor to file on a timely basis any reports
        required to be filed by Lessor with any Government Entity because of
        Lessor's rights, title and interests in and to the Aircraft or under
        this Agreement or any other Operative Document; and

             (iv) notwithstanding anything contained herein to the contrary,
        provided there is no Default existing and no Credit Event has occurred
        and is then continuing, if Lessee is required by law to meet Stage III
        noise requirements, then, with at least nine months' written notice
        from Lessee, Lessor will finance a portion of the cost of purchasing
        one (1) ship-set of hushkits to be installed on the Aircraft, in
        accordance with the parameters set forth in Exhibit M.

       (d) OPERATION.

             (i) Lessee shall not maintain, use, service, repair, overhaul or
        operate the Aircraft (or permit maintenance, use, service, overhaul or
        operation of the Aircraft) in violation of any law of any Government
        Entity having jurisdiction, in violation of any manufacturer's
        operating manuals, recommendations or instructions or in violation of
        any airworthiness certificate, license or registration relating to the
        Aircraft issued by any such Government Entity.

             (ii) Lessee shall not operate the Aircraft or permit the Aircraft
        to be operated (y) outside of the Permitted Jurisdictions or (z) on
        routes other than those approved by the government of the State of
        Registration.

             (iii) Lessee shall not knowingly employ, suffer or cause the
        Aircraft to be used for the carriage of (w) livestock, (x) acids, toxic
        chemicals or other corrosive materials, unless the same are
        appropriately packaged in compliance with applicable law, (y)
        explosives, nuclear fuels or wastes, (z) illegal drugs, controlled
        substances or the like or any other goods, materials or items of cargo
        which are prohibited by law or which could reasonably be expected or
        anticipated to cause damage to the Aircraft.

                                      47

<PAGE>

                                          [Amended and Restated Lease Agreement]

             (iv) Lessee will not use, or permit the use of, the Aircraft for
        testing or for training, qualifying or reconfirming the status of
        flight crew members other than employees of Lessee, and then only if
        the use of the Aircraft for such purpose is not disproportionate to the
        use for such purpose of other Airframe Manufacturer model 737 aircraft
        owned or operated by Lessee.

             (v) Notwithstanding anything herein to the contrary, Lessee shall
        not install, and shall not permit the installation of, any Engine on
        any airframe that is not an Airframe Manufacturer model 737-200ADV
        airframe, except solely to the extent the Aviation Authority has
        approved the use of engines of the same model and manufacturer as such
        Engine on any Airframe Manufacturer model 737-200 airframe, or, to the
        extent permitted by Section 10(d)(viii) below, 727 airframe.

             (vi) Lessee shall comply with the requirements of Section 15(l) of
        this Agreement.

             (vii) Lessee shall provide Lessor (a) on the tenth day of each of
        January, April, July, October during the Lease Term with a completed
        and duly executed Aircraft Status Report for the preceding three month
        period substantially in the form of Exhibit L and (b) all other reports
        set forth in Schedule 6.

             (viii) Lessee may install an Engine on an Airframe Manufacturer
        model 727 airframe, in accordance with the foregoing provisions, so
        long as the projected utilization of such airframe shall be not less
        than 2 1/2 Airframe Flight Hours per Airframe Cycle.

       (e) INSIGNIA. Lessee shall affix and maintain in respect of
the Airframe and each Engine a fireproof identification plate of a reasonable
size, in the location specified below, that contains the following legends or
any other legend requested from time to time by Lessor in writing:

Location:      (i) in the case of the Airframe, in the upper sill of the
               left-hand forward entry door, adjacent to the Airframe
               Manufacturer's plate and (ii) in the case of each Engine, in a
               clearly visible place in close proximity to the manufacturer's
               plate.

Legend:        (y) in the case of the Airframe, "THIS AIRCRAFT IS OWNED BY
               FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, AND
               IS HELD UNDER LEASE BY ALOHA AIRLINES, INC.", and

               (z) in the case of each Engine, "THIS ENGINE IS OWNED BY FIRST
               SECURITY BANK, NATIONAL ASSOCIATION, AS

                                      48

<PAGE>

                                          [Amended and Restated Lease Agreement]

               OWNER TRUSTEE, AND IS HELD UNDER LEASE BY ALOHA AIRLINES, INC."

Lessee shall promptly replace any such nameplate that becomes illegible, lost,
damaged or destroyed for any reason.

       (f) COSTS OF OPERATION. Lessee shall pay all costs incurred in the
operation of the Aircraft for profit or otherwise, including, without
limitation, the costs and expenses of flight crews, cabin personnel, fuel, oil,
lubricants, maintenance, insurance, landing fees, navigation fees, airport
charges, passenger service and any and all other expenses or claims of any kind
or nature (including, without limitation, any and all Taxes) directly or
indirectly incurred or imposed in connection with or related to the use,
movement, operation, maintenance, repair, storage or location of the Aircraft
during the Lease Term.

       (g) PAYMENT OF FLIGHT CHARGES. Without limiting the effect of Section 8,
Lessee shall pay during the Lease Term promptly upon the same becoming due and
payable all Flight Charges payable by Lessee during the Lease Term whether in
respect of the Aircraft or any other aircraft of Lessee and which involve any
risk of the imposition of a Lien on the Aircraft or the confiscation or
detention thereof (unless such Flight Charges are being contested in good faith
by appropriate proceedings) and shall indemnify and hold Lessor and any other
Indemnified Party harmless in respect of the same, which indemnity shall
continue in full force and effect notwithstanding the termination or expiration
of the Lease Term or Return of the Aircraft.

       (h) LOSS OR DAMAGE.

             (i) Without limiting the other provisions of this Section 10, if
        the Aircraft or any part thereof suffers loss or damage not
        constituting an Event of Loss of the Aircraft or the Airframe or any
        Engine (in respect of which, for the avoidance of doubt, Section 13
        shall apply), Lessee shall promptly correct and repair such loss or
        damage, including the repair or replacement of all damaged or lost
        Parts at its own expense in accordance with this Agreement in order
        that the Aircraft is placed in an airworthy condition and in
        substantially the same condition as it was prior to such loss or
        damage. Any insurance payments with respect to loss or damage not
        constituting an Event of Loss of the Aircraft or the Airframe shall be
        paid in accordance with the provisions of Section 15 and applied in
        payment for repairs to or for replacement of the property suffering the
        loss or damage.

             (ii) Lessee shall notify Lessor forthwith of any such loss or
        damage to the Aircraft for which the cost of correction or repairs may
        exceed $500,000 and shall provide an explanation or proposal for
        carrying out the correction or repair. If after its receipt of such
        proposal, Lessor does not agree with Lessee's proposal, Lessor shall
        promptly notify Lessee of such disagreement. Lessee and Lessor shall
        then consult with the Airframe Manufacturer, Engine Manufacturer or
        other

                                      49

<PAGE>

                                          [Amended and Restated Lease Agreement]

        relevant manufacturer, and Lessee and Lessor agree to accept as
        conclusive, and be bound by, such Person's directions or
        recommendations as to the manner in which to carry out such repairs;
        provided, that, in the event more than one direction or recommendation
        is provided, Lessee in its sole discretion may choose the direction or
        recommendation it shall follow.

     SECTION 11. POSSESSION. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, Airframe or an Engine or any Part, or
install an Engine, or permit any such Engine to be installed, on an airframe
other than the Airframe, provided that so long as (1) no Event of Default shall
have occurred and be continuing, (2) the action to be taken shall not adversely
affect, or be of a nature that could reasonably be expected to adversely
affect, Lessor's rights, title and interests in and to the Aircraft or
Airframe, or any Engine or Part, or under this Agreement or any other Operative
Document (including, without limitation, any impairment of title to or the
registration with the then Aviation Authority of, the Aircraft), (3) all
applicable approvals, if any, of the Aviation Authority and any other
Government Entity having jurisdiction shall have been obtained, and (4) the
insurance provisions of Section 15 hereof shall have been complied with, then,
at the cost and expense of Lessee:

       (a) MAINTENANCE, ETC. Without the prior consent of Lessor, Lessee may
deliver possession of the Airframe or an Engine or any Part to the manufacturer
thereof, to any Approved Maintenance Performer or to any other Aviation
Authority-approved company acceptable to Lessor for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any Part or for
alterations or modifications in or additions to such Airframe or Engine or Part
to the extent required or permitted by the terms of Section 12(b).

       (b) INSTALLATION OF ENGINES ON OTHER AIRFRAMES. Without the prior
consent of Lessor, Lessee may install an Engine on any Airframe Manufacturer
model 737 or, subject to Section 10(d)(vii) hereof, 727 airframe (other than the
Airframe) operated by Lessee so long as no Person will acquire or claim any
right, title or interest in any Engine by reason of such Engine's being
installed on such airframe at any time while such Engine is owned by Lessor.

       (c) SUBLEASE. Lessee will not sublease the Aircraft or any Engine, or
assign its rights or obligations under the Lease, without the prior written
consent of Lessor, such consent not to be unreasonably withheld. Lessee shall
pay Lessor's reasonable expenses relating to review of Lessee's request to
sublease regardless of whether such sublease is approved. Notwithstanding the
foregoing, in the event of any sublease permitted as described above, (i) Lessee
shall remain primarily liable for the payment and performance of all the terms,
conditions and provisions of this Lease and (ii) any permitted sublease will be
expressly subject and subordinate to this Lease and shall not extend beyond the
lease term with respect to the applicable Aircraft. Subject to Exhibit 0, any
subleasing proposals submitted to Lessor will be subject to a processing fee of
Five Thousand U.S. Dollars (US$ 5,000), payable on demand (whether the sublease
is approved or not). In addition, Lessee will indemnify Lessor on demand

                                      50

<PAGE>

                                          [Amended and Restated Lease Agreement]

for all reasonable out-of-pocket expenses (including legal fees) incurred in
connection with its assessment of the proposal or its implementation.

       (d) TRANSFERS OF POSSESSION IN GENERAL. The rights of any Person who
receives possession by reason of a transfer or sublease permitted by this
Section 11 shall be effectively and expressly subject and subordinate to all
the terms of this Lease, including, without limitation, the covenants contained
in Section 10, this Section 11 and Section 15 and the rights of Lessor to
repossession pursuant to Section 20 and to avoid transfer upon such possession.
No sublease, relinquishment or transfer of possession of the Aircraft or
Airframe, or any Engine or Part, shall in any way release, discharge or
otherwise limit or diminish any of Lessee's obligations to Lessor (it being
agreed that notwithstanding any such transfer or relinquishment of possession,
Lessee shall continue to be primarily liable and responsible for performance of
all of its obligations under this Agreement and each other Operative Document),
or constitute a waiver of Lessor's rights or remedies hereunder or affect the
registration of the Aircraft with the Aviation Authority. Notwithstanding any
other provision of this Agreement or any other Operative Document, any sublease,
relinquishment or transfer of possession must (x) be consistent with the terms
of this Agreement and the other Operative Documents, and (y) not adversely
affect the rights, title or interests of Lessor in or to the Aircraft or
Airframe, or any Engine or Part, or under this Agreement or any other Operative
Document, and (z) not result in any increases in Taxes to the Lessor which are
not indemnifiable hereunder, or otherwise adversely affect applicable tax
benefits available to Lessor.

       (e) MAINTENANCE RESERVES. In the event Lessee falls to meet a minimum
Fixed Charge Coverage Ratio of 1.05 to 1 (the "Financial Requirement") (such
failure a "Credit Event"), Lessee shall increase the initial Security Deposit
by the amount calculated pursuant to this Section (in no event shall such amount
be less than USD two hundred fifty-seven thousand five hundred ($257,500),
plus an adjustment for the Aircraft's then current condition and the standard
the Aircraft would have to meet to be in half-time condition) (the "Adjustment
Amount") as security that Lessee shall perform its obligations as stipulated
herein. The Adjustment Amount shall be calculated based on the maintenance
status of each Engine on the date of the occurrence of the applicable Credit
Event and shall be recalculated for any Replacement Engine which is provided
after the occurrence and during the continuance of such (or a subsequent) Credit
Event. The Adjustment Amount shall equal the sum of (I) $51,500 in respect of
the Airframe (the "Airframe Adjustment") plus (II) $77.25 per Engine per Engine
Cycle or Engine Flight Hour, whichever is more limiting, for which such Engine
is below "half-time," which shall be calculated as Lessee's then current time
between engine overhauls (ESV2s) (based on an average over the last three (3)
years), and converting such time to an equivalent amount of Engine Cycles or
Engine Flight Hours, as applicable, based on Lessee's then current utilization
(based on an average over the last three (3) years); provided, however, if the
Aircraft is in a block D Check structural inspection program at the time of the
occurrence of the applicable Credit Event, then the Airframe Adjustment shall
equal $77.25 per Aircraft Flight Hour or Airframe Cycle, whichever is more
limiting, for which the Airframe is below "half time" to its next scheduled "D"
Check. The Security Deposit may be reduced following the occurrence

                                      51

<PAGE>

                                          [Amended and Restated Lease Agreement]

of a Credit Event, if either (i) Lessee demonstrates renewed compliance with the
Financial Requirements (in which case the Security Deposit shall be reduced to
USD three hundred thousand ($300,000)) or (ii) the physical condition of an
Engine or, if the Aircraft is on a block D Check structural inspection program,
the Airframe has been restored (in which case the Security Deposit shall be
reduced as follows). In the event that Lessee at its sole cost and expense (A)
restores the physical condition of an Engine to the condition required by
Schedule 5 hereto the Adjustment Amount portion of the Security Deposit
applicable to such Engine shall be subtracted from the Security Deposit;
provided, that, if the condition of such Engine deteriorates below "half-time"
during the continuance of the applicable Credit Event, Lessee again shall
increase the Security Deposit by the original Adjustment Amount calculated for
such Engine and (B) if the Aircraft is on a block D Check structural inspection
program, performs a D Check on the Airframe, the Airframe Adjustment shall be
subtracted from the Security Deposit; provided, that, if the condition of the
Airframe deteriorates below "half time" during the continuance of the applicable
Credit Event, Lessee shall increase the Security Deposit by the original
Airframe Adjustment.

     SECTION 12. REPLACEMENT OF PARTS, ALTERATIONS, MODIFICATIONS AND ADDITIONS.

       (a) REPLACEMENT OF PARTS.

             (i) Lessee, at its own expense, will replace or cause to be
        replaced as soon as reasonably practicable and in accordance with
        applicable manufacturer maintenance manual limits (and in any event
        within thirty (30) days of removal or, if earlier, on the date the
        Lease Term expires or terminates) all Parts which may from time to time
        become unserviceable, obsolete, lost, stolen, destroyed, seized,
        confiscated, damaged beyond repair or permanently rendered unfit for
        use for any reason whatsoever, except as otherwise provided in Section
        12(b) with respect to Additional Parts.

             (ii) Subject to Section 5(a)(iv), all Parts incorporated or
        installed in or attached or added to the Airframe or any Engine shall
        (x) be free and clear of all Liens (except for Permitted Liens), (y)
        except with respect to additional parts, be in as good operating
        condition as, and shall have a value and utility at least equal to, the
        Parts replaced, assuming such replaced Parts were in the condition and
        repair required to be maintained by the terms hereof and (z) have a
        current valid Aviation Authority "serviceable tag" of the manufacturer
        or maintenance facility providing such items to Lessee identifying the
        manufacturer, vendor, part number, make, model and serial number, date
        and hours and/or cycles and, if such a tag is issuable with respect to
        the Parts, indicating that such Parts are new, serviceable or
        overhauled. Lessee may substitute for any Part a part that does not
        meet the requirements of the foregoing sentence if a complying Part
        cannot be procured or installed within the available ground time of the
        Aircraft, provided that the original Part is reinstalled or the
        noncomplying part is removed and replaced by a

                                      52

<PAGE>

                                          [Amended and Restated Lease Agreement]

        complying Part, in each case as soon as reasonably practicable
        (and in any event within thirty (30) days of removal or, if earlier, on
        the date the Lease Term expires or terminates).

             (iii) Immediately upon any Part's becoming incorporated in,
        installed on or attached to the Airframe or any Engine, as above
        provided, without further act (x) title to such Part shall thereupon
        vest in Lessor, free and clear of all Liens (other than Permitted
        Liens), (y) such Part shall become subject to this Agreement and be
        deemed part of such Airframe or such Engine for all purposes hereof,
        and (z) title to any replaced Part shall thereupon vest in Lessee, free
        and clear of all Lessor Liens, Liens arising prior to Delivery of the
        Aircraft to Lessee and Liens granted by Lessor to Lessor's lenders and
        shall no longer be deemed a Part hereunder. All Parts (other than
        Additional Parts) at any time removed from the 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
        incorporated or installed in or attached to the Airframe or any Engine
        and which meet the requirements set forth in clause (iii) above. Upon
        any removal of Additional Parts, title thereto shall, without further
        act, vest in Lessee, and such Additional Part shall no longer be deemed
        a Part hereunder.

             (iv) Notwithstanding any other provision hereof, no Part that is a
        life limited part shall be installed on the Aircraft or any Engine,
        including, without limitation, a Replacement Engine, after the Delivery
        Date unless such Part is new or Lessee has complete certified,
        back-to-birth records for such part.

        (b) MODIFICATIONS.

             (i) Except as otherwise provided with respect to Required
        Modifications in Section 10(c)(ii)(B), Lessee, at its own expense,
        will make, or cause to be made, such Modifications to the Airframe and
        Engines as may be required from time to time to meet the applicable
        standards of the Aviation Authority, provided that Lessee may, in good
        faith, contest the validity or application of any law, rule, regulation
        or order in any manner which does not involve any risk of the sale,
        forfeiture or loss of the Aircraft or, in the reasonable judgment of
        Lessor, materially adversely affect Lessor or involve any risk of civil
        or criminal liability on Lessor or any Indemnified Party.

             (ii) Lessee, at its own expense, may from time to time add further
        parts or accessories and make such Modifications to the Airframe or any
        Engine as Lessee may deem desirable in the proper conduct of its
        business, provided that:

                   (y) Lessee shall not, without Lessor's prior written
              consent, make any Major Modifications costing in excess of
              $100,000, including,

                                      53

<PAGE>

                                          [Amended and Restated Lease Agreement]

              without limitation, modifications as to the type or
              manufacture of the avionics and Cabin modifications which change
              the interior layout, to the Aircraft (it being agreed that Lessee
              shall, if requested by Lessor, provide advance copies of
              regulatory approvals and all designs, plans, diagrams, drawings
              and data used by Lessee in accomplishing such Major
              Modifications); provided that any such Major Modifications that
              are performed shall be approved by the Aviation Authority (as
              evidenced by the issuance of a supplemental type certificate or
              similar data acceptable to the Aviation Authority and Lessor);
              and

                   (z) no such Modification shall reduce the remaining useful
              life of the Airframe or such Engine or diminish the value or
              utility of the Airframe or such Engine or impair the condition,
              airworthiness or marketability thereof below the remaining useful
              life, value, utility, condition, marketability or airworthiness
              thereof immediately prior to such Modification, assuming the
              Airframe or such Engine was then of the remaining useful life,
              value and utility and in the condition and airworthiness required
              to be maintained by the terms of this Agreement. Title to all
              Additional Parts shall, without further act, vest in Lessor, and
              Lessee hereby relinquishes all right, title and interest thereto.

              (iii) Lessor shall not be required under any circumstances to pay
        directly or indirectly for any Modifications. Notwithstanding the
        foregoing, Lessee may, at any time during the Lease Term, so long as no
        Event of Default shall have occurred and be continuing, remove or suffer
        to be removed any such Modification (other than a Required
        Modification), provided that such Modification (x) in the case of an
        Additional Part, either (1) such Additional Part or Parts being removed
        is in addition to, and not in replacement of or substitution for, any
        Part originally incorporated or installed in or attached to the Airframe
        or any Engine at the time of delivery thereof or any Part in replacement
        of or substitution for any such Part or (2) concurrently with the
        removal of such Additional Part or Parts, Lessee reinstalls the Part or
        Parts (or replacements thereof) installed on the Aircraft upon delivery
        thereof to Lessee, (y) is not required to be incorporated or installed
        in or attached or added to the Airframe or any Engine pursuant to the
        terms of this Section 12 and (z) can be removed from the Airframe or
        such Engine without damaging the Airframe or such Engine or diminishing
        or impairing the value, utility, condition or airworthiness which the
        Airframe or such Engine would have had at such time had such
        Modification not occurred, assuming the Airframe or such Engine was then
        of the fair market value and utility and in the condition and
        airworthiness required to be maintained by the terms of this Agreement.

                                      54

<PAGE>

                                          [Amended and Restated Lease Agreement]

              (iv) Upon expiration or termination of the Lease Term and the
        written request of Lessor at least forty-five (45) days prior to such
        expiration or termination, Lessee shall, at its own expense, remove or
        cause to be removed any Additional Part. Upon the removal by Lessee of
        any Additional Part as provided above, title thereto shall, without
        further act, vest in Lessee free and clear of Lessor Liens, Liens
        arising prior to Delivery of the Aircraft to Lessee and Liens granted by
        Lessor to Lessor's lenders, and such Additional Part shall no longer be
        deemed part of the Airframe or Engine from which it was removed. Any
        Additional Part not removed by Lessee as above provided prior to the
        return of the Airframe or Engine to Lessor hereunder shall remain the
        property of Lessor.

              (v) Notwithstanding anything to the contrary contained herein,
        Lessee shall not, without Lessor's prior written consent, remove any
        Modification which is required by the Aviation Authority.

     SECTION 13. RISK OF LOSS, DESTRUCTION, REQUISITION, ETC.

        (a) RISK OF LOSS. Throughout the Lease Term and until the Return shall
have been effected in accordance with the terms of this Agreement, Lessee shall
bear all risk of loss, damage, theft or destruction of, or any other Event of
Loss with respect to, the Aircraft or to the Airframe, any Engine or any Part.

        (b) EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.

              (i) Upon the occurrence of an Event of Loss with respect to the
        Airframe or the Airframe and Engines and/or engines then installed
        thereon, Lessee shall forthwith (and, in any event, within three (3)
        days after such occurrence) give Lessor written notice of such Event of
        Loss. By the earlier of (y) sixty (60) days following the Event of Loss
        Date or (z) the date on which the applicable insurance proceeds are
        received by the loss payee, Lessee shall pay or cause to be paid to
        Lessor in immediately available funds the Stipulated Loss Value of the
        Aircraft together with all other amounts then due and owing by Lessee
        hereunder.

              (ii) Until the date on which the Stipulated Loss Value and the
        other amounts referred to in clause (b)(i) above are paid in full,
        Lessee shall be obligated to pay all Basic Rent as scheduled and shall
        continue to perform all of its other obligations under the Operative
        Documents, except to the extent rendered impossible by the occurrence of
        such Event of Loss or rendered, in the opinion of Lessor, unnecessary.
        If the Stipulated Loss Value referred to in clause (b)(i) above is paid
        on a date other than a Basic Rent Date, Lessor shall refund or cause to
        be refunded to Lessee any paid but unaccrued Basic Rent. Upon receipt of
        the full amount of the Stipulated Loss Value and the other amounts
        referred to in clause (b)(i) above by Lessor pursuant to this Section
        13(b), and if Lessee has paid all other amounts then due and payable by
        Lessee under this Agreement and

                                       55

<PAGE>

                                          [Amended and Restated Lease Agreement]

        the other Operative Documents, then (x) Lessor shall, upon the
        joint written request of Lessee and each insurer or their appointed
        representatives which contributed to the payment of the Stipulated Loss
        Value, transfer to the Person designated in such request all of Lessor's
        right, title and interest in the Aircraft without recourse or warranty
        (except as to absence of Lessor Liens, Liens existing prior to
        Delivery of the Aircraft to Lessee and Liens granted by Lessor to
        Lessor's lenders) and subject to the disclaimer set forth in Section
        5(a), and (y) Lessee shall be relieved of its obligations under
        Section 7.

        (c) EVENT OF LOSS WITH RESPECT TO AN ENGINE.

              (i) Upon the occurrence of an Event of Loss with respect to an
        Engine under circumstances in which there has not occurred an Event of
        Loss with respect to the Airframe, Lessee shall promptly (and, in any
        event, within seven (7) days after such occurrence) give Lessor written
        notice thereof and shall, as soon as reasonably practicable and, in any
        event, within ninety (90) days after the occurrence of such Event of
        Loss (or, if earlier the date of expiration or termination of the Lease
        Term) and upon five days' prior written notice, convey or cause to be
        conveyed to Lessor, as replacement for the Engine with respect to which
        such Event of Loss occurred, title to a Replacement Engine, free and
        clear of all Liens (other than Permitted Liens) and having an equivalent
        or greater value, condition, utility, airworthiness, remaining useful
        life as, and being in as good operating condition as, the Engine with
        respect to which such Event of Loss occurred, assuming such replaced
        Engine was in the condition and repair required to be maintained by the
        terms of this Agreement. For all purposes hereof, each such Replacement
        Engine shall, after such conveyance, be deemed part of the property
        leased hereunder, and shall be deemed an "Engine."

              (ii) Prior to or at the time of any conveyance of a Replacement
        Engine, Lessee, at its own expense, shall (t) furnish Lessor with a full
        warranty (as to title) bill of sale, in form and substance satisfactory
        to Lessor, conveying to Lessor such Replacement Engine, (u) cause
        supplements to be executed which shall subject such Replacement Engine
        to this Agreement, (v) cause the filing of such instruments as are
        necessary or advisable to establish, perfect and protect the interest of
        Lessor in any such Engine (including, without limitation, cause a Lease
        Supplement, in form and substance satisfactory to Lessor, to be duly
        executed by Lessee) (w) furnish Lessor with such evidence of the
        transfer of title to such Replacement Engine to Lessor as Lessor may
        reasonably request, including, without limitation, that such Replacement
        Engine is free and clear of all Liens of record with the Aviation
        Authority, except Permitted Liens, such evidence to include, without
        limitation, an opinion of Lessee's counsel addressed to Lessor, and
        opining that such title has been so conveyed and that such Replacement
        Engine has been duly subjected to this Agreement (such opinion to be in
        form and substance, and from counsel, satisfactory to Lessor), (x)
        furnish Lessor with such

                                       56

<PAGE>

                                          (Amended and Restated Lease Agreement]

        evidence of compliance with the provisions of Sections 10(e),
        12(a)(v) and 15 with respect to such Replacement Engine as Lessor may
        reasonably request and, (y) furnish Lessor with a certificate signed by
        an officer of Lessee certifying that, upon consummation of such
        replacement, no Event of Default will exist hereunder and certifying
        that such Replacement Engine has a value, condition, utility,
        airworthiness and remaining useful life at least equal to, and is in as
        good operating condition as, the Engine so replaced, assuming such
        Engine was in the condition and repair required by the terms of this
        Agreement immediately prior to the occurrence of such Event of Loss.

              (iii) Upon compliance by Lessee with the requirements of this
        Section 13(c), if no Event of Default shall have occurred or be
        continuing, Lessor shall, upon the joint written request of Lessee and
        each insurer which contributed to the payment of any insurance proceeds
        with respect to the lost Engine, transfer to the Person designated in
        such request all of Lessor's right, title and interest in such Engine
        without recourse or warranty (except as to absence of Lessor Liens,
        Liens arising prior to Delivery of the Aircraft to Lessee and Liens
        granted by Lessor to Lessor's lenders) and subject to the disclaimer set
        forth in Section 5(a), and such Engine shall thereupon cease to be an
        Engine leased hereunder.

              (iv) No Event of Loss with respect to an Engine shall result in
        any reduction in Basic Rent.

        (d) APPLICATION OF PAYMENTS FROM ANY GOVERNMENT ENTITY FOR REQUISITION
OF TITLE, ETC. Any payments (other than insurance proceeds the application of
which is provided for in Section 15) received at any time by Lessor or by Lessee
from any Government Entity or other Person with respect to an Event of Loss will
be applied as follows:

              (i) if payments are received with respect to the Airframe (or the
        Airframe and an Engine or engines then installed thereon), after
        reimbursement of Lessor for reasonable costs and expenses, so much of
        such payments remaining as shall not exceed the Stipulated Loss Value
        required to be paid by Lessee pursuant to Section 13(b) shall, unless a
        Default or any Event of Default shall have occurred and be continuing,
        be applied in reduction of Lessee's obligation to pay such Stipulated
        Loss Value and such other amounts of Rent, if not already paid by
        Lessee, or, if already paid by Lessee, shall be applied to reimburse
        Lessee for its payment of such Stipulated Loss Value, and the balance,
        if any, of such payments shall be distributed to or retained by Lessee
        or

              (ii) if such payments are received with respect to an Engine under
        circumstances contemplated by Section 13(c), then so much of such
        payments remaining after reimbursement of Lessor for reasonable costs
        and expenses; up to an amount equal to Lessee's actual cost of replacing
        such Engine in accordance with Section 13(c), shall, unless a Default or
        Event of Default shall have occurred

                                       57

<PAGE>

                                          [Amended and Restated Lease Agreement]

        and be continuing, be paid over to, or retained by, Lessee if Lessee
        shall have fully performed, or concurrently therewith will perform, the
        terms of Section 13(c) with respect to the Event of Loss for which such
        payments are made, and the balance, if any, of such payments shall be
        distributed to or retained by Lessee.

        (e) APPLICATION OF PAYMENTS DURING, EXISTENCE OF DEFAULT. Any amount
referred to in this Section 13 which is payable to or retainable by Lessee
shall not be paid to or retained by Lessee if at the time of such payment or
retention a Default or any Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Lessor, as security for the
obligations of Lessee under this Agreement to be held and applied pursuant to
Section 20 and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing, any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not applied in
accordance with the preceding sentence.

     SECTION 14. INTENTIONALLY RESERVED.

     SECTION 15. INSURANCE.

        (a) REQUIREMENTS. At all times during the Lease Term, and until the
Aircraft is returned to Lessor in the condition and manner required by this
Agreement, Lessee shall maintain or cause to be maintained with respect to the
Aircraft, at its own expense, insurance in compliance with the Insurance
Requirements of Exhibit F hereto.

        (b) APPLICATION OF PROCEEDS OF HULL INSURANCE. As between Lessor and
Lessee, it is agreed that all proceeds of insurance maintained in compliance
with this Section 15 (except Section 15(f)) and received as the result of the
occurrence of an Event of Loss will be applied as follows:

              (x) if such payments are received with respect to the Airframe (or
        the Airframe and the Engines or engines installed thereon), so much of
        such payments remaining, after reimbursement of Lessor for reasonable
        costs and expenses, as shall not exceed the Stipulated Loss Value and
        the other amounts payable under Section 13(b) shall be applied in
        reduction of Lessee's obligation to pay such Stipulated Loss Value and
        the other amounts payable under Section 13(b), if not already paid by
        Lessee, or, if already paid by Lessee, shall be applied to reimburse
        Lessee for its payment of such Stipulated Loss Value, and the balance,
        if any, of such payments remaining thereafter shall be paid over to, or
        retained by, Lessee; and

              (y) if such payments are received with respect to an Engine under
        the circumstances contemplated by Section 13(c), so much of such
        payments remaining, after reimbursement of Lessor for reasonable costs
        and expenses, shall be paid over to, or retained by, Lessee, provided
        that Lessee shall have fully

                                       58

<PAGE>

                                          [Amended and Restated Lease Agreement]

        performed or, concurrently therewith, will fully perform the terms
        of Section 13(c) with respect to the Event of Loss for which such
        payments are made.

        As between Lessor and Lessee, the insurance payments with respect to any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse Lessee) for
repairs or for replacement property in accordance with the terms of Sections 10
and 12, if not already paid for by Lessee, and any balance remaining, after
compliance with such sections with respect to such loss shall be paid to Lessee.

        (c) INSURANCE FOR INDEMNITIES; CONTINUATION OF LIABILITY INSURANCE. The
insurance referred to in Section 15(a) shall in each case include and insure (to
the extent of the risks covered by the policies) the indemnity provisions of
Section 9. For a period of twenty-four months after the last day of the Lease
Term, or, if earlier, the next C-Check of the Aircraft, and at Lessee's cost,
Lessee shall continue to name each Indemnified Party as an additional insured
under Lessee's comprehensive airline and war-risk liability insurance described
in Exhibit F to the extent of its interest under the indemnities referred to in
the preceding sentence.

        (d) REPORTS, ETC. Lessee shall furnish, or cause to be furnished, to
Lessor (x) on or before the Delivery Date and not later than each renewal date
of any insurance, and otherwise upon reasonable request, a Certificate of
Insurance and a report, signed by the Insurance Broker, stating that (i) it is
the Lessee's insurance broker; (ii) in the opinion of such firm (x) such
insurance complies with the terms hereof and (y) such insurance together with
any self-insurance permitted hereby are in such amounts and cover such perils
and are placed with insurers of recognized reputation and responsibility in the
worldwide aviation insurance marketplace so that the protection afforded thereby
is not less than that which would customarily be maintained for aircraft of a
similar character by corporations engaged in the same or similar business,
similarly situated with Lessee; (iii) such Insurance Broker shall advise Lessor
in writing of any act or omission on the part of Lessee of which the Insurance
Broker has knowledge and which has been confirmed by the insurers as
invalidating or rendering unenforceable, in whole or in part, any insurance on
the Aircraft and advise in writing at least 30 days (7 days in the case of war
risk and allied perils coverage) prior to the cancellation (but not scheduled
expiration if renewed prior thereto) or material adverse change to any insurance
maintained pursuant to this Section 15 and Exhibit F; and (iv) Lessee is current
on the payment of all insurance premiums; and (v) on the Delivery Date and no
later than five (5) days prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance and a report of
the Insurance Broker. The reports required by this Section 15(d) are part of the
reporting requirements set forth in Schedule 6.

        (e) SELF-INSURANCE. Lessee may not self-insure the risks required to be
insured against pursuant to this Section 15, provided that Lessee may
self-insure the risks required to be insured against pursuant to Exhibit F
(except total loss) by way of deductible, premium adjustment or similar
provisions, in such amounts as are customarily self-insured with respect to

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<PAGE>

                                          [Amended and Restated Lease Agreement]

aircraft of the same type and used in the same manner as the Aircraft by major
international air carriers, but in no event in an amount greater than the
$500,000 per aircraft per occurrence.

        (f) ADDITIONAL INSURANCE BY LESSOR. Lessee acknowledges that Lessor has
an insurable interest in the Aircraft. Lessor shall have the right to obtain
insurance in its own name with respect to such insurable interest. Lessee will
render Lessor all reasonable assistance requested by Lessor in order that Lessor
may adequately protect such insurable interest. Lessee agrees that the maximum
amounts payable to it or to others for its account or to be applied in discharge
of its obligations by any underwriter or carrier of insurance maintained by
Lessee upon the occurrence of an Event of Loss with respect to the Aircraft
shall be limited to the Stipulated Loss Value unless the maintenance of any such
insurance in an amount in excess of such Stipulated Loss Value in respect of
Lessee's insurable interest in the Aircraft does not prejudice Lessor's or any
Insured Party's interests under the insurances otherwise required by this
Section 15, or prevent Lessor from obtaining such insurances as it requires, in
which event nothing herein shall prevent Lessee from effecting such additional
insurance for its account.

        (g) APPLICATION OF PAYMENTS DURING EXISTENCE OF A DEFAULT. Any amount
referred to in this Section 15 which is payable to or retainable by Lessee shall
not be paid to or retained by Lessee if at the time of such payment or retention
a Default or any Event of Default shall have occurred and be continuing, but
shall be held by or paid over to Lessor as security for the obligations of
Lessee under this Agreement and, if any such Default or Event of Default shall
have occurred and be continuing, applied against Lessee's obligations hereunder
as and when due. At such time as there shall not be continuing any such Default
or Event of Default, such amount shall be paid to Lessee to the extent not
applied in accordance with the preceding sentence.

        (j) NEGATIVE UNDERTAKINGS. Lessee shall not (1) act or fail to act, or
cause, permit or suffer an act or failure to act, whereby any insurance required
by this Section 15 would or might reasonably be expected to be limited or
rendered in whole or in part invalid, unenforceable or otherwise not in full
force and effect (including any limitation resulting from inaccuracy of any
representation or warranty of Lessee, or any illegal use of the Aircraft), and
(ii) without limiting the foregoing, use, operate, employ or locate the
Aircraft, Airframe, any Engine or any Part, or cause, permit or suffer the
Aircraft, Airframe, any Engine or any Part to be used, operated, employed or
located, in any place or in any manner or for any purpose (x) in any area
excluded from coverage, or in any manner for any purpose that is not covered, by
any insurance policy in effect or required by the terms of this Agreement to be
maintained by Lessee or (y) that might reasonably be expected to be excluded
from coverage under, or to invalidate or in any way limit (including any
limitation with respect to coverage of the specified insured perils, events or
circumstances) any such insurance policy.

        (k) FAILURE TO INSURE. If at any time Lessee fails to maintain insurance
in compliance with this Section 15, Lessor shall be entitled but not bound to do
any of the following (without prejudice to any other rights which it may have
under this Agreement by reason of such failure):

                                       60
<PAGE>

                                          [Amended and Restated Lease Agreement]

     (i)  to pay any premiums due or effect or maintain such insurance or
          otherwise remedy such failure in such manner as Lessor considers
          appropriate (and Lessee shall upon demand reimburse Lessor in full for
          any amount so expended in that connection) and/or

     (ii) at any time while such failure is continuing, require the Aircraft to
          remain at any airport or, as the case may be, upon provision by Lessor
          of insurance coverage satisfactory to Lessee, proceed to and remain at
          any airport designated by Lessor, until such failure is remedied to
          Lessor's satisfaction.

     SECTION 16. INSPECTION.

        (a) MAINTENANCE SCHEDULE. During the Lease Term, Lessee shall furnish
Lessor with such information concerning the location, condition, use and
operation of the Aircraft as Lessor may reasonably request. Lessee shall provide
Lessor with maintenance schedules relating to the Aircraft upon delivery of the
Aircraft and from time to time as such schedules are adjusted or updated. Lessee
shall give Lessor reasonable prior notice of the date of, and any change in the
date of, any Major Checks, in order to enable Lessor, or its agents,
representatives or designees, to inspect the Aircraft, including, without
limitation, the Aircraft Documentation (should Lessor choose to do so), at the
time and place any such Major Checks occur and to make a reasonable number of
photocopies of any Aircraft Documentation. Lessee's obligations under the second
and third sentences of this Section 16(a) can be satisfied through Lessee's
provision of the quarterly reports pursuant to Section 10(d)(vii) hereof.

        (b) REASONABLE INSPECTIONS. At all reasonable times, Lessor or its
authorized representatives may inspect the Airframe and Engines and inspect and
make copies (at such Person's expense, or if such inspection is made in
connection with or following a Default or an Event of Default, at Lessee's
expense) of the books and records of Lessee relating to the Airframe and Engines
and the maintenance of the Airframe and Engines (including, without limitation,
any Aircraft Documentation and also including any airworthiness directive and
service bulletin compliance records, component life status reports, and the
then-current aircraft configuration), and if such inspection is made at the time
of any maintenance operation, such Persons may inspect behind any panels, bays
or other apertures which have already been opened in the course of such
maintenance operation, provided that, so long, as no Default or Event of Default
has occurred and is continuing, no exercise of such inspection right shall
interfere with the normal operation of the Aircraft by Lessee.

        (c) NO DUTY TO INSPECT. Lessor shall not have any duty to make any such
inspection nor shall Lessor incur any liability or obligation by reason of
making or not making any such inspection.

        (d) FOLLOW-ON LEASE. Upon request by Lessor, Lessee shall from time to
time during the Lease Term make the Aircraft, including, without limitation, the
Aircraft Documentation, available for inspection and/or a reasonable amount of
photocopying to Lessor's

                                       61

<PAGE>

                                          [Amended and Restated Lease Agreement]

designated representatives or technical teams evaluating the Aircraft for use
after the end of the Lease Tenn. Lessor agrees to give Lessee at least five (5)
Business Days' advance notice of any such inspection and to coordinate such
inspections with Lessee so as not to unreasonably interfere with Lessee's
operation or maintenance or with its personnel.

        (e) ABSOLUTE RIGHT. The right of Lessor and its designated
representatives to inspect the Aircraft and Aircraft Documentation in accordance
with this Section 16 during the Lease Term shall be absolute.

     SECTION 17. ASSIGNMENT.

        (a) ASSIGNMENT BY LESSEE. Lessee shall not assign, convey or otherwise
transfer (each, an "assignment") any of its rights, title or interests in and to
the Aircraft or this Agreement without the prior written consent of Lessor.

        (b) The Lessor may sell, assign or transfer all or any of its rights
under this Agreement and in the Aircraft (a "Transfer") and the Lessor will,
other than in the case of an assignment for security purposes, have no further
obligation under this Agreement following a Transfer (except with regard to a
breach by Lessor of this subpart (b) and subject to subpart (c) of this Section)
but, notwithstanding any Transfer, will remain entitled to the benefit of each
indemnity under this Agreement. In connection with any Transfer, the following
conditions shall apply:

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

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

              (iii) the Transferee will be a Citizen of the United States and
        have full corporate power and authority to enter into and perform the
        transactions contemplated by this Agreement on the part of "Lessor";

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

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

                                       62

<PAGE>

                                          [Amended and Restated Lease Agreement]

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

        (d) Upon compliance by Lessor and a Transferee with the terms and
conditions of Clause 17(b), except during the continuance of an Event of
Default, Lessee shall at the time of Transfer, at the specific written request
of Lessor and with Lessor paying, all of Lessee's out-of-pocket costs and
expenses:

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

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

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

              (iv) cause to be delivered to Lessor and such Transferee
        certificates of insurance and broker's letter of undertaking
        substantially in the form set out in Exhibits F and G, detailing the
        coverage and confirming the insurers' agreement to the specified
        insurance requirements of this Agreement and listing the Lessor and
        Transferee as additional insureds and the Transferee as sole loss payee,
        in accordance with the terms of Exhibit F;

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

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

                                       63

<PAGE>

                                          [Amended and Restated Lease Agreement]

        (e) COLLATERAL ASSIGNMENT. Notwithstanding any of the foregoing, it is
understood and agreed that Lessor may, without the prior written consent of
Lessee but with prior notice to the Lessee, mortgage or pledge and/or assign
all or any portion of its right, title and interest in and to this Agreement,
the Aircraft or any Rent due hereunder to any Lender. Lessee shall acknowledge
in writing any such mortgage, pledge or assignment by an acknowledgment in a
form reasonably satisfactory to the Lessee. Upon notice to the Lessee from any
Lender under any such mortgage, pledge or assignment, such Lender may require
that all Rent shall be paid directly to such Lender and/or that the Aircraft be
returned to such Lender, but, in the case of the return of the Aircraft, only
upon completion or termination of this Agreement. Any acknowledgment from the
Lessee shall include, without limitation, an agreement of the Lessee that:

        (i)  upon such mortgage, pledge or assignment, all rights of the Lessor
             hereunder (including without limitation, all rights to be named as
             loss payee, in accordance with the terms of Exhibit F, and an
             additional insured under any policies of insurance maintained
             pursuant to Section 15 hereof, all rights to receive monies,
             reports, certificates and any other information pursuant to the
             terms of this Agreement and all rights to indemnification) shall,
             to the extent provided for in the mortgage, pledge or assignment,
             be exercisable by such Lender, and such Lender shall be deemed an
             Indemnified Party and a Tax Indemnitee for all purposes of this
             Agreement;

        (ii) the rights of such Lender shall not be subject to any defense,
             counterclaim, or set-off that the Lessee may have or assert against
             Lessor;

        (iii) such Lender shall not be liable for any of Lessor's obligations
             hereunder;

        (iv) subject to the terms of the mortgage, pledge or assignment, such
             Lender may require that all Rent be paid directly to such party (or
             its designee), and Lessee agrees that upon receipt of such notice,
             Lessee shall pay directly to such Lender all Rent due or to become
             due hereunder; and

        (v)  Lessee shall comply, at the Lessor's expense, with all reasonable
             requests of Lessor and such Lender in connection with any such
             mortgage, pledge or assignment including, without limitation, the
             execution of all consents and amendments in a form reasonably
             acceptable to Lessee and the making of any and all registrations
             and filings.

        (f) SUCCESSORS AND ASSIGNS. Subject to the foregoing, the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
Lessor, Lessee and their respective successors and permitted assigns.

                                       64

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 18. EARLY TERMINATION. So long as no Default or Event of Default
shall then have occurred and be continuing, on any Basic Rent Date occuring on
or after September 1, 2003, Lessee may, with at least ninety (90) days prior
written notice to Lessor, elect to terminate this Lease, effective on the Basic
Rent Date specified in such notice (the "Termination Date"). On the Termination
Date, Lessee shall (i) return the Aircraft to Lessor pursuant to Section 7
hereof, (ii) pay to Lessor all rent due and owing to Lessor through such
Termination Date, and (iii) pay to Lessor as an early termination fee the
remaining payments of Basic Rent due after the Termination Date, discounted to
the Termination Date using, a discount rate of 8% per annum. Upon Lessee's
compliance with clauses (i) and (ii), Lessor shall execute all documents
provided by Lessee to effect termination of this Lease, effective as of the
Termination Date. If Lessee falls to comply with clauses (i), (ii) and (iii)
above, then this Lease shall continue in full force and effect as if Lessee had
not yet given a notice of its election to terminate this Lease.

     SECTION 19. EVENTS OF DEFAULT. Lessor and Lessee agree that it is a
fundamental term and condition of this Agreement that none of the following
events shall occur during the Lease Term and that the occurrence of any of the
following events shall constitute a repudiatory breach of this Agreement and an
"Event 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 Government Entity):

        (a) FAILURE TO PAY BASIC RENT. Lessee shall have failed to make any
payment of Basic Rent, Stipulated Loss Value or Early Termination Fee in
accordance with this Agreement and the other Operative Documents when the same
shall have become due and payable and such failure shall continue for five (5)
Business Days from such due date.

        (b) FAILURE TO PAY SUPPLEMENTAL RENT. Lessee shall have failed to make
any payment of Supplemental Rent (other than as specified in paragraph (a)
above) in accordance with this Agreement or the other Operative Documents when
the same shall have become due and such failure shall continue for ten (10)
Business Days from such due date.

        (c) INSURANCE.

              (i) Lessee shall have failed to carry and maintain, or cause to be
        carried and maintained, on or with respect to the Aircraft, any
        insurance required to be maintained in accordance with the provisions of
        Section 15;

              (ii) The Aircraft shall be operated at a time when any insurance
        requiredunder Section 15 shall not be in effect.

        (d) RETURN. Lessee shall have failed to return the Aircraft at the end
of the Lease Term pursuant to the provisions of, and in the condition required
by, Section 7.

                                       65

<PAGE>

                                          [Amended and Restated Lease Agreement]

        (e) UNAUTHORIZED TRANSFER. There shall be any unauthorized transfer of
possession of the Aircraft, Airframe or any Engine by Lessee.

        (f) CERTAIN COVENANTS. Lessee shall have failed to comply with its
obligations under Section 6(a), 6(b), 10(a)(i), 10(b), 10(d)(ii) or 11 (except,
with respect to 11(a) and 11(d), for which Section 19(g) shall apply and 11(b),
for which Lessee shall have 5 Business Days to cure the relevant failure after
the earlier of (i) the date of written notice thereof to Lessee or (ii) the date
Lessee obtains actual knowledge of such failure).

        (g) OTHER COVENANTS. Lessee shall have failed to comply with, observe or
perform, and shall fail to cause to be complied with, observed and performed,
any of its covenants, agreements or obligations hereunder or under any other
Operative Document, except to the extent provided above in this Section 19, and
such failure shall continue for 30 days after the earlier of (i) the date of
written notice thereof to Lessee or (ii) the date Lessee obtains actual
knowledge of such failure; provided, if Lessee has not cured such failure with
such 30-day period and such failure can be cured with further reasonable
diligence, Lessee, so long as it is proceeding diligently to cure such failure,
shall have an additional 30-day period to cure such failure at the expiration of
the initial 30-day period.

        (h) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
by Lessee herein or in any other Operative Document shall have proven to have
been incorrect, inaccurate or untrue in any material respect as of the time
made.

        (i) AUTHORIZATIONS. Lessee shall no longer possess the Authorizations
required hereunder or under any other Operative Document or otherwise required
for the conduct of its business as a commercial passenger and cargo air carrier
in the Lessee Jurisdiction or for the performance of its obligations hereunder
or under any other Operative Document, or any such Authorizations are revoked,
canceled, adversely modified or otherwise terminated, or the continued use and
exercise thereof is prevented.

        (j) VOLUNTARY BANKRUPTCY, ETC. Lessee shall have (i) commenced any
proceeding or filed any petition seeking relief under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or other
similar law, (ii) consented to or acquiesced in the institution of, or failed to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such petition, (iii) applied for or consented to the appointment of a
receiver, examiner, trustee, custodian, sequestrator or similar official for
itself or for a substantial part of its property or assets, (iv) filed an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) proposed or entered into any composition or other arrangement,
or made a general assignment, for the benefit of creditors or declared a
moratorium on the payment of indebtedness, (vi) become insolvent or suspended
payments on, become unable to, admitted in writing its inability to or failed
generally to pay, any material portion of its debts as they become due, (vii)
sought its own liquidation, reorganization, dissolution or winding up (other
than for the purposes of a reorganization previously approved by Lessor),

                                       66

<PAGE>

                                          [Amended and Restated Lease Agreement]

(viii) suspended payment procedures or (ix) taken any corporate action for the
purpose of effecting any of the foregoing

        (k) INVOLUNTARY BANKRUPTCY, ETC. A proceeding shall have been commenced
or a petition shall have been filed, in either case, without the consent or
application of Lessee, seeking (i) relief in respect of Lessee or of a
substantial part of its property or assets under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or similar
law, (ii) the appointment of a receiver, examiner, trustee, custodian,
sequestrator or similar official for Lessee or for a substantial part of its
property or assets or (iii) the liquidation, reorganization, dissolution or
winding up of Lessee; and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be issued and shall not immediately be stayed.

        (l) GOVERNMENT ACTION. The franchises, concessions, permits, rights or
privileges required for the conduct of the business or operations of Lessee
shall have been revoked, canceled or otherwise terminated or the free and
continued use or exercise thereof curtailed, prevented or modified in a manner
that materially adversely affects Lessee's ability to perform its obligations
under any Operative Document.

        (m) CROSS DEFAULT:

               (i)  any Indebtedness of the Lessee or any of its Affiliates that
                    exceeds $5,000,000 is not paid when due and any applicable
                    grace period shall have expired;

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

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

               provided always, in any such case, it shall not constitute an
               Event of Default under this Agreement if, in connection
               with Lessee's working lines of credit and related letters of
               credit facilities:

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

               (2)  the non-payment, acceleration, termination or event in
                    question is being discussed by the Lessee with the creditors
                    of such facilities

                                       67

<PAGE>

                                          [Amended and Restated Lease Agreement]

                    in good faith and on reasonable grounds and there has been
                    no declaration of default, termination of agreement or
                    enforcement of security.

        (n) CHANGE OF OWNERSHIP. Any single person acquires, or group of persons
acquire, control, directly or indirectly, of twenty-five percent (25%) or more
of Lessee's then outstanding voting stock (including by virtue of control of
twenty-five percent (25%) or more of Lessee's direct or indirect parent's then
outstanding voting stock) without the previous consent in writing of the Lessor
(which consent shall not be withheld unless the Lessor is of the reasonable
opinion that such acquisition of control will have a materially adverse effect
on the Lessee's ability to perform its obligations under this Agreement or the
Lessor's rights, title and interest in and to the Aircraft or under this
Agreement), not including, (i) persons that are currently in control of Lessee,
(ii) spouses of such persons, (iii) any lineal ancestor or descendant of such
persons, (iv) any spouse of any person covered by clause (iii), or (v) a
partnership or trust set up for the benefit of persons identified in clauses (i)
through (iv).

        (o) LETTER OF CREDIT OR SURETY BOND. The Letter of Credit or Surety Bond
shall be repudiated by the issuing entity or shall become ineffective, the
Lessee shall fail to replace the Letter of Credit or Surety Bond pursuant to
Section 3(d)(v) following the occurrence of a Substitution Event (as defined in
said Section 3(d)(v) or, following, any occurrence of an event entitling Lessor
to draw on the Letter of Credit or Surety Bond, Lessor shall be prohibited by
law from drawing on the Letter of Credit or Surety Bond when Lessor is otherwise
entitled to make such a drawing and, within five (5) Business Days after notice
of any of the foregoing by Lessor, Lessee does not replace the Letter of Credit
or Surety Bond with a new Letter of Credit or Surety Bond meeting the
requirements of Section 3(d)(v).

     SECTION 20. REMEDIES. Upon the occurrence of any Event of Default and so
long as the same shall be continuing, Lessor shall have the right, effective
upon notice to Lessee, to terminate this Agreement and all of Lessee's rights
hereunder; and at any time thereafter Lessor may do all or any of the following,
at its option and in its sole discretion (in addition to such other rights and
remedies which Lessor may have under applicable law):

        (a) RETAKE POSSESSION. Upon the written demand of Lessor and at Lessee's
expense, cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe and Engines or such part of the Aircraft as Lessor may so demand to
Lessor or its order in the manner and condition required by, and otherwise in
accordance with, all the provisions of, Section 7 as if such Airframe and
Engines were being returned at the expiration of the Lease Term, or Lessor,
acting, in its individual capacity or as attorney for Lessee, at its option,
may enter upon the premises where the Airframe or an 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, subject to all the rights
of the owner, lessor, lienor or secured party of such engine, and such engine
shall be held for the account of any such owner, lessor, lienor or secured
party or, if owned by Lessee, may, at the option of Lessor, be exchanged with
Lessee for an Engine in accordance with the provisions of Section 7(b)) by
summary proceedings or other-wise, and

                                       68

<PAGE>

                                          [Amended and Restated Lease Agreement]

Lessee waives any right it may have under applicable law to a hearing prior to
repossession of the Aircraft, Airframe or any Engine or Part, all without
liability accruing to Lessor for or by reason of such entry or taking of
possession or removing whether for the restoration of damage to property caused
by such action or otherwise. Lessee acknowledges and agrees that its obligation
to return the Aircraft in those instances is incontrovertible without prejudice
to its right to dispute any amounts, damages, interests or other amounts claimed
by Lessor upon termination of this Agreement and as such this Agreement will be
incontrovertible written evidence of such obligation of Lessee to return the
Aircraft which Lessor will be entitled to enforce via injunctive orders.

        (b) TERMINATION OR ENFORCEMENT. Rescind this Agreement, terminate this
Agreement and/or exercise any other right or remedy which may be available to it
under applicable law or proceed by appropriate court action to enforce the terms
hereof and/or exercise any other power, right or remedy which may be available
to Lessor hereunder or under applicable law. Without limiting the generality of
the foregoing, Lessor shall have the right, without need of any consent,
authorization or action of Lessee, to cause the Aircraft to be deregistered by
the Aviation Authority, and to be made ready for export and to be exported out
of the Lessee Jurisdiction, and to cause all nights of Lessee in respect of the
Aircraft and this Lease under or in connection with or resulting from the
registration of the Aircraft with the Aviation Authority or otherwise under or
in connection with or resulting from any law in the Lessee Jurisdiction, to be
terminated and extinguished. In furtherance of the foregoing, Lessor shall be
entitled and empowered to act in the name and in the place of Lessee with
respect to the Aircraft as may be necessary or desirable, in Lessor's sole
discretion, including, without limitation, with respect to the execution of
documents and instruments, to effect such deregistration, exportation,
termination and extinguishment.

        (c) APPLICATION OF FUNDS. Without limiting any other provision of this
Agreement or of any other Operative Document, Lessor shall have the right to
withhold or set off against all amounts otherwise payable to Lessee hereunder,
all as security for Lessee's obligations and liabilities under this Agreement
and the other Operative Documents, and to use and apply in whole or in part any
or all of such amounts and setoffs to and against such obligations and
liabilities of Lessee (in whatever order and according to whatever priority
Lessor may choose), and any such use, application or setoff shall be absolute,
final and irrevocable.

        (d) DAMAGES. In addition to Lessor's rights under Section 9, Lessor may
recover from Lessee, and Lessee shall on demand pay, damages to equal the sum
of:

              (i) all accrued and unpaid Rent payable hereunder in respect of
        any period prior to Return of the Aircraft to Lessor in the condition
        and otherwise in the manner required under Section 7 together with Break
        Amount, if any;

              (ii) all Expenses incurred by Lessor and any other Indemnified
        Party in connection with such Event of Default or the exercise of
        Lessor's remedies with respect thereto, including, without limitation,
        all costs and expenses incurred in

                                       69

<PAGE>

                                          [Amended and Restated Lease Agreement]

        connection with recovering possession of the Airframe or any
        Engine or in placing such Airframe or Engine in the configuration,
        condition and airworthiness required by Section 7 and all lost Rent
        payments during such recovery and reconditioning;

              (iii) all incidental and consequential damages incurred by Lessor
        and any other Indemnified Party in connection with such Event of
        Default, including, without limitation, all losses (including, without
        limitation, reasonable lost profits) suffered by Lessor because of
        Lessor's inability to place the Aircraft on lease with another lessee on
        terms as favorable to Lessor as this Agreement or because whatever use,
        if any, to which Lessor is able to put the Aircraft upon its return to
        Lessor, or the amount received by Lessor upon a sale or other disposal
        of the Aircraft, is not as profitable to Lessor as leasing the Aircraft
        in accordance with the terms of this Agreement would have been,
        including, without limitation, in each case, lost Rent payments during
        any remarketing period; and

              (iv) all reasonable and actual legal fees and other reasonable
        costs and Expenses incurred by Lessor and any other Indemnified Party by
        reason of the occurrence of any Event of Default or the exercise of
        Lessor's remedies with respect thereto.

     SECTION 21. TRANSACTION EXPENSES. Except as expressly otherwise
provided herein, each of Lessor and Lessee agrees that it shall be responsible
for any and all fees and expenses it incurs in connection with the negotiation,
preparation, execution and delivery of this Agreement and any other documents
or instruments relating to the transaction contemplated hereby, including,
without limitation, legal fees, expenses and disbursements.

     SECTION 22. NO SETOFF, COUNTERCLAIM, ETC. This Agreement is a net lease and
Lessee's obligation to pay Rent under this Agreement and each other Operative
Document to which it is a party is and shall be absolute and unconditional
and shall not be abated, suspended, diminished, reduced, delayed,
discontinued or otherwise affected by any condition, circumstance, act or
event of any kind whatsoever, including, without limitation, any of the
following:

              (i) any right of setoff, deduction, counterclaim, recoupment,
        defense, suspension, deferment or other right (including any right of
        reimbursement) which Lessee may have against Lessor, Airframe
        Manufacturer, Engine Manufacturer, any Insured Party, any Inspecting
        Party, any Indemnified Party or any other Person for any reason
        whatsoever, including any claim Lessee may have for the foregoing, any
        present or future law to the contrary notwithstanding;

              (ii) the unavailability, interruption or cessation in use of the
        Aircraft for any reason, including (A) any requisition thereof or any
        restriction, prohibition or curtailment of, interference with, or other
        restriction against, Lessee's use, operation or possession of the
        Aircraft (whether by law, any Government Entity or other Person or
        otherwise) and

                                       70

<PAGE>

                                          [Amended and Restated Lease Agreement]

        (B) any damage to or loss or destruction (including an Event of
        Loss except as otherwise expressly provided in Section 13(b)) of or to
        the Aircraft and (C) the removal of the Aircraft from service to correct
        deficiencies described in Section 2 or to permit the Final Inspection or
        Return of the Aircraft;

              (iii) any defect in the title, airworthiness, merchantability,
        fitness for any purpose, condition, design, specification or operation
        of any kind or nature of the Aircraft, or the ineligibility of the
        Aircraft for any particular use or trade or for registration or
        documentation under the laws of any jurisdiction;

              (iv) any amendment or modification of or supplement to any of the
        Operative Documents, any agreements relating to any thereof or any other
        instrument or agreement applicable to the Aircraft, the Airframe or any
        Engine, or any assignment or transfer of any thereof, or any furnishing
        or acceptance of any additional security, or any failure or inability to
        perfect any security;

              (v) any insolvency, bankruptcy, reorganization, arrangement,
        readjustment of debt, dissolution, liquidation, receivership,
        administration or similar proceedings by or against Lessee, Lessor, any
        Indemnified Party or any other Person;

              (vi) the invalidity, unenforceability or impossibility of
        performance of this Agreement, any other Operative Document or any of
        the terms hereof or thereof, the lack of power or authority of Lessee to
        enter into this Agreement or any other Operative Document, or any other
        defect in this Agreement or any other Operative Document;

              (vii) any breach by Lessor, any Indemnified Party or any other
        Person of any representation, warranty or covenant, express or implied,
        made or alleged to be made to Lessee;

              (viii) any right, claim, bill, action or suit whatsoever by or
        against or on the part of Lessee, including, without limitation, whether
        arising out of legal action or otherwise, at law or in equity, whether
        affirmative, negative or defensive in nature for or on account of the
        legality, validity, enforceability or otherwise arising as a result of
        (x) this Agreement or any other Operative Document or any of the terms
        or conditions hereof or thereof, (y) any express of implied warranty or
        (z) any contract, agreement or transaction between Lessee and Lessor or
        any other Person, whether direct or indirect, written or oral;

              (ix) any waiver, consent, change, extension, indulgence or any
        action or inaction under or in respect of any such instrument or
        agreement or any exercise or nonexercise of any right, remedy, power or
        privilege in respect of any such instrument or agreement or this
        Agreement or any other Operative Document;

              (x) any transfer of any interest in this Agreement or in the
        Aircraft by Lessor or any Indemnified Party or any change of ownership
        of Lessor or any Indemnified Party; or

                                     71
<PAGE>

                                          [Amended and Restated Lease Agreement]

              (xi) any other circumstance, happening or event whatsoever,
        whether or not similar to the foregoing, which but for this provision
        would or might have the effect of terminating or in any other way
        affecting any obligation of Lessee hereunder, it being the express
        intention of Lessor and Lessee that all Rent and other amounts payable
        by Lessee hereunder or under any other Operative Document shall be
        payable in all events, unless the obligation to pay the same shall be
        terminated pursuant to the express provisions of this Agreement.

        Lessee hereby waives, to the extent permitted by applicable law, any and
all rights which it may have or which at any time hereafter may be conferred
upon Lessee, by law or otherwise, to terminate, cancel, quit or surrender this
Agreement or any other Operative Document, or to abate, suspend, defer, reduce
or otherwise fall to comply in full with any obligation imposed upon Lessee
hereunder or thereunder or in relation hereto, except termination of this
Agreement in accordance with the express provisions hereof Each Rent payment
made by Lessee shall be final, and Lessee shall not seek to recover all or any
part of any such payment for any reason whatsoever. The foregoing provisions of
this Section 22 shall in no event limit Lessee's ability to seek recovery by
independent legal action against Lessor with respect to any breach by Lessor of
its obligations under this Lease.

     SECTION 23. FURTHER ASSURANCES, ETC.

        (a) FURTHER ASSURANCES. Without limiting the other obligations and
liabilities of Lessee under this Agreement and the other Operative Documents,
Lessee agrees to 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 effectively carry out the intent and purpose
of this Agreement and the other Operative Documents and to establish, perfect
and protect the rights and remedies created or intended to be created in favor
of Lessor or any other Person hereunder and thereunder, including,, without
limitation, (x) any explanations, clarifications or translations (into English)
requested by Lessor relating to the information required to be provided by
Lessee under Section 6(c), and (y) the execution and delivery of supplements or
amendments hereto, in recordable form, rendering subject to this Agreement any
Replacement Engine and the recording or filing of counterparts hereof or thereof
or of other appropriate materials, in accordance with the laws of such
jurisdictions as Lessor may from time to time reasonably deem advisable.

        (b) LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
make any payment of Rent or falls to perform or comply with any agreement,
covenant or obligation contained herein or in any other Operative Document,
Lessor shall have the right, but not the obligation, at its election and without
waiver of any of its rights or remedies against Lessee, to perform or comply
with such covenant, agreement or obligation and/or pay such amount, and the
amount of such payment and any Expenses incurred by Lessor in connection with
such payment or the performance of or compliance with such agreement, covenant
or obligation, as the case may be, together with interest at the Past Due Rate,
shall be payable by Lessee to Lessor upon demand as Supplemental Rent. The
taking of any action by Lessor pursuant to this Section 23(b)

                                       72

<PAGE>

                                          [Amended and Restated Lease Agreement]

shall not constitute a waiver or release of any obligation of Lessee hereunder
nor a waiver of any Default which may arise out of Lessee's nonperformance of
such obligation, nor an election or waiver by Lessor of any right or remedy
available to Lessor under or in relation to this Agreement.

        (c) NO IMPLIED WAIVERS; RIGHTS CUMULATIVE.

              (i) No failure on the part of Lessor to exercise and no delay in
        exercising any right, power, remedy or privilege under any Operative
        Document or provided by statute or at law or in equity or otherwise
        shall impair, prejudice or constitute a waiver of any such right, power,
        remedy or privilege or be construed as a waiver of any Event of Default
        or as an acquiescence thereto, nor shall any single or partial exercise
        of any such right, power, remedy or privilege impair, prejudice or
        preclude any other or further exercise thereof or the exercise of any
        other right, power, remedy or privilege. No acceptance of partial
        payment or performance shall, whether or not expressly stated, be or be
        deemed to be a waiver of any Event of Default then existing or a waiver
        or release of full payment and performance. No notice to or demand on
        Lessee shall in any case entitle Lessee to any other or further notice
        or demand in other or similar circumstances or constitute a waiver of
        the right of Lessor to any other or further action in any circumstances
        without notice or demand.

              (ii) Nothing contained in any Operative Document shall be
        construed to limit in any way any right, power, remedy or privilege of
        Lessor hereunder or under any Operative Document or now or hereafter
        existing at law or in equity. Each and every right, power, remedy and
        privilege of Lessor under the Operative Documents (x) shall be in
        addition to and not in limitation of, or in substitution for, any other
        right, power, remedy or privilege under any Operative Document or at law
        or in equity, (y) may be exercised from time to time or simultaneously
        and as often and in such order as may be deemed expedient by Lessor and
        (z) shall be cumulative and not mutually exclusive, and the exercise of
        one shall not be deemed a waiver of the right to exercise any other.

              (iii) Lessee hereby agrees and acknowledges that nothing
        contained herein or in any Operative Document shall be construed to
        require in any way, Lessor to take any action, upon a Default by
        Lessee of this Agreement, or a breach by Lessee of any provision of
        any Operative Document, to limit the damages suffered by Lessor as a
        result of any such Default or breach as the case may be.

        (d) WARRANTIES. Lessor agrees that it will assign to Lessee, for the
duration of the Lease Term so long as no Event of Default shall have occurred
and be continuing, the benefit of any assignable warranties (including, without
limitation, any repair warranties on any Engines or Parts) from the Airframe
Manufacturer, Engine Manufacturer or manufacturer or supplier of any Part for
which Lessor has an interest (but only to the extent of such interest).

                                       73

<PAGE>

                                          [Amended and Restated Lease Agreement]

     SECTION 24. CONFIDENTIALITY. Each of Lessee and Lessor shall keep this
Agreement and each other Operative Document, and all terms and provisions
hereof and thereof, confidential and shall not disclose, or cause to be
disclosed, the same to any Person, without the prior written consent of the
other, except (a) to prospective and permitted transferees of Lessor's or
Lessee's interests or their respective counsel or special counsel, certified
public accountants, independent insurance brokers or other agents, (b) in
connection with any administration or enforcement of any provisions of this
Agreement or any other Operative Document by Lessor or Lessee, (c) to its
Affiliates, (d) to its advisors, insurance brokers and accountants, (e) to
creditors of either Lessee or Lessor, (f) to prospective purchasers of stock
of Lessee or Aloha Airgroup, Inc., or (a) as may be required by any statute,
court or administrative order or decree or governmental ruling or regulation,
including insurance regulatory bodies, banking examiners and other government
officials; provided, however, that any and all disclosures of all or any part
of such documents and provisions which are permitted by this Section 24 shall
be made only to the extent necessary to meet the specific requirements or
needs of the Persons to whom such disclosures are hereby permitted.

     SECTION 25. GOVERNING LAW AND JURISDICTION.

        (a) GOVERNING LAW. THIS AGREEMENT AND EACH OTHER OPERATIVE DOCUMENT,
UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.

        (b) NONEXCLUSIVE JURISDICTION IN NEW YORK. Each of Lessor and Lessee
hereby irrevocably consents that any legal action or proceeding against it or
any of its assets arising out of or relating to this Agreement or any other
Operative Document may be brought in any jurisdiction where it or any of its
assets may be found and in the courts of the State of New York and U.S. Federal
Courts for the Southern District of New York and by execution and delivery of
this Agreement each of Lessor and Lessee hereby irrevocably submits to and
accepts with regard to any such action or proceeding, for itself and in respect
of its assets, generally and unconditionally, the jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby.
Nothing herein shall prevent any party from bringing any legal action or
proceeding or obtaining execution of judgment in any other appropriate
jurisdiction. Lessee and Lessor further agree that a final judgment in any
action or proceeding arising out of or relating to this Agreement or any other
Operative Document shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment, a certified or exemplified copy of which
shall be conclusive evidence of the fact and the amount of the indebtedness or
liability therein described, or in any other manner provided by law. Each of
Lessee and Lessor hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Operative Document brought in any court in New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any court in New York has been brought in an inconvenient forum.
Lessee shall maintain the process

                                       74

<PAGE>

                                          [Amended and Restated Lease Agreement]

agent specified for it in Section 25(c), or such other Person located within
New York as may be acceptable to Lessor, as its agent for service of process in
New York during the Lease Term, at Lessee's sole cost and expense. LESSEE AND
LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT.

     SECTION 26. MISCELLANEOUS.

        (a) AMENDMENTS. No provision of this Agreement or any other Operative
Document may be amended, changed, waived or discharged orally, but only by an
instrument in writing specifying the provision intended to be amended, changed,
waived or discharged and signed by each party hereto or thereto; and no
provision of this Agreement or any other Operative Document shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or other matter not specifically set forth in an agreement in
writing and signed by each party hereto or thereto.

        (b) SEVERABILITY. If any provision hereof or of any Operative Document
should be held invalid, illegal or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by law (i) all other provisions
hereof or thereof shall remain in full force and effect in such jurisdiction and
(ii) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

        (c) COUNTERPARTS. This Agreement, any Operative Document and any
amendments, waivers, consents or supplements hereto or thereto 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 counterparts, taken together, shall constitute
one and the same instrument.

        (d) CHATTEL PAPER. To the extent, if any, that this Agreement
constitutes chattel paper (as defined in the Uniform Commercial Code in effect
from time to time in any applicable jurisdiction) no security interest in this
Agreement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by Lessor on the signature
page thereof

        (e) TIME OF THE ESSENCE. Subject to the periods of grace referred to in
Section 19, time shall be of the essence as regards the performance by Lessee of
its obligations under this Agreement and each other Operative Document.

        (f) NOTICES. All notices, requests and other communications to Lessee,
Lessor or any other Person hereunder or under any other Operative Document shall
be in writing (for this purpose, "writing" includes telecopy or similar
electronic transmissions), shall refer specifically to this Agreement or such
other Operative Document, as the case may be, and shall be personally delivered
or sent by telecopy or other similar electronic facsimile transmission, or sent
by

                                       75

<PAGE>

                                          [Amended and Restated Lease Agreement]

overnight courier service (e.g., Federal Express), in each case to the
respective address and telecopy number, if any, specified in Schedule 3 or such
other address or telecopy number as such Person may hereafter specify by notice
to the other party or to the parties hereto. Each such notice, request or other
communication shall be effective when received or, if by telecopier or other
similar electronic transmission, when "confirmed" by the sending, telecopy or
similar machine and written evidence of such confirmation is produced by such
machine, provided that any such notice by telecopy so "confirmed" after 6:00
p.m., for the recipient, shall be effective on the next succeeding local
Business Day.

        (g) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof, and supersedes all
previous proposals, agreements, understandings, negotiations and other written
and oral communications in relation hereto. The parties acknowledge that there
have been no representations, warranties, promises, guarantees or agreements,
express or implied, except as set forth herein.

        (h) TRUE LEASE. Lessee and Lessor agree that this Lease is to be treated
as a true operating lease for federal income tax purposes, that Lessor is the
owner of the Aircraft for federal income tax purposes and all other purposes and
that the interest of Lessee in the Aircraft is that of a lessee only.

                                   *   *   *

                                       76

<PAGE>

                                          [Amended and Restated Lease Agreement]

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

                                    FIRST SECURITY BANK,
                                    NATIONAL ASSOCIATION,
                                    not in its individual capacity,
                                    but solely as Owner Trustee,
                                             Lessor

                                    By:           [ILLEGIBLE]
                                        ------------------------------

                                    Title:      VICE PRESIDENT
                                           ---------------------------

                                    ALOHA AIRLINES, INC.,
                                             Lessee

                                    By:
                                        ------------------------------

                                    Title:
                                           ---------------------------

                                    By:
                                        ------------------------------

                                    Title:
                                           ---------------------------

                                      77

<PAGE>

                                          [Amended and Restated Lease Agreement]

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

                                    FIRST SECURITY BANK,
                                    NATIONAL ASSOCIATION,
                                    not in its individual capacity,
                                    but solely as Owner Trustee,
                                             Lessor

                                    By:
                                        -------------------------------

                                    Title:
                                           ----------------------------

                                    ALOHA AIRLINES, INC.,
                                             Lessee

                                    By:           [ILLEGIBLE]
                                        -------------------------------

                                           EXECUTIVE VICE PRESIDENT AND
                                    Title:    CHIEF FINANCIAL OFFICER
                                           ----------------------------

                                    By:           [ILLEGIBLE]
                                        -------------------------------

                                                  VICE PRESIDENT
                                    Title:    PLANNING & DEVELOPMENT
                                           ----------------------------

                                      77

<PAGE>

                                          [Amended and Restated Lease Agreement]

                                                            Exhibit A to
                                                            Amended and Restated
                                                            Lease Agreement
                                                            (MSN 24031)

                             [INTENTIONTALLY OMITTED]

                                       A-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                   EXHIBIT B

     [One page of confidential information has been omitted and filed
separately with the Commission]

                                      B-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit C to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                              [INTENTIONALLY OMITTED]

                                      C-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit D to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                          FORM OF LEASE SUPPLEMENT NO. [___]

    THIS LEASE SUPPLEMENT NO. [___], dated [_________________], (this "LEASE
SUPPLEMENT"), is entered into between Aloha Airlines, Inc., a Delaware
corporation having its principal place of business at 371 Aokea Street,
Honolulu, Hawaii 96819 ("LESSEE") and First Security Bank, National
Association, not individually but solely as trustee under that certain Trust
Agreement dated as of March 22, 1995 between itself and Fleet Business Credit
Corporation, formerly known as Sanwa Business Credit Corporation ("LESSOR").

                                  WITNESSETH:

    WHEREAS, Lessor and Lessee have heretofore entered into that certain
Amended and Restated Lease Agreement dated as of March 31, 2000 (the
"LEASE"), which provides for the execution and delivery from time to time of
Lease Supplements (this and all other capitalized terms used but not defined
herein shall have the respective meanings, and shall be interpreted and
construed in the manner set forth or incorporated by reference in Section I
of the Lease) substantially in the form hereof for the purpose of leasing the
Aircraft under the Lease as and when delivered by Lessor to Lessee in
accordance with the terms thereof; [and]

    This Lease Supplement No. [___] has been executed in several
counterparts. To the extent, if any, that this Lease Supplement No. [___]
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 Supplement No. [___] may be created through the transfer or
possession of any counterpart other than the original executed counterpart
containing the receipt therefor executed by Lessor or, if Lessor has assigned
its rights to any Person in accordance with the Lease Agreement, such Person
on the signature page thereof.

    The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, attached and made a party of Lease Supplement No. 1
dated ________________, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on ________________, as one document and
assigned Conveyance No. ________________.

                                  AGREEMENT:

    NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy of receipt of which is hereby
acknowledged, and pursuant to Section [13(c)] [___] of the Lease, Lessor and
Lessee hereby agree as follows:

                                      D-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

    1. The following-described property has been installed on and made a part
of the Aircraft and is the property of Lessor and is hereby made subject to
the Lease:

[Describe property]

    2. A number of counterparts of this Lease Supplement have been executed,
each of which shall be deemed an original and all of which together shall
constitute but one and the same agreement. To the extent, if any, that this
Lease Supplement constitutes chattel paper (as defined in the Uniform
Commercial Code) no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by Lessor or, if Lessor has assigned its rights
to any Person in accordance with the Lease, such Person on the signature page
thereof

    3. All of the provisions of the Lease are hereby incorporated by
reference in this Lease Supplement on and as of the date of this Lease
Supplement, to the same extent as if full set forth herein.

    4. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                                      D-2

<PAGE>

                                        [Amended and Restated Lease Agreement]

    IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. [___] to be duly executed on and as of the day and year first above
written.

                                            FIRST SECURITY BANK, NATIONAL
                                            ASSOCIATION, not in its
                                            individual capacity, but solely
                                            as Owner Trustee, Lessor

                                            By: ______________________________

                                            Title: ___________________________

                                            ALOHA AIRLINES, INC., as Lessee

                                            By: ______________________________

                                            Title: ___________________________

                                            By: ______________________________

                                            Title: ___________________________

               [THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.]

    [RECEIPT OF THIS ORIGINAL COUNTERPART OF THE FOREGOING LEASE SUPPLEMENT
NO. [___] IS HEREBY ACKNOWLEDGED ON THIS ___ DAY OF ________________, 2000.]

FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee, Lessor

By: ______________________________

Title: ___________________________

                                      D-3

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit E to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                              [INTENTIONALLY OMITTED]

                                      E-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit F to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                               INSURANCE REQUIREMENTS

    (a) At all times during the Lease Term, and until the Aircraft is
returned to Lessor in the condition and manner required by this Agreement,
Lessee shall maintain or cause to be maintained with respect to the Aircraft,
at its own expense, comprehensive airline liability (including, without
limitation, third-party and passenger, bodily injury, property damage,
product liability, cargo, mail, baggage (checked and unchecked), premises and
hangar keepers' liability) insurance (exclusive of the Airframe and/or Engine
Manufacturer's product liability insurance), (i) in an amount not less than
the greater of (y) the amounts of comprehensive airline liability insurance
from time to time applicable to aircraft owned or leased and operated by
Lessee of the same type as the Aircraft and (z) $350,000,000, (ii) of the
type and covering the same risks usually carried by air carriers owning or
operating similar aircraft and engines and covering risks of the kind
customarily insured against by such air carriers, (iii) with insurers of
recognized reputation and responsibility reasonably acceptable to Lessor and
(iv) that names each Indemnified Party as an additional insured and otherwise
complies with the requirements set forth in, and is consistent with the
issuance of a valid certificate of insurance and a report of the Insurance
Broker.

    (b) INSURANCE AGAINST EXPENSE OR DAMAGE TO THE AIRCRAFT. At all times
during the Lease Term, and until the Aircraft is returned to Lessor in the
condition and manner required by this Agreement, Lessee shall maintain or
cause to be maintained, with respect to the Aircraft, at its own expense,
all-risk aircraft hull insurance covering the Aircraft, all-risk property
damage insurance covering Engines and Parts while temporarily removed from
the Aircraft and all-risk spares insurance (i) for an agreed value not less
than the Stipulated Loss Value for the Aircraft in respect of all-risk hull
insurance, (ii) for the full replacement value, in respect of all-risk
property damage insurance, (iii) of the type and covering the same risks
usually carried by air carriers owning or operating similar aircraft and
engines and covering risks of the kind customarily insured against by such
air carriers, (IV) confirming that the insurers shall not be entitled to
replace the Aircraft of Airframe upon the occurrence of an Event of Loss with
respect thereto, (v) with insurers of recognized reputation and
responsibility reasonably acceptable to Lessor and (vi) that, except with
respect to partial losses of less than $500,000, names Lessor as the sole
loss payee up to the Stipulated Loss Value and otherwise complies with the
requirements set forth in and is consistent with the requirements of Section
15 of the Lease and this Exhibit F and otherwise in form and substance
reasonably satisfactory to Lessor. Lessee agrees that it will not settle any
claim with respect to the insurances provided hereunder without the consent
of Lessor (which consent shall not be unreasonably withheld); provided that,
so long as no Event of Default shall have occurred and be continuing, such
consent shall not be required in respect of claims which do not exceed
$500,000.

                                      F-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

    (c) WAR-RISK, HIJACKING AND RELATED PERILS INSURANCE. At all times during
the Lease Term, and until the Aircraft is returned to Lessor in the condition
and manner required by this Agreement, and, for liability coverage, Lessee
shall maintain or cause to be maintained, with respect to the Aircraft, at
its own expense, worldwide (subject to standard insurance market geographical
limits) coverage of war-risk, hijacking and related perils insurance of the
type and in substantially the amounts carried by air carriers operating the
same or comparable models of aircraft in such areas (i) in no event in an
amount less than (x) $350,000,000 with respect to liability coverage and (y)
the Stipulated Loss Value with respect to hull coverage and (z) full
replacement value with respect to property damage coverage, (ii) in any
event, covering the perils of (u) 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, (v) strikes, riots, civil commotions or labor
disturbances, (w) 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, (x) any malicious
act or act of sabotage, (y) confiscation, nationalization, seizure,
restraint, detention, appropriation, requisition for title or use by or under
the order of any government (other than the government of the State of
Registration) (whether civil, military or de facto) or public or local
authority, and (z) hijacking, or any unlawful seizure or wrongful exercise of
control of any aircraft or crew in flight (including any attempt at such
seizure or control) made by any Person or Persons on board any aircraft
acting without the consent of the insured (including if committed by Persons
engaged in a program of irregular warfare for terrorist purposes), (iii) with
insurers of recognized reputation and responsibility reasonably acceptable to
Lessor and (iv) except with respect to partial losses of less than $500,000
that names each Indemnified Party as an additional insured with respect to
liability insurance and, for hull coverage only, names Lessor or its designee
as the sole loss payee up to the Stipulated Loss Value and otherwise complies
with the requirements set forth in, and is consistent with the requirements
of Section 15 of the lease and this Exhibit F. Lessee agrees that it will not
settle any claim with respect to the insurances provided hereunder without
the consent of Lessor (which consent shall not be unreasonably withheld);
provided that, so long as no Event of Default shall have occurred and be
continuing, such consent shall not be required in respect of claims which do
not exceed $500,000.

    (d) Comprehensive airline liability, aircraft third party, contractual
liability (as per endorsement), property damage, passenger, baggage, cargo
and mail and airline general third party (including products) legal liability
for a Combined Single Limit (Bodily Injury/Property Damage) of an amount not
less than U.S. $350,000,000 for the time being any one occurrence. War and
Allied Risks are also to be covered under this Policy to the same extent as
set forth above.

    (e) All required insurance (as specified in paragraphs (a), (b), (c) and
(d) above),

shall:

    (i) in the case of the insurance required by paragraph (a), name each
        Indemnified Party as additional assureds for their respective rights
        and interests, warranted, each as to itself only, no operational
        interest;

                                      F-2

<PAGE>

                                        [Amended and Restated Lease Agreement]

   (ii) in the case of the insurance required by paragraph (b), provide that
        any loss shall be settled with the Lessee and shall for amounts in
        excess of $500,000 up to the Stipulated Loss Value be payable in
        Dollars to the Lessor as Loss Payee; provided, that, all amounts up
        to the Stipulated Loss Value shall be payable to Lessor in the case
        of a total loss;

  (iii) in the case of the insurance required by paragraph (a), include a
        Severability of Interest Clause which provides that the insurance
        shall operate to give each assured the same protection as if there
        were a separate policy issued to each assured;

   (iv) in the case of the insurance required by paragraph (a), contain a
        provision confirming that the policy is primary without right of
        contribution and the liability of the insurers shall not be affected
        by any other insurance of which any Indemnified Party or Lessee have
        the benefit so as to reduce the amount payable to the Additional
        Insureds under such policies;

    (v) in the case of the insurance required by paragraph (b), contain a
        50/50% clause per AVS 103 or its equivalent,

   (vi) shall provide that in respect of the respective interests of each
        Indemnified Party in such policies the insurance shall not be
        invalidated or impaired by any action or inaction of Lessee or any
        other Indemnified Party and shall insure the respective interests of
        each Indemnified Party, as they appear, regardless of any breach or
        violation of any warranty, declaration or condition contained in such
        policies by Lessee or by any other Person;

  (vii) be in accordance with normal industry practice of organizations
        operating similar aircraft in similar circumstances;

 (viii) provide coverage denominated in Dollars;

   (ix) acknowledge the insurer is aware of the Lease and that the Aircraft
        is owned by Lessor;

    (x) provide that the insurers shall hold harmless and waive any rights of
        recourse and/or subrogation against each Indemnified Party;

   (xi) provide that an Indemnified Party shall have no obligation or
        responsibility for the payment of any premiums due (but reserve the
        right to pay the same should any of them elect so to do) and that the
        insurers will not exercise any right of set-off or counter-claim in
        respect of any premium due against the respective interests of an
        Indemnified Party;

                                      F-3

<PAGE>

                                        [Amended and Restated Lease Agreement]

  (xii) provide that the Insurances shall continue unaltered for the benefit
        of each Indemnified Party for at least thirty (30) days after
        written notice by registered mail or telex of any cancellation,
        changes, event of nonpayment of premium or installment thereof shall
        have been sent to Lessor, except in the case of war risks for which
        seven (7) days will be given, or in the case of war between the five
        great powers or nuclear peril for which termination is automatic;

 (xiii) in the case of the insurance required by paragraph (a), accept and
        insure the indemnity provisions of the Lease (Section 15(c)) to the
        extent of the risks covered by the policies; and

  (xiv) contain an initial term of at least twelve (12) months and it (or any
        replacement policy) shall at all times have a remaining term of at
        least one (1) month in regard to all required insurance.

                                      F-4

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit G to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                              [INTENTIONALLY RESERVED]

                                      G-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit H to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                              [INTENTIONALLY OMITTED]

                                      H-1

<PAGE>

                                       [Amended and Restated Lease. Agreement]

                                                          Exhibit I to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

Approved Maintenance Performers

Air New Zealand
Engineering Services
Christchurch, New Zealand

Dalfort Corporation
7701 Lemmon Avenue
Dallas, TX 75209

Tramco
11323 30th Avenue West
Everett, WA 98204

The Dee Howard
9610 John Saunders Road
San Antonio, Texas 78216

Sparr Aviation
P.D. Box 9664
Edmonton, Alberta, Canada T5J2T2

                                      I-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit  to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                           FORM OF OPINION OF LESSEE COUNSEL

                                   [To be provided]

                                      J-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit K to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                      FORM OF OPINION OF LESSOR'S SPECIAL COUNSEL

                                   [To be provided]

                                      K-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit L to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                          FORM OF AIRCRAFT STATUS REPORT
               REPORT FOR THE CALENDAR MONTH ENDED _________________,

Aircraft Type: 737-200                       Actual Registration:
Lessor: BANK, not in its individual          Manufacturer Serial Number: 24031
        capacity, but solely as Owner
        Trustee

AIRFRAME               DURING PERIOD          SINCE NEW         SINCE C/D
--------               -------------          ---------         ---------

Flight Hours:           _________             _________         _________
Cycles:                 _________             _________         _________

ORIGINAL ENGINES
                                      POSITION 1      POSITION 2
                                      ----------      ----------

Serial Number of Original Engine:      ________         ________
Location of Original Engine:           ________         ________
Flight Hours Since New:                ________         ________
Cycles Since New:                      ________         ________
Flight Hours During Period:
Cycles During Period:                  ________         ________
Flight Hours Since Last Shop Visit:    ________         ________
Cycles Since Last Shop Visit:          ________         ________
Engine Cycle Limit:                    ________         ________
Cycles Remaining for Limit:            ________         ________
Serial Number of Engine Installed:     ________         ________

LANDING GEAR

                       DURING PERIOD          SINCE NEW         SINCE OVERHAUL
                       -------------          ---------         --------------

Landing Gear Cycles:    _________             _________         _________

ORIGINAL APU

Serial Number of Original APU:         ________
Location of Original APU:              ________
Flight Hours During Period:            ________

                                      L-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

Flight Cycles During Period:           ________
Flight Hours Since Last Shop Visit:    ________
Cycles Since Last Shop Visit:          ________
Serial Number of APU Installed:        ________

TECHNICAL ACTIVITY

Engine/APU Removals (if any): __________

                                                OFF        ON
                                                ---        --

Serial Number:                                  ______     _____
Date:                                           ______     _____
Flight Hours Since New:                         ______     _____
Flight Cycles Since New:                        ______     _____
Reason: ______________________________________________________________________
______________________________________________________________________________

DESCRIBE ANY REPAIRS, MODIFICATIONS, INCIDENTS OR ACCIDENTS TO AIRCRAFT
DURING PERIOD

We certify that the above information is true, correct and complete as of the
date hereof, __________________, 2000.

                             ALOHA AIRLINES, INC.

                             By: ______________________________

                             Title: ___________________________

                             By: ______________________________

                             Title: ___________________________

                                      L-2

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit M to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                           TERMS OF HUSH KITTING FINANCING

    If Lessee is required by Law to meet Stage III noise compliance, then
with at least nine (9) months prior written notice from Lessee, Lessor will
fund the provisioning of such Stage III compliant hush-kits to be installed
on the Aircraft during, the Lease Term. If less than thirty-six (36) months
are remaining on the Lease Term at the time of the hush-kit installation,
then Lessee will extend the Lease Term, in increments of not less than one
(1) year, as required to ensure that there are at least thirty-six (36)
months remaining on the Lease Term at the time the hush-kits are installed on
the Aircraft. In addition, Lessee will pay additional Rent for the Aircraft
based on 1.6 percent per month of Lessor's invoiced costs for provisioning of
the hush-kits commencing at the time such cost is incurred by Lessor. For
example, if Lessor's invoiced costs for the hush-kits is Two Million U.S.
Dollars (US$2,000,000), then the monthly Rent will increase by US$2,000,000
times 1.6 percent which is equal to Thirty-two Thousand U.S. Dollars
(US$32,000) per month Rent increase (US$2,000,000 x 1.6% = US$32,000).

                                      M-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit N to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

    Notwithstanding, anything in the Lease to the contrary, in the event an
airworthiness directive is issued by the Aviation Authority and is complied
with by terminating action at any time after the fifth (5th) anniversary date
of the commencement of the Lease Term:

    (a) Lessee shall be responsible for the cost of complying (parts and
labour) with such AD up to an amount of Fifty Thousand and No/100 U.S.
Dollars ($50,000.00 USD) per airworthiness directive.

    (b) Lessee shall also be responsible for the cost of complying (parts and
labour) in excess of Fifty Thousand and No/100 U.S. Dollars ($50,000.00 USD)
per airworthiness directive in accordance with the following formula:

    (c minus 50,000)    x    (m divided by 150)

    where c equals the cost of complying (parts and labour) and m equals the
number of months remaining in the Lease Term.

    (c) Lessor will reimburse Lessee for the balance of the cost of complying
(parts and labour) with that airworthiness directive.

    (d) If Lessee is not obliged by the terms of the Lease or the
requirements of the Aviation Authority to comply with the airworthiness
directive during the term of the Lease, Lessor will have to agree upon the
compliance of the directive in order to be responsible to reimburse Lessee
any cost of complying hereunder.

    Notwithstanding the above, (i) Lessee shall as concerns airworthiness
directives which require compliance within one (1) year after Termination, be
responsible for the costs set out in (a) above up to an amount of TWENTY-FIVE
THOUSAND AND NO/100 U.S. DOLLARS ($25,000.00 USD) per airworthiness directive
and the formula set out in (b) above be adjusted accordingly and (ii) in the
case of any airworthiness directive costing $250,000 or more, Lessee, prior
to complying with such airworthiness directive, shall notify Lessor of such
airworthiness directive, which shall describe the means of compliance and the
cost thereof and upon receipt of such notification Lessee and Lessor shall
discuss a mutually satisfactory means of addressing such airworthiness
directive, whether by terminating action, alternative mean of compliance,
requests for extensions and/or waivers from the FAA, termination of the Lease
or other alternatives.

                                      N-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Exhibit O to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

    Lessee shall not be obliged to pay the proposal fee set out in 11 (c) of
the Lease provided the proposed Sublessee is any of the following airlines
(or its successor in interest):

Alaska                          America West               Austrian

Delta                           Southwest                  British Midland

United                          Aer Lingus                 China Airlines

Air France                      Air-Inter                  Japan Airlines

Ansett                          Alitalia                   Korean Airlines

Braathens                       British Airways            Martinair

Canadian Airlines               Cathay Pacific             Sabena
International

Condor                          Japan Asia Air-ways        Swissair

Japan Air System                Royal Dutch Airlines

Lufthansa                       Singapore Airlines

Qantas                          Air Canada

Scandinavian Airlines System    Air New Zealand

Thai Airways International      All Nippon Airways

                                      O-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 1 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                               PERMITTED JURISDICTIONS

Anywhere in the world, other than (1) those areas excluded pursuant to Section
15(l) of the Lease Agreement, (2) Afghanistan, Chad, Ethiopia, Iran, Iraq,
Lebanon, Libya, Mali, Niger, Nigeria, Pakistan, Somalia, Sudan, Syria, Yemen
(North and South), Yugoslavia (as was) and Zaire and (3) any other jurisdiction
that shall become subject to a U.S. or United Nations sanction or prohibition.

                                    Sch. 1-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 2 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                               [INTENTIONALLY OMITTED]

                                    Sch. 2-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 3 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                               ADDRESSES AND ACCOUNTS

LESSEE

Aloha Airlines, Inc.                             Acct. No.: 01-063820
P.O. Box 30028                                   First Hawaiian Bank
Honolulu, Hawaii 96820                           P.O. Box 3200
                                                 Honolulu, Hawaii 96847
Attention: Senior Vice President Finance         ABA No.: 121301015
           Chief Financial Officer
Facsimile:        (808) 833-3100
Telephone:        (808) 836-4245

                                    Sch. 3-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

LESSOR

First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Dept.
Telephone: (801) 246-5300
Facsimile: (801) 246-5051

Account No.: 9370015315
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
ABA No.: 011900571
Reference: Aloha Airlines (N810AL)
03-210-71461-0000103

with a copy to:

Fleet Business Credit Corporation
One South Wacker Drive
Chicago, Illinois 60606
Attn: Aircraft Finance Division
Telephone: (312) 782-8080
Facsimile: (312) 853-1458

Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Suite 2600
Chicago, Illinois 60601
Attn: Dean N. Gerber
Telephone: (312) 609-7500
Facsimile: (312) 60-9-5005

                                    Sch. 3-2

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 4 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                             FILINGS AND RECORDINGS

DOCUMENT                                             AUTHORITY
--------                                             ---------

Lease                                                FAA

Lease Supplement No. 1                               FAA

Application for Aircraft Registration                FAA

UCC-1 Financing Statement                            Hawaii Secretary of State

Amended and Restated Lease                           FAA

                                    Sch. 4-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 5 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                                 RETURN CONDITIONS

The Aircraft shall be returned by Lessee to Lessor with all items of
equipment, Engines, APU's, systems and appliances fully functional and
operating in accordance with manufacturer specifications. At the time of
Return (the "Return Date"), the Aircraft shall conform to the following
standards:

A.  The Aircraft shall be delivered in AS-IS, WHERE-IS condition and shall
    have completed its C Check and shall,

    (i)   in the event that immediately prior to Return, the Aircraft is
          being operated on an Approved Maintenance Program that has
          incorporated a block D Check, the Aircraft shall have at least
          3,500 Airframe Flight Hours, 4,500 Airframe Cycles and/or one
          calendar year remaining to performance of the next block D
          Check pursuant to such Approved Maintenance Program; and

    (ii)  in the event that immediately prior to Return, the Aircraft is
          being operated on an Approved Maintenance Program that has
          incorporated a phased program combining structural inspection
          required work cards with CPCP required work cards ("Integrated
          Program"), the Aircraft shall be delivered as-is with respect
          to its next scheduled "D" Check and fresh from its last C
          Check.

B.  Any materially adverse deviations from Boeing MPD tasks shall be brought
    into compliance with the MPD prior to delivery.

C.  The Aircraft shall be delivered with a valid and current Transport
    Category Airworthiness Certificate issued by the Aviation Authority. The
    Aircraft shall be accompanied by its respective complete documentation,
    manuals and records (in the English language; provided, however, Lessee
    shall not be required to translate documentation, manuals and records
    which were delivered by Lessor in a language other than English), as set
    forth on Attachment 2 hereto, and shall have been maintained in
    accordance with FAR Part 121 or its equivalent.

D.  The Aircraft shall have all temporary repairs replaced by permanent
    repairs or with continued repetitive inspections per the manufacturer's
    repair manual. The Aircraft shall be free of significant dents, abrasions
    and loose or pulled rivets which are not acceptable to OEM maintenance,
    overall manuals including OEM/FAA bulletins and notices.

                                    Sch. 5-1

<PAGE>

                                        [Amended and Restated Lease Agreement]

E.  There shall be no evidence of untreated, improperly treated or noticeable
    corrosion. All CPCP inspections will be current and up to date, in
    accordance with manufacturer specifications and Aviation Authority
    requirements. Lessor will ensure that the current operator will open
    areas of the Aircraft that are either (i) ordinarily opened during "C"
    Checks or (ii) reasonably requested by lessor based on indicia of damage
    otherwise found or revealed during Lessor's inspection.

F.  The Aircraft shall be in compliance with all Aviation Authority
    requirements for operation as a transport category aircraft including all
    Aviation Authority airworthiness directives ("AD's") and SBs that are
    issued prior to the Return Date and are applicable to the Aircraft,
    without special deferment, exemption or Alternate Means of Compliance
    (AMOC), with terminating action accomplished for all AD's and Required
    SBs which require that the terminating action be accomplished on or prior
    to the Return Date. The Aircraft shall conform to its Type Certificate
    Data Sheet. All major modifications and repairs accomplished on the
    Aircraft shall have been performed in accordance with Aviation Authority
    approved data that is to be redelivered with the Aircraft Records.

G.  There shall be no open, outstanding, or deferred maintenance items,
    scheduled or unscheduled, routine or non-routine, against the Aircraft.
    Minor non-airworthiness cabin defects shall be mutually considered and
    accepted.

H.  The Aircraft shall be clean, cosmetically acceptable, all compartments
    reasonably free of foreign objects, accumulated dirt, grime, grease and
    liquids, and be prepared for immediate placement into commercial service.
    Any deterioration of paint or other protective coatings due to leakage,
    impact damage or other presence of foreign materials or liquids shall be
    repaired and replaced per manufacturer specifications.

I.  Each Engine shall be delivered in serviceable condition with maintenance
    records that meet all Aviation Authority requirements.

J.  Each Engine and each Life Limited Component on each Engine shall have at
    least 4,500 Airframe Cycles remaining until next scheduled inspection,
    overhaul or Shopvisit based upon disk life limits or other hard-time
    requirements per Aviation Authority approved list.

K.  Each Engine shall pass power assurance performance tests without
    operational limitations in accordance with the manufacturer's maintenance
    manual. The Aircraft and its Engine's shall be capable of certificated
    full rated performance without limitations throughout the entire
    operating envelope as defined by the Aviation Authority approved Aircraft
    Flight Manual.

L.  Each Engine shall pass a complete video borescope inspection, conducted
    by Lessor or its designee, of all accessible Engine sections (accessible
    whether by borescope port or other

                                    Sch. 5-2

<PAGE>

                                        [Amended and Restated Lease Agreement]

    means) in accordance with manufacturer specifications which borescope can
    inspect the C6, C7, C13 and T1 stages, the TI blades and the burner cans.

M.  No Engine shall be on engineering watch or on a reduced interval
    inspection of any nature that could lead to premature removal of the
    Engine. If Engine historical records, engine power assurance runs,
    borescope inspection or trend monitoring data indicate a level of
    performance deterioration or oil consumption, or acceleration in
    performance deterioration or oil consumption, which based on Lessee's or
    manufacturer's specifications would require shop maintenance to be
    performed prior to return, Lessee shall correct or cause to be corrected,
    such conditions as necessary to rectify all Engine performance parameters
    in accordance with manufacturer specifications. In addition, no Engine,
    based on Lessee's or, if appropriate Lessee data is unavailable, industry
    mean time to first Shopvisit and mean time between Shopvisits would
    require shop maintenance to be performed prior to return.

N.  All Landing Gear, at a minimum, shall have not less than 3,500 hours
    remaining before next scheduled overhaul.

    Landing Gear components will have "back-to-birth" documentation per FAA
requirements and Lessee shall replace certain un-serialized parts that are
hard timed in the Lessee's maintenance program.

O.  The installed APU will be serviceable with no individual part having less
    than three thousand five hundred (3,500) hours to the next scheduled
    removal. If the auxiliary power unit is maintained on a hard-time basis
    the unit will have no less than three thousand five hundred (3,500) hours
    to the next scheduled overhaul (excluding, hours consumed on the
    acceptance flight). At the reasonable request of Lessor, Lessee shall
    perform a borescope inspection thereon.

P.  The Components that are controlled by calendar time, Airframe Flight
    Hours or Airframe Cycles shall be delivered "as is, where is" and in
    serviceable condition. All such Components shall be supported by
    maintenance records which satisfy all Aviation Authority requirements
    (including records of last overhaul for those items requiring to be
    overhauled per Lessee's maintenance program and/or per the Boeing MPD).

Q.  Complete and current maintenance records (to be specified during the
    drafting of final documents) which comply with all Aviation Authority
    requirements shall be delivered with the Aircraft. Maintenance records
    required to be maintained by the Aviation Authority shall be in the
    English language and include complete documentation for all airworthiness
    directives, life limited parts (including back-to-birth records for all
    internal engine life limited parts) and major repairs and alterations in
    accordance with Aviation Authority requirements. For each AD that is
    applicable to the Aircraft, the records shall include the current status
    of the Aircraft, the date of compliance, and the method of compliance
    with appropriate supporting documentation. Any deficiencies with Aviation

                                    Sch. 5-3

<PAGE>

                                        [Amended and Restated Lease Agreement]

    Authority requirements are to be corrected prior to delivery of the
    Aircraft at Lessee's cost.

R.  Any manufacturer no-charge service bulletin parts which Lessee has
    received but not installed for the Aircraft shall be delivered to
    Purchaser with the Aircraft.

S.  All windows shall be free of delamination, blemishes, and crazing that is
    beyond maintenance manual limits.

T.  All doors shall be free moving, correctly rigged and fitted with
    serviceable seals.

U.  All ceiling, sidewall and bulkhead panels shall be clean and free from
    significant or unserviceable damage. All seats shall be serviceable and
    in fair overall condition.

V.  All flight control surfaces and wing leading edges shall be free from
    damage that is beyond serviceable limits.

W.  All cargo compartment floor, sidewall and ceiling panels shall be in
    serviceable condition in accordance with Boeing maintenance manual limits.

X.  The entire fuselage, vertical stabilizer including wing to body fairings,
    Engine cowls and wheel well doors shall have any identifying marks or
    designators removed or painted-out in a manner consistent with commercial
    airline standards.

Z.  Except as otherwise expressly herein provided all components or Parts of
    the Aircraft which have a hard time (hour/cycle) limit to overhaul
    pursuant to the MPD and the Maintenance Program shall have at least three
    thousand five hundred (3,500) hours and four thousand five hundred
    (4,500) cycles (whichever is applicable) remaining to operate until its
    next scheduled overhaul pursuant to the MPD and the Maintenance Program.

AA. Except as otherwise expressly herein provided, all life limited
    components or Parts of the Aircraft shall have at least three thousand
    five hundred (3,500) hours and four thousand five hundred (4,500) cycles
    (whichever is applicable) remaining to operate until the expiry of the
    Part's life pursuant to the Maintenance Program, however, components and
    Parts with an approved life shorter than said limits will have one
    hundred percent (100%) of its total approved life remaining pursuant to
    the MPD and the Maintenance Program.

BB. Except as otherwise expressly herein provided each component or Part
    which has a calendar limit (including emergency equipment) will have
    remaining to operate at least (i) one (1) year from the date of return of
    the Aircraft to Lessor or (ii) one hundred percent (100%) of its total
    approved life, whichever is less, pursuant to the MPD and the Maintenance
    Program.

                                    Sch. 5-4

<PAGE>

                                        [Amended and Restated Lease Agreement]

                                                          Schedule 6 to
                                                          Amended and Restated
                                                          Lease Agreement
                                                          (MSN 24031)

                              REPORTING REQUIREMENTS

Aircraft Status Report: Lessee shall provide to Lessor quarterly on the tenth
of each January, April, July and October, an Aircraft Status Report for the
preceeding three month period, pursuant to the terms set forth in Section
10(d).

Audited Financial Statements of the Aloha Airgroup, Inc.: Lessee shall provide
Lessor as soon as available but not more than 120 days after the last day of
each fiscal year, Audited Financial Statements of Aloha Airgroup, Inc.,
including balance sheets, pursuant to the terms set forth in Section 6(c)(ii).

Certificate of Insurance and Report: Lessee shall furnish Lessor on or before
the Delivery Date and not later than each renewal date of any insurance, a
Certificate of Insurance and a report, signed by the Insurance Broker, pursuant
to the terms set forth in Section 15(d).

Notice to Creditors: Lessee shall provide Lessor a copy of each notice or
circular issued to the Lessee's creditors as a group, pursuant to the terms
set forth in Section 6(c)(v).

Officer's Certificate of Lessee: Lessee shall provide to Lessor concurrently
with the financial statements furnished pursuant to Clauses 6(c)(i) and (ii),
an officer's certificate stating that no Default exists or has occurred in
accordance with the terms set forth in Section 6(c)(iv).

Unaudited consolidated quarterly financial statements of the Aloha Airgroup,
Inc.: Lessee shall provide to Lessor within 60 days after the last day of the
first three fiscal quarters of each fiscal year of Aloha Airgroup Inc.,
unaudited consolidated quarterly financial statements and statements of income
and retained earnings for such quarter pursuant to the terms set forth in
Section 6(c)(i).

Written Communications: Lessee shall make available for review by Lessor, or
Lessor's designees copies of any written communications with the Aviation
Authority, Airframe Manufacturer, Engine Manufacturer or other vendors with
respect to incidents, defects or malfunctions of the Aircraft, pursuant to the
terms set forth in Section 10(c)(ii)(F).

                                    Sch. 6-1
<PAGE>

                             LEASE SUPPLEMENT NO. 1

     THIS LEASE SUPPLEMENT NO. 1, dated Aug. 7, 2000, (this "LEASE SUPPLEMENT"),
is entered into between Aloha Airlines, Inc., a Delaware corporation having its
principal place of business at 371 Aokea Street, Honolulu, Hawaii 96819
("LESSEE") and First Security Bank, National Association, not individually but
solely as trustee under that certain Trust Agreement dated as of March 22, 1995
between itself and Fleet Business Credit Corporation, formerly known as Sanwa
Business Credit Corporation ("LESSOR").

                                   WITNESSETH:

     WHEREAS, Lessor and Lessee have heretofore entered into that certain
Amended and Restated Lease Agreement dated as of June 1, 2000 (the "LEASE"),
which provides for the execution and execution and delivery from time to time of
Lease Supplements (this and all other capitalized terms used but not defined
herein shall have the respective meanings, and shall be interpreted and
construed in the manner set forth or incorporated by reference in Section 1 of
the Lease) substantially in the form hereof for the purpose of leasing the
Aircraft under the Lease as and when delivered by Lessor to Lessee in accordance
with the terms thereof; and

     This Lease Supplement No. 1 has been executed in several counterparts.
To the extent, if any, that this Lease Supplement No. 1 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 Supplement
No. 1 may be created through the transfer or possession of any counterpart
other than the original executed counterpart containing the receipt therefor
executed by Lessor or, if Lessor has assigned its rights to any Person in
accordance with the Lease Agreement, such Person on the signature page
thereof.

                                  AGREEMENT:

     NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy of receipt of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:

     1. The following-described property has been installed on and made a part
of the Aircraft and is the property of Lessor and is hereby made subject to the
Lease:

     (i) Airframe: One Boeing B737-2Y5 Aircraft, U.S. Registration No. N810AL
and manufacturer's serial no. 24031; and

     (ii) Engines: two (2) Pratt & Whitney JT8D-9A engines bearing,
respectively, manufacturer's serial nos. 665196 and 656020 (each of which
engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).

     2. A number of counterparts of this Lease Supplement have been executed,
each of

<PAGE>

which shall be deemed an original and all of which together shall constitute but
one and the same agreement. To the extent, if any, that this Lease Supplement
constitutes chattel paper (as defined in the Uniform Commercial Code) no
security interest in this Lease Supplement may be created through the transfer
or possession of any counterpart other than the original executed counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by Lessor or, if Lessor has assigned its rights to any Person in
accordance with the Lease, such Person on the signature page thereof.

     3. All of the provisions of the Lease are hereby incorporated by reference
in this Lease Supplement on and as of the date of this Lease Supplement, to the
same extent as if fully set forth herein.

     4. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                                        2
<PAGE>

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

                                        FIRST SECURITY BANK, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, but solely as Owner Trustee,
                                        Lessor

                                        By: /s/ [ILLEGIBLE]
                                                -------------------------------
                                        Title:  Vice President
                                                -------------------------------

                                        ALOHA AIRLINES, INC., as Lessee

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

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

                                        3
<PAGE>

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

                                        FIRST SECURITY BANK, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, but solely as Owner Trustee,
                                        Lessor

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

                                        ALOHA AIRLINES, INC., as Lessee

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

                                        By: /s/ JAMES M. KING
                                                -------------------------------
                                        Title:  VICE PRESIDENT PLANNING &
                                                -------------------------------
                                                DEVELOPMENT
                                                -------------------------------

                                        3

<PAGE>

                         FIRST AMENDMENT TO AMENDED AND
                            RESTATED LEASE AGREEMENT

     This First Amendment to Amended and Restated Lease Agreement (the
"Amendment") between Wells Fargo Bank Northwest, N.A. (formerly known as First
Security Bank, National Association, and First Security Bank of Utah, National
Association) as Owner Trustee, lessor ("Lessor") and Aloha Airlines, Inc. as
lessee ("Lessee").

                               W I T N E S S E T H

     WHEREAS, Lessee and Lessor entered into a Lease Agreement dated as of
March 22, 1995 (the "Original Lease"); and

     WHEREAS, the Original Lease, as amended, was amended and restated by the
Amended and Restated Lease Agreement dated June 1, 2000 (the "Amended and
Restated Lease"); and

     WHEREAS, the Original Lease, as amended and restated by the Amended and
Restated Lease, is more fully described on the attached Appendix and shall be
collectively defined as the "Lease"; and

     WHEREAS, Lessor and Lessee desire to amend the Lease effective as of
NOVEMBER 09, 2001; and

     WHEREAS, capitalized terms used and not defined herein shall have the
meanings attributed thereto in the Lease.

     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:

     Section 1. AMENDMENT TO LEASE. The Lease is hereby amended as follows:

          a. The definition of "Stipulated Loss Value" shall be deleted and the
following shall be subsituted in lieu thereof:

          "Stipulated Loss Value" shall mean the value as described on Exhibit A
attached hereto.

          b. Exhibit B to the Lease shall be deleted and replaced with Exhibit B
attached hereto.

<PAGE>

          c. The following is added as Section 27 (g) to the Lease;

               "Lessee will use best efforts to utilize Owner Participant and
          owner participant's affiliates for the furnishing of Lessee's
          maintenance needs including purchases of products, services
          and exchanges (including but not limited to components, landing gear,
          engines, etc.)."

     Section 2. RATIFICATION; REFERENCES TO LEASE. Except as amended hereby, the
Lease continues and shall remain in full force and effect in all respects from
and after the date of this Amendment. Each and every reference in the Lease to
"this Lease", "this Agreement", "herein", "hereof", or similar words and phrases
referring to the Lease or any word or phrase referring to a section or provision
of the Lease is deemed for all purposes to be a reference to the Lease or such
section or provision as amended by this Amendment.

     Section 3. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES.

     Section 4. SEPARATE COUNTERPARTS. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

     Section 5. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

                THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK

2

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officer duly authorized, as of the day and year
first above written.

WELLS FARGO BANK NORTHWES, N.A.,
NOT INDIVIDUALLY, BUT SOLELY AS OWNER TRUSTEE

By:       /s/ Val T. Orton
    ---------------------------------

Name:         Val T. Orton
      -------------------------------

Title:        Vice President
       ------------------------------

ALOHA AIRLINES, INC.

By:      /s/ Brenda F. Cutwright          By:         /s/ James M. King
    ---------------------------------         ---------------------------------

Name:        BRENDA F. CUTWRIGHT          Name:           JAMES M. KING
      -------------------------------           -------------------------------
       EXECUTIVE VICE PRESIDENT AND                   SENIOR VICE PRESIDENT
Title:    CHIEF FINANCIAL OFFICER         Title: PLANNING & BUSINESS DEVELOPMENT
       ------------------------------            ------------------------------

3

<PAGE>

                                    APPENDIX

[One paragraph of confidential information has been omitted and filed
separately with the Commission]

4

<PAGE>

EXHIBIT A

                              STIPULATED LOSS VALUE

[One paragraph of confidential information has been omitted and filed
separately with the Commission]

5

<PAGE>

                                   EXHIBIT B

                                   Basic Rent

[One page of confidential information has been omitted and filed
separately with the Commission]

6

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