Document:

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                                                                   Exhibit 10.61

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         ORIGINAL
  TO BE RETURNED TO M&T

                                                          RECORDED
                                               Federal Aviation Administration
                                               Date 4/1/98    Time [ILLEGIBLE]
                                               Conveyance Number T057073
                                               By /s/ [ILLEGIBLE]
                                                  ----------------------------

                                 LEASE AGREEMENT

                            dated as of March 26, 1998

                                     between

                        WILLIS LEASE FINANCE CORPORATION,

                                     Lessor

                                       and

                              ALOHA ISLANDAIR, INC.

                                     Lessee

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

                          Covering One (1) de Havilland
                      Dash 8-103 Aircraft (Reflected on the
                          FAA Records as a DHC-8-102),
                        Manufacturer's Serial Number 353
                          U.S. Registration No. N853MA,

                             Two (2) Pratt & Whitney
                     Model PW 121 Engines (Reflected on the
                            FAA Records as PW 120 A),
                              Manufacturer's Serial
                            Numbers 120968 and 121244

                                       and

                            Two (2) Hamilton Standard
                               14 SF-7 Propellers,
                              Manufacturer's Serial
                            Numbers 930310 and 920913

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

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                                TABLE OF CONTENTS

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<S>            <C>                                                        <C>
 SECTION 1.    DEFINITIONS................................................   1

 SECTION 2.    AGREEMENT TO LEASE: TERM...................................   8
      2.01      Leasing of Aircraft.......................................   8
      2.02      Acceptance................................................   8
      2.03      Delivery of Aircraft......................................   8
      2.04      Term......................................................   8

 SECTION 3     CONDITIONS PRECEDENT.......................................   9
      3.01     Conditions Precedent to Lessor's Obligations...............   9
      3.02     Conditions Precedent to Lessee's Obligations...............  11

 SECTION 4     LESSEE'S REPRESENTATIONS AND WARRANTIES.....................  11
      4.01     Due Organization, Standing etc.............................  11
      4.02     Operative Documents........................................  12
      4.03     No Conflict; Consent.......................................  12
      4.04     Governmental Consents......................................  12
      4.05     No Adverse Agreements......................................  12
      4.06     No Defaults or Violations..................................  13
      4.07     Litigation.................................................  13
      4.08     No Event of Default........................................  13
      4.09     Financial Statements.......................................  13
      4.10     Chief Executive Office.....................................  13
      4.11     Filings Made...............................................  13
      4.12     Certificate................................................  14

 SECTION 5     LESSOR'S REPRESENTATIONS AND WARRANTIES....................  14
      5.01      Due Organization, Standing etc............................  14
      5.02      Operative Documents.......................................  14

 SECTION 6     COVENANTS OF LESSEE........................................  14
      6.01      Air Operator's Certificate................................  14
      6.02      Financial and Other.......................................  15
      6.03      Information to be Supplied Existence......................  15
      6.04      Inspection Rights; Records................................  16
      6.05      Payment of Taxes and Claims...............................  16
      6.06      Notice of Litigation......................................  16
      6.07      Merger....................................................  17
      6.08      Chief Executive Office....................................  17
      6.09      Certificate...............................................  17

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<S>            <C>                                                        <C>

 SECTION 7     PAYMENTS...................................................  17
      7.01      Rent......................................................  17
      7.02      Net Lease; No Set-Off or Deductions.......................  18
      7.03      Immediately Available Funds...............................  18
      7.04      Supplemental Rent; Overdue Rent...........................  18
      7.05      Reserved..................................................  19
      7.06      Gross Up..................................................  19

 SECTION 8.    LIMITATION OF LESSOR'S LIABILITY...........................  19

 SECTION 9.    USE OPERATION AND MAINTENANCE..............................  19
      9.01      General...................................................  19
      9.02      Operation and Use.........................................  20
      9.03      Maintenance in General....................................  20
      9.04      Specific Items of Maintenance.............................  21
      9.05      Parts.....................................................  21
      9.06      Airworthiness Directives..................................  22
      9.07      Service Bulletins: Nondiscrimination......................  23
      9.08      Corrosion Control.........................................  23
      9.09      Modifications.............................................  23
      9.10      Possession; Subleasing; Equipment Substitution............  24
      9.11      Repairs...................................................  25
      9.12      Aircraft Records..........................................  25
      9.13      Warranties................................................  26
      9.14      Airport Charges...........................................  26
      9.15      Right to Inspect..........................................  26
      9.16      Reporting.................................................  26

 SECTION 10.   RETURN OF AIRCRAFT.........................................  27
     10.01      Return....................................................  27
     10.02      Condition of Aircraft.....................................  27
     10.03      Boroscope Inspection......................................  27
     10.04      Historical Records; Trend Monitoring Data.................  27
     10.05      Inspection................................................  27
     10.06      Operational Ground Check..................................  28
     10.07      Operational Check Flight..................................  28
     10.08      Acceptance................................................  29
     10.09      Deferred Discrepancy Correction...........................  29
     10.10      Flight Cost...............................................  29
     10.11      Indemnification...........................................  29
     10.12      Insurance.................................................  29
     10.13      Manuals and Technical Records.............................  30
     10.14      Service Bulletin Kits.....................................  30
     10.15      Lessee's Special Exterior Markings........................  30
     10.16      Ownership.................................................  31
     10.17      Storage Upon Return.......................................  31

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<S>            <C>                                                        <C>

 SECTION 11.   TITLE; REGISTRATION; LIENS.................................  31
     11.01      Title.....................................................  31
     11.02      Registration; Filings; Registration.......................  31
     11.03      Liens.....................................................  32
     11.04      Notice of Ownership.......................................  32

 SECTION 12.   INSURANCE..................................................  32
    12.01       All-Risk Insurance........................................  33
    12.02       War Risk Insurance........................................  33
    12.03       Liability Insurance.......................................  33
    12.04       Deductibles and Self Insurance ...........................  34
    12.05       Additional Requirements; Loss Payment.....................  34
    12.06       No Set-Off................................................  35
    12.07       Notice of Material Alteration or Cancellation.............  35
    12.08       Application of Certain Insurance Proceeds.................  35
    12.09       Insurance for Own Account.................................  35
    12.10       Certificates and Reports..................................  36

 SECTION 13.   LOSS, DAMAGE OR REQUISITION................................  36
    13.01       An Event of Loss of Airframe..............................  36
    13.02       Engine or Propeller Loss..................................  37
    13.03       Payments from Governmental Authorities for
                  Requisition of Title or Use.............................  38
    13.04       Application of Payments During Existence of Event of
                  Default.................................................  38

 SECTION 14.   EVENT OF DEFAULT...........................................  39
    14.01       Failure to Make Payments..................................  39
    14.02       Failure to Obtain or Maintain Insurance...................  39
    14.03       Failure to Perform Other Obligations......................  39
    14.04       Representations and Warranties Untrue.....................  39
    14.05       Insolvency or Bankruptcy..................................  39
    14.06       Loss of Registration or Protection........................  40
    14.07       Loss of License...........................................  40
    14.08       Other Lease...............................................  40
    14.09       Final Judgment............................................  40
    14.10       Other Default.............................................  40
    14.11       Contest...................................................  40
    14.12       Failure to Maintain Letter of Credit......................  40
    14.13       ..........................................................  41

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

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<S>            <C>                                                        <C>

 SECTION 16.   INDEMNITIES AND EXPENSES...................................  43
    16.01       General Indemnification and Waiver of Certain Claims......  43
    16.02       General Tax Indemnity.....................................  44
    16.03       After-Tax Basis; Survival.................................  49
    16.04       Expenses..................................................  50

 SECTION 17.   QUIET ENJOYMENT............................................  50

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

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

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

 SECTION 21.   LEASE; SECTION 1110........................................  52
    21.01       Lease.....................................................  52
    21.02       Section 1110..............................................  52

 SECTION 22.   MISCELLANEOUS..............................................  52
    22.01       Waivers, Headings.........................................  52
    22.02       Counterparts..............................................  52
    22.03       Governing Law.............................................  52
    22.04       Benefit and Binding Effect................................  53
    22.05       Further Assurances........................................  53
    22.06       Service of Process; Waiver of Jury Trial and Immunity.....  53
    22.07       Usury Laws................................................  54
    22.08       Entire Agreement..........................................  54

 Exhibit A      Description of Aircraft
 Schedule 1     to Exhibit A - Delivery Conditions
 Exhibit B      Rent and Other Financial Matters
 Schedule 1     to Exhibit B - Letter of Credit
 Exhibit C      Acceptance Certificate
 Exhibit D      Schedule of Manuals and Technical Records
 Schedule 3     Time, Flight Hours, Cycles
 Exhibit E      Return Acceptance Certificate
 Exhibit F      General Return Conditions of the Aircraft

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                                 LEASE AGREEMENT

                  THIS LEASE AGREEMENT, dated as of March 26, 1998 ("Lease"), is
between [WILLIS LEASE FINANCE CORPORATION] ("Lessor"), a California corporation
having its principal place of business at 180 Harbor Drive, Suite 200,
Sausalito, California 94965 and ALOHA ISLANDAIR, INC. ("Lessee"), a Delaware
corporation having its principal place of business at 99 Kapalulu Place,
Honolulu, Hawaii 96819.

                                   WITNESSETH:

                  WHEREAS, Lessor is purchasing the Aircraft from the Seller;

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

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

                  SECTION 1. DEFINITIONS

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

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

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

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

<PAGE>

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

                  "AIRCRAFT SALE AGREEMENT" means the Aircraft Sale Agreement
dated as of the date hereof between Seller and Lessor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       -3-

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       -4-

<PAGE>

that the same are not the direct or indirect result of any Default or Event of
Default hereunder and provided that the same are not covered by the Lessee's
indemnity obligations hereunder.

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

                  "LIEN" means any mortgage, pledge, lien, charge or
encumbrance, lease, financing statement, claim, exercise of rights or security
interest.

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

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

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

                  "MODIFICATIONS" means Optional Modifications and Required
Modifications.

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

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

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

                  "OTHER LEASE" means the Lease Agreement, dated as of the date
hereof, between the Lessor and Lessee with respect to the Other Aircraft.

                  "OTHER AIRCRAFT" means that certain de Havilland Dash 8-103
aircraft, manufacturer's serial number 357, as further identified in the Other
Lease.

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

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

                                       -5-

<PAGE>

                  "PERMITTED LIENS" means (i) Lessor's Liens; (ii) the
respective rights of Lessor and Lessee as provided herein; (iii) the rights of
others under agreements or arrangements to the extent expressly permitted in
Section 9.10 hereof; (iv) Liens for Taxes either not yet due or being contested
in good faith (and for the payment of which adequate reserves have been
provided) by appropriate proceedings conducted in due diligence, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Airframe or any Engine or Propeller; (v) material suppliers',
mechanics', workers', repairers', employees' or other like liens arising in the
ordinary course of business and for amounts the payment of which is either not
yet delinquent or is being contested in good faith (and for the payment of
which adequate reserves have been provided) by appropriate proceedings
conducted in due diligence, so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Airframe or any Engine
or Propeller; and (vi) Liens arising out of judgments or awards against Lessee
with respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith (and for the payment of which adequate reserves have
been provided) and there shall have been secured a stay of execution pending
such appeal or proceeding for review.

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

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

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

                  "RENT" means Basic Rent and Supplemental Rent.

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

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

                                       -6-

<PAGE>

without materially impairing the value or utility of the Airframe and having a
time and Cycle status, modification status, value, condition and utility at
least equal to the Engine it is replacing (assuming such Engine was in the time
status, modification status, condition and repair required by the terms hereof
immediately prior to being replaced).

                  "REPLACEMENT PROPELLER" means a propeller of the same or an
improved model (and manufactured by the same manufacturer) as a Propeller being
replaced pursuant to Section 13.02 hereof, which is suitable for installation
and use on an Engine and the Airframe and having a time and Cycle status,
modification status, value, condition and utility at least equal to the
Propeller that it is replacing (assuming such Propeller was in the time and
Cycle status, modification status, value, condition and repair required by the
terms hereof immediately prior to being replaced).

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

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

                  "SELLER" means de Havilland Corporation.

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

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

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

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

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

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

                                       -7-

<PAGE>

                  SECTION 2.  AGREEMENT TO LEASE: TERM

                  2.01 LEASING OF AIRCRAFT.

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

                  2.02 ACCEPTANCE.

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

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

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

                  2.03 DELIVERY OF AIRCRAFT.

                  The Aircraft shall be delivered for purposes of this Lease at
Great Falls, Montana, or at a mutually agreed location, which shall be in a
jurisdiction that is intended to avoid any sales, use, transfer and other
similar taxes payable upon the purchase and lease of the Aircraft. The Lessee
shall be obligated to accept delivery of the Aircraft pursuant to this Lease,
at the time and place and in the condition, AS IS, WHERE IS, that the Lessor
shall be obligated to take delivery of the Aircraft pursuant to the Aircraft
Sale Agreement; provided, that the Aircraft satisfies the Delivery Conditions
set forth in Schedule I to Exhibit A hereto, in which connection, the execution
and delivery of the Acceptance Certificate shall, as between Lessor and Lessee,
constitute conclusive evidence that the Aircraft satisfies such conditions
without prejudice, however, to any claim Lessor or Lessee may have against
Seller or any Manufacturer.

                  2.04 TERM.

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

                                       -8-

<PAGE>

                  SECTION 3. CONDITIONS PRECEDENT.

                  3.01 CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS.

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

                  (a) Lessor shall have purchased the Aircraft pursuant to the
Aircraft Sale Agreement and each condition precedent therein to Lessor's
obligation to purchase the Aircraft shall have been satisfied.

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

                  (c) Lessor shall have received the following:

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

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

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

                  (iv) evidence that the Lessor has been duly registered with
the FAA as owner of the Aircraft, or that application for such registration has
been duly filed;

                  (v) evidence that the Lease and FAA Bill of Sale have been
duly filed for recordation with the FAA;

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

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

                                       -9-

<PAGE>

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

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

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

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

                  (xii) an insurance report of an independent insurance broker
and certificates of insurance as to Lessee's due compliance with the terms of
Section 8 of this Lease;

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

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

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

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

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

                  (d) No material adverse change in Lessee's or Guarantor's
financial or operational condition or its ability to meet its obligations under
the Operative Documents shall have occurred, as determined by Lessor, since
September 30, 1997.

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

                                      -10-

<PAGE>

                  (f) Lessor shall have received the first Basic Rent payment
and the Security Deposit.

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

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

                  3.02 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS.

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

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

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

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

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

                  SECTION 4. LESSEE'S REPRESENTATIONS AND WARRANTIES.

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

                  4.01 DUE ORGANIZATION, STANDING ETC.

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

                                      -11-

<PAGE>

necessary and the failure to so qualify would adversely effect Lessee's or
Guarantor's ability to perform its obligations under the Operative Documents to
which it is a party.

                  4.02 OPERATIVE DOCUMENTS.

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

                  4.03 NO CONFLICT; CONSENT.

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

                  4.04 GOVERNMENTAL CONSENTS.

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

                  4.05 NO ADVERSE AGREEMENTS.

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

                                      -12-

<PAGE>

                  4.06 NO DEFAULTS OR VIOLATIONS.

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

                  4.07 LITIGATION.

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

                  4.08 NO EVENT OF DEFAULT.

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

                  4.09 FINANCIAL STATEMENTS.

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

                  4.10 CHIEF EXECUTIVE OFFICE.

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

                  4.11 FILINGS MADE.

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

                                      -13-

<PAGE>

perfect Lessor's interest in the Aircraft and Lease in any jurisdiction in the
United States or elsewhere.

                  4.12 CERTIFICATE.

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

                  SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES.

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

                  5.01 DUE ORGANIZATION, STANDING ETC.

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

                  5.02 OPERATIVE DOCUMENTS.

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

                  SECTION 6. COVENANTS OF LESSEE.

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

                  6.01 AIR OPERATOR'S CERTIFICATE.

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

                                      -14-

<PAGE>

                  6.02 FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED.

                  Furnish to Lessor:

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

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

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

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

                  6.03 EXISTENCE.

                  At all times maintain its corporate existence and do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate rights, powers, privileges and franchises except for any
corporate right, power, privilege or

                                      -15-

<PAGE>

franchise that it determines is no longer necessary or desirable in the conduct
of its business as a common carrier for the commercial transport of passengers
and the loss of which will not materially adversely affect or diminish the
rights of Lessor under the Operative Documents.

                  6.04 INSPECTION RIGHTS; RECORDS.

                  (a) Permit any duly authorized representative or designee of
Lessor (which may be a manufacturer's representative, an outside consultant or
representative of Lessor or of a lender secured by the Aircraft) to inspect the
Aircraft, to examine Lessee's technical books and Aircraft records, to take
memoranda and extracts therefrom and to make copies thereof, and to discuss the
affairs, finances and accounts of Lessee. Such inspections shall be at Lessor's
expense unless an Event of Default exists, in which case inspections shall be
at Lessee's expense. Unless an Event of Default exists, such inspections may
only take place at any reasonable time. Lessee shall notify Lessor in writing
when "C" and "D" Checks, if Lessee shall no longer be utilizing the de
Havilland Equalized Maintenance Program, are scheduled to take place and if
Lessee shall be utilizing the de Havilland Equalized Maintenance Program, when
structural inspections required by the Maintenance Program and not included in
the de Havilland Equalized Maintenance Program are scheduled to take place and
if Lessor advises Lessee in writing that it or its designee will be inspecting
during such check, the parties will use reasonable efforts to coordinate
regarding the exact time and place thereof. Lessee shall also provide Lessor,
quarterly, with scheduling information regarding the performance of the various
segments of the de Havilland Equalized Maintenance Program required to be
performed or performed during each such quarter and if Lessor advises Lessee in
writing that it or its designee will be inspecting during such segments, the
parties will use reasonable efforts to coordinate regarding the exact time and
place thereof.

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

                  6.05 PAYMENT OF TAXES AND CLAIMS.

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

                  6.06 NOTICE OF LITIGATION.

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

                                      -16-

<PAGE>

                  6.07 MERGER.

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

                  6.08 CHIEF EXECUTIVE OFFICE.

                  Lessee shall provide Lessor with not less than 30 days prior
written notice of any change in its chief executive office or office where
records pertaining to the Aircraft are kept, if moved, to any place or location
outside of the State of Hawaii and will file such financing statements or other
filings as may be reasonably requested by Lessor with respect to such change.

                  6.09 CERTIFICATE.

                  Lessee shall maintain the certificate described in Section
4.12.

                  SECTION 7. PAYMENTS

                  7.01 RENT.

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

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

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

                                      -17-

<PAGE>

                  7.02 NET LEASE; NO SET-OFF OR DEDUCTIONS.

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

                  7.03 IMMEDIATELY AVAILABLE FUNDS.

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

                  7.04 SUPPLEMENTAL RENT; OVERDUE RENT.

                  Lessee also agrees to pay to Lessor or to whomsoever shall be
entitled thereto any and all Supplemental Rent when the same shall become due
and owing, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity in the case of nonpayment of Basic Rent. Without
limitation of the foregoing, Lessee shall

                                      -18-

<PAGE>

pay interest at the Overdue Rate on any payment of Rent not paid when due
hereunder for the period in which such Rent remains overdue and not paid.

                  7.05 RESERVED.

                  7.06 GROSS UP.

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

                  SECTION 8. LIMITATION OF LESSOR'S LIABILITY

                  LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS", "WHERE-IS" AND
LESSOR HAS NOT MADE, AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESSED OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR PARTICULAR PURPOSE OF
THE AIRCRAFT, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, ANY LIABILITY IN
TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, ANY
IMPLIED WARRANTY FROM COURSE OF PERFORMANCE OR DEALING OR USAGE OR TRADE, OR
LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL
DAMAGES, except that on the Delivery Date, Lessor (a) warrants that the
Aircraft shall be free of Lessor's Liens and (b) agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Lien on or with respect to the Airframe or any Engine or Propeller.

                  SECTION 9. USE OPERATION AND MAINTENANCE

                  9.01 GENERAL.

                  Lessee, at its own cost and expense shall (i) service, repair,
maintain and overhaul or cause the same to be done to the Airframe and each
Engine and Propeller under the Maintenance Program in the same manner and with
the same care as used

                                      -19-

<PAGE>

by Lessee with similar aircraft and engines and propellers operated by Lessee
and so as to keep the Airframe and each Engine and Propeller in as good
operating condition as when delivered to the Lessee hereunder, ordinary wear
and tear excepted, and (ii) maintain the Manuals and Technical Records in the
English language in accordance with the Maintenance Program.

                  9.02 OPERATION AND USE.

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

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

                  9.03 MAINTENANCE IN GENERAL.

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

                                      -20-

<PAGE>

                  9.04 SPECIFIC ITEMS OF MAINTENANCE.

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

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

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

                  (c) if required by Aeronautical Authority regulations, to
notify the Manufacturer promptly (with a copy to Lessor) of any modifications
or configuration changes to the Airframe which would have a material effect on
or be a material change to the type design and/or the manuals relating to the
Airframe (such as flight, operations and maintenance); and

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

                  9.05 PARTS.

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

                                      -21-

<PAGE>

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

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

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

                  9.06 AIRWORTHINESS DIRECTIVES.

                  (a) Lessee agrees to carry out or cause to be carried out in
accordance with the requirements thereof on the Aircraft any airworthiness
directive or any other mandatory regulation or directive ("Airworthiness
Directive") which the Aeronautical Authority from time to time may issue and
which becomes due during the Term or if later prior to return of the Aircraft
to the Lessor pursuant to Section 10. All Airworthiness Directives shall be
timely accomplished in accordance with all applicable bulletins and manuals
published by the Manufacturer of the Airframe or Engines or Propellers or Parts
or data approved by the Aeronautical Authority to the extent the same are
incorporated in or by reference into the Airworthiness Directive.

                                      -22-

<PAGE>

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

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

                  9.07 SERVICE BULLETINS: NONDISCRIMINATION.

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

                  9.08 CORROSION CONTROL.

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

                  9.09 MODIFICATIONS.

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

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

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

                                      -23-

<PAGE>

                  (d) All Modifications shall be accomplished at Lessee's
expense and only by a Person approved by the FAA. Lessee shall provide copies
of all drawings and data to be used by Lessee in accomplishing such Optional
Modifications for Lessor's consent prior to such work.

                  9.10 POSSESSION; SUBLEASING EQUIPMENT SUBSTITUTION.

                  Lessee shall not sublease the Aircraft or otherwise in any
manner deliver, relinquish or transfer possession of the Airframe or any Engine
or Propeller to any Person or install any Engine, or permit any Engine to be
installed, on any airframe other than the Airframe or install any Propeller, or
permit any Propeller to be installed, on any engine other than an Engine or
permit any other Person to do any of the foregoing during the Term, without the
prior written consent of Lessor, PROVIDED, HOWEVER, that so long as Lessee
shall comply with the provisions of Section 12 hereof, Lessee, without the
prior written consent of Lessor (except as specified below) may:

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

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

                  (c) install an Engine on an airframe owned by Lessee free and
clear of all Liens, except (i) Permitted Liens, and (ii) those which apply only
to the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety), and (iii)
those created by the rights of other Permitted Air Carriers under normal
interchange or pooling agreements or arrangements customary in the airline
industry which do not contemplate, permit or require the transfer of title to
such engines installed thereon; or

                  (d) install an Engine on an airframe leased to Lessee or
owned by Lessee subject to a conditional sale or other security agreement,
PROVIDED that (i) such airframe is free and clear of all Liens except (A) the
rights of the parties to the lease, conditional sale or other security
agreement and (B) Liens of the type permitted by

                                      -24-

<PAGE>

clause (c) above, and (ii) such lease, conditional sale or other security
agreement effectively provides that such Engine shall not become subject to the
Lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe in. which particular
connection, a provision contained in such lease, conditional sale or other
security agreement substantially to the effect of clause (e) of this Section
9.10 shall be deemed to so effectively provide;

PROVIDED that the rights of a transferee who receives possession by reason of a
transfer permitted by this Section 9.10 shall be subject and subordinate to all
the terms of this Lease and the rights of the Lessor hereunder to repossess
such property and any such arrangement shall expressly state it is so
subordinate or contain a provision substantially to the effect of clause (e) of
this Section 9.10, and Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
transfer had not occurred.

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

                  9.11 REPAIRS.

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

                  9.12 AIRCRAFT RECORDS.

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

                                      -25-

<PAGE>

                  9.13 WARRANTIES.

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

                  9.14 AIRPORT CHARGES.

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

                  9.15 RIGHT TO INSPECT.

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

                  9.16 REPORTING.

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

                                      -26-

<PAGE>

                  SECTION 10.      RETURN OF AIRCRAFT

                  10.01 RETURN.

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

                  10.02 CONDITION OF AIRCRAFT.

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

                  10.03 BOROSCOPE INSPECTION.

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

                  10.04 HISTORICAL RECORDS; TREND MONITORING DATA.

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

                  10.05 INSPECTION.

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

                                      -27-

<PAGE>

personnel, provided, however, the parties agree that such inspections shall be
scheduled in such manner that scheduled flights shall not be delayed or
cancelled.

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

                  10.06 OPERATIONAL GROUND CHECK.

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

                  10.07 OPERATIONAL CHECK FLIGHT.

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

                                      -28-

<PAGE>

                  10.08 ACCEPTANCE.

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

                  10.09 DEFERRED DISCREPANCY CORRECTION.

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

                  10.10 FLIGHT COST.

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

                  10.11 INDEMNIFICATION.

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

                  10.12 INSURANCE.

                  To the extent not covered by the existing insurance
certificates, with respect to Lessee's aviation liability insurance, Lessee
shall (i) cause Lessor to be named as an additional insured under Lessee's
aviation liability insurance policies to the extent of Lessee's undertaking set
forth in Section 10.11 and (ii) shall furnish to Lessor not later than 7
Business Days prior to the start of Lessor's ground inspection of the

                                      -29-

<PAGE>

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

                  10.13 MANUALS AND TECHNICAL RECORDS.

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

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

                  10.14 SERVICE BULLETIN KITS.

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

                  10.15 LESSEE'S SPECIAL EXTERIOR MARKINGS.

                   At the time of the return of the Aircraft* Lessee shall paint
over exterior markings painted on such Aircraft by Lessee and the area where
such markings were painted over shall be refurbished by Lessee as necessary to
blend in with the surrounding surface. In the event that, notwithstanding
Lessee's obligation to do so, Lessee does not remove such markings, Lessor
shall have no obligation to remove such markings prior to the sale, lease, or
other disposition of the Aircraft by Lessor after its return; however, if
Lessor elects to remove such markings, Lessee shall pay Lessor's

                                      -30-

<PAGE>

reasonable direct costs and expenses paid for such removal within 10 days of
the date of Lessor's invoice therefor.

                  10.16 OWNERSHIP.

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

                  10.17 STORAGE UPON RETURN.

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

                  SECTION 11. TITLE; REGISTRATION; LIENS

                  11.01 TITLE.

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

                  11.02 REGISTRATION; FILINGS; REGISTRATION.

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

                  (b) Lessee shall take or cause to be taken, at Lessee's cost
and expense, such actions as are necessary or requested by Lessor and
appropriate to maintain, so long as this Lease is in effect, (i) registration
of the Aircraft at the FAA, in the name of the Lessor including, without
limitation, the filing of all reports and applications and the payment of all
fees and (ii) maintaining the ownership interest of Lessor in the Aircraft,
provided, however, the foregoing shall not be deemed to impose upon Lessee any
obligation with respect to Lessor Liens. Lessee shall take such actions at
Lessee's expense as are necessary or reasonably requested by Lessor to
maintain the perfection

                                      -31-

<PAGE>

of any security interest that may be claimed to be created by this Lease,
including without limitation, the recording, filing, re-recording, and refiling
of this Lease, any other Operative Document, any financing statements or other
instruments. Lessee shall take no action adversely affecting the due
registration of the Aircraft with the FAA in the name of the Lessor.

                  11.03 LIENS.

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

                  11.04 NOTICE OF OWNERSHIP.

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

                      "[WILLIS LEASE FINANCE CORPORATION],
                                Owner and Lessor,
                     Leased to ALOHA ISLANDAIR, INC., Lessee"

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

                  SECTION 12. INSURANCE.

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

                                      -32-

<PAGE>

                  12.01 ALL-RISK INSURANCE.

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

                  12.02 WAR RISK INSURANCE.

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

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

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

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

                  (d) any malicious act or act of sabotage;

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

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

                  12.03 LIABILITY INSURANCE.

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

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

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<PAGE>

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

                  12.04 DEDUCTIBLES AND SELF INSURANCE.

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

                  12.05 ADDITIONAL REQUIREMENTS; LOSS PAYMENT.

                  The insurance required under this Section 12 shall be provided
on an agreed value basis and the policies shall, where applicable:

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

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

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

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

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

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

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

                  (h) subject to Section 12.09 hereof, name Lessor (or any
lender or other assignee designated by Lessor) as sole loss payee and provide
that losses will be adjusted with such loss payee to the extent of coverage
required herein by Section 12.

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<PAGE>

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

                  12.06 NO SET-OFF.

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

                  12.07 NOTICE OF MATERIAL ALTERATION OR CANCELLATION.

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

                  12.08 APPLICATION OF CERTAIN INSURANCE PROCEEDS.

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

                  (a) if such payments are received with respect to loss or
damage (including an Event of Loss with respect to an Engine or Propeller) not
constituting an Event of Loss with respect to the Airframe, such payments shall
be paid over to Lessee or at Lessee's election, to the repair facility jointly
with Lessee, upon performance by Lessee of the Lessee's repair obligations or
(if applicable) replacement obligations under this Lease pursuant to Section
13.02 hereof to the reasonable satisfaction of Lessor and, where appropriate,
Lessor shall issue any necessary payment orders with respect to such payments;

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

                  12.09 INSURANCE FOR OWN ACCOUNT.

                  Nothing in this Section 12 shall prohibit Lessee, Lessor or
any other Insured Party (in that order of priority should insurance capacity in
excess of the

                                      -35-

<PAGE>

insurances required in this Section 12 be limited as to availability or
amount), at its cost, from obtaining insurance for its own account and any
proceeds payable thereunder shall be payable as provided in the insurance
policy relating thereto, provided that no such insurance may be obtained which
would limit or otherwise adversely affect the coverage or payment of any
insurance required to be obtained or maintained pursuant to this Section 12.

                  12.10 CERTIFICATES AND REPORTS.

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

                  SECTION 13. LOSS, DAMAGE OR REQUISITION

                  13.01 AN EVENT OF LOSS OF AIRFRAME.

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

                  (b) In the event of a payment in full of the Stipulated Loss
Value for the Aircraft and other Rent payable as provided in Section 13.01(a)
above, (i) this Lease

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<PAGE>

and the obligations of Lessee to pay Basic Rent and Supplemental Rent shall
terminate; and (ii) Lessor shall convey to Lessee all of Lessor's right, title
and interest, AS-IS, WHERE-IS WITHOUT RECOURSE OR WARRANTY, EXPRESS OR IMPLIED
except for a warranty against Lessor's Liens, in and to (1) the Airframe and
Engines and Propellers and (2) all claims for damage to the Airframe and
Engines and Propellers, if any, against third persons arising from the Event of
Loss (unless any insurance carrier requires that such claims be assigned to
it).

                  13.02 ENGINE OR PROPELLER LOSS.

                  Upon the occurrence during the Term of an Event of Loss with
respect to an Engine or Propeller not then installed on the Airframe or an
Event of Loss with respect to an Engine or Propeller installed on the Airframe
not involving an Event of Loss with respect to the Airframe, Lessee shall give
Lessor and Lender written notice thereof as soon as is practicable but in no
event later than ten (10) Business Days after such occurrence and shall within
45 days of the occurrence of such Event of Loss and on at least 5 days' prior
written notice to Lessor substitute a Replacement Engine for such Engine or a
Replacement Propeller for such Propeller. In such event, immediately upon the
effectiveness of such substitution on the date set forth in such notice and
without further act, (i) title to the Replacement Engine or Replacement
Propeller shall thereupon vest in Lessor (subject only to Permitted Liens),
(ii) title to the replaced Engine or Propeller shall thereupon vest in Lessee,
in AS-IS, WHERE-IS CONDITION, free and clear of all rights of Lessor and free
and clear of Lessor Liens (other than Lessor Liens arising out of events
occurring after the transfer which are not attributable to actions of the
Lessor or omissions by the Lessor of actions which the Lessor is legally
obligated to take) and shall no longer be deemed an Engine or Propeller
hereunder, and (iii) such Replacement Engine or Replacement Propeller shall
become subject to this Lease and be deemed part of the Aircraft for all
purposes hereof to the same extent as the Engine or Propeller originally
installed on or attached to the Airframe. Upon such substitution, Lessee shall
execute and deliver to Lessor such bills of sale, opinions and other documents
and instruments as Lessor shall reasonably request by notice hereunder to
evidence the interest of Lessor and conveyance to Lessor of good and marketable
title to such Replacement Engine or Replacement Propeller. Upon such
substitution, (x) Lessor shall execute and deliver to Lessee such bills of sale
and other documents and instruments, prepared at Lessee's expense, as Lessee
shall reasonably request to evidence such transfer and vesting of title in and
to the replaced Engine or Propeller in Lessee, free and clear of all rights of
Lessor and (y) Lessee shall receive all insurance proceeds and proceeds in
respect of any Event of Loss causing such replacement. No Event of Loss with
respect to an Engine or Propeller under the circumstances contemplated by this
Section 13.02 shall result in any reduction of Lessee's obligations to pay Rent
hereunder. Lessee agrees that it shall at all times during the Term maintain or
cause to be maintained one (1) Engine, or other aircraft engine and one (1)
Propeller or other aircraft propeller suitable and available for use on the
Airframe and/or the airframe included with the Other Aircraft.

                                      -37-

<PAGE>

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

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

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

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

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

                  13.04 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF
DEFAULT.

                  Any amount referred to in Section 13 or Section 12 hereof
which is payable to Lessee shall not be paid to Lessee, or, if it has been
previously paid directly to Lessee, shall not be retained by Lessee if at the
time of such payment an Event of Default shall have occurred and be continuing,
but shall be paid to and held by the Lessor as security for the obligations of
Lessee under this Lease and/or applied to any unpaid Rent hereunder then due,
and at such time as there shall not be continuing any such Event of Default,
such remaining amount shall be paid over to Lessee.

                                      -38-
<PAGE>

                 SECTION 14. EVENT OF DEFAULT

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

                 14.01 FAILURE TO MAKE PAYMENTS.

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

                 14.02 FAILURE TO OBTAIN OR MAINTAIN INSURANCE.

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

                 14.03 FAILURE TO PERFORM OTHER OBLIGATIONS.

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

                 14.04 REPRESENTATIONS AND WARRANTIES UNTRUE.

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

                 14.05 INSOLVENCY OR BANKRUPTCY.

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

                                     -39-

<PAGE>

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

                 14.06 LOSS OF REGISTRATION OR PROTECTION.

                 If the Aircraft is no longer registered in compliance with
Section 11.02(a) hereof.

                 14.07 LOSS OF LICENSE.

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

                 14.08 OTHER LEASE.

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

                 14.09 FINAL JUDGMENT.

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

                 14.10 OTHER DEFAULT.

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

                 14.11 CONTEST.

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

                 14.12 FAILURE TO MAINTAIN LETTER OF CREDIT.

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

                                     -40-

<PAGE>

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

                 SECTION 15. REMEDIES

                 Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor, at its option, may
declare this Lease to be in default; and at any time thereafter so long as
Lessee shall not have remedied all outstanding Events of Default, Lessor may
do, and Lessee shall comply with, one or more of the following with respect to
all or any part of the Airframe and the Engines and Propellers, as Lessor in
its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, Applicable Law then in effect:

                 (a) Cause Lessee, upon notice hereunder to Lessee by Lessor
and at Lessee's expense, to, and Lessee shall, promptly return all or such
part of the Airframe or the Engines or Propellers as Lessor may demand to
Lessor at such location in the United States as selected by Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Section 10 hereof; or Lessor, at its option, may enter upon
the premises where the Airframe or any or all Engines or Propellers are
located or believed to be located and take immediate possession of and remove
such Airframe or Engines or Propellers without the necessity for first
instituting proceedings, or by summary proceedings or otherwise, in which
connection, to the extent permitted by Applicable law, Lessee waives and
agrees to waive any requirement that Lessor post any bond or other security
in connection with any such proceedings, and Lessee shall comply therewith,
all without liability to Lessor for or by reason of such entry or taking
possession, whether for the restoration or damage to property caused by such
taking or otherwise;

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

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

                                     -41-

<PAGE>

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

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

                 (e) Terminate this Lease as to the Airframe or any or all of
the Engines or Propellers, or exercise any other right or remedy which may be
available under Applicable Law or proceed by appropriate court action to
enforce the terms hereof or to recover damages for the breach hereof, provided,
however, that this Lease shall be deemed to be terminated automatically and
immediately upon the occurrence of any Event of Default under Section 14.05. In
addition, Lessee shall be liable for any and all Rent due hereunder before or
after any termination hereof, including all costs and expenses (including
reasonable attorneys' fees and disbursements) paid by Lessor as a result of
the occurrence of any Event of Default or the exercise of remedies with respect

                                     -42-

<PAGE>

thereto including all costs and expenses incurred in connection with the return
of the Airframe or any Engine or Propeller in accordance with the terms of
Section 10 hereof and such obligation shall survive any termination of the
Lease. Except as otherwise expressly provided above, no remedy referred to in
this Section 15 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity; and the exercise or beginning of exercise by Lessor
of any one or more of such remedies shall not preclude the simultaneous or
later exercise by Lessor of any or all such other remedies. No express or
implied waiver by Lessor of any Default or Event of Default hereunder shall in
any way be, or be construed to be, a waiver of any future or subsequent Default
or Event of Default.

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

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

                 SECTION 16. INDEMNITIES AND EXPENSES

                 16.01 GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.

                 (a) INDEMNIFICATION. Lessee assumes liability for, and hereby
agrees to indemnify, protect, save and keep harmless each Indemnitee from and
against any and all liabilities, obligations, losses, damages, injuries,
penalties, claims (including,

                                     -43-

<PAGE>

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

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

                 16.02 GENERAL TAX INDEMNITY.

                 (a) INDEMNITY. Lessee agrees to pay and to indemnify each
Indemnitee for, and hold each Indemnitee harmless from and against, all license
and registration fees, income, franchise, gross receipts, sales, use, excise
(including without limitation, any excise tax imposed by the State of Hawaii),
personal property, ad

                                     -44-

<PAGE>

valorem, value added (except as indicated in subclause 16.02(a)(i) below),
leasing, leasing use, stamp, documentary, landing, airport use or other taxes,
and all levies, imposts, duties, charges, or withholdings of any nature, each
of the foregoing together with any penalties, forfeitures, fines or interest
thereon ("Impositions"), arising out of the transactions contemplated by this
Lease and imposed against an Indemnitee, Lessee or the Aircraft or any part
thereof by any Federal, state, local or foreign government or other taxing
authority upon or with respect to the Aircraft or any part thereof or upon the
sale, purchase, ownership, delivery, leasing, possession, use, operation,
return, transfer or other disposition thereof or based on or measured by the
rentals, receipts or earnings arising therefrom, or upon or with respect to
this Lease. Notwithstanding the provisions of the above paragraph, Lessee's
obligations under this Section 16.02 shall not include any of the following:

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

                   (ii) any Impositions imposed as a result of a voluntary
              sale, transfer of title, mortgaging, pledging, financing, or
              other voluntary disposition by any Indemnitee of the Aircraft or
              part thereof or interest therein, or any interest in the Rent or
              part thereof or any interest in the Lease or part thereof, unless
              such sale, transfer, mortgage, pledge or disposition occurs by
              reason of the occurrence of a Default or an Event of Default or
              the exercise of Lessor's remedies under this Lease upon an Event
              of Default;

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

                   (iv) Impositions relating to the Aircraft or any part
              thereof, or interest therein, for any taxable period or portion
              thereof, relating to events occurring prior to commencement of
              the Term of this Lease or after the expiration of the Term of
              this Lease and the redelivery of the Aircraft in accordance with
              this Lease;

                   (v) indemnification of the Lessor, but without prejudice to
              the rights of indemnification of any other Indemnitee, with
              respect to any Impositions

                                     -45-

<PAGE>

              imposed as a direct result of the willful misconduct or
              gross negligence of the Lessor or its affiliates or, if acting
              within the scope of their employment or duties, of Lessor's
              officers, directors, employees, agents or representatives or as a
              direct result of a breach by Lessor of its express obligations
              under this Lease or as a direct result of an express
              representation or warranty given by Lessor in this Lease not
              being true and correct at the date when, or when deemed to have
              been, given or made;

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

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

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

                                     -46-

<PAGE>

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

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

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

                                     -47-

<PAGE>

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

                   (iii) in the event that the subject matter of the contest is
              of a continuing nature and has previously been decided adversely
              pursuant to the contest provisions of this Section 16.02 by the
              highest court to which an appeal could be taken (other than the
              U.S. Supreme Court), there has been a change in the law
              (including, without limitation, amendments to statutes or
              regulations, administrative rulings and court decisions) after
              such claim shall have been so previously decided and Lessor shall
              have received an opinion of independent tax counsel selected by
              the Lessee and reasonably acceptable to Lessor, which opinion
              shall be obtained at the Lessee's sole expense, to the effect
              that, as a result of such change, it is more likely than not that
              the position which Lessor, an Indemnitee or the Lessee, as the
              case may be, had asserted in such previous contest would prevail;

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

                   (v) prior to the commencement of any contest undertaken by
              the Lessee or any contest undertaken by Lessor or any Indemnitee
              with respect to which Lessor or such Indemnitee is required to
              follow the direction of the Lessee, the Lessee shall have
              delivered to Lessor a written acknowledgement of its obligations
              to indemnify fully Lessor and such Indemnitee to the extent that
              the contest is not successful;

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

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

                                     -48-

<PAGE>

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

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

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

                                     -49-

<PAGE>

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

                  SECTION 17. QUIET ENJOYMENT

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

                  SECTION 18. ASSIGNMENT

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

                                     -50-

<PAGE>

                 SECTION 19. NOTICES

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

                 IF TO LESSOR:

                 Willis Lease Finance Corporation
                 180 Harbor Drive
                 Suite 200
                 Sausalito, CA 94965
                 Attention: General Counsel
                 Telephone: (415) 331-5281
                 Telecopy: (415) 331-0607

                 If to Lessee:

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

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

                 SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE

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

                                     -51-

<PAGE>

                 SECTION 21. LEASE; SECTION 1110

                 21.01 LEASE.

                 Lessee and Lessor agree that this Lease is to be treated as a
Lease for Federal income tax purposes, that the Lessor is the owner of the
Aircraft for Federal income tax purposes and all other purposes and that the
interest of the Lessee in the Aircraft is that of a lessee only.

                 21.02 SECTION 1110.

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

                 SECTION 22. MISCELLANEOUS

                 22.01 WAIVERS, HEADINGS.

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

                 22.02 COUNTERPARTS.

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

                 22.03 GOVERNING LAW.

                 THIS LEASE HAS BEEN DELIVERED IN THE STATE OF CALIFORNIA AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND

                                     -52-

<PAGE>

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

                 22.04 BENEFIT AND BINDING EFFECT.

                 The terms and provisions of this Lease shall inure to the
benefit of and be binding on Lessor and Lessee and their respective successors
and permitted assigns.

                 22.05 FURTHER ASSURANCES.

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

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

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

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

                                     -53-

<PAGE>

                 22.07 USURY LAWS.

                 The parties intend to contract in strict compliance with the
usury laws of the State of California and, to the extent applicable, the United
States. Notwithstanding anything to the contrary in the Operative Documents,
Lessee will not be obligated to pay interest at the Overdue Rate on overdue
payments of Rent or other interest in excess of the maximum non-usurious
interest rate, as in effect from time to time, which may by Applicable Law be
charged, contracted for, reserved, received or collected by Lessor in
connection with the Operative Documents. During any period of time in which the
then-applicable highest lawful rate is lower than the Overdue Rate, interest on
overdue payments of Rent will accrue and be payable at such highest lawful
rate. However, if at later times such highest lawful rate is greater than the
Overdue Rate, then Lessee will pay interest on overdue payments of Rent at the
highest lawful rate until the interest on overdue payments of Rent which is
paid by Lessee equals the amount of interest that would have been payable at
the Overdue Rate.

                 22.08 ENTIRE AGREEMENT.

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

                    [This space intentionally left blank.]

                                     -54-

<PAGE>

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

LESSOR                                        WILLIS LEASE FINANCE CORPORATION

                                              By: /s/ [ILLEGIBLE]
                                                  -----------------------------
                                                  Name:
                                                  Title: [ILLEGIBLE]

LESSEE                                        ALOHA ISLANDAIR, INC.

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

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

Lease of DeHavilland Dash 8-103 Aircraft
MSN 353

<PAGE>

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

LESSOR                                WILLIS LEASE FINANCE CORPORATION

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

LESSEE                                ALOHA ISLANDAIR, INC.

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

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

Lease of DeHavilland Dash 8-103 Aircraft
MSN 353

<PAGE>

                                  EXHIBIT A

                            DESCRIPTION OF AIRCRAFT

<TABLE>
<CAPTION>
Mfr.             Model        Manufac-    Registration    Number and Type
----         Configuration    turer's     ------------      of Engines*
             -------------    Serial                      ---------------
                              Number
                              ------

<S>           <C>             <C>         <C>            <C>
DeHavilland   Dash-103         353          N853MA       Two (2) Pratt &
              Aircraft                                   Whitney 121 (reflected
              (reflected on the                          on the FAA Records as
              FAA Records as a                           PW 120 A) Engines
              DHC-8-102)                                 MSN 120968
                                                         MSN 121244

                                                         Number and Type
                                                         of Propellers"

                                                         Two (2) Hamilton
                                                         Standard 14 SF-7
                                                         Propellers
                                                         MSN 930310
                                                         MSN 920913

</TABLE>

The Aircraft is to be delivered and redelivered without APU.

     *     Each of the engines is of 750 or more rated takeoff horsepower or
           the equivalent of such horsepower.

     **    Each such propeller is capable of absorbing 750 or more rated
           takeoff shaft horsepower or the equivalent thereto.

                                      -57-

<PAGE>

                             SCHEDULE 1 TO EXHIBIT A

                               DELIVERY CONDITIONS

 (1)     The Aircraft engines shall have completed an engine overhaul in
         accordance with Pratt and Whitney overhaul maintenance practices. The
         life limited components will have a minimum of 5,000 cycles remaining.

 (2)     The Aircraft engines shall be upgraded from Model 120 to Model 121
         engines.

 (3)     All Aircraft propeller components that have more than 7,000 hours shall
         be overhauled in accordance with Hamilton Standard maintenance
         practices.

 (4)     The Aircraft shall have completed a bridging inspection to Aloha's
         equalized maintenance program ("EMP").

 (5)     The Aircraft will be stripped and painted to Aloha's paint scheme.

 (6)     Prior to delivery, the Aircraft will be weighed and a weight and
         balance statement shall be provided.

 (7)     The Aircraft shall be delivered with serviceable passenger life vests
         installed in under seat stowage pockets.

 (8)     A "3W randome boot shall be installed.

 (9)     The Aircraft shall be delivered with the existing ground spoilers
         de-activated.

(10)     The Aircraft will be delivered with leather passenger seat covers
         installed. Lessee shall pay to, or as directed by Lessor, the
         difference in price between fabric seat covers and leather seat
         covers.

 (11)    The Aircraft will be delivered with the existing APU removed from the
         Aircraft.

 (12)    Any de-ice boots that have deterioration or more than 3 patches shall
         be replaced prior to the delivery of the Aircraft.

 (13)    The main landing gear shall, at the time of delivery to Buyer, have at
         least fifty (50%) cycles remaining prior to the required time for
         removal for overhaul or refurbishment.
         The nose landing gear at the time of delivery shall have remaining, for
         Aircraft Serial Number 353 at least 7500 cycles and for Aircraft Serial
         Number 357 at least 7,800 cycles, prior to the required time for
         removal for overhaul or refurbishment.

                                      -58-

<PAGE>

 (14)    The propellers shall have modification AD95-22-12 Paragraph "B" to the
         secondary damper quills ("SDQ") installed,

 (15)    The next structural inspection shall be due no sooner than twelve (12)
         months, 3,500 flight hours or cycles as appropriate after delivery of
         the Aircraft to Lessee.

 (16)    The Aircraft shall be delivered to Lessee with no deferred maintenance.
         All airworthiness directives shall be in compliance without waiver or
         deviation.

 (17)    A power assurance run shall be completed and any discrepancies
         corrected prior to the delivery of the Aircraft to Lessee.

 (18)    The interior of the Aircraft shall be refurbished including the
         replacement of the carpet.

 (19)    At the time of technical acceptance the condition of N853MA will be
         substantially the same or better than the condition of the Aircraft as
         inspected by Lessee's designees on March 1, 1998, and March 9 through
         11, 1998 and March 25, 1998.

 (20)    The Aircraft shall have a valid FAA Standard United States Certificate
         of Airworthiness.

 (21)    The Aircraft shall have cleared U.S. Customs.

 (22)    The Aircraft shall have been registered in the name of the Lessor, as
         owner, or application for such registration shall have been filed, with
         the FAA.

                                      -59-

<PAGE>

                                    EXHIBIT B

                        RENT AND OTHER FINANCIAL MATTERS

 1.       STIPULATED LOSS VALUE

          [This provision has been omitted as confidential information, and is
 separately filed with the Commission.]

 2.       PAYMENT ACCOUNT

          All payments of Rent shall be paid to Lessor's bank account at:

               Wells Fargo Bank
               San Francisco, California USA
               ABA No. 121000 248

               To the Account of
               Willis Lease Finance Corporation
               Account No. 4518-101423

 until Lessee is advised by Lessor in writing to pay such amounts to another
 account.

 3.       TERM.

          The Term shall commence on the Delivery Date and expire on the same
 calendar date as the Delivery Date sixty (60) months thereafter unless earlier
 terminated in accordance with the terms of the Lease.

 4.       BASIC RENT

          [This provision has been omitted as confidential information, and is
 separately filed with the Commission.]

 5.       PUBLIC LIABILITY INSURANCE.

          [This provision has been omitted as confidential information, and is
 separately filed with the Commission.]

                                      -60-

<PAGE>

 6.      LETTER OF CREDIT.

          Lessee shall establish a Letter of Credit in favor of the Lessor in
compliance with Schedule 1 hereto.

 7.      EXTENSION OF TERM.

          Provided no Event of Default shall have occurred and be continuing,
 Lessee shall have the option, exercisable once, to extend the Term of the Lease
 for an additional two years at the same Rent and on the same terms and
 conditions as provided for in the Lease, exercisable by written notice given to
 the Lessor no later than one year prior to the end of the Term. Upon such
 notice of extension, the Term shall be deemed extended and such extension shall
 be irrevocable once such notice shall have been given. Failure to give such
 notice shall constitute an irrevocable undertaking on the part of the Lessee to
 return the Aircraft pursuant to Section 10 of the Lease at the end of the Term,
 without extension.

 8.       OVERDUE RATE.

          [This provision has been omitted as confidential information, and is
 separately filed with the Commission.]

                                      -61-

<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

                                LETTER OF CREDIT

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

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

 Notwithstanding the foregoing, in the event that:

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

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

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

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

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

                                      *Intentionally omitted as
                                      confidential financial
                                      information and filed
                                      separately with the
                                      Commission.

                                            -62-

<PAGE>

                                    EXHIBIT C

                             ACCEPTANCE CERTIFICATE

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

                  1. Lessee has received this _______ day of , 1998 (Time: ), at
___________, from [WILLIS LEASE FINANCE CORPORATION] ("Lessor") possession of:

          A.   One (1) de Havilland Model Dash 8-103 (reflected on the FAA
               Records as a DHC-8-102) Aircraft, bearing Manufacturer's Serial
               Number 353, U.S. Registration No. N853MA, together with two (2)
               Pratt & Whitney PW 121 (reflected on the FAA Records as PW 120 A)
               Engines, Manufacturer's Serial Numbers 120968 and 121244, two (2)
               Hamilton Standard 14 SF-7 Propellers, Manufacturer's Serial
               Numbers 930310 and 920913 and all appliances, instruments,
               accessories, equipment (not including an APU) and parts attached
               thereto and thereon, in an airworthy condition;

          B.   Fuel on board the Aircraft, _______________________;

          C.   All manuals, logbooks, flight records and historical information
               regarding the Aircraft, the engines and the accessories and
               equipment, including, without limitation, those listed on Exhibit
               D to the Lease, as received from the Seller; and

          D.   the items listed on Schedule 1 hereto.

                  2. All of the foregoing were delivered and accepted to
 Lessee's full satisfaction and pursuant to the terms and provisions of the
 Aircraft Lease Agreement between Lessor and Lessee, dated as of __, 1998 (the
 "Lease"), except as set forth on Schedule 2 hereto. For purposes of the Lease,
 Lessor and Lessee agree that the installed hard time components have, as of the
 Delivery Date, the time, Flight Hours and Cycles operating time remaining as
 set forth on Schedule 3 hereto.

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

                  4. The Lease and Operative Documents (as defined therein) are
 in full force and effect; Lessor has fully, duly and timely performed all of
 its obligations of every kind or nature under the Lease and other Operative
 Documents; and Lessee has

                                      -63-

<PAGE>

 no claims; deductions, set-offs or defenses of any kind or nature in connection
 with the Lease and other Operative Documents.

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

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

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

                                     ALOHA ISLANDAIR, INC.
                                                              (LESSEE)
                                     By: ____________________
                                     Name:
                                     Title:

                                     By: ____________________
                                     Name:
                                     Title:

 Lease Acceptance Certificate
 Lease of de Havilland Dash 8-103
 MSN 353

                                      -64-

<PAGE>

                  SCHEDULE 1 TO EXHIBIT C

S/N 353                                Aircraft Purchase Agreement UAS-125

                        AIRCRAFT LOOSE EQUIPMENT
<Table>
<Caption>
QTY              ITEM DESCRIPTION
---              ----------------
<S>              <C>
3                Crew Oxygen masks
3                Smoke goggles
2                Crew headsets
2                coffee cup holders
1                QRH, AFM, Ops Data Manual (3 books in total)
2                crew life-vests
1                observer's lifevest
2                hand-microphones
2                crew flashlights
1                crew fire extinguisher
1                crew fire-axe
1                spare filament holder
1                PBE forward RH side of fit compartment
1                alternate extension handle RH side of crew compt. (also 1 unit in RH nacelle)
1                emergency light
1                galley pax service cart and 3 beverage trays
3                galley food tray boxes
2                galley hot jugs
1                PBE fwd cabin in fwd galley stowage
1                Fire extinguisher fwd cabin in fwd galley stowage
3                seat belt extenders in pouch in fwd galley stowage
2                Pax oxygen bottles in fwd galley stowage
5                cabin seat tables
37               underseat life-vest pouches and 37 life-vests
1                Crew life vest under fwd FA seat
1                Flashlight under fwd FA seat
2                First-Aid Kits RH fwd overhead locker
1                PBE Aft bulkhead
1                Fire extinguisher Aft bulkhead
2                Prop restraint a/c parking
2                Engine plugs (consisting of one plug type and one cover type)
2                Gear locking pins
2                Static port covers
6                wheel covers-2 x NLG, 4 x MLG,
2                exhaust covers
2                pitot covers
2                MLG downlock safety pins
2                MLG door safety pins
1                NLG door safety pins
2                Aft cargo nets and post
1                cargo net door

</Table>

On behalf of Willis Lease Finance Corporation accepted as complete except
where noted next to the item.

By _________________

Its: _______________

<PAGE>

                                   SCHEDULE 2

                                 [Discrepancies]

<PAGE>

                                   SCHEDULE 3

                          [Time, Flight Hours, Cycles]

<PAGE>

                           SCHEDULE 3 TO EXHIBIT C

           TIME CONTROLLED / LIFE LIMITED PARTS STATUS AT DELIVERY

        Aircraft: Total Time 11,326 Total Cycles 12,409 Date 12/02/97

<TABLE>
<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Cockpit Voice Recorder           Only                         61173                             1990 fh

Flight Data Recorder             Only                         03346                             211 days

Air Cycle Machine                Only                         831230                            651 fh

Starter / Generator              Left                         96145                             Zero fh

Starter / Generator              Right                        1513                              2 fh

A/C Generator                    Left                         883                               4,371 fh

A/C Generator                    Right                        1252                              1,313 fh

ELT                              Only                         406422                            03/18/98

Fire Bottle Discharge Cart.      #1                           MAL2778                           611 days

Fire Bottle Discharge Cart.      #2                           MAL1434                           1019 days

Fire Bottle Discharge Cart.      #3                           MAL1444                           1030 days

Fire Bottle Discharge Cart.      #4                           MAL1449                           1038 days

Fire Bottles, HST                Fwd                          23108D1                           237 days

Fire Bottle, HST                 Aft                          23584D1                           126 days

Crew O2 Bottle, HST              Only                         140163                            219 days

Transponder                      Left                         92040817                          03/06/98

Transponder                      Right                        92020729                          03/06/98

Propeller                        Left                         930310                            57 fh

Blade, Propeller                 #1                           858396-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           858162-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           876199-7                          741 fh

Blade, Propeller                 #4                           876187-7                          677 fh

Propeller                        Right                        920913                            2,042 fh

Blade, Propeller                 #1                           855893-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           863561-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           855004-7                          Zero fh            03/23/98

                                       1

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Blade, Propeller                 #4                           878378-7                          655 fh

Propeller Control Unit           Left                         920243                            Zero fh            03/23/98

Propeller Control Unit           Right                        861142                            4118 fh

Propeller Actuator               Left                         920523                            Zero fh            03/23/98

Propeller Actuator               Right                        920311                            2042 fh

Engine                           Left                         120968/121205                     Zero               02/26/98

Impeller, HP                     Left                         7D525                             12,256 cy          02/26/98

Impeller, LP                     Left                         7D255                             12,256 cy          02/26/98

Cover, HP Front                  Left                         97A905                            4,739 cy           02/26/98

Cover, HP Rear                   Left                         14B637                            4,739 cy           02/26/98

Disc, HP                         Left                         14B364                            4,739 cy           02/26/98

Disc, LP                         Left                         23A386                            12,256 cy          02/26/98

Disc, PT-1                       Left                         19A958                            12,256 cy          02/26/98

Disc, PT-2                       Left                         20A946                            12,256 cy          02/26/98

Seal, Air Interstage             Left                         19B751                            4,739 cy           02/26/98

Blades, HP                       Left                         Various                           657 cy             02/26/98

Engine                           Right                        121244                            Zero               02/27/98

Impeller, HP                     Right                        4B739                             12,274 cy          02/27/98

Impeller, LP                     Right                        4E960                             12,274 cy          02/27/98

Cover, HP Front                  Right                        28B598                            2,800 cy           02/27/98

Cover, HP Rear                   Right                        29B142                            2,800 cy           02/27/98

Disc, HP                         Right                        26B649                            2,800 cy           02/27/98

Disc, LP                         Right                        6X375                             14,132 cy          02/27/98

Disc, PT-1                       Right                        56A062                            12,274 cy          02/27/98

Disc, PT-2                       Right                        55A958                            12,274 cy          02/27/98

Seal, Air Interstage             Right                        27B841                            2,800 cy           02/27/98

Blades, HP                       Right                        Various                           Zero cy            02/27/98

Ground Prox. Warn.               Only                         7103                              Zero fh

Air Data Computer                Left                         90033971                          03/24/98 days

                                       2

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Air Data Computer                Right                        92055334                          03/24/98 days

Altimeter                        Pilot                        92107266                          03/24/98 days

Altimeter                        Co-Pilot                     92107266                          03/24/98 days

Altimeter                        Standby                      8160A                             03/24/12 days

Yolk Assembly, MLG               Left                         DCL542/92                         12,409 cy

Yolk Assembly, MLG               Right                        DCL547/92                         12,409 cy

Drag Strut Assembly, MLG         Left                         DCL554/92                         12,409 cy

Drag Strut Assembly, MLG         Right                        DCL553/92                         12,409 cy

Shock Strut Assembly, MLG        Left                         DCL553/9292                       12,409 cy

Shock Strut Assembly, MLG        Right                        DCL541/9292                       12,409 cy

Pin. Strut to Yolk, MLG          Left                         DCL702                            12,409 cy

Pin. Strut to Yolk, MLG          Right                        DCL704                            12,409 cy

Stabilizer Stay Assembly, MLG    Left                         DCL502/92                         12,409 cy

Stabilizer Stay Assembly, MLG    Right                        DCL505/92                         12,409 cy          03/23/98

Frame Assembly, MLG              Left                         495572CTA/495571CTA               12,409 cy

Frame Assembly, MLG              Right                        495572CTA/495572CTA               12,409 cy

Drag Strut Assembly, NLG         Only                         DCL378/92                         12,443 cy          03/23/98

Drag Strut Assembly, NLG         Only                         DCL379/92                         12,409 cy

Outer Cylinder, NLG              Only                         DCL470                            12,409 cy

Trunnion Plate, NLG              Left                         486306CB                          12,409 cy

Trunnion Plate, NLG              Right                        49740380HXC                       12,409 cy

Trunnion Cap, NLG                Left                         252008CO                          12,409 cy

Trunnion Cap, NLG                Right                        252008CP                          12,409 cy

</TABLE>

To calculate delivery times on all undated items add 21 Flight hours, 11
Flight cycles, 113 Days to all undated items to compensate for ferry time
between return to de Havilland on 12/02/97 and delivery to Island Air on
3/26/98. To calculate delivery times on all dated items add 6 Flight hours, 6
Flight cycles, [ILLEGIBLE] Days to compensate for ferry time from
installation maintenance facility and delivery to Island Air on 3/26/98.

<TABLE>
<S>                                              <C>                                               <C>
Aircraft Time at Delivery                        Total Time: 11,347                                Delivery Location: Wichita, KS
                                                 Total Cycles: 12,420                              Delivery Date: 3/26/98
</TABLE>

                                       3

<PAGE>

                                  EXHIBIT D

                  Schedule of Manuals / Maintenance Records

<TABLE>
<CAPTION>
             Description                                               Qty
             -----------                                               ---
<S>                                                                    <C>
Aircraft Journey and Maintenance Log Books                             Numerous

Aircraft Technical Log Book, Record of Installations and Modifications   1

Engine Log Book for each Engine                                          1

Propeller Log Book for each Propeller                                    1

Component Serialization Record                                           1

Aircraft Technical Log for Airframe                                      1

FAA Approved Flight Manual (FAA-103)                                     1

Operating Data Manual                                                    1

Weight & Balance Manual                                                  1

Quick Reference Manual                                                   1

Customized Maintenance Manual                                            1

Customized Wiring Manual                                                 1

Airworthiness Directive Records and Accomplishment Files               Numerous

STC Record File                                                          1

Serviceable Tags for Components                                          1 Box

Structural Deviation Inspection Requirements File                        1

Electrical Load Analysis File                                            1

Form 337 File                                                            1

FDAU Calibration File                                                    1

Flight Data Recorder File                                                1

Previous Maintenance Checks Accomplished File                            1

Certified Computer Record for Parts Installed Time Status/Summary        1

Certified Computer Record for Maintenance Due Summary                    1

Current Weight & Balance File                                            1
</TABLE>

<PAGE>

                                   EXHIBIT E

                          RETURN ACCEPTANCE CERTIFICATE

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

                  1. Lessor has received this ____ day of _______ 200_
(Time:____), at [____________], from ALOHA ISLANDAIR, INC. ("Lessee")
possession of:

                  A.   One (1) de Havilland Model Dash 8-103 Aircraft,
                       bearing Manufacturer's Serial Number ____ together
                       with two (2) Pratt & Whitney___ Engines,
                       Manufacturer's Serial Numbers _______ and _______, two
                       (2) Hamilton Standard ___ propellers, Manufacturer's
                       Serial Numbers _______ and _______ and all appliances,
                       instruments, accessories, equipment (not including an
                       APU) and parts attached thereto and thereon, in an
                       airworthy condition;

                  B.   Fuel on board the Aircraft, __________________; and

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

                  2. All of the foregoing were delivered and accepted to
Lessor's full satisfaction and pursuant to the terms and provisions of the Lease
Agreement between Lessor and Lessee dated as of March __, 1998 (the "Lease")
except as set forth on Schedule 2 hereto.

                  3. The Aircraft, Engines, Propellers and Parts as described in
the Lease have been fully examined by Lessor and have been received in a
condition fully

<PAGE>

satisfactory to Lessor and in full conformance with the Lease except as set
forth on Schedule 2 hereto.

                    Dated this ____ day of _________, [200_]

                                       WILLIS LEASE FINANCE CORPORATION

                                                                (LESSOR)

                                       By:    ________________________________
                                       Name:  ________________________________
                                       Title: ________________________________

Lease Return Acceptance Certificate
Lease of de Havilland Dash 8-103
MSN __

                                      -2-

<PAGE>

                                    EXHIBIT F

I.       GENERAL RETURN CONDITIONS OF THE AIRCRAFT.

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

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

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

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

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

                   (f) CORROSION TREATMENT. The Aircraft shall have been
maintained by cleaning and treating of all mild corrosion and correcting of all
moderate and severe or exfoliated corrosion in accordance with the Maintenance
Program.

<PAGE>

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

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

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

II.      CONDITION OF AIRFRAME AND ENGINES.

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

                  (a) Lessee shall have performed or caused to be performed
prior to redelivery to the Lessor the following: (i) the next succeeding
segment of the de Havilland Equalized Maintenance Program, (ii) any maintenance
or inspections, including structural inspections, required by the Maintenance
Program and not included in the Equalized Maintenance Program or, any
replacement Maintenance Program for the de Havilland Equalized Maintenance
Program, in effect on the Redelivery Date, (the "Out of Phase Items") due
within 3,500 Flight Hours or Cycles or 12 months (whichever is the more
limiting) after the end of the Term, (iii) the Aircraft shall be redelivered to
the Lessor with not less than the number of Cycles remaining until the next
40,000 cycle structural inspection required under the de Havilland Maintenance
Program as it had remaining on the Delivery Date. In the event, during the
Term, the Lessee adopts a Maintenance Program other than the de Havilland
Equalized Maintenance Program the requirement in (i) above shall be changed to,
an "A" and "C" check or their equivalent under the Maintenance Program. The
Aircraft

                                       -2-

<PAGE>

shall not have been operated since the completion of the maintenance required
in this section except for flights pursuant to Section 10.07 and 10.08.

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

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

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

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

                   (f) The Engines and Propellers shall have not less than the
number of Flight Hours and Cycles remaining to their next scheduled removal as
each did on the Delivery Date, provided that in no event shall any Engine or
Propeller have fewer than 3,500 Flight Hours or Cycles (whichever is more
limiting) until its next scheduled removal; and

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

III.    ADJUSTMENTS.

                  In the event the Airframe, Engines, Propellers, Parts or other
components (each a "Component") do not meet the return conditions in Part II
above, the Lessee shall pay the Lessor a dollar amount computed by multiplying
(i) the cost to Lessee of having an outside supplier or contractor perform
checks, scheduled removal, scheduled maintenance or replacement of the
Component, whichever is the appropriate measure for such return condition (the
"Periodic Service"), by (ii) a fraction of which (i) the numerator shall be the
difference between the required number of Flight Hours or

                                      -3-

<PAGE>

Cycles (whichever is more limiting) for such Component to the next Periodic
Service specified in Part II above and the actual number of Flight Hours or
Cycles (whichever is more limiting) remaining for such Component to the next
Periodic Service and (y) the denominator shall be the number of Flight Hours or
Cycles (whichever is more limiting) allowable between each instance of Periodic
Service for such Component. To the extent that the remaining life of any
Component exceeds the Flight Hours or Cycles (whichever is more limiting) to
the next Periodic Service required in part II above and no Default or Event of
Default shall then exist, the Lessee shall be entitled to a credit against
amounts due to Lessor by operation of the preceding sentence. Such credit shall
equal a dollar amount calculated by multiplying (i) the cost to Lessee of
having an outside supplier or contractor perform the appropriate Periodic
Service for the Component by (ii) a fraction of which (i) the numerator shall
be the difference between the actual number of Flight Hours or Cycles
(whichever is more limiting) remaining for such Component to the next Periodic
Service and the required number of hours of operation or Cycles for such
Component to the next Periodic Service specified in Part II above, and (y) the
denominator shall be the number of Flight Hours or Cycles (whichever is more
limiting) allowable between each instance of Periodic Service for such
Component, provided that (1) the credit shall only be used to offset the
Lessee's obligation to pay a dollar adjustment to Seller pursuant to this Part
III and in no event shall Lessor be required to pay any amount to Lessee by
reason of the condition of any Component and (2) no credit provided herein
shall be used to offset a dollar adjustment caused by the Component having less
than the minimum hours of Flight Hours or Cycles (whichever is more limiting)
to the next Periodic Service provided for in Part II above.

                                       -4-

<PAGE>

                             ACCEPTANCE CERTIFICATE

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

                  1. Lessee has received this 26th day of March, 1998 (Time:
10:15 a.m. CST), at Wichita, Kansas from [WILLIS LEASE FINANCE CORPORATION]
("Lessor") possession of:

                   A.    One (1) de Havilland Model Dash 8-103 (reflected on the
                         FAA Records as a DHC-8-102) Aircraft, bearing
                         Manufacturer's Serial Number 353, U.S. Registration No.
                         N853MA, together with two (2) Pratt & Whitney PW 121
                         (reflected on the FAA Records as PW 120 A) Engines,
                         Manufacturer's Serial Numbers 120968 and 121244, two
                         (2) Hamilton Standard 14 SF-7 Propellers,
                         Manufacturer's Serial Numbers 930310 and 920913 and
                         all appliances, instruments, accessories, equipment
                         (not including an APU) and parts attached thereto and
                         thereon, in an airworthy condition;

                    B.   Fuel on board the Aircraft, 1,400 lbs;

                    C.   All manuals, logbooks, flight records and historical
                         information regarding the Aircraft, the engines and the
                         accessories and equipment, including, without
                         limitation, those listed on Exhibit D to the Lease, as
                         received from the Seller; and

                    D.   the items listed on Schedule 1 hereto.

                  2. All of the foregoing were delivered and accepted to
Lessee's full satisfaction and pursuant to the terms and provisions of the
Aircraft Lease Agreement between Lessor and Lessee, dated as of March 26, 1998
(the "Lease"), except as set forth on Schedule 2 hereto. For purposes of the
Lease, Lessor and Lessee agree that the installed hard time components have, as
of the Delivery Date, the time, Flight Hours and Cycles operating time
remaining as set forth on Schedule 3 hereto.

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

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

<PAGE>

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

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

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

                                            ALOHA ISLANDAIR, INC.

                                                                      (LESSEE)

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

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

Lease Acceptance Certificate
Lease of DeHavilland Dash 8-103
MSN 353

<PAGE>

                                   SCHEDULE 1

S/N 353                                Aircraft Purchase Agreement UAS-125

                        AIRCRAFT LOOSE EQUIPMENT
<Table>
<Caption>
QTY              ITEM DESCRIPTION
---              ----------------
<S>              <C>
3                Crew Oxygen masks
3                Smoke goggles
2                Crew headsets
2                coffee cup holders
1                QRH, AFM, Ops Data Manual (3 books in total)
2                crew life-vests
1                observer's lifevest
2                hand-microphones
2                crew flashlights
1                crew fire extinguisher
1                crew fire-axe
1                spare filament holder
1                PBE forward RH side of fit compartment
1                alternate extension handle RH side of crew compt. (also 1 unit in RH nacelle)
1                emergency light
1                galley pax service cart and 3 beverage trays
3                galley food tray boxes
2                galley hot jugs
1                PBE fwd cabin in fwd galley stowage
1                Fire extinguisher fwd cabin in fwd galley stowage
3                seat belt extenders in pouch in fwd galley stowage
2                Pax oxygen bottles in fwd galley stowage
5                cabin seat tables
37               underseat life-vest pouches and 37 life-vests
1                Crew life vest under fwd FA seat
1                Flashlight under fwd FA seat
2                First-Aid Kits RH fwd overhead locker
1                PBE Aft bulkhead
1                Fire extinguisher Aft bulkhead
2                Prop restraint a/c parking
2                Engine plugs (consisting of one plug type and one cover type)
2                Gear locking pins
2                Static port covers
6                wheel covers-2 x NLG, 4 x MLG,
2                exhaust covers
2                pitot covers
2                MLG downlock safety pins
2                MLG door safety pins
1                NLG door safety pins
2                Aft cargo nets and post
1                cargo net door

</Table>

On behalf of Willis Lease Finance Corporation accepted as complete except
where noted next to the item.

By _________________

Its: _______________

<PAGE>

                                   SCHEDULE 2

                                 [Discrepancies]

<PAGE>

                                   SCHEDULE 3

                          [Time, Flight Hours, Cycles]

<PAGE>

                           SCHEDULE 3 TO EXHIBIT C

           TIME CONTROLLED / LIFE LIMITED PARTS STATUS AT DELIVERY

        Aircraft: Total Time 11,326 Total Cycles 12,409 Date 12/02/97

<TABLE>
<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Cockpit Voice Recorder           Only                         61173                             1990 fh

Flight Data Recorder             Only                         03346                             211 days

Air Cycle Machine                Only                         831230                            651 fh

Starter / Generator              Left                         96145                             Zero fh

Starter / Generator              Right                        1513                              2 fh

A/C Generator                    Left                         883                               4,371 fh

A/C Generator                    Right                        1252                              1,313 fh

ELT                              Only                         406422                            03/18/98

Fire Bottle Discharge Cart.      #1                           MAL2778                           611 days

Fire Bottle Discharge Cart.      #2                           MAL1434                           1019 days

Fire Bottle Discharge Cart.      #3                           MAL1444                           1030 days

Fire Bottle Discharge Cart.      #4                           MAL1449                           1038 days

Fire Bottles, HST                Fwd                          23108D1                           237 days

Fire Bottle, HST                 Aft                          23584D1                           126 days

Crew O2 Bottle, HST              Only                         140163                            219 days

Transponder                      Left                         92040817                          03/06/98

Transponder                      Right                        92020729                          03/06/98

Propeller                        Left                         930310                            57 fh

Blade, Propeller                 #1                           858396-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           858162-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           876199-7                          741 fh

Blade, Propeller                 #4                           876187-7                          677 fh

Propeller                        Right                        920913                            2,042 fh

Blade, Propeller                 #1                           855893-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           863561-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           855004-7                          Zero fh            03/23/98

                                       1

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Blade, Propeller                 #4                           878378-7                          655 fh

Propeller Control Unit           Left                         920243                            Zero fh            03/23/98

Propeller Control Unit           Right                        861142                            4118 fh

Propeller Actuator               Left                         920523                            Zero fh            03/23/98

Propeller Actuator               Right                        920311                            2042 fh

Engine                           Left                         120968/121205                     Zero               02/26/98

Impeller, HP                     Left                         7D525                             12,256 cy          02/26/98

Impeller, LP                     Left                         7D255                             12,256 cy          02/26/98

Cover, HP Front                  Left                         97A905                            4,739 cy           02/26/98

Cover, HP Rear                   Left                         14B637                            4,739 cy           02/26/98

Disc, HP                         Left                         14B364                            4,739 cy           02/26/98

Disc, LP                         Left                         23A386                            12,256 cy          02/26/98

Disc, PT-1                       Left                         19A958                            12,256 cy          02/26/98

Disc, PT-2                       Left                         20A946                            12,256 cy          02/26/98

Seal, Air Interstage             Left                         19B751                            4,739 cy           02/26/98

Blades, HP                       Left                         Various                           657 cy             02/26/98

Engine                           Right                        121244                            Zero               02/27/98

Impeller, HP                     Right                        4B739                             12,274 cy          02/27/98

Impeller, LP                     Right                        4E960                             12,274 cy          02/27/98

Cover, HP Front                  Right                        28B598                            2,800 cy           02/27/98

Cover, HP Rear                   Right                        29B142                            2,800 cy           02/27/98

Disc, HP                         Right                        26B649                            2,800 cy           02/27/98

Disc, LP                         Right                        6X375                             14,132 cy          02/27/98

Disc, PT-1                       Right                        56A062                            12,274 cy          02/27/98

Disc, PT-2                       Right                        55A958                            12,274 cy          02/27/98

Seal, Air Interstage             Right                        27B841                            2,800 cy           02/27/98

Blades, HP                       Right                        Various                           Zero cy            02/27/98

Ground Prox. Warn.               Only                         7103                              Zero fh

Air Data Computer                Left                         90033971                          03/24/98 days

                                       2

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Air Data Computer                Right                        92055334                          03/24/98 days

Altimeter                        Pilot                        92107266                          03/24/98 days

Altimeter                        Co-Pilot                     92107266                          03/24/98 days

Altimeter                        Standby                      8160A                             03/24/12 days

Yolk Assembly, MLG               Left                         DCL542/92                         12,409 cy

Yolk Assembly, MLG               Right                        DCL547/92                         12,409 cy

Drag Strut Assembly, MLG         Left                         DCL554/92                         12,409 cy

Drag Strut Assembly, MLG         Right                        DCL553/92                         12,409 cy

Shock Strut Assembly, MLG        Left                         DCL553/9292                       12,409 cy

Shock Strut Assembly, MLG        Right                        DCL541/9292                       12,409 cy

Pin. Strut to Yolk, MLG          Left                         DCL702                            12,409 cy

Pin. Strut to Yolk, MLG          Right                        DCL704                            12,409 cy

Stabilizer Stay Assembly, MLG    Left                         DCL502/92                         12,409 cy

Stabilizer Stay Assembly, MLG    Right                        DCL505/92                         12,409 cy          03/23/98

Frame Assembly, MLG              Left                         495572CTA/495571CTA               12,409 cy

Frame Assembly, MLG              Right                        495572CTA/495572CTA               12,409 cy

Drag Strut Assembly, NLG         Only                         DCL378/92                         12,443 cy          03/23/98

Drag Strut Assembly, NLG         Only                         DCL379/92                         12,409 cy

Outer Cylinder, NLG              Only                         DCL470                            12,409 cy

Trunnion Plate, NLG              Left                         486306CB                          12,409 cy

Trunnion Plate, NLG              Right                        49740380HXC                       12,409 cy

Trunnion Cap, NLG                Left                         252008CO                          12,409 cy

Trunnion Cap, NLG                Right                        252008CP                          12,409 cy

</TABLE>

To calculate delivery times on all undated items add 21 Flight hours, 11
Flight cycles, 113 Days to all undated items to compensate for ferry time
between return to de Havilland on 12/02/97 and delivery to Island Air on
3/26/98. To calculate delivery times on all dated items add 6 Flight hours, 6
Flight cycles, [ILLEGIBLE] Days to compensate for ferry time from
installation maintenance facility and delivery to Island Air on 3/26/98.

<TABLE>
<S>                                              <C>                                               <C>
Aircraft Time at Delivery                        Total Time: 11,347                                Delivery Location: Wichita, KS
                                                 Total Cycles: 12,420                              Delivery Date: 3/26/98
</TABLE>

                                       3

<PAGE>

                                  EXHIBIT D

                  Schedule of Manuals / Maintenance Records

<TABLE>
<CAPTION>
             Description                                               Qty
             -----------                                               ---
<S>                                                                    <C>
Aircraft Journey and Maintenance Log Books                             Numerous

Aircraft Technical Log Book, Record of Installations and Modifications   1

Engine Log Book for each Engine                                          1

Propeller Log Book for each Propeller                                    1

Component Serialization Record                                           1

Aircraft Technical Log for Airframe                                      1

FAA Approved Flight Manual (FAA-103)                                     1

Operating Data Manual                                                    1

Weight & Balance Manual                                                  1

Quick Reference Manual                                                   1

Customized Maintenance Manual                                            1

Customized Wiring Manual                                                 1

Airworthiness Directive Records and Accomplishment Files               Numerous

STC Record File                                                          1

Serviceable Tags for Components                                          1 Box

Structural Deviation Inspection Requirements File                        1

Electrical Load Analysis File                                            1

Form 337 File                                                            1

FDAU Calibration File                                                    1

Flight Data Recorder File                                                1

Previous Maintenance Checks Accomplished File                            1

Certified Computer Record for Parts Installed Time Status/Summary        1

Certified Computer Record for Maintenance Due Summary                    1

Current Weight & Balance File                                            1
</TABLE>

<PAGE>

                           MORTGAGE SUPPLEMENT N0. 14

                   MORTGAGE SUPPLEMENT NO. 14 dated March 26, 1998, of Willis
Lease Finance Corporation (together with its successors and assigns being
hereinafter called the "Borrower"), supplementing the Mortgage and Security
Agreement, dated as of June 27, 1997 (as amended, modified or supplemented from
time to time, herein called the "Mortgage"), made by the Borrower in favor of
CoreStates Bank, N.A. (together with its successors and assigns, the
"Mortgagee").

                                   WITNESSETH:

                   WHEREAS, the Mortgage provides for the execution and delivery
from time to time of Mortgage Supplements thereto substantially in the form
hereof, each of which shall particularly describe certain Engines, Airframes
and Spare Parts (such term and other defined terms in the Mortgage being herein
used with the same meanings) and shall specifically mortgage such Engines,
Airframes and Spare Parts to the Mortgagee; and

                  WHEREAS, the Mortgage and Mortgage Supplement No. 1 of the
Borrower, dated June 27, 1997 were recorded by the Federal Aviation
Administration on July 9, 1997, and assigned Conveyance No. H90651; and

                  WHEREAS, Mortgage Supplement No. 2 of the Borrower, dated June
30, 1997 was recorded by the Federal Aviation Administration on July 9, 1997,
and assigned Conveyance No. H90653; and

                  WHEREAS, Mortgage Supplement No. 3 of the Borrower, dated July
28, 1997 was recorded by the Federal Aviation Administration on July 31, 1997,
and assigned Conveyance No. GG011163; and

                  WHEREAS, Mortgage Supplement No. 4 of the Borrower, dated
August 1, 1997 was recorded by the Federal Aviation Administration on August 20,
1997, and assigned Conveyance No. M32717; and

                  WHEREAS, Mortgage Supplement No. 5 of the Borrower, dated
August 25, 1997 was recorded by the Federal Aviation Administration on December
11. 1997, and assigned Conveyance No. MM015328; and

                  WHEREAS, Mortgage Supplement No. 6 of the Borrower, dated
September 29, 1997 was recorded by the Federal Aviation Administration on
December 12, 1997, and assigned Conveyance No. MM015329; and

                  WHEREAS, Mortgage Supplement No. 7 of the Borrower, dated
September 30, 1997 was recorded by the Federal Aviation Administration on
October 6, 1997, and assigned Conveyance No. FF22634; and

<PAGE>

                  WHEREAS, Amendment No. 1 to the Mortgage, dated November 18,
1997 was recorded by the Federal Aviation Administration on January 13, 1998,
and assigned Conveyance No. P13938; and

                  WHEREAS, Mortgage Supplement No. 8 of the Borrower, dated
November 20, 1997 was recorded by the Federal Aviation Administration on January
13, 1998, and assigned Conveyance No. P13939; and

                  WHEREAS, Mortgage Supplement No. 9 of the Borrower, dated
December 2, 1997 was recorded by the Federal Aviation Administration on December
3, 1997, and assigned Conveyance No. Z02486; and

                  WHEREAS, Mortgage Supplement No. 10 of the Borrower, dated
December 4, 1997 was recorded by the Federal Aviation Administration on December
9, 1997, and assigned Conveyance No. X133882; and

                  WHEREAS, Mortgage Supplement No. 11 of the Borrower, dated
March 10, 1998 was filed with the Federal Aviation Administration on March 10,
1998, but has not yet been recorded; and

                  WHEREAS, Mortgage Supplement No. 12 of the Borrower, dated
March 16, 1998 was filed with the Federal Aviation Administration on March 16,
1998, but has not yet been recorded; and

                  WHEREAS, Mortgage Supplement No. 13 of the Borrower, dated
March 19, 1998 was filed with the Federal Aviation Administration on March 19,
1998, but has not yet been recorded; and

                  WHEREAS, the Mortgage relates in part to the Aircraft and
Lease described in the following paragraph:

                   NOW, THEREFORE, This Supplement Witnesseth, that to secure
(i) the prompt and complete payment and performance when due of all of the
Obligations and (ii) the performance and observance by the Borrower of all the
agreements, covenants and provisions in the Mortgage, and in consideration of
the premises and of the covenants contained in the Mortgage, and of the sum of
$1.00 paid to the Borrower by the Mortgagee at or before the delivery hereof,
the receipt whereof is hereby acknowledged, the Borrower has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a
security interest in and confirmed unto the Mortgagee, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security
interest in and confirm unto the Mortgagee, the Borrower's interest (whether as
owner or secured party) in the following described property, whether now owned
or hereafter acquired (the "Mortgaged Property"):

                    A.   (i) One (1) de Havilland Dash 9-103 turboprop passenger
                         aircraft consisting of the following principal
                         components (the "Aircraft"):
                             (a) one (1) Dash 8-103 (described in the FAA
                             records as a DHC-8-102) airframe bearing
                             Manufacturer's Serial No. 353 and United States
                             Registration No. N853MA and; (b) two (2) Pratt &
                             Whitney Model PW120A aircraft engines bearing
                             Manufacturer's Serial Nos. 120968 and

<PAGE>

                             121244, respectively (each of which engines has 750
                             or more rated takeoff horsepower or the equivalent
                             of such horsepower), whether or not such engines
                             shall be installed in or attached to any airframe;
                             (c) two (2) Hamilton Standard Model 14SF-7
                             four-blade propellers bearing Manufacturer's Serial
                             Nos. 930310 and 920913, respectively (each of
                             which is capable of absorbing at least 750 rated
                             takeoff horsepower or the equivalent of such
                             horsepower), whether or not such propellers shall
                             be installed on or attached to any engine

                      (ii) Lease Agreement, dated as of March 26, 1998 between
                   Willis Lease Finance Corporation, as lessor and Aloha
                   IslandAir, Inc., as lessee in respect of the Aircraft, with
                   Acceptance Certificate dated March 26, 1998 by Aloha
                   IslandAir, Inc.

                   B. all parts, components, equipment instruments, appliances,
avionics, radio and radar devices, cargo handling systems and loose equipment
that are incorporated or installed in or attached to said Aircraft, with the
exception of one Sunstrand Model T-62-40-C7B APU with serial number 925151,
whether now owned or hereafter acquired by the Borrower; and

                    C. all Records relating to any of the property described in
paragraphs A and B above.

                   TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Mortgagee, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Mortgage.

                   This Supplement shall be construed as supplemental to the
Mortgage and shall form a part of the Mortgage and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.

                    This Supplement is being delivered in the State of
Pennsylvania.

                   This Supplement may be executed by the Borrower and the
Mortgagee in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same Supplement.

                   AND, FURTHER, the Borrower hereby acknowledges that the
Mortgaged Property has been delivered to the Borrower and is included in the
property of the Borrower covered by all the terms and conditions of the
Mortgage.

<PAGE>

                  IN WITNESS WHEREOF, the Borrower and the Mortgagee have each
caused this Supplement to be duly executed, as of the day and year first above
written.

                                       WILLIS LEASE FINANCE CORPORATION

                                       By:   /s/ Charles F. Willis
                                             ---------------------------------
                                       Name:  CHARLES F. WILLIS
                                       Title:     PRESIDENT

                                       CORESTATES BAN& N.A.

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

<PAGE>

                  IN WITNESS WHEREOF, the Borrower and the Mortgagee have each
caused this Supplement to be duly executed, as of the day and year first above
written.

                                       WILLIS LEASE FINANCE CORPORATION

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

                                       CORESTATES BANK, N.A.

                                       By:     /s/ Hugh W. Connelly
                                             ---------------------------------
                                       Name:   Hugh W. Connelly
                                       Title:  Vice President

<PAGE>

[LOGO IslandAir]
--------------------------------------------------------------------------------

May 20, 1998

VIA FACSIMILE
(415) 331-0607

Mr. Donald A. Nunemaker
Richard A. Cogan, Esq.
Willis Lease Finance Corporation

RE:  Lease Agreement between Willis Lease Finance Corporation, as Lessor, and
     Aloha IslandAir, Inc., as Lessee, relating to one (1) de Havilland Dash
     8-103 aircraft Manufacturer Serial No. 353, U.S. Registration No. N853MA
     dated as of March 26, 1998 ("Lease").

Gentlemen:

Lease, Section 12.05(b), page 34, is corrected as follows, effective as of March
26, 1998:

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

Lease, Section 1, page 5, definitions of "Other Lease" and "Other Aircraft" are
amended as of the date hereof to read as follows:

          "OTHER LEASE" means the Lease Agreement covering one (1) de Havilland
     Dash 8-103 Aircraft (Reflected on the FAA Records as a DHC-8-102),
     Manufacturer's Serial Number 357, U.S. Registration No. N854MA, two (2)
     Pratt & Whitney Model PW 121 Engines (Reflected on the FAA Records as PW
     120 A), Manufacturer's Serial Numbers 121298 and 121179, and two (2)
     Hamilton Standard 14SF-7 Propellers, Manufacturer's Serial Numbers 921018
     and 921211 between Lessor and Lessee with respect to the Other Aircraft.

          "OTHER AIRCRAFT" means that certain de Havilland Dash 8-103 aircraft
     (Reflected on the FAA Records as a DHC-8-102), Manufacturer's Serial
     Number 357, U.S. Registration No. N854MA, as further identified in the
     Other Lease.

In all other respects, the Lease shall remain in full force and effect.

99 Kapalulu Place - Honolulu, Hawaii 96819-1843 - Telephone (808) 836-7693 -
Facsimile (808) 833-5498

<PAGE>

May 20, 1998
Mr. Donald Nunemaker
Richard A. Cogan, Esq.
Page - 2 -

ALOHA ISLANDAIR, INC.

By:
    -----------------------------
    Its:
         ------------------------

By:
    -----------------------------
    Its:
         ------------------------

 WILLIS LEASE FINANCE CORPORATION

By: /s/ JAMES D. McBRIDE
        -------------------------
        JAMES D. McBRIDE
        -------------------------
   Its: EXECUTIVE VICE PRESIDENT
        -------------------------
        CHIEF FINANCIAL OFFICER
        -------------------------

<PAGE>

May 20, 1998
Mr. Donald Nunemaker
Richard A. Cogan, Esq.
Page - 2 -

ALOHA ISLANDAIR, INC.

By: /s/ BRENDA F. CUTWRIGHT
        ------------------------
   Its: Sr. Vice President
        ------------------------
        Finance & Planning
        ------------------------
        and CFO
        ------------------------

By: /s/ OWEN SEKIMURA
        ------------------------
   Its: Staff Vice President
        ------------------------
        Finance & Controller
        ------------------------

 WILLIS LEASE FINANCE CORPORATION

By:
    -----------------------------
    Its:
         ------------------------<PAGE>

                                                                 EXHIBIT 10.62

                            AIRCRAFT LEASE AGREEMENT

                          Dated as of October 15, 1999

                                     Between

                           COMPASS CAPITAL CORPORATION
                                    As Lessor

                                     - and -

                              ALOHA AIRLINES, INC.
                                    As Lessee

                                  In respect of

                  Aircraft:                          Boeing 737-2T4
                  Serial No:                         23445
                  F.A.A. Registration Mark:          N808AL

 -------------------------------------------------------------------------------
 The rights of Lessor under this Aircraft Lease Agreement and in the Aircraft
 covered hereby will be or have been assigned to, and are or will be subject to
 a security interest in favor of The Provident Bank, as Lender and Secured Party
 under that certain Loan and Security Agreement dated as of July 1, 1999, as
 supplemented. To the extent, if any, that this Aircraft 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
 Aircraft Lease Agreement may be created through this transfer of possession of
 any counterpart other than the original counterpart which shall be identified
 as the counterpart containing this receipt therefor executed by The Provident
 Bank as Lender, on the signature page thereof.

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

<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>

  CLAUSE                                                                                           PAGE

  <S>      <C>                                                                                     <C>
  1.       INTERPRETATION                                                                          1
  1.1      DEFINITIONS                                                                             1
  1.2      CONSTRUCTION                                                                            10

  2.       REPRESENTATIONS AND WARRANTIES                                                          11
  2.1      Lessee's Representations and Warranties                                                 12
  2.2      Lessee's Further Representations and Warranties                                         13
  2.3      Repetition                                                                              13
  2.4      Lessor's Representations and Warranties                                                 13

  3.       CONDITIONS PRECEDENT                                                                    14
  3.1      Lessor's Conditions Precedent                                                           15
  3.2      Further conditions precedent                                                            17
  3.3      Waiver                                                                                  17
  3.4      Lessee's Conditions Precedent                                                           17

  4.      COMMENCEMENT; TERM                                                                       17
  4.1     Leasing                                                                                  17
  4.2     [Intentionally Omitted]                                                                  17
  4.3     [Intentionally Omitted]                                                                  17
  4.4     Licenses                                                                                 17
  4.5     [Intentionally Omitted]                                                                  17
  4.6     Indemnity                                                                                17
  4.7     Early Termination Option                                                                 18

  5.      PAYMENTS                                                                                 18
  5.1     [Intentionally Omitted]                                                                  18
  5.2     Rental Periods                                                                           18
  5.3     Rent                                                                                     18
  5.4     [Intentionally Omitted]                                                                  19
  5.5     Payments                                                                                 19
  5.6     Gross-up                                                                                 19
  5.7     Taxation                                                                                 19
  5.8     Value Added Tax                                                                          20
  5.9     Information                                                                              20
  5.10    Taxation of Indemnity Payments                                                           20
  5.11    Default Interest                                                                         21
  5.12    Contest                                                                                  21
  5.13    Absolute                                                                                 21
  5.14    Security                                                                                 21

<PAGE>

 <S>      <C>                                                                                     <C>
 6.       MANUFACTURER'S WARRANTIES                                                                22
 6.1      Assignment                                                                              22
 6.2      Proceeds                                                                                22
 6.3      Parts                                                                                   22
 6.4      Agreement                                                                               22

 7.       LESSOR'S COVENANTS                                                                      23
 7.1      Quiet Enjoyment                                                                         23
 7.2      Lessor Obligations Following Expiry Date                                                23
 7.3      Fixed Place of Business                                                                 23

 8.       LESSEE'S COVENANTS                                                                      23
 8.1      Duration                                                                                23
 8.2      Information                                                                             24
 8.3      Lawful and Safe Operation                                                               25
 8.4      Taxes and other Outgoings                                                               26
 8.5      Sub-Leasing                                                                             26
 8.6      Inspection                                                                              26
 8.7      Ownership; Property Interests; Related Matters                                          27
 8.8      General                                                                                 27
 8.9      Records                                                                                 28
 8.10     Protection                                                                              29
 8.11     Maintenance and Repair                                                                  29
 8.12     Removal of Engine and Parts                                                             31
 8.13     Installation of Engines and Parts                                                       32
 8.14     Non-Installed Engines and Parts                                                         32
 8.15     Pooling of Engines and Parts                                                            33
 8.16     Equipment Changes                                                                       34
 8.17     Title                                                                                   34
 8.18     Third Party                                                                             34

 9.       INSURANCE                                                                               34
 9.1      Insurances                                                                              35
 9.2      Requirements                                                                            35
 9.3      Change                                                                                  36
 9.4      Insurance Covenants                                                                     36
 9.5      Failure to Insure                                                                       36
 9.6      Continuing Indemnity                                                                    37
 9.7      Application of Insurance Proceeds                                                       37

 10.      INDEMNIFICATION                                                                         37
 10.1     General                                                                                 38
 10.2     Duration                                                                                38

 11.      EVENTS OF LOSS                                                                          38
 11.1     Events of Loss                                                                          39

<PAGE>

 <S>      <C>                                                                                     <C>
 11.2     Requisition                                                                             39

 12.      RETURN OF AIRCRAFT                                                                      39
 12.1     Return                                                                                  40
 12.2     Final Inspection                                                                        40
 12.3     Non-Compliance                                                                          40
 12.4     Redelivery                                                                              40
 12.5     Acknowledgement                                                                         40
 12.6     Maintenance Program                                                                     40
 12.7     Fuel                                                                                    40
 12.8     [Intentionally Omitted]                                                                 40

 13.      DEFAULT                                                                                 41
 13.1     Events                                                                                  42
 13.2     Rights                                                                                  43
 13.3     Deregistration                                                                          43
 13.4     Default Payments                                                                        44

 14.      ASSIGNMENT                                                                              45

 15.      ILLEGALITY                                                                              45

 16.      MISCELLANEOUS                                                                           46
 16.1     Waivers, Remedies Cumulative                                                            46
 16.2     Delegation                                                                              46
 16.3     Certificates                                                                            46
 16.4     Appropriation                                                                           46
 16.5     Currency Indemnity                                                                      46
 16.6     Set-off                                                                                 47
 16.7     Severability                                                                            47
 16.8     Remedy                                                                                  47
 16.9     Expenses                                                                                47
 16.10    Time of Essence                                                                         48
 16.11    Notices                                                                                 48
 16.12    Law and Jurisdiction                                                                    48
 16.13    Sole and Entire Agreement                                                               48
 16.14    Indemnification                                                                         50
 16.15    Counterparts                                                                            50
 16.16    Language                                                                                50

 17.      DISCLAIMERS AND WAIVERS                                                                 50
 17.1     Exclusion                                                                               51
 17.2     Waiver                                                                                  51
 17.3     Confirmation                                                                            51

 18.      SECTION 1110                                                                            51
</Table>

<PAGE>

 SCHEDULE 1
 PART I - DESCRIPTION OF AIRCRAFT
 PART 2 - AIRCRAFT DOCUMENTS

 SCHEDULE 2
 [INTENTIONALLY OMITTED]

 SCHEDULE 3
 OPERATING CONDITION AT REDELIVERY

 SCHEDULE 4
 INSURANCE REQUIREMENTS

<PAGE>

 THIS AIRCRAFT LEASE AGREEMENT is made as of this 15th day of October, 1999
 between

 COMPASS CAPITAL CORPORATION, a corporation incorporated under the laws of the
 State of California whose chief executive office is 750 Battery Street, Suite
 430, San Francisco, California 94111 U.S.A. ("Lessor"); and

 ALOHA AIRLINES, INC., a corporation incorporated under the laws of the State of
 Delaware whose principal address is 371 Aokea Street, Honolulu, Hawaii 96819,
 U.S.A. ("Lessee").

 WHEREAS: Lessor wishes to lease to Lessee and Lessee is willing to lease from
 Lessor the Aircraft on the terms of this Agreement.

 IT IS AGREED as follows:

 1.  INTERPRETATION

 1.1 DEFINITIONS

 In this Agreement the following terms shall have the following meanings:

 Agreed Maintenance Performer       Lessee or such other person as shall be
                                    approved from time to time in writing by
                                    Lessor (such approval not to be unreasonably
                                    withheld).

 Agreed Maintenance Program         such Program as shall be approved by the FAA
                                    and agreed to from time to time in writing
                                    by Lessor.

 Agreed Value                       the amount set forth in Appendix A.

 Air Authority                      the FAA.

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

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

 Airframe                           the Aircraft, excluding the Engines and
                                    Aircraft Documents.

 APU                                the auxiliary power unit installed on the
                                    Aircraft on the

                                      -1-
<PAGE>

                                    date on which the Aircraft was delivered
                                    pursuant to the Prior Lease and any
                                    replacement auxiliary power unit installed
                                    in accordance with this Agreement.

 Boeing                             The Boeing Company, a Delaware corporation
                                    with its principal office in Seattle, State
                                    of Washington, U.S.A.

 Business Day                       a day (other than a Saturday or Sunday) on
                                    which business of the nature required by
                                    this Agreement is carried out in San
                                    Francisco, California, Cincinnati, Ohio and
                                    the State of Incorporation or where used in
                                    relation to payments on which banks are open
                                    for business in London, Hawaii, California
                                    and Ohio.

 Certificated Air Carrier           shall mean any corporation (except the
                                    United States Government) domiciled in
                                    the United States of America and holding
                                    a Certificate of Convenience and
                                    Necessity issued under Section 401 of the
                                    Federal Aviation Act by the Department of
                                    Transportation or any predecessor or
                                    successor agency thereto, or, in the
                                    event such Certificates shall no longer
                                    be issued, any corporation (except the
                                    United States Government) domiciled in
                                    the United States of America and legally
                                    engaged in the business of transporting
                                    for hire passengers or cargo by air
                                    predominantly to, from or between points
                                    within the United States of America, and,
                                    in either event, operating commercial jet
                                    aircraft, which also is certificated so
                                    as to fall within the purview of Section
                                    1110 of Title 11 of the United States
                                    Code or any analogous statute.

 Commencement Date                  October 15, 1999

 Cycle                              one take-off and landing of the Aircraft.

 Damage Notification Threshold      the amount set forth in Appendix A.

 Default                            any Event of Default and any event or
                                    condition which with the giving of notice or
                                    lapse of time would constitute an Event of
                                    Default.

 Dollars and $                      the lawful currency of the United States of
                                    America.

 Engine                             whether or not installed on the Aircraft:

                                    (a) each engine of the manufacture and model

                                      -2-
<PAGE>

                                    specified in Part 1 of Schedule 1 (each of
                                    which has 750 or more rated takeoff
                                    horsepower or the equivalent of such
                                    horsepower), such engines being specified as
                                    to serial numbers on the Part 1 of Schedule
                                    1; or

                                    (b) any engine which has replaced that
                                    engine, title to which has or should have,
                                    passed to Lessor in accordance with this
                                    Agreement;

                                    and in each case includes all modules and
                                    Parts from time to time belonging to or
                                    installed in that engine but excludes any
                                    properly replaced engine title to which has,
                                    or should have, passed to Lessee pursuant to
                                    this Agreement.

  Event of Default                  an event or condition specified in
                                    Clause 13.1.

  Event of Loss                     with respect to the Aircraft (including for
                                    the purposes of this definition the
                                    Airframe):

                                    (a) the actual or constructive total loss of
                                    the Aircraft (including any damage to the
                                    Aircraft which results in an insurance
                                    settlement on the basis of a total loss,
                                    or requisition for use or hire which results
                                    in an insurance settlement on the basis of a
                                    total loss); or

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

                                    (c) the requisition of title, or other
                                    compulsory acquisition, capture, seizure,
                                    deprivation, confiscation or detention for
                                    any reason of the Aircraft by the government
                                    of the State of Registration or other
                                    competent authority (whether de jure or de
                                    facto), but excluding requisition for use or
                                    hire not involving requisition of title; or

                                    (d) the hijacking, theft, condemnation,
                                    confiscation, seizure or requisition for use
                                    or hire of the Aircraft which deprives any
                                    person permitted by this Agreement to have
                                    possession and/or use of the Aircraft of its
                                    possession and/or use for more than 15 days.

  Excusable Delay                   with respect to delivery of the Aircraft,
                                    delay or

                                      -3-
<PAGE>
                                    non-performance 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, any
                                    manufacturer, Lessor 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 manufacturers, suppliers, any
                                    existing owner, seller or lessee in a timely
                                    manner, damage, destruction or loss, or any
                                    other cause to the extent that such cause is
                                    beyond the control of Lessor whether above
                                    mentioned or not and whether or not similar
                                    to the foregoing.

 Expiry Date                        29 September 2007 or if earlier the date
                                    on which:

                                    (a) the Aircraft has been redelivered in
                                    accordance with this Agreement; or

                                    (b) Lessor receives the Agreed Value
                                    following an Event of Loss.

 FAA                                the Federal Aviation Administration of the
                                    United States of America and any successor
                                    thereof.

 Federal Aviation Act               United States Federal Aviation Act of 1958,
                                    as amended, or any similar legislation of
                                    the United States of America enacted in
                                    substitution or replacement thereof.

 Financial Indebtedness             any indebtedness in respect of:

                                    (a) moneys borrowed or raised;

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

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

                                    (d) any guarantee, indemnity or similar
                                    assurance

                                      -4-
<PAGE>

                                    against financial loss of any person in
                                    respect of the above.

 Financing Statements               Uniform Commercial Code Financing Statements
                                    in respect of this Agreement, the Mortgage
                                    and the Security Agreement and the
                                    collateral described therein prepared in a
                                    form acceptable for filing with the
                                    applicable Government Entities in the
                                    Habitual Base, the State in which Lessee's
                                    chief executive office is located and such
                                    other jurisdictions as Lessor shall
                                    reasonably require.

 First Termination Amount           the amount set forth in Appendix A.

 Flight Hour                        each hour or part thereof (rounded up to two
                                    decimal places) elapsing from the moment the
                                    wheels of the Aircraft leave the ground on
                                    take off until the wheels of the Aircraft
                                    next touch the ground.

 Governing Law                      the laws of the State of New York.

 Government Entity                  (a)  any national government, political
                                    subdivision thereof, or local jurisdiction
                                    therein;

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

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

 Habitual Base                      the State of Hawaii or, subject to the prior
                                    written consent of Lessor, any other state,
                                    country or countries in which the Aircraft
                                    is for the time being habitually based.

 Indemnitees                        each of the Prior Interested Parties, Lessor
                                    and Lender including any of their respective
                                    successors and assigns, shareholders,
                                    subsidiaries, affiliates, partners,
                                    contractors, directors, officers, servants,
                                    agents and employees.

 Interim Period                     the period specified in Section 5.2.

                                      -5-
<PAGE>

 Landing Gear                       the landing gear assembly of the Aircraft
                                    excluding any rotable components.

 Lender                             The Provident Bank as Lender under the
                                    Mortgage.

 Lessee Installed Seats             passenger seats with respect to which (a)
                                    title to which is held by Lessee subject to
                                    a Security Interest in favor of an unrelated
                                    third party or (b) title to which is held by
                                    an unrelated third party and such seats are
                                    leased or conditionally sold to Lessee.

 Lessor Assignment                  the assignment of Lessor's rights under
                                    this Agreement to The Provident Bank
                                    pursuant to the Mortgage.

 Lessor Lien                        (a) the Mortgage, Lessor Assignment and any
                                    security interest whatsoever from time to
                                    time created by or through Lessor in
                                    connection with the financing of the
                                    Aircraft;

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

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

 Lessor Taxes                       Taxes:

                                    (a) imposed as a direct result of activities
                                    of Lessor in the jurisdiction imposing the
                                    liability unrelated to Lessor's dealings
                                    with Lessee with respect to the Aircraft or
                                    to the transactions contemplated by this
                                    Agreement or the operation of the Aircraft
                                    by Lessee; or

                                    (b) imposed on the income, profits or gains
                                    of Lessor by any Government Entity in the
                                    State of California or the State of New York
                                    or by the Federal Government of the United
                                    States of America; or

                                    (c) imposed with respect to any period
                                    commencing or event occurring (x) prior to
                                    the Commencement Date; or (y) after the
                                    Expiry Date and unrelated to Lessor's
                                    dealings with Lessee with respect to the
                                    Aircraft or to the transactions contemplated
                                    by this Agreement; or

                                      -6-
<PAGE>

                                    (d) which otherwise would not be Lessor
                                    Taxes which are imposed as a direct result
                                    of (x) the failure by Lessor to timely and
                                    properly file a tax return or to pay any
                                    Taxes which are required to be filed or paid
                                    by Lessor; or (y) the failure by Lessor to
                                    timely and properly furnish to Lessee
                                    (following a request by Lessee) any
                                    information, document or signature required
                                    by Lessee in order for Lessee to timely and
                                    properly file a tax return or to pay any
                                    Taxes on behalf of Lessor which Lessee is
                                    obligated to do hereunder; or

                                    (e) resulting from the gross negligence or
                                    willful misconduct of Lessor; or

                                    (f) imposed on Lessor as a direct result
                                    of an assignment or disposition by Lessor
                                    of the Aircraft, any interest in or with
                                    respect to the Aircraft or any interest
                                    in or with respect to the Rent.

 Maintenance Program                an Air Authority approved maintenance
                                    program for the Aircraft encompassing
                                    scheduled maintenance (including block
                                    maintenance), condition monitored
                                    maintenance, and/or on-condition maintenance
                                    of Airframe, Engines and Parts, including
                                    but not limited to, servicing, testing,
                                    preventive maintenance, repairs, structural
                                    inspections, system checks, overhauls,
                                    approved modifications, service bulletins,
                                    engineering orders, airworthiness
                                    directives, corrosion control, inspections
                                    and treatments.

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

 Manufacturer                       Boeing.

 Minimum Liability Coverage         $500,000,000 on each occurrence (provided
                                    that, in the event that Lessee reduces its
                                    general liability limit applicable to its
                                    aircraft fleet to an amount which is less
                                    than $500,000,000, the Minimum Liability
                                    Coverage may, with prior written notice to
                                    Lessor, be reduced by Lessee to an amount
                                    equal to the greater of (x) such lesser
                                    amount; and (y) $400,000,000 on each

                                      -7-
<PAGE>

                                    occurrence).

 Mortgage                           the Loan and Security Agreement, dated as
                                    of July 1, 1999 between Lessor as "Borrower"
                                    and Lender as "Lender" and any supplements
                                    and amendments thereto in respect of the
                                    Aircraft.

 Other Leases                       (x) the Aircraft Lease Agreement made or to
                                    be made between Lessor and Lessee with
                                    respect to Boeing 737-200A Aircraft Serial
                                    Number 23443; and (y) any other agreement
                                    (other than this Agreement) made or to be
                                    made between Lessor (or an affiliate or
                                    associate of Lessor) and Lessee (or an
                                    affiliate or associate of Lessee).

 Part                               whether or not installed on the Aircraft:

                                    (a) any component, furnishing or equipment
                                    (other than a complete Engine) furnished or
                                    delivered with the Aircraft pursuant to the
                                    Prior Lease and any replacement component,
                                    furnishing or equipment installed in
                                    accordance with this Agreement; and

                                    (b) any other component, furnishing or
                                    equipment (other than a complete Engine)
                                    title to which has, or should have passed to
                                    Lessor pursuant to this Agreement but
                                    excluding (i) any such items title to which
                                    has, or should have, passed to Lessee
                                    pursuant to this Agreement and (ii) any
                                    Lessee Installed Seats.

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

                                    (b) any lien of a repairer, mechanic,
                                    carrier, hangarkeeper or other similar lien
                                    arising in the ordinary course of business
                                    or by operation of law in respect of
                                    obligations which are not overdue or are
                                    being contested in good faith by appropriate
                                    proceedings; but only if (in the case of
                                    both (a) and (b) (i) adequate reserves have
                                    been provided by Lessee for the payment of
                                    the Taxes or obligations; and (ii) such
                                    proceedings, or the continued existence of
                                    the lien, do not give rise to any likelihood
                                    of the sale, forfeiture or other loss of the
                                    Aircraft or any interest therein or of
                                    criminal liability on Lessor or

                                      -8-
<PAGE>

                                   Lender; and

                                    (c) any Lessor Lien.

 Person                             shall mean and include any individual
                                    person, corporation, partnership, firm,
                                    joint stock company, joint venture, trust,
                                    estate, unincorporated organization,
                                    association, Governmental Entity, or
                                    organization or association of which any of
                                    the above is a member or a participant.

 Prior Interested Parties           each of (i) AerFi Finance (Bermuda) No. 3
                                    Limited (formerly known as GPA Finance
                                    (Bermuda) No. 3 Limited), as prior, a prior
                                    owner and, to the extent applicable, as
                                    prior lessor, (ii) AerFi Group plc (formerly
                                    known as GPA Group plc), as a prior owner
                                    and, to the extent applicable, as prior
                                    lessor, (iii) AerFi Corporation, as prior
                                    lessor and a prior owner on the FAA Registry
                                    (iv) Wilmington Trust Company, as prior
                                    trustee, (v) GE Capital Aviation Services,
                                    Inc. and (vi) GE Capital Aviation Services,
                                    Limited.

 Prior Lease                        the Aircraft Lease Agreement, dated as of
                                    May 27, 1994, between Lessor and Lessee, as
                                    supplemented, amended and assigned.

 Redelivery Location                an airport within the United States of
                                    America to be agreed between Lessor and
                                    Lessee.

 Reference Banks                    The Provident Bank.

 Rent                               all amounts payable pursuant to Clause 5.3.

 Rent Amount                        the amount set forth in Appendix A.

 Rental Period                      each period ascertained in accordance with
                                    Clause 5.2.

 Rent Date                          the first day of each Rental Period.

 Second Termination Amount          the amount set forth in Appendix A.

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

                                      -9-
<PAGE>

                                    create the foregoing other than a Permitted
                                    Lien.

 State of Incorporation             the State of Delaware.

 State of Registration              the United States of America.

 Subsidiary                         (a)  in relation to any reference to
                                    accounts, any company whose accounts are
                                    consolidated with the accounts of Lessee in
                                    accordance with accounting principles
                                    generally accepted under accounting
                                    standards of the State of Incorporation;

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

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

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

 Taxes                              taxes, duties and the like of all kinds and
                                    any other amount corresponding to any
                                    taxation together with any penalties, fines,
                                    surcharge or interest thereon.

 Term                               the period commencing on the Commencement
                                    Date and ending on the Expiry Date.

 Termination Payment                has the meaning assigned to such term in
                                    Clause 4.7 of this Agreement.

1.2   CONSTRUCTION

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

      (i) each of "Lessor" or "Lessee" or any other person includes without
      prejudice to the provisions of this Agreement any successor in title to it
      and any permitted assignee;

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

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

      (iv) a law (1) includes any statute, decree, constitution, regulation,
      order, judgment or directive of any Government Entity; (2) includes any
      treaty, pact, compact or other agreement to

                                      -10-

<PAGE>

      which any Government Entity is a signatory or party; (3) includes any
      judicial or administrative interpretation or application thereof and (4)
      is a reference to that provision as amended, substituted or re-enacted;
      and

      (v) a Clause or a Schedule is a reference to a clause of or a schedule to
      this Agreement, and

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

2.    REPRESENTATIONS AND WARRANTIES

2.1   Lessee's Representations and Warranties : Lessee represents and warrants
      to Lessor that:

(a)   Status: Lessee is a corporation duly incorporated and validly existing
      in good standing under the laws of the State of Incorporation and has
      the corporate power to own its assets and carry on its business as it
      is being conducted and is the holder of all necessary air
      transportation licenses required in connection therewith and with the
      use and operation of the Aircraft;

(b)   Power and Authority: Lessee has the corporate power to enter into and
      perform, and has taken all necessary corporate action to authorize the
      entry into, performance and delivery of, this Agreement and the
      transactions contemplated by this Agreement;

(c)   Legal Validity: This Agreement constitutes Lessee's legal, valid and
      binding obligations;

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

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

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

      (iii) conflict with or result in default under any indenture, mortgage,
      chattel mortgage, deed of trust,conditional sales contract, lease, bank
      loan or credit agreement or other agreement which is binding upon Lessee
      or any of its assets nor result in the creation of any Security Interest
      over any of its assets;

(e)   Authorization: All authorizations, consents, registrations and
      notifications required in connection with the entry into, performance,
      validity and enforceability of, this Agreement and the transactions
      contemplated by this Agreement, have been (or will on or before the
      Commencement Date have been) obtained or effected (as appropriate) and are
      (or will on their being obtained or effected be) in full force and effect;

(f)   No Immunity:

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

                                      -11-
<PAGE>

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

(g)   Accounts: the audited consolidated accounts of Aloha Airgroup, Inc.
      (Lessee's parent company) and its Subsidiaries most recently delivered to
      Lessor:-

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

      (ii) fairly represent the consolidated financial condition of Aloha
      Airgroup, Inc., and its Subsidiaries as at the date to which they were
      drawn up;

(h)   Chief Executive Office: Lessee's chief executive office is located at the
      address stated in the Recitals to this Agreement;

(i)   Certificated Air Carrier: Lessee is a Certificated Air Carrier and Lessor,
      as lessor of the Aircraft to Lessee, is entitled to the benefits of
      Section 1110 of Title 11 of the United States Code with respect to the
      Aircraft; and

(j)   Citizen of the United States: Lessee is a "citizen of the United States"
      as defined in Section 40102(a)(1 5) of Title 49 of the United States Code.

2.2   Lessee's Further Representations and warranties : Lessee further
      represents and warrants to Lessor that:

(a)   No Default:

      (i) no Default has occurred and is continuing or might result from the
      entry into or performance of this Agreement; and

      (ii) no other event or condition has occurred and is continuing which
      constitutes (or with the giving of notice, lapse of time, determination of
      materiality or the fulfillment of any other applicable condition or any
      combination of the foregoing, might constitute) a material default under
      any material indenture, mortgage, chattel mortgage, deed of trust,
      conditional sales contract, lease, bank loan or credit agreement or other
      agreement which is binding on Lessee or any assets of Lessee;

(b)   Registration:

      (i) except for the filing of this Agreement with the FAA and the filing of
      the Financing Statements and related documents, it is not necessary or
      advisable under the laws of the State of Incorporation, the State of
      Registration or the Habitual Base in order to ensure the validity,
      effectiveness and enforceability of this Agreement or to establish,
      perfect or protect the property rights of Lessor in the Aircraft or any
      Engine or Part that this Agreement or any other instrument

                                      -12-
<PAGE>

      relating thereto be filed, registered or recorded or that any other action
      be taken or if any such filings, registrations, recordings or other
      actions are necessary or advisable, the same have been effected or will
      have been effected on or before the Commencement Date; and

      (ii) except for the filing of this Agreement with the FAA and the filing
      of the Financing Statements and related documents, under the laws of the
      State of Incorporation, the State of Registration and the Habitual Base
      the property rights of Lessor in the Aircraft, have been fully
      established, perfected and protected and this Agreement will have priority
      in all respects over the claims of all creditors of Lessee;

(c)   Litigation: no litigation, arbitration or administrative proceedings are
      pending or to Lessee's knowledge 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
      under this Agreement;

(d)   Pari Passu: the obligations of Lessee under this Agreement rank at least
      pari passu with all other present and contingent unsecured and
      unsubordinated obligations of Lessee, with the exception of such
      obligations as are mandatorily preferred by law and not by virtue of any
      contract;

(e)   Material Adverse Change: there has been no material adverse change in the
      consolidated financial condition of Aloha Airgroup, Inc. and its
      Subsidiaries or the financial condition of Lessee since the date to
      which the accounts most recently provided to Lessor on or prior to the
      Commencement Date were drawn up;

(f)   Taxes: Lessee has delivered all necessary returns and payments due to the
      tax authorities in the State of Incorporation, the State of Registration
      and the Habitual Base and all other jurisdictions in which Lessee is
      required to pay taxes and/or file tax returns or reports and Lessee is not
      required by law to deduct any Taxes from any payments under this
      Agreement; and

(g)   Information: the financial and other information furnished by Lessee in
      connection with this Agreement does not contain any untrue statement or
      omit to state facts, the omission of which makes the statements therein,
      in the light of the circumstances under which they were made, misleading,
      nor omits to disclose any material matter to Lessor and all forecasts and
      opinions contained therein were honestly made on reasonable grounds after
      due and careful enquiry by Lessee.

2.3   Repetition: The representations and warranties in Clause 2.1 and Clause
      2.2 will survive the execution of this Agreement. The representations and
      warranties contained in Clause 2.1 and Clause 2.2 will be deemed to be
      repeated by Lessee on the Commencement Date with reference to the facts
      and circumstances then existing. The representations and warranties
      contained in Clause 2.1 will be deemed to be repeated by Lessee on each
      Rent Date as if made with reference to the facts and circumstances then
      existing.

2.4   Lessor's Representations and Warranties : Lessor represents and warrants
      to Lessee that:

                                      -13-
<PAGE>

(a)   Status: Lessor is a corporation duly incorporated and validly existing in
      good standing under the laws of the State of California and has the
      corporate power to own its assets and carry on its business as it is now
      being conducted;

(b)   Power and authority: Lessor has the corporate power to enter into and
      perform, and has taken all necessary corporate action to authorize the
      entry into, performance and delivery of, this Agreement and the
      transactions contemplated by this Agreement;

(c)   Legal validity: This Agreement constitutes Lessor's legal, valid and
      binding obligation;

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

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

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

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

(e)   Authorization: So far as concerns the obligations of Lessor, all
      authorizations, consents, registrations and notifications required in
      connection with the entry into, performance, validity and enforceability
      of, and the transactions contemplated by, this Agreement by Lessor have
      been (or will on or before the Commencement Date have been) obtained or
      effected (as appropriate) and are (or will on their being obtained or
      effected be) in full force and effect;

(f)   No Immunity:

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

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

(g)   No Lessor Liens: Notwithstanding anything herein to the contrary, on the
      Commencement Date, there shall be no Lessor Liens on the Aircraft or facts
      and circumstances of which Lessor is aware and which might give rise to a
      Lessor Lien the existence of which would interfere with Lessee's rights
      under Clause 7.1.

3.    CONDITIONS PRECEDENT

3.1   Lessor's Conditions Precedent : Lessor's obligation to lease the Aircraft
      under this Agreement is subject to satisfaction of each of the following
      conditions:

(a)   receipt by Lessor from Lessee on or before the Commencement Date of the
      following satisfactory in form and substance to Lessor:

                                      -14-
<PAGE>

      (i) Constitutional Documents: a copy of the constitutional documents of
      Lessee;

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

      (iii) Opinion: an opinion in the form of Schedule 6 by independent legal
      counsel acceptable to Lessor in the State of Registration, the Habitual
      Base and the State of Incorporation;

      (iv) FAA Opinion: an opinion of Crowe & Dunleavy or other counsel
      acceptable to Lessor who are recognized specialists with regard to FAA
      registration matters in a form acceptable to Lessor as to the due filing
      for recordation of this Agreement;

      (v) Approvals: each approval, license and consent which may be required in
      relation to, or in connection with, the remittance to Lessor in Dollars of
      all amounts payable under this Agreement or the performance by Lessee of
      any of its obligations hereunder;

      (vi) Import: evidence that any required import license, and all customs
      formalities, relating to the import of the Aircraft into the Habitual Base
      have been obtained or complied with, and that the import of the Aircraft
      into the Habitual Base is exempt from;

      (vii) Licenses: copies of Lessee's Certificate of Convenience and
      Necessity, Radio License, FAR 121 Operator's Certificate and the U.S.
      Certificate of Airworthiness for the Aircraft;

      (viii) [Intentionally Omitted];

      (ix) Certificate: a certificate of a duly authorized officer of Lessee:

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

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

      (x) Deregistration Power: an irrevocable power of attorney authorizing
      Lessor by or through its duly authorized officers or agents or such other
      person as Lessor may from time to time specify to do any thing or act or
      to give any consent or approval which may be required to obtain
      deregistration of the Aircraft and to export the Aircraft from the
      Habitual Base upon termination of the leasing of the Aircraft under this
      Agreement, duly notarized and legalized; and

      (xi) General: such other documents as Lessor may reasonably request;

(b)   the receipt by Lessor on or before the Commencement Date of

                                      -15-
<PAGE>

      (i) Opinions: a signed original of each of the opinions referred to in
      Clauses 3.1(a)(iii) and (iv);

      (ii) Payments: subject to Clause 5.1, all sums due to Lessor under this
      Agreement on or before the Commencement Date;

      (iii) Insurance: certificates of insurance, an undertaking from Lessee's
      insurance broker and other evidence satisfactory to Lessor that Lessee is
      taking the required steps to ensure due compliance with the provisions of
      this Agreement as to Insurances with effect on and after the Commencement
      Date;

      (iv) Acknowledgement and Consent: an acknowledgement of and consent to the
      assignment of this Lease by Lessor to Lender as collateral security in
      form and substance satisfactory to Lender;

      (v) Accounts: the latest available accounts of Aloha Airgroup, Inc. as
      described in Clause 8.2(b)(i) and (ii);

      (vi) Documents: a list of the Aircraft Documents delivered with the
      Aircraft on the Commencement Date; and

      (vii) General: such other documents as Lessor may reasonably request;

(c)   receipt by Lessor of such information and documents relating to the
      proposed Maintenance Program as Lessor may require and Lessor having
      agreed the proposed Maintenance Program on or prior to the Commencement
      Date; and

(d)   evidence that on the Commencement Date the Aircraft and the Mortgage have
      been validly registered under the laws of the State of Registration, that
      the Financing Statements have been duly filed and that all filings,
      registrations, recordings and other actions have been or will be taken
      which are necessary or advisable to ensure the validity, effectiveness and
      enforceability of this Agreement and the Lease Assignment and to protect
      the property rights of Lessor and Lender in the Aircraft or any Part.

3.2   Further conditions precedent : The obligations of Lessor to deliver and
      lease the Aircraft under this Agreement are subject to the further
      conditions precedent that:

(a)   the representations and warranties of Lessee under Clauses 2.1 and 2.2 are
      correct and would be correct if repeated on delivery of the Aircraft under
      this Agreement; and

(b)   no Default has occurred and is continuing or might result from the leasing
      of the Aircraft to Lessee under this Agreement.

3.3   Waiver: The conditions specified in Clauses 3.1 and 3.2 are for the sole
      benefit of Lessor and may be waived or deferreed in whole or in part and
      with or without conditions by Lessor. If any of

                                      -16-
<PAGE>

      those conditions are not satisfied or have not been waived on the
      Commencement Date and Lessor (in its absolute discretion) nonetheless
      agrees to deliver the Aircraft to Lessee, Lessee will ensure that those
      conditions are fulfilled within 15 days after the Commencement Date and
      Lessor may treat as an Event of Default the failure of Lessee to do so.

3.4   Lessee's Conditions Precedent : Lessee's obligation to lease the Aircraft
      under this Agreement is subject to receipt by Lessee from Lessor on or
      prior to the Commencement Date (unless waived) of:

(a)   Constitutional Documents: a copy of Lessor's constitutional documents;

(b)   Resolutions: a copy of a resolution of the Board of Directors of 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

(c)   Letter of Quiet Enjoyment: provided that Lessee shall have delivered to
      Lessor the Acknowledgement and Consent specified under 3.1 (b)(iv)
      hereof, a letter of quiet enjoyment from Lessor and the Lender.

In addition to the foregoing, on the Commencement Date, the representations and
warranties of Lessor under Clause 2.4 shall be correct.

4.    COMMENCEMENT; TERM

4.1   Leasing: Lessor will lease the Aircraft to Lessee and Lessee will take
      the Aircraft on lease in accordance with this Agreement for the duration
      of the Term. Lessee acknowledges that the Aircraft has been delivered to
      and accepted by Lessee as in conformance with all requirements of this
      Lease. Effective upon the Commencement Date, the Aircraft and every Part
      will be in every respect at the sole risk of Lessee, who will bear all
      risk of loss, theft, damage or destruction to the Aircraft from any cause
      whatsoever.

4.2   [Intentionally Omitted].

4.3   [Intentionally Omitted].

4.4   Licenses : Lessee will at its expense obtain all licenses, permits and
      approvals which may be necessary to export and/or transport the Aircraft
      from the Delivery Location. Lessor will furnish such data and information
      as may be reasonably requested by Lessee in connection with obtaining any
      such license, permit or approval.

4.5   [Intentionally Omitted].

4.6   Indenmity : Lessee will indemnify and hold harmless the Indemnitees from
      and against all Claims (as defined in Clause 10) arising from death or
      injury to any observer of Lessee or any employee of Lessee in connection
      with any demonstration flight or inspection of the Aircraft by

                                      -17-
<PAGE>

      Lessee (except to the extent that such Claim arises out of the gross
      negligence or willful misconduct of Lessor).

4.7   Early Termination Option: Provided no Event of Default shall have occurred
      and be continuing, and subject as hereinafter provided, Lessee shall have
      the option (the "Early Termination Option") to terminate the Term on
      either 29 September 2005 or 29 September 2006 (an "Early Termination
      Date"). The Early Termination Option may only be exercised by Lessee if
      (i) Lessee shall have given Lessor written irrevocable notice of Lessee's
      intention to exercise the Early Termination Option not later than 360 days
      before the Early Termination Date selected by Lessee and (ii) on or before
      the Early Termination Date selected by Lessee, Lessee pays to Lessor an
      amount equal to the First Termination Amount if the Early Termination Date
      is 29 September 2005 or the Second Termination Amount if the Early
      Termination Date is 29 September 2006. Upon the exercise by Lessee of the
      Early Termination Option, the definition of "Expiry Date" currently stated
      in this Agreement shall be deemed to have been amended so as to refer to
      the Early Termination Date, and the Aircraft shall be redelivered to
      Lessor on that date in accordance with the terms and conditions of this
      Agreement (including without limitation Part B of Schedule 3 hereto).

5.    PAYMENTS

5.1   [Intentionally Omitted].

5.2   Rental Periods : The Term will be divided into Rental Periods. The first
      Rental Period (the "Interim Period") will commence on the Commencement
      Date and end on October 28, 1999, and each subsequent Rental Period will
      commence on the date succeeding the last day of the previous Rental
      Period. Each Rental Period will end on the date immediately preceding the
      numerically corresponding day in the next month except that:

(a)   if there is no such numerically corresponding day in that month, it will
      end on the last day of that month;

(b)   if a Rental Period would otherwise end after the Expiry Date, it will end
      on the Expiry Date.

      In addition to the foregoing, if a Rental Period begins on a non-Business
      Day, the Rent payable in respect of that Rental Period will be paid on the
      Business Day immediately succeeding the date on which that Rental Period
      commences.

5.3   Rent:

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

(b)   Amount: The Rent payable in respect of all Rental Periods commencing on or
      after the Commencement Date will be equal to the Rent Amount, except that
      no Rent shall be due with

                                      -18-
<PAGE>

      respect to the Interim Period, which has been paid prior to the
      Commencement Date.

(c)   [Intentionally Omitted].

5.4   [Intentionally Omitted].

5.5   Payments : All payments by Lessee to Lessor under this Agreement will be
      made for value on the due date in Dollars and in immediately available
      funds by wire transfer to The Provident Bank, Cincinnati, Ohio, ABA No.
      042000424, Account No. 215-16510, Reference: Aloha Airlines N808AL, or to
      such other account in the United States as Lessor may advise Lessee in
      writing.

5.6   Gross-up :

(a)   All payments by Lessor under or in connection with this Agreement will be
      made without set-off counterclaim, free and clear of and without deduction
      for or on account of all Taxes (other than Lessor Taxes);

(b)   All Taxes (other than Lessor Taxes) in respect of payments under this
      Agreement shall be for the account of and will be paid by Lessee for its
      own account prior to the date on which penalties apply; if requested by
      Lessee, Lessor shall prepare and timely file all necessary tax returns and
      Lessee shall either furnish the funds to Lessor for Lessor to pay such
      Taxes or Lessee shall pay such Taxes for the account of Lessor;

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

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

      If Lessor shall realize any Tax savings (by way of refund, deduction,
      credit or otherwise) in respect of any amount with respect to which Lessee
      has made an indemnity payment under this Agreement, and such Tax savings
      shall not have been taken into account previously in calculating any
      indemnity payment by Lessee, then Lessor shall, within 30 days after
      realizing such Tax savings, pay to Lessee the amount of such Tax savings
      (together with, in the case of a refund, any interest received thereon)
      plus the amount of any Tax savings realized by Lessor as a result of any
      such payment pursuant to this sentence, provided, however, that Lessor
      shall not be obligated to make any payment pursuant to this sentence to
      the extent that the amount of any Tax savings for which such payment is to
      be made (other than Tax savings realized as a result of such

                                      -19-
<PAGE>

      payment) would exceed the aggregate amount of all prior payments made by
      Lessee to, on behalf of, or as indemnification of Lessor under this
      Agreement for Taxes less the amount of all prior payments pursuant to this
      sentence for such Tax savings. It is intended that Lessor shall retain a
      net tax benefit in respect of any amount with respect to which Lessee has
      made an indemnity payment under this Agreement only if Lessee shall first
      have been reimbursed for all payments made or withheld by it for Taxes
      under this Agreement.

5.8   Value Added Tax:

(a)   For the purposes of this sub-clause:

      (i) "VAT" means value added tax and any sales or turnover tax, imposition
      or levy of a like nature (other than Lessor Taxes);

      (ii) "supply" includes anything on which VAT is chargeable;

(b)   Lessee will pay to Lessor the amount of any VAT chargeable in respect of
      any supply for VAT purposes under this Agreement;

(c)   Each amount stated as payable by Lessee under this Agreement is exclusive
      of VAT (if any) and is accordingly to be construed as a reference to that
      amount plus any VAT in respect of it.

5.9   Information : If Lessee is required by any applicable law, or by any third
      party, to deliver any report or return in connection with any Taxes,
      Lessee will complete the same in a manner satisfactory to Lessor and in
      particular will state therein that Lessee is exclusively responsible for
      the use and operation of the Aircraft and for any Taxes arising therefrom,
      and Lessee will, on request supply a copy of the report or return to
      Lessor.

5.10  Taxation of Indemnity Payments :

(a)   If and to the extent that any sums payable to Lessor by Lessee under this
      Agreement by way of indemnity are insufficient, by reason of any Taxes
      (other than Lessor Taxes) payable in respect to those sums, for Lessor,
      except with respect to Lessor Taxes, to discharge the corresponding
      liability to the relevant third party (including any taxation authority),
      or to reimburse Lessor for the cost incurred by it to a third party
      (including any taxation authority) Lessee will pay to Lessor such sum as
      will after the tax liability has been fully satisfied leave Lessor with
      the same amount as it would have been entitled to receive in the absence
      of that liability together with interest on the amount of the deficit at
      the rate of interest stated in Clause 5.11 in respect of the period
      commencing on the date on which the payment of taxation is finally due
      until payment by Lessee (both before and after judgment);

(b)   If and to the extent that any sums constituting (directly or indirectly)
      an indemnity to Lessor but paid by Lessee to any person other than Lessor
      are treated as taxable in the hands of Lessor, Lessee will pay to Lessor
      such sum as will after the tax liability (except tax liability for Lessor
      Taxes) has been fully satisfied indemnify Lessor to the same extent as it
      would have been

                                      -20-
<PAGE>

      indemnified in the absence of such liability together with interest on the
      amount payable by Lessee under this sub-clause at the rate of interest
      stated in Clause 5.11 in respect of the period commencing on the date on
      which the payment of taxation is finally due until payment by Lessee (both
      before and after judgment).

5.11  Default Interest : If Lessee fails to pay any amount payable under this
      Agreement on the due date, Lessee will pay on demand from time to time to
      Lessor interest (both before and after judgment) on that amount, from the
      due date to the date of payment in full by Lessee to Lessor, at the rate
      calculated by Lessor to be one month Dollar LIBOR plus 300 basis points.
      All such interest will be compounded monthly and calculated on the basis
      of the actual number of days elapsed and a 360 day year.

5.12  Contest : If Lessee disputes the payment of any Taxes payable by Lessor
      for which Lessee is responsible under this Agreement, Lessor will take
      such action as Lessee may reasonably request at Lessee's expenses to
      contest that payment but will not be obliged to take any such action:

(a)   which Lessor considers in its reasonable discretion may prejudice it,
      unless Lessee shall have provided security reasonably satisfactory to
      Lessor to cover the liability for Taxes and the expense of the contest; or

(b)   which Lessor reasonably considers does not have a reasonable prospect of
      success; or

(c)   for which Lessee has not made adequate provision to the reasonable
      satisfaction of Lessor in respect of the expense concerned.

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

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

(b)   any unavailability of the Aircraft for any reason, including, but not
      limited to, a requisition of the Aircraft or any prohibition or
      interruption of or interference with or other restriction against Lessee's
      use, operation or possession of the Aircraft;

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

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

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

                                      -21-
<PAGE>

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

      The provisions of this Clause 5.13 shall not limit Lessee's right to take
      such legal action as Lessee shall deem appropriate as a consequence of the
      breach by Lessor of its obligations to Lessee under this Agreement.

5.14  [Intentionally Omitted].

6.    MANUFACTURER'S WARRANTIES

6.1   Assignment : Notwithstanding this Agreement, Lessor will remain entitled
      to the benefit of each warranty, express or implied, with respect to the
      Aircraft, any Engine or Part so far as concerns any manufacturer, vendor,
      subcontractor or supplier. Except to the extent Lessor otherwise directs,
      Lessor hereby authorizes Lessee to pursue any claim thereunder in relation
      to defects affecting the Aircraft, any Engine or Part and, if Lessee
      decides to pursue such claim, Lessee agrees diligently to pursue any such
      claim which arises at its own cost. Lessee will use reasonable efforts to
      notify Lessor promptly upon becoming aware of any such claim.

6.2   Proceeds: Except to the extent Lessor otherwise agrees in a particular
      case, all proceeds of any such claim will be paid directly to Lessor but
      if and to the extent that such proceeds relate:

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

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

(c)   the costs incurred by Lessee in pursuing such claim; and

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

6.3   Parts: Except to the extent Lessor otherwise agrees in a particular
      case, Lessee will ensure that all engines, components, furnishings or
      equipment provided by the manufacturer, vendor, subcontractor or supplier
      in replacement of a defective Engine or Part pursuant to the terms of any
      warranty will be installed promptly by Lessee and that title thereto free
      of Security Interests vests in Lessor. On installation those items will be
      deemed to be an Engine or part as applicable.

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

(a)   pay the proceeds of any claim thereunder to Lessor to be applied pursuant
      to Clause 6.2 and pending such payment will hold the claim and the
      proceeds in trust for Lessor;

                                      -22-
<PAGE>

(b)   take all such steps as are necessary at the end of the Term to ensure the
      benefit of any of those warranties which have vested in Lessee (to the
      extent that they are assignable) which have not expired are vested in
      Lessor.

7.    LESSOR'S COVENANTS

7.1   Quiet Enjoyment: Provided that no Default shall have occurred and be
      continuing, Lessee shall quietly possess, use and enjoy the Aircraft and
      the rents, revenues, profits and income derived through Lessee's use and
      operation thereof without interference, hindrance or interruption by
      Lessor or any person or entity validly claiming by or through Lessor;
      provided that the exercise by Lessor of its rights under or in connection
      with this Agreement shall not constitute such an interference, hindrance
      or interruption.

7.2   Lessor Obligations Following Expiry Date : Within 5 Business Days of:

(a)   redelivery of the Aircraft to Lessor in accordance with and in the
      condition required by this Agreement; or

(b)   payment to Lessor of the Agreed Value following an Event of Loss after the
      Commencement Date;

      or in each case such later time as Lessor is satisfied Lessee has
      irrevocably paid to Lessor all amounts which may then be outstanding and
      payable under this Agreement, the Other Leases or under any other
      agreement between Lessor (or any affiliate or associate of Lessor) and
      Lessee, Lessor will pay to Lessee the amount of any Rent received in
      respect of any period falling after the date of redelivery of the Aircraft
      or payment of the Agreed Value, as the case may be.

7.3   Fixed Place of Business : During the Term, Lessor shall not establish a
      fixed place of business in the State of Hawaii without the prior written
      consent of Lessee (such consent not to be unreasonably withheld or delayed
      if such establishment will not have the effect of increasing Lessee's
      obligations under this Agreement or, if such establishment does so
      increase Lessee's obligations under this Agreement, if Lessor and Lessee
      shall have entered into alternative substitute arrangements having the
      same substantial effect as this Agreement but which avoid such increase in
      such obligations).

8.    LESSEE'S COVENANTS

8.1   Duration : The undertakings in this Clause and in Clause 12 will:

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

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

8.2   Information : Lessee will:

                                      -23-
<PAGE>

(a)   notify Lessor forthwith of the occurrence of any Default or any other
      event which might adversely affect Lessee's ability to perform any of its
      obligations under this Agreement;

(b)   furnish to Lessor:

      (i) as soon as available but in any event not later than 60 days after the
      last day of each financial quarter of Aloha Airgroup, Inc. (Lessee's
      parent company), the consolidated management accounts of Aloha Airgroup,
      Inc. (comprising a balance sheet and profit and loss statement) prepared
      for the most recent previous financial quarter certified by Lessee's chief
      financial officer as being true and correct;

      (ii) as soon as available but not in any event later than 120 days after
      the last day of each financial year of Aloha Airgroup, Inc., its audited
      consolidated balance sheet as of such day and its audited consolidated
      profit and loss statement for the year ending on such day;

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

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

(c)   upon request, keep Lessor informed as to current serial numbers of the
      Engines and any engine installed on the Aircraft;

(d)   promptly furnish to Lessor all information Lessor from time to time
      reasonably requests regarding the Aircraft, any Engine or any Part, its
      use, location and condition including, without limitation, the hours
      available on the Aircraft and any Engine until the next scheduled check,
      inspection, overhaul or shop visit, as the case may be;

(e)   on request, within 10 days after the end of any Rental Period furnish to
      Lessor, evidence satisfactory to Lessor of payment of all Taxes (other
      than Lessor Taxes) due during that or any previous Rental Period the
      non-payment of which could give rise to the imposition of a Security
      Interest on the Aircraft;

(f)   on request, furnish to Lessor evidence satisfactory to Lessor that all
      Taxes (other than Lessor Taxes) and charges incurred by Lessee with
      respect to the Aircraft, including without limitation all payments due to
      the relevant air traffic control authorities the non-payment of which
      could give rise to the imposition of a Security Interest on the Aircraft,
      have been paid and discharged in full;

(g)   provide Lessor with a monthly report on the Aircraft and each Engine in
      the form required from time to time by Lessor;

(h)   upon request, give Lessor written notice as to the time and location of
      all Major Checks; and

                                      -24-
<PAGE>

(i)   promptly notify Lessor of

      (i) any loss, theft, damage or destruction to the Aircraft, any Engine or
      any Part, or any modification to the Aircraft if the potential cost may
      exceed the Damage Notification Threshold; and

      (ii) any claim or other occurrence likely to give rise to a claim under
      the insurances in excess of the Damage Notification Threshold and details
      of any negotiations with the insurance brokers over any such claim.

8.3   Lawful and Safe Operation: Lessee will:

(a)   comply with the law for the time being in force in any country or
      jurisdiction which may for the time being be applicable to the Aircraft
      (including, without limitation, FAR91.851 et seq (which FARs include the
      "non-addition rule")) or, so far as concerns the use and operation of the
      Aircraft, an owner or operator thereof;

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

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

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

(e)   not use the Aircraft for the carriage of:

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

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

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

(f)   not utilize the Aircraft for purposes of training, qualifying or
      re-confirming the status of cockpit personnel except for the benefit of
      Lessee's cockpit personnel, and then only if the use of the

                                      -25-
<PAGE>

      Aircraft for such purpose is not disproportionate to the use for such
      purpose of other aircraft of the same type operated by Lessee;

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

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

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

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

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

8.4   Taxes and other Outgoings : Lessee will promptly pay:

(a)   all license and registration fees, Taxes (other than Lessor Taxes) and
      other amounts (other than Lessor Taxes) of any nature imposed by any
      Government Entity with respect to the Aircraft, including without
      limitation the ownership, delivery, leasing, possession, use, operation,
      return, sale or other disposition of the Aircraft; and

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

      except to the extent that in the reasonable opinion of Lessor (which
      opinion shall not be unreasonably withheld) such payment is being
      contested in good faith by appropriate proceedings, in respect of which
      adequate reserves have been provided by Lessee and non-payment of which
      does not give rise to any material likelihood of the Aircraft or any
      interest therein being sold, forfeited or otherwise lost or of criminal
      liability on the part of Lessor or any of the Indemnitees.

8.5   Sub-Leasing: LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
      SUB-LEASE OR PART WITH POSSESSION OF THE AIRCRAFT, THE ENGINES OR ANY PART
      EXCEPT THAT LESSEE MAY PART WITH POSSESSION (A) WITH RESPECT TO THE
      AIRCRAFT, THE ENGINES OR ANY PART TO THE RELEVANT MANUFACTURERS FOR
      TESTING OR SIMILAR PURPOSES OR TO THE AGREED MAINTENANCE PERFORMER FOR
      SERVICE, REPAIR, MAINTENANCE OR OVERHAUL, WORK, OR ALTERATIONS,
      MODIFICATIONS OR ADDITIONS TO THE EXTENT REQUIRED OR PERMITTED BY THIS
      AGREEMENT, AND (B) WITH RESPECT TO AN ENGINE OR PART, AS EXPRESSLY
      PERMITTED BY THIS AGREEMENT.

      Lessor shall not seek to charge Lessee any fee which is in addition to the
      actual cost incurred by

                                      -26-
<PAGE>

      Lessor in connection with the granting of such consent or in connection
      with the fulfillment of any conditions which might be attached thereto as
      a condition precedent to the grant thereof.

8.6   Inspection:

(a)   Lessor, the Lender and any Person designated by Lessor or the Lender may
      at any time visit, inspect and survey the Aircraft, any Engine or any Part
      and for such purpose may, subject to any applicable Aviation Authority
      regulation, travel on the flight deck as observer. Lessee shall give
      Lessor and the Lender at least 15 days prior written notice of the date
      and location of each Major Check. At each Major Check, including the "C"
      check performed immediately before the redelivery of the Aircraft, Lessor,
      the Lender and any Person designated by Lessor or the Lender shall be
      entitled to be present at and to observe any areas of the Aircraft opened
      during such Major Check; and

(b)   Lessor will:

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

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

8.7   Ownership; Property Interests; Related Matters : Lessee will:

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

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

(c)   not at any time (i) represent or hold out Lessor or Lender as carrying
      goods or passengers on the Aircraft or as being in any way connected or
      associated with any operation or carriage (whether for hire or reward or
      gratuitously) which may be undertaken by Lessee or (ii) pledge the credit
      of Lessor or Lender;

(d)   ensure that there is always affixed, and not removed or in any way
      obscured, a fireproof plate (having dimensions of not less than 10 cm. x 7
      cm.) in a reasonably prominent position in the cockpit of the Aircraft
      adjacent to the certificate of airworthiness and on each Engine stating:

      "Title to this Aircraft/Engine is held by Compass Capital Corporation and
      is subject to a security interest held by The Provident Bank. The Aircraft
      is leased to Aloha Airlines, Inc. and may not be operated by any other
      person without the prior written consent of Compass Capital

                                      -27-
<PAGE>

      Corporation and the Provident Bank.";

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

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

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

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

(i)   not attempt, or hold itself out as having any power, to sell, lease or
      otherwise dispose of the Aircraft, any Engine or any Part.

8.8   General: Lessee will:

(a)   not make any substantial change in the nature of the business in which it
      is engaged, will preserve its corporate existence, and will conduct its
      business in an orderly and efficient manner and will maintain its rights,
      privileges, licenses and franchises material thereto or material to
      performing its obligations under this Agreement;

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

(c)   not, without giving Lessor 30 days prior notice (in accordance with this
      Agreement), change its chief executive office from the address stated in
      the Recitals to this Agreement;

(d)   remain a Certificated Air Carrier and maintain, without limitation, its
      status so as to fall within the purview of Section 1110 of Title 11 of
      the United States Code or any analogous Statute; and

(e)   remain a "citizen of the United States" as defined in Section 40102(a)(15)
      of Title 49 of the United States Code:

8.9   Records: Lessee will:

(a)   cause accurate, complete and current records of all flights made by, and
      all maintenance carried out on, the Aircraft (including in relation to
      each Engine and Part subsequently installed, before the installation) to
      be kept; keep the records in such manner as the Air Authority may from
      time

                                      -28-
<PAGE>

      to time require. During the Term, all records must be maintained in
      English. The records will form part of the Aircraft Documents; and

(b)   procure access to a revision service in respect of, and will maintain with
      appropriate revisions in English, all Aircraft Documents, records, logs,
      and other materials required by applicable laws and best practice of major
      international air transport operators in respect of the Aircraft.

8.10  Protection: Lessee will:

(a)   cooperate with Lessor in connection with the maintenance of the
      registration of the Aircraft with the Air Authority in the name of Lessor
      and reflecting the respective interests of Lender and not do or suffer to
      be done anything which might adversely affect that registration;

(b)   do all acts and things (including, without limitation, making any filing
      or registration with the Air Authority or any other Government Entity) and
      execute and deliver, notarize, file, register and record all documents
      (including, without limitation, any amendment of this Agreement) as may be
      required by Lessor:

      (i) following any change or proposed change in the ownership, lien in
      favor of Lender or financing of the Aircraft; or

      (ii) following any modification of the Aircraft, any Engine or any Part or
      the permanent replacement of any Engine or Part in accordance with this
      Agreement, so as to ensure that the rights of Lessor as lessor of and
      holder of title to the Aircraft and under this Agreement and the rights of
      Lender under the Mortgage and the Lease Assignment in respect thereof
      apply with the same effect as before; or

      (iii) to establish, maintain, preserve, perfect and protect the rights of
      Lessor as lessor of and holder of title to the Aircraft and under this
      Agreement and the interest of Lender under the Mortgage and under the
      Lease Assignment.

8.11  Maintenance and Repair: Lessee will:

(a)   keep the Aircraft airworthy in all respects and in good repair and
      condition in accordance with normal airline practice;

(b)   not change the intervals of the Agreed Maintenance Program, or the
      schedule of the Agreed Maintenance Program without the written consent of
      Lessor (such consent not to be unreasonably withheld);

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

(d)   maintain the Aircraft in accordance with FAA Federal Air Regulations Part
      121 and any other

                                      -29-
<PAGE>

      rules and regulations of the FAA as may be applicable to passenger
      category aircraft and in at least the same manner and with at least the
      same care, including, without limitation, maintenance scheduling,
      modification status and technical condition, as is the case with respect
      to similar aircraft owned or otherwise operated by Lessee and as if Lessee
      were to retain the Aircraft in its fleet and continue to operate the
      Aircraft after the Expiry Date and including, without limitation, all
      maintenance to the Airframe, any Engine or any Part required to maintain
      all warranties, performance guarantees or service life policies in full
      force and effect;

(e)   comply with all mandatory inspection and modification requirements,
      airworthiness directives and similar requirements applicable to the
      Aircraft, any Engine or Part having a compliance date during the Term or
      within 180 days after the Expiry Date and which are required by the FAA;

      If any of the foregoing (each a "Relevant Item") is issued by the FAA,
      Lessor shall, if Lessee shall have performed modification or terminating
      action with regard to the same or shall have caused such modification or
      terminating action with regard to the same to be performed, in respect of
      any individual item of the same, on receipt by Lessor of evidence of
      payment and completion of the Relevant Item, reimburse Lessee with an
      amount equal to the solution to the following formulas:

      (C-$50,000) X (I- (RT/60))

      Where:

      C = the total cost of the Relevant Item;

      RT = the number of months remaining in the Tenn when the Relevant Item is
      completed; and

      60 = the assumed 5 year useful life of the Relevant Item;

      provided, however, Lessor's obligation to reimburse Lessee pursuant
      to this Clause 8.11 (e) shall not exceed $100,000 in the aggregate.

(f)   comply with all applicable laws and the regulations of the Air Authority
      and other aviation authorities with jurisdiction over Lessee or the
      Aircraft, any Engine or Part regardless of upon whom such requirements are
      imposed and which related to the maintenance, condition, use or operation
      of the Aircraft or require any modification or alteration to the Aircraft,
      any Engine or Part;

(g)   maintain in good standing a current certificate of airworthiness (in the
      appropriate category for the nature of the operations of the Aircraft) for
      the Aircraft issued by the Air Authority except where the Aircraft is
      undergoing maintenance, modification or repair required or permitted by
      this Agreement and will from time to time provide to Lessor a copy on
      request;

(h)   if required by the Air Authority, maintain a current certification as to
      maintenance issued by or on behalf of the Air Authority in respect of the
      Aircraft and will from time to time provide to

                                      -30-

<PAGE>

      Lessor a copy on request; and

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

8.12  Removal of Engine and Parts : Lessee will ensure that no Engine or Part
      installed on the Aircraft is at any time removed from the Aircraft other
      than:

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

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

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

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

      (iii) for the purpose of making such modifications to the Engine or the
      Aircraft, as the case may be, as are permitted under this Agreement; and
      then in each case only if it is reinstalled or replaced by an engine or
      part complying with Clause 8.13(a) as soon as practicable and in any event
      no later than the Expiry Date.

8.13  Installation of Engines and Parts : Lessee will:

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

      (i) in the case of an engine, it (x) is an engine of the same model as, or
      an improved or advanced version of the Engine it replaces; (y) is in the
      same or better operating condition, has substantially similar hours
      available until the next scheduled checks, inspections, overhauls and shop
      visits (provided, however, that, on the Expiry Date, Lessee may make the
      financial adjustments referred to in Clause 12.8 in lieu of complying with
      this sub-paragraph (y)); and (z) has the same or greater value and utility
      as the replaced Engine;

      (ii) in the case of a part, it is in as good operating condition, has
      substantially similar hours available until the next scheduled checks,
      inspections, overhauls and shop visits, is of the same or a more advanced
      make and model and is of the same interchangeable modification status as
      the replaced Part;

      (iii) in each case, it has become and remains the property of Lessor free
      from Security interests and on installation of the Aircraft will without
      further act be subject to this Agreement

                                      -31-
<PAGE>

      and the Mortgage;

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

      (v) Lessee complies with all applicable provisions of the Mortgage;

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

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

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

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

      Where, pursuant to this sub-clause (b), an engine or part is
      installed on the Aircraft, Lessor shall not be entitled to any ownership
      or Security Interest in such engine or part.

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

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

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

(iii) before the Expiry Date the Lessee removes the Lessee Installed Seats and
      replaces them with the seats owned by them or by other seats, in either
      case complying with Clause 8.13(a).

                                      -32-
<PAGE>

8.14  Non-Installed Engines and Parts: Lessee will:

(a)   ensure that any Engine or Part which is not installed on the Aircraft (or
      any other aircraft as permitted by this Agreement) is, except as expressly
      permitted by this Agreement, properly and safely stored, and kept free
      from Security Interests;

(b)   on request notify Lessor if any Engine has been removed from the Aircraft
      and, from time to time, on request procure that any person to whom
      possession of an Engine is given acknowledges in writing to Lessor, in
      form and substance satisfactory to Lessor, that it will respect the
      interests of Lessor as lessor and Lender as mortgagee and secured party
      and will not seek to exercise any rights whatsoever in relation to it;

(c)   (notwithstanding the foregoing provisions of this sub-clause), be
      permitted, if no Default has occurred and is continuing, to install any
      Engine or Part on an aircraft, or in the case of a Part, an engine:

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

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

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

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

      (1) the terms of any such lease, conditional sale agreement or Security
      Interest will not have the effect of prejudicing the interests of Lender
      as mortgagee and secured party or Lessor as holder of title and lessor of
      that Engine or Part and lessor of that Engine or Part or the interests of
      Lender in respect thereof under the Lease Assignment; and

      (2) if requested by Lessor, the lessor under such lease, the seller under
      such conditional sale agreement or the holder of such Security Interest,
      as the case may be, has confirmed and acknowledged in writing to Lessor,
      in form and substance satisfactory to Lessor, that it will respect the
      interest of Lessor as owner and lessor and Lender as mortgagee and secured
      party of that Engine or Part and that it will not seek to exercise any
      rights whatsoever in relation thereto.

8.15  Pooling of Engines and Parts : Lessee will not enter into nor permit
      any pooling agreement or arrangement in respect of an Engine or Part
      without the prior written consent of Lessor.

8.16  Equipment Changes :

                                      -33-
<PAGE>

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

      (i) is expressly permitted by this Agreement, or

      (ii) which does not diminish the value, utility, condition, or
      airworthiness of the Aircraft;

(b)   So long as a Default has not occurred and is continuing, Lessee may remove
      any Equipment Change if it can be removed from the Aircraft without
      diminishing or impairing the value, utility, condition or airworthiness of
      the Aircraft.

8.17  Title :

(a)   Except as provided in Part 1 of Schedule 1 with respect to Windshear, TCAS
      and 11 Parameter FDR equipment, title to all Engines and Parts installed
      on the Aircraft whether by way of replacement, as the result of an
      Equipment Change or otherwise (except those installed pursuant to Clause
      8.13(b) or 8.13(c)) will on installation, without further act, vest in
      Lessor subject to this Agreement and the Mortgage free and clear of all
      Security Interests. Lessee will at its own expense take all such steps and
      execute, and procure the execution of, all such instruments as Lessor may
      require and which are necessary to ensure that title so passes to Lessor
      according to all applicable laws. At any time when requested by Lessor,
      Lessee will provide evidence to Lessor's satisfaction (including the
      provision, if required, to Lessor of one or more legal opinions) that
      title has so passed to Lessor;

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

(c)   Except as referred to in Clause 8.17(b) any Engine or Part (other than the
      Windshear, TCAS and 11 Parameter FDR equipment referred to in Part 1 of
      Schedule 1) at any time removed from the Aircraft will remain the property
      of Lessor until replacement has been made in accordance with this
      Agreement and until title in that replacement has passed, according to
      applicable laws, to Lessor subject to this Agreement and the Mortgage free
      of all Security Interests whereupon title to the Engine or Part will,
      provided no Default has occurred and is continuing, pass to Lessee (in
      connection with which Lessor shall execute such documents as Lessee shall
      reasonably request and at Lessee's cost which are necessary to convey such
      title to Lessee).

8.18  Third Party : Lessee will procure that no person (other than Lessor or
      Lender) will act in any manner inconsistent with its obligations under
      this Agreement and that all persons will comply with those obligations as
      if references to "Lessee" included a separate reference to those persons.

9.    INSURANCE

9.1   Insurances : Lessee will maintain in full force during the Term insurances
      in respect of the Aircraft in form and substance satisfactory to Lessor
      (the "Insurances" which expression includes, where the context so admits,
      any relevant re-insurance(s)) through such brokers and

                                      -34-
<PAGE>

      with such insurers and having such deductibles and being subject to such
      exclusions as may be approved by Lessor. The Insurances will be effected
      either:

(a)   on a direct basis with insurers of recognized standing who normally
      participate in aviation insurances in the leading international insurance
      markets and led by reputable underwriter(s) approved by Lessor; or

(b)   with a single insurer or group of insurers approved by Lessor who does not
      retain the risk but effects substantial reinsurance with reinsurers in the
      leading international insurance markets and through brokers each of
      recognized standing and acceptable to Lessor for a percentage acceptable
      to Lessor of all risks insured (the "Reinsurances").

9.2   Requirements : Lessor's current requirements as to required Insurances are
      as specified in this Clause and in Schedule 4. Lessor may from time to
      time stipulate other requirements for the Insurances so that the scope and
      level of cover is maintained in line with best industry practice and the
      interests of Lessor and each of the Indemnitees are protected; provided,
      however, that this Clause of itself will not permit Lessor to increase the
      levels of coverage required under this Agreement (but without prejudice to
      any other provisions of this Agreement).

9.3   Change : If at any time and on reasonable grounds Lessor wishes to
      revoke its approval of any insurer, reinsurer, insurance or
      reinsurance, Lessor and/or its brokers will consult with Lessee and
      Lessee's brokers (as for the time being approved by Lessor) regarding
      whether that approval should be revoked to protect the interests of the
      parties insured. If, following the consultation, Lessor considers that
      any change should be made, Lessee will then arrange or procure the
      arrangement of alternative cover satisfactory to Lessor.

9.4   Insurance Covenants: Lessee will:

(a)   ensure that all legal requirements as to insurance of the Aircraft, any
      Engine or any Part which may from time to time be imposed by the laws of
      the State of Registration or any state to, from or over which the Aircraft
      may be flown, in so far as they affect or concern the operation of the
      Aircraft, are complied with and in particular those requirements
      compliance with which is necessary to ensure that (i) the Aircraft is not
      in danger of detention or forfeiture, (ii) the insurances remain valid and
      in full force and effect, and (iii) the interests of the Indemnitees in
      the Insurances and the Aircraft or any Part are not thereby prejudiced;

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

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

      (i) invalidates or may invalidate the Insurances; or

                                      -35-
<PAGE>

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

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

(d)   not take out without the prior written approval of Lessor any insurance or
      reinsurance in respect of the Aircraft other than those required under
      this Agreement unless relating solely to hull total loss, business
      interruption, profit commission and deductible risk. Notwithstanding the
      foregoing, Lessee may, at its own cost, increase the Agreed Value over the
      value currently provided for in this Agreement;

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

      (i) if requested by Lessor, a written statement status report of renewal
      negotiation 14 days prior to each expiry date.

      (ii) confirmation of completion of renewal prior to each expiry date;

      (iii) certificates of insurance (and whether appropriate certificates of
      reinsurance), and broker's (and any reinsurance brokers') letter of
      undertaking in a form acceptable to Lessor in English, detailing the
      coverage and confirming the insurers' (and any reinsurers') agreement to
      the specified insurance requirements of this Agreement within 7 days after
      each renewal date;

(f)   on request, and if a Default shall have occurred, provide to Lessor copies
      of documents evidencing the Insurances;

(g)   on request, and if a Default shall have occurred, provide to Lessor
      evidence that the Insurance premiums have been paid;

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

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

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

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

(a)   to pay the premiums due or to effect and maintain insurances satisfactory
      to it or otherwise remedy Lessee's failure in such manner (including,
      without limitation to effect and maintain an "owner's interest" policy) as
      it considers appropriate. Any sums so expended by it will become

                                      -36-
<PAGE>

      immediately due and payable by Lessee to Lessor together with interest
      thereon at the rate specified in Clause 5.11, from the date of expenditure
      by it up to the date of reimbursement by Lessee;

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

9.6   Continuing Indemnity : Lessor may require Lessee to effect and to maintain
      product liability insurance after the Expiry Date with respect to its
      liability under the Indemnification in Clause 10 for such period as Lessor
      may reasonably require (but in any event not more than 3 years) which
      provides for each Indemnitee to be named as additional insured. Lessee's
      obligation in this Clause shall not be affected by Lessee ceasing to be
      lessee of the Aircraft and/or any of the Indemnitees ceasing to have any
      interest in respect of the Aircraft.

9.7   Application of Insurance Proceeds:

      As between Lessor and Lessee:

(a)   all insurance payments received as a result of an Event of Loss occurring
      during the Term will be paid to Lessor or as it may direct and Lessor or
      its designee who received such payment will pay the balance of those
      amounts to Lessee after deduction of all amounts which may be or are
      payable by Lessee to Lessor under this Agreement (including under Clause
      11.1(b));

(b)   all insurance proceeds of any property, damage or loss to the Aircraft,
      any Engine or any Part occurring during the Term not constituting an Event
      of Loss and in excess of the Damage Notification Threshold will be paid to
      Lessor or as it may direct and applied to payment (or to reimburse Lessee)
      for repairs or replacement property upon Lessor being satisfied that the
      repairs or replacement have been effected in accordance with this
      Agreement. Insurance proceeds in amounts below the Damage Notification
      Threshold may be paid by the insurer directly to Lessee;

(c)   all insurance proceeds in respect of third party liability will, except to
      the extent paid by the Insurers to the relevant third party, be paid to
      Lessor or as it may direct to be paid directly in satisfaction of the
      relevant liability or to Lessee in reimbursement of any payment so made;

(d)   notwithstanding Clauses 9.7(a), (b) or (c), if at the time of the payment
      of any such insurance proceeds a Default has occurred and is continuing
      all such proceeds will be paid to or retained by Lessor or Lessor's
      designee to be applied toward payment of any amounts which may be or are
      payable by Lessee in such order as Lessor or Lessor's designee sees fit or
      as Lessor may elect.

10.   INDEMNIFICATION

10.1  General : Lessee agrees to assume liability for, defend, indemnify and
      hold harmless the Indemnitees on an after tax basis from and against any
      and all claims, proceedings, losses, liabilities, damages (whether direct,
      indirect, special, incidental or consequential), suits,

                                      -37-
<PAGE>

      judgments, costs, expenses (including, without limitation, legal fees and
      expenses), penalties (whether civil or criminal) or fines (each a "Claim")
      (regardless of when the same is made or incurred, whether on or after July
      1, 1999, during or after the Term):

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

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

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

(d)   which results from Lessee's breach of any of its representations or
      warranties or any other event of Default under this Agreement;

      but excluding any Claim in relation in a particular Indemnitee (x) to the
      extent that that Claim is covered pursuant to another indemnity provision
      of this Agreement or (y) to the extent it arises as a result of the gross
      negligence or willful misconduct of that Indemnitee, Lessor Taxes or a
      Lessor Lien or (z) to the extent it arises out of facts and circumstances
      occurring prior to July 1, 1999 or after the expiry of the Term where such
      facts and circumstances do not result from acts or omissions of Lessee.

10.2  Duration : the Indemnification contained in this Agreement will continue
      in full force after the Expiry Date.

11.   EVENTS OF LOSS

11.1  Events of Loss :

(a)   Pre-delivery: If an Event of Loss occurs prior to delivery of the Aircraft
      to Lessee this Agreement will immediately terminate and except as
      expressly stated in this Agreement neither party will have any further
      obligation or liability under this Agreement other than pursuant to Clause
      16.9 except that Lessor will rebate to Lessee the amount of any aircraft
      commitment fee paid under this Agreement.

(b)   Post-delivery: If an Event of Loss occurs after delivery of the Aircraft
      to Lessee, Lessee will pay the Agreed Value to Lessor or as it may direct
      on or prior to the earlier of (i) 21 Business Days

                                      -38-
<PAGE>

      after the Event of Loss and (ii) the date of receipt of insurance proceeds
      in respect of that Event of Loss. Subject to the rights of any insurers
      and reinsurers or other third party, upon irrevocable payment in full to
      Lessor or its designee of that amount and all other amounts which may be
      or become payable to Lessor under this Agreement, Lessor will without
      recourse or warranty (except as to Lessor's Liens) and without further
      act, cause to have transferred to Lessee all of Lessor's rights to any
      Engines and Parts not installed when the Event of Loss occurred, all on an
      AS-IS-WHERE-IS basis, and will at Lessee's expense, cause Lessor to
      execute and deliver such bills of sale and other documents and instruments
      as Lessee may reasonably request to evidence (on the public record or
      otherwise) the transfer and the vesting of Lessor's rights in such Engines
      and Parts in Lessee, free and clear of all rights of Lessor and Lessor
      Liens.

11.2  Requisition : During any requisition for use or hire of the Aircraft, any
      Engine or Part which does not constitute an Event of Loss:

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

(b)   so long as no Default has occurred and is continuing, Lessee will be
      entitled to any hire paid by the requisitioning authority in respect of
      the Term. Lessee will, as soon as practicable after the end of any such
      requisition, cause the Aircraft to be put into the condition required by
      this Agreement. Lessor will be entitled to all compensation payable by the
      requisitioning authority in respect of any change in the structure, state
      or condition of the Aircraft arising during the period of requisition, and
      Lessor will apply such compensation in reimbursing Lessee for the cost of
      complying with its obligations under this Agreement in respect of any such
      change, but so that, if any Default has occurred and is continuing, Lessor
      may apply the compensation or hire in or towards settlement of any amounts
      owing by Lessee under this Agreement.

12.   RETURN OF AIRCRAFT

12.1  Return : On the Expiry Date or termination of the leasing of the Aircraft
      under this Agreement Lessee will unless an Event of Loss has occurred, at
      its expense, redeliver the Aircraft and Aircraft Documents to Lessor at
      the Redelivery Location or such other airport as is mutually acceptable to
      the parties hereto, in a condition complying with Schedule 3, free and
      clear of all Security interests and Permitted Liens (other than Lessor
      Liens) and in a condition qualifying for immediate certification of
      airworthiness by the FAA or as otherwise agreed by Lessor and Lessee, and
      thereupon cause the Aircraft to be deregistered by the Air Authority.

12.2  Final Inspection : immediately prior to redelivery of the Aircraft, Lessee
      will make the Aircraft available to Lessor and Lender for inspection
      ("Final Inspection") in order to verify that the condition of the Aircraft
      complies with this Agreement. The Final Inspection will be long enough to
      permit Lessor to:

(a)   inspect the Aircraft Documents;

                                      -39-
<PAGE>

(b)   inspect the Aircraft and uninstalled Parts;

(c)   inspect the Engines, including without limitation (i) a borescope
      inspection of (A) the low pressure and high pressure compressors and (B)
      turbine area and (ii) engine condition runs; and

(d)   observe a 2 hour demonstration flight (with Lessor's representatives as
      on-board observers).

      Lessor will indemnify and hold harmless Lessee from and against all
      Claims (as defined in Clause 10) arising from death or injury to any
      observer of Lessor or any employee of Lessor in connection with any
      demonstration flight or inspection of the Aircraft by Lessor (except to
      the extent that such Claim arises out of the gross negligence or
      willful misconduct of Lessee).

12.3  Non-Compliance : To the extent that, at the time of Final Inspection, the
      condition of the Aircraft does not comply with this Agreement, Lessee will
      at Lessor's option:

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

(b)   redeliver the Aircraft to Lessor and indemnify Lessor, and provide to
      Lessor's satisfaction cash as security for that indemnity, against the
      cost of putting the Aircraft into the condition required by this
      Agreement.

12.4  Redelivery : Upon redelivery Lessee will provide to Lessor all documents
      necessary to export the Aircraft from the Habitual Base (including,
      without limitation, a valid and subsisting export license for the
      Aircraft) and required in relation to the deregistration of the Aircraft
      with the Air Authority.

12.5  Acknowledgement: Provided Lessee has complied with its obligations under
      this Agreement, following redelivery of the Aircraft by Lessee to Lessor
      at the Redelivery Location, Lessor will deliver to Lessee an
      acknowledgement confirming that Lessee has redelivered the Aircraft to
      Lessor in accordance with this Agreement.

12.6  Maintenance Program:

(a)   Prior to the Expiry Date and upon Lessor's request, Lessee will provide
      Lessor or its agent reasonable access to the Agreed Maintenance Program
      and the Aircraft Documents in order to facilitate the Aircraft's
      integration into any subsequent operator's fleet;

(b)   Lessee will, if requested by Lessor to do so, upon return of the Aircraft
      deliver to Lessor a certified true current and complete copy of the Agreed
      Maintenance Program. Lessor agrees that it will not disclose the contents
      of the Agreed Maintenance Program to any person or entity except to the
      extent necessary to monitor Lessee's compliance with this Agreement and/or
      to bridge the maintenance Program for the Aircraft from the Agreed
      Maintenance Program to

                                      -40-
<PAGE>

      another Program after the Expiry Date.

12.7  Fuel : Upon redelivery of the Aircraft to Lessor, an adjustment will be
      made in respect of fuel on board on delivery of the Aircraft pursuant to
      the Prior Lease and fuel on board at redelivery at the price then
      prevailing at the Redelivery Location.

12.8  [Intentionally Omitted].

13.   DEFAULT

13.1  Events : Each of the following events or conditions will constitute an
      Event of Default and a repudiation of this Agreement by Lessee (whether
      any such event or condition is voluntary or involuntary or occurs by
      operation of law or pursuant to or in compliance with any judgment, decree
      or other of any court or any order, rule or regulation of any Government
      Entity):

(a)   Non-payment: Lessee fails to make any payment under this Agreement on the
      due date and such failure continues for 5 days; or

(b)   Insurance: Lessee fails to comply with any provision of Clause 9 or any
      insurance required to be maintained under this Agreement is cancelled or
      terminated or notice of cancellation is given in respect of any such
      insurance; or

(c)   Breach: Lessee fails to comply with any other material provision of this
      Agreement and, if such failure is in the reasonable opinion of Lessor
      capable of remedy, the failure continues for 15 days after notice from
      Lessor to Lessee; or

(d)   Representation: any material representation or warranty made (or deemed to
      be repeated) by Lessee in or pursuant to this Agreement or in any document
      or certificate or statement is or proves to have been incorrect in any
      material respect when made or deemed to be repeated; or

(e)   Cross Default:

      (i) any Financial Indebtedness of Lessee or any of its Subsidiaries which
      is in excess of $500,000 is not paid when due (but such amounts will not
      be considered to be due if they are being contested in good faith by
      Lessee and the circumstances contemplated in (i) and (ii) in the
      definition of Permitted Lien exist in respect of such amounts); or

      (ii) any such Financial Indebtedness becomes due or capable of being
      declared due prior to the date when it would otherwise have become due; or

      (iii) the security for any such Financial Indebtedness becomes
      enforceable; or

      (iv) any event of default or termination event, howsoever described,
      occurs under the Other Leases or any lease, hire purchase, conditional
      sale or credit sale agreement of Lessee or any of its Subsidiaries; or

                                      -41-
<PAGE>

(f)   Approvals: any consent, authorization, license, certificate or approval of
      or registration with or declaration to any Government Entity in connection
      with this Agreement (including, without limitation):

      (i) any authorization required by Lessee to obtain and transfer freely
      Dollars (or any other relevant currency) out of any relevant country; or

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

      (iii) the registration of the Aircraft (to the extent that the events
      listed below are caused by acts or omissions of Lessee); or

      (iv) any airline license or air transport license including, without
      limitation, authority to operate the Aircraft under Part 121 of the
      Federal Aviation Regulations and a Certificate of Convenience and
      Necessity issued under Section 401 of the Federal Aviation Act;

      is modified in a manner unacceptable to Lessor or is withheld, or is
      revoked, suspended, cancelled, withdrawn, terminated or not renewed, or
      otherwise ceases to be in full force; or

(g)   Bankruptcy, etc:

      (i) Lessee or any Subsidiary consents to the appointment of a custodian,
      receiver, or liquidator of itself or all or any material part of Lessee's
      property or Lessee's consolidated property, or Lessee or any Subsidiary
      admits in writing its inability to, or is unable to, or does not, pay its
      debts generally as they come due, or makes a general assignment for the
      benefit of creditors, or Lessee or any Subsidiary files a voluntary
      petition in bankruptcy or a voluntary petition seeking reorganization in a
      proceeding under bankruptcy or insolvency laws (as now or hereafter in
      effect), or an answer admitting the material allegations of a petition
      filed against Lessee or any Subsidiary in any such proceeding, or Lessee
      or any Subsidiary by voluntary petition, answer or consent seeks relief
      under the provisions of any other bankruptcy, insolvency or other similar
      law providing for the reorganization or winding-up of corporations, or
      provides for an agreement, composition, extension or adjustment with its
      creditors, or any corporate action (including, without limitation, any
      board of directors or shareholder action) is taken by Lessee or any
      Subsidiary in furtherance of any of the foregoing, whether or not the same
      is fully effected or accomplished; or

      (ii) An order, judgment or decree is entered by any court appointing,
      without the consent of Lessee or any Subsidiary, a custodian, receiver, or
      liquidator of Lessee or any Subsidiary, or of all or any material part of
      Lessee's property or Lessee's consolidated property is sequestered, and
      any such order, judgment or decree of appointment or sequestration remains
      in effect, undismissed, unstayed or unvacated for a period of 30 days
      after the date of entry thereof or at any time an order for relief is
      granted; or

                                      -42-
<PAGE>

      (iii) An involuntary petition against Lessee or any Subsidiary in a
      proceeding under the United States Federal Bankruptcy laws or other
      insolvency laws (as now or hereafter in effect) is filed and is not
      withdrawn or dismissed within 30 days thereafter or at any time an order
      for relief is granted in such proceeding, or if, under the provisions of
      any law providing for reorganization or winding-up of corporations which
      may apply to Lessee or any Subsidiary, any court of competent jurisdiction
      assumes jurisdiction over, or custody or control of, Lessee or any
      Subsidiary or of all or any material part of Lessee's property, or
      Lessee's consolidated property and such jurisdiction, custody or control
      remains in effect, unrelinquished, unstayed or unterminated for a period
      of 30 days or at any time an order for relief is granted in such
      proceeding; or

(h)   Unlawful: it becomes unlawful for Lessee to perform any of its obligations
      under this Agreement or this Agreement becomes wholly or partly invalid or
      unenforceable; or

(i)   Suspension of Business: Lessee or any of its Subsidiaries suspends or
      ceases or threatens to suspend or cease to carry on all or a substantial
      part of its business as a Certificated Air Carrier; or

(j)   Disposal: Lessee or any of its Subsidiaries disposes, conveys or transfers
      or threatens to dispose, convey or transfer of all or a material part of
      its assets, liquidates or dissolves or consolidates or merges with any
      other Person whether by one or a series of transactions, related or not,
      other than for the purpose of a reorganization the terms of which have
      received the previous consent in writing of Lessor (provided that such
      consent shall not be required where the resulting entity has a net worth
      equal to or greater than that of Lessee prior to such reorganization); or

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

(l)   Change of Ownership: any single person, or group of persons acquire
      control of Lessee without the previous consent in writing of Lessor; or

(m)   Delivery: Lessee fails to accept delivery of the Aircraft when validly
      tendered pursuant to this Agreement by Lessor; or

(n)   Adverse Change: any event or series of events occurs which, in the
      reasonable opinion of Lessor might have a material adverse effect on the
      ability of Lessee to comply with its obligations under this Agreement.

13.2  Rights : If an Event of Default occurs, Lessor may at its option (and
      without prejudice to any of its other rights under this Agreement), at any
      time thereafter (without notice to Lessee except as required under
      applicable law):

(a)   accept such repudiation and by notice to Lessee and with immediate effect
      terminate the letting

                                      -43-
<PAGE>

      of the Aircraft (but without prejudice to the continuing obligations of
      Lessee under this Agreement), whereupon all rights of Lessee under this
      Agreement shall cease; and/or

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

(c)   either:

      (i) take possession of the Aircraft, for which purpose Lessor may enter
      any premises belonging to or in the occupation of or under the control of
      Lessee where the Aircraft may be located, or cause the Aircraft to be
      redelivered to Lessor at Shannon International Airport, Co. Clare, Ireland
      (or such other location as Lessor may require), and Lessor is hereby
      irrevocably by way of security for Lessee's obligations under this
      Agreement appointed attorney for Lessee in causing the redelivery or in
      directing the pilots of Lessee or other pilots to fly the Aircraft to that
      airport and will have all the powers and authorizations necessary for
      taking that action; or

      (ii) by serving notice require Lessee to redeliver the Aircraft to Lessor
      at Shannon International Airport, Ireland (or such other location as
      Lessor may require).

13.3  Deregistration : If an Event of Default occurs, Lessor may sell or
      otherwise deal with the Aircraft free and clear of any leasehold or other
      interest of Lessee as if this Agreement had never been made and Lessee
      will at the request of Lessor take all steps necessary to effect (if
      applicable) deregistration of the Aircraft and its export from the country
      where the Aircraft is for the time being situated and any other steps
      necessary to enable the Aircraft to be redelivered to Lessor in accordance
      with this Agreement; Lessee hereby irrevocably and by way of security for
      its obligations under this Agreement appoints (which appointment is
      coupled with an interest) Lessor as its attorney to execute and deliver
      any documentation and to do any act or thing required in connection with
      the foregoing.

13.4  Default Payments : If

(a)   Default occurs; or

(b)   the Aircraft is not delivered on the proposed Commencement Date by reason
      of failure of Lessee to satisfy any conditions to that delivery;

      at Lessor's election, the present value of all Rent due and payable under
      this Agreement after the date of the Default shall immediately become due
      and payable (such amounts to be discounted to the then present value at
      the rate of 8.5% per annum) as liquidated damages for the loss of a
      bargain and not as a penalty. In addition, Lessee will indemnify Lessor on
      demand against any loss (including loss of profit), damages, expense, cost
      or liability which Lessor may sustain or incur directly or indirectly as a
      result including but not limited to:

      (i) any loss of profit 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

                                      -44-
<PAGE>

      use, if any, to which Lessor is able to put the Aircraft upon its return
      to Lessor, or the funds arising upon a sale or other disposal of the
      Aircraft, is not as profitable to Lessor as this Agreement;

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

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

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

14.   ASSIGNMENT

14.1  LESSEE WILL NOT ASSIGN, TRANSFER (VOLUNTARILY OR INVOLUNTARILY BY
      OPERATION OF LAW OR OTHERWISE) OR CREATE OR PERMIT TO EXIST ANY SECURITY
      INTEREST OVER, ANY OF ITS RIGHTS UNDER THIS AGREEMENT.

14.2  Subject to Clause 14.4 Lessor may assign, novate or transfer all or any of
      its rights under this Agreement and in the Aircraft provided that Lessor
      will in the case of an assignment, novation or transfer other than by way
      of security have no further obligation under this Agreement following the
      assignment, novation or transfer of all its rights under this Agreement
      but notwithstanding that assignment, novation or transfer will remain
      entitled to the benefit of each indemnity and the liability insurances
      effected under this Agreement. Lessee will comply with all reasonable
      requests of Lessor, its successors and assigns in respect of any such
      assignment. Lessor will promptly notify Lessee of any assignment, novation
      or transfer.

14.3  If Lessor desires to effect any assignment, novation or transfer of its
      rights and obligations under this Agreement, Lessee agrees to cooperate
      and take all such steps as Lessor may reasonably request to give the
      assignee, novatee or transferee the benefit of this Agreement (including
      as to the execution of novation agreements, lease amendment agreements and
      acknowledgements of assignment).

14.4  Any assignment, novation or transfer by Lessor shall be at Lessor's cost
      and shall not result in any increase in Lessee's obligations hereunder in
      excess of those which would exist in the absence of such assignment,
      novation or transfer. In addition, such assignment, novation or transfer
      shall be to a Person having a net worth of at least $6,400,000.

15.   ILLEGALITY

      If it is or becomes unlawful in any jurisdiction for Lessor to give effect
      to any of Lessor's obligations as contemplated by this Agreement or to
      continue this Agreement Lessor may by

                                      -45-
<PAGE>

      notice in writing to Lessee terminate the leasing of the Aircraft under
      this Agreement and Lessee will forthwith redeliver the Aircraft to Lessor
      in accordance with Clause 12. Without prejudice to the foregoing Lessor
      will consult in good faith with Lessee as to any steps which may be taken
      to restructure the transaction to avoid that unlawfulness but will be
      under no obligation to take any such steps.

16.   MISCELLANEOUS

16.1  Waivers, Remedies Cumulative : The rights of Lessor under this Agreement:

(a)   may be exercised as often as necessary;

(b)   are cumulative and not exclusive of its rights under any law; and

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

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

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

16.3  Certificates : Save where expressly provided in this Agreement, any
      certificate or determination by Lessor as to any rate of interest or as to
      any other amount payable under this Agreement will, in the absence of
      manifest error, be conclusive and binding on Lessee.

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

16.5  Currency Indemnity:

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

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

      (ii) If the amount received by Lessor, when converted into the contractual
      currency (at the market rate at which Lessor is able on the date of
      receipt by Lessor (or on the next date thereafter on which under normal
      banking practice Lessor is able to convert the amount received into the

                                      -46-
<PAGE>

      contractual currency) to purchase the contractual currency in London or at
      its option New York with that other currency) is less than the amount owed
      in the contractual currency, Lessee will, forthwith on demand, pay to
      Lessor an amount in the contractual currency equal to the deficit; and

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

(b)   Lessee waives any right it may have in any jurisdiction to pay any amount
      under this Agreement in a currency other than that in which it is
      expressed to be payable.

16.6  Set-off : Lessor may set off any matured obligation owed by Lessee under
      this Agreement, the Other Leases or under any other agreement between
      Lessor (or any affiliate or associate of Lessor) and Lessee (to the extent
      beneficially owned by Lessor) against any obligation (whether or not
      matured) owed by Lessor to Lessee, regardless of the place of payment or
      currency. If the obligations are in different currencies, Lessor may
      convert either obligation at the market rate of exchange available in
      London or at its option New York for the purpose of the set-off. If an
      obligation is unascertained or unliquidated, Lessor may in good faith
      estimate that obligation and set off in respect of the estimate, subject
      to the relevant party accounting to the other when the obligation is
      ascertained or liquidated. Lessor will not be obliged to pay any amounts
      to Lessee under this Agreement so long as any sums which are then due from
      Lessee under this Agreement, the Other Leases or under any other agreement
      between Lessor (or any affiliate or associate of Lessor) and Lessee remain
      unpaid and any such amounts which would otherwise be due will fall due
      only if and when Lessee has paid all such sums except to the extent Lessor
      otherwise agrees or sets off such amounts against such payment pursuant to
      the foregoing.

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

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

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

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

      In the event that Lessee obtains a judgment against Lessor, Lessee shall
      be entitled to receive all costs and expenses (including legal costs) in
      connection therewith.

16.9  Expenses : Whether or not the Aircraft is accepted by Lessee pursuant to
      this Agreement, if

                                      -47-
<PAGE>

      Lessor shall have tendered the Aircraft to Lessee pursuant to this
      Agreement, Lessee will pay to Lessor on demand:

(a)   all expenses associated with perfecting this Agreement in the State of
      Registration, the Habitual Base and other states having regard to the
      operation of the Aircraft (including, but not limited to the provision of
      legal opinions (unless otherwise agreed between Lessor and Lessee) stamp
      duties, translations and registrations, whether required by Lessor or
      Lessee); and

(b)   upon the occurrence of a Default, all expenses (including legal, survey
      and other costs) payable or incurred by Lessor in contemplation of, or
      otherwise in connection with, the enforcement of or preservation of any of
      Lessor's rights under this Agreement, or in respect of the repossession of
      the Aircraft.

      Lessor shall bear the cost of importing the Aircraft into the United
      States of America.

      All expenses payable pursuant to this Clause 16.9 will be paid in the
      currency in which they are incurred by Lessor.

16.10 Time of Essence : The time stipulated in this Agreement for all payments
      payable by Lessee to Lessor and for the performance of Lessee's other
      obligations under this Agreement will be of the essence of this Agreement.

16.11 Notices : All notices under, or in connection with, this Agreement will,
      unless otherwise stated, be given in writing by letter, telex, facsimile
      or SITA. Any such notice is deemed effectively to be given as follows:

      (i) if by letter, when delivered;

      (ii) if by telex, when dispatched, but only if, at the time of
      transmission, the correct answerback appears at the start and at the end
      of the sender's copy of the notice; and

      (iii) if by facsimile or SITA, when transmitted and full transmission has
      been separately notified by telephone by the transmitting party. The
      address, telex numbers, SITA, facsimile and telephone numbers of Lessee
      and Lessor are as follows:

      Lessee:                               371 Aokea Street,
                                            Honolulu,
                                            Hawaii 96819,
                                            U.S.A.
                                            Attn:       Chief Financial Officer
                                            SITA:       HNLGOAQ
                                            Facsimile:  808-839-6447
                                            Telephone:  808-836-4241

      Lessor:                               750 Battery Street

                                      -48-
<PAGE>

                                            Suite 430
                                            San Francisco, California 94111
                                            Attn:       Mark S. Maymar
                                            Executive Vice President
                                            Facsimile:  415-392-9142
                                            Telephone:  415-392-4900

16.12 Law and Jurisdiction:

(a)   THIS AGREEMENT IN ALL RESPECTS IS GOVERNED BY THE GOVERNING LAW;

(b)   For the benefit of Lessor, Lessee agrees that the courts of the State of
      New York are to have nonexclusive jurisdiction to settle any disputes in
      connection with this Agreement and submits itself and its property to the
      nonexclusive jurisdiction of the courts of the State of New York in
      connection with this Agreement;

(c)   Without prejudice to any other mode of service, Lessee:

      (i) appoints CT Corporation, New York as its agent for service of process
      relating to any proceedings before the New York courts in connection with
      this Agreement and agrees to maintain the process agent in New York
      notified to Lessor;

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

      (iii) consents to the service of process relating to any such proceedings
      by prepaid posting of a copy of the process to Lessee's agent at the
      address identified in sub-paragraph (i) above;

(d)   Lessee:

      (i) waives objection to the courts of the State of New York on grounds of
      inconvenient forum or otherwise as regards proceedings in connection with
      this Agreement;

      (ii) agrees that a judgment or order of a court of the State of New York
      in connection with this Agreement is conclusive and binding on it and may
      be enforced against it in the courts of any other jurisdiction;

(e)   Nothing in this Clause limits the right of Lessor to bring proceedings
      against Lessee in connection with this Agreement:

      (i) in any other court of competent jurisdiction; or

      (ii) concurrently in more than one jurisdiction;

(f)   Lessee irrevocably and unconditionally:

                                      -49-
<PAGE>

      (i) agrees that if Lessor brings legal proceedings against it or its
      assets in relation to this Agreement no immunity from such legal
      proceedings (which will be deemed to include without limitation, suit,
      attachment prior to judgment, other attachment, the obtaining of judgment,
      execution or other enforcement) will be claimed by or on behalf of itself
      or with respect to its assets;

      (ii) waives any such right of immunity which it or its assets now has or
      may in the future acquire;

      (iii) consents generally in respect of any such proceedings to the giving
      of any relief or the issue of any process in connection with such
      proceedings including, without limitation, the making, enforcement or
      execution against any property whatsoever (irrespective of its use or
      intended use) of any order or judgment which may be made or given in such
      proceedings.

16.13 Sole and Entire Agreement : This Agreement is the sole and entire
      agreement between Lessor and Lessee in relation to the leasing of the
      Aircraft, and supersedes all previous agreements in relation to that
      leasing.

16.14 Indemnification : All rights expressed to be granted to each Indemnitee
      under this Agreement (other than Lessor) are given to Lessor on behalf of
      that Indemnitee.

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

16.16 Language : All notices to be given under this Agreement will be in
      English. All documents delivered to Lessor pursuant to this Agreement will
      be in English, or if not in English, will be accompanied by a certified
      English translation. If there is any inconsistency between the English
      version of this Agreement and any version in any other language, the
      English version will prevail.

17.   DISCLAIMERS AND WAIVERS

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

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

(b)   ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR

                                      -50-
<PAGE>

      NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED; OR

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

17.2  Waiver: LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS
      RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
      ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER
      ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE
      OF THE AIRCRAFT OR THIS AGREEMENT EXCEPT TO THE EXTENT ARISING UNDER
      CLAUSE 2.4.

17.3  Confirmation: LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF
      THIS CLAUSE AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE BEEN
      CALCULATED BASED ON ITS PROVISIONS.

18.   SECTION 1110

18.1  Section 1110: Lessee acknowledges that Lessor would not have entered
      into this Agreement unless it had available to it the benefits of a
      lessor under Section 1110 of Title 11 of the United States code. Lessee
      covenants and agrees with Lessor that to better ensure the availability
      of such benefits, Lessee shall support any motion, petition or
      application filed by Lessor with any bankruptcy court having
      jurisdiction over Lessee, whereby Lessor seeks recovery of possession
      of the Aircraft under said Section 1110 and shall not in any way oppose
      such action by Lessor unless Lessee shall have complied with the
      requirements of said Section 1110 to be fulfilled in order to entitle
      Lessee to continued use and possession of the Aircraft hereunder. In
      the event said Section 1110 is amended, or if it is repealed and
      another statute is enacted in lieu thereof, Lessor and Lessee agree to
      amend this Agreement and take such other action not inconsistent with
      this Agreement as Lessor reasonably deems necessary so as to afford to
      Lessor the rights and benefits as such amended or substituted statute
      confers upon owners and lessors of aircraft similarly situated to
      Lessor.

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

                                      -51-
<PAGE>

                                [Missing page 52]

<PAGE>

                                [Missing page 53]

<PAGE>

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

WITNESS                                SIGNED on behalf of:
                                       COMPASS CAPITAL CORPORATION

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

WITNESS                                SIGNED on behalf of:
                                       ALOHA AIRLINES, INC.

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

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

     The undersigned acknowledges receipt of this original counterpart of the
foregoing Aircraft Lease Agreement on this _____ day of _______________ 1999
and consents to the terms hereof.

                                           THE PROVIDENT BANK

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

                                     -54-

<PAGE>

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

WITNESS                                SIGNED on behalf of:
                                       COMPASS CAPITAL CORPORATION

                                       By: [Illegible]
----------------------------------        -----------------------------------
                                       Name: [Illegible]
                                       Title: F.V.P.

WITNESS                                SIGNED on behalf of:
                                       ALOHA AIRLINES, INC.

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

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

     The undersigned acknowledges receipt of this original counterpart of the
foregoing Aircraft Lease Agreement on this _____ day of _______________ 1999
and consents to the terms hereof.

                                       THE PROVIDENT BANK

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

<PAGE>

                          Appendix A to Lease Agreement

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall, unless the context otherwise requires, have the following
respective meanings in this Agreement:

[This provision has been omitted as confidential information, and is
separately filed with the Commission.]

<PAGE>

                                  SCHEDULE 1

                                    PART I

                            DESCRIPTION OF AIRCRAFT

AIRCRAFT

MANUFACTURER:                           Boeing

MODEL:                                  737-2T4

SERIAL NUMBER:                          23445

DATE OF MANUFACTURE:                    September, 1985

U.S. REGISTRATION NO.:                  N808AL

ENGINES

ENGINE TYPE AND NUMBER:                 Pratt & Whitney JT8D-17A

SERIAL NOS.:                            665650 and 665603

(Each of which has 750 or more rated takeoff horsepower or the equivalent of
such horsepower)

DELIVERY CONDITION OF AIRCRAFT

On the Commencement Date, the Aircraft shall be deemed to be delivered to
Lessee in the same condition as redelivered pursuant to the Prior Lease and,
consequently, for the purposes of delivery under this Agreement Lessee
acknowledges its satisfaction with the condition of the Aircraft. Except as
provided in Part B of Schedule 3, TCAS, Windshear and 11 Parameter FDR
equipment installed on the Aircraft shall remain property of the Lessee.

<PAGE>

                                   SCHEDULE 1

                                     PART 2

                               AIRCRAFT DOCUMENTS

Such documents as shall be agreed between Lessor and Lessee prior to the
Commencement Date.

<PAGE>

                                   SCHEDULE 2
                             [Intentionally Omitted]

<PAGE>

                                   SCHEDULE 3

                        OPERATING CONDITION AT REDELIVERY

PART A.   CONDITIONS APPLICABLE TO ANY REDELIVERY

On the Expiry Date the Aircraft, subject to fair wear and tear generally
(notwithstanding anything contained in this Agreement to the contrary), will
be in the condition set out below.

1.   General Conditions

The Aircraft will:

(a)  be clean by airline standards;

(b)  have installed the full complement of engines and other equipment, parts
     and accessories and loose equipment as is normally installed in the
     Aircraft, be in Lessee's standard configuration with respect to LOPA and
     the installed seats and be in a condition suitable for immediate operation
     in commercial service by any other Certificated Air Carrier, subject to
     the special exemptions permitted Lessee regarding compliance with the
     Airport Noise and Capacity Act of 1990, as amended, and the regulations
     promulgated by the FAA thereunder;

(c)  have in existence a valid certificate of airworthiness issued by the FAA
     in accordance with FAR part 21 (or if required by the Lessor, a valid
     export certificate of airworthiness) with respect to the Aircraft issued
     by the Aviation Authority;

(d)  comply with the manufacturer's original specification and be in either the
     same configuration as at delivery or in the configuration operated by
     Lessee immediately prior to redelivery, as Lessor may elect by written
     notice to Lessee given 120 days before the Expiry Date; provided that if
     Lessor fails to give such written notice to Lessee 120 days before the
     Expiry Date, Lessee shall be permitted to redeliver the Aircraft in the
     configuration operated by Lessee immediately prior to redelivery;

(e)  have undergone, immediately prior to redelivery, the next "C" check due in
     accordance with the Agreed Maintenance Program, including all structural
     inspections and sampling to be performed under the Agreed Maintenance
     Program at the time of such "C" check, including corresponding lower
     checks ("A" and "B" or equivalent) and any other maintenance and
     inspections tasks that are a part of such checks, all in accordance with
     the Boeing MPD;

(f)  have had accomplished all outstanding airworthiness directives and
     mandatory orders affecting that model of Aircraft issued by the FAA which,
     if the Aircraft were registered with the FAA, would have to be complied
     with during the Term or within 180 days after the Expiry Date;

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

<PAGE>

(h)  be painted in Lessee's external colors but with logos removed; and

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

2.   COMPONENTS

(a)  Each life-limited component (other than the APU) shall have not less than
     the number of Flight Hours of life as were remaining thereon to the next
     scheduled removal as on the date on which the Aircraft was delivered
     pursuant to the Prior Lease, in accordance with the Agreed Maintenance
     Program;

(b)  Each calendar-Limited component will have not less than 12 months life
     remaining to the next scheduled removal in accordance with the Agreed
     Maintenance Program (provided that, if the calendar limit for any such
     component is less than 12 months, such component shall have such less
     number of months so remaining);

(c)  Each "on-condition" and "condition monitored" component will be
     serviceable; and

(c)  The APU will be in serviceable condition such condition to be verified
     by a borescope inspection and "health check" under full load conditions.

3.   ENGINES

     Each engine will be installed on the Aircraft and if not the engines
     installed on the date on which the Aircraft was delivered pursuant to the
     Prior Lease the will be accompanied by all documentation Lessor may
     require to evidence that title thereto is properly vested in Lessor and
     will:

(a)  be serviceable with not less than 3,000 Cycles remaining to the next
     limiter; and

(b)  be in a condition which can operate at required take off power at sea
     level at a temperature of 34 degrees C.

4.   FUSELAGE, WINDOWS AND DOORS

(a)  The fuselage will be free of major dents and abrasions, scab patches and
     loose or pulled or missing rivets;

(b)  Windows will be free of delamination, blemishes, crazing and will be
     properly sealed; and

(c)  Doors will be free moving, correctly rigged and fitted with serviceable
     seals.

5.   WINGS AND EMPENNAGE

(a)  Leading edges will be free from damage;

<PAGE>

(b)  Control surfaces will be waxed and polished;

(c)  Unpainted cowlings and fairings will be polished; and

(d)  Wings will be free of fuel leaks.

6.   INTERIOR

(a)  Ceilings, sidewalls and bulk panels will be clean and free of stains

(b)  Carpets and seat covers will be in good condition, clean and free of
     stains and meet FAR fire resistance regulations;

(c)  Seats will be serviceable, in good condition and repaired as necessary;
     and

(d)  Emergency equipment having a calendar life will have a minimum of 1 year
     or 100% of its total approved life, whichever is less, remaining.

7.   COCKPIT

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

(b)  Floor coverings will be clean and effectively sealed.

(c)  Seat covers will be in good condition, clean and free of stains and will
     conform to FAR fire resistance regulations; and

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

8.   CARGO COMPARTMENTS

(a)  Panels will be in good condition; and

(b)  Nets will be in good condition.

9.   LANDING GEAR

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

10.  CORROSION

(a)  The Aircraft will have been inspected and treated with respect to
     corrosion as defined in the Agreed Maintenance Program;

(b)  The entire fuselage will be substantially free from corrosion and will be
     adequately treated and an approved corrosion prevention Program will be in
     operation; and

<PAGE>

(c)  Fuel tanks will be free from contamination and corrosion and a tank
     treatment Program will be in operation.

PART B.   ADDITIONAL CONDITIONS APPLICABLE UPON EARLY TERMINATION

Upon redelivery of the Aircraft upon early termination of the Lease in
accordance with Section 4.7 thereof, the Aircraft will be returned (1) in
accordance with Part A of this Schedule 3 and (2) all TCAS, Windshear and 11
Parameter FDR equipment shall be installed and functional subject to fair wear
and tear generally and shall become property of the Lessor.

<PAGE>

                                   SCHEDULE 4

                             INSURANCE REQUIREMENTS

The Insurances required to be maintained are as follows:

(a)  HULL ALL RISKS of Loss or Damage whilst flying and on the ground with
     respect to the Aircraft on an "agreed value basis" for the Agreed Value
     and with a deductible not exceeding $500,000 or such other amount agreed
     by Lessor and Lender from time to time (provided that, in the event that
     Lessee increases its general deductible amount applicable to its aircraft
     fleet to an amount which is greater than $500,000, the deductible amount
     under this Agreement may, with prior written notice to Lessor, be
     increased by Lessee to an amount equal to the lesser of (x) such greater
     amount; and (y) $750,000;

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

(c)  ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the ground or in
     transit other than by air) property insurance on all Engines and Parts
     when not installed on the Aircraft on an "agreed value" basis for their
     full replacement value including engine test and running risks;

(d)  AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO AND MAIL
     AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL LIABILITY for a
     Combined Single Limit (Bodily Injury/Property Damage) of an amount not
     less than the Minimum Liability Coverage for the time being any one
     occurrence (but, in respect of products and personal injury liability,
     this limit may be an aggregate limit for any and all losses occurring
     during the currency of the policy); War and Allied Risks are also to be
     covered under the Policy to the fullest extent available from the leading
     international insurance markets;

(e)  All required hull and spares insurance (as specified above), so far as it
     relates to the Aircraft will:-

     (i) name Lessor, Lender (so long as the Mortgage remains in effect with
     respect to the Aircraft), their respective successors and assigns as
     additional assureds for their respective rights and interests, warranted,
     each as to itself only, no operational interest;

     (ii) provide that any loss will be settled with Lessor and Lessee, subject
     to final prior approval of Lender (so long as the Mortgage remains in
     effect with respect to the Aircraft) and will be payable in Dollars to
     Lender (so long as the Mortgage remains in effect with respect to the
     Aircraft) or Lessor if the Mortgage is no longer in effect with respect to
     the Aircraft), for the account of all interests except where such loss
     does not exceed the Damage Notification Threshold, and Lender (so long as
     the Mortgage remains in effect with respect to the Aircraft) has not
     notified the insurers to the contrary, in which case the loss will be
     settled with and paid to Lessee;

     (iii) include a notice and/or acknowledgement of assignment (relating to
     the assignment of Lessor's interest in the insurances to Lender) in a form
     acceptable to Lessor and Lender;

<PAGE>

     (iv) if separate Hull "all risks" and "war risks" insurances are arranged,
     include a 50/50 provision in accordance with market practice (AVS103 is
     the current market language); and

     (v) confirm that the insurers are not entitled to replace the Aircraft in
     the event of an insured Event of Loss.

(f)  All required liability insurances specified in Clause 1(d) above will:

     (i) name Lessor and each of the Indemnitees and their respective
     successors and assigns and their respective shareholders, subsidiaries,
     directors, officers, agents, employees and indemnitees as additional
     insureds for their respective rights and interests, warranted, each as to
     itself only, no operational interest;

     (ii) include a Severability of Interest Clause which provides that the
     insurance, except for limits of liability, will operate to give each
     assured the same protection as if there was a separate policy to be issued
     to each assured;

     (iii) contain a provision confirming that the policy is primary without
     right of contribution and the liability of the insurers will not be
     affected by any other insurance of which Lessor or any of the Indemnitees
     or Lessee have the benefit so as to reduce the amount payable to the
     additional insureds under such policies;

(g)  All Insurances will:

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

     (ii) provide cover denominated in Dollars and any other currencies which
     Lessor may reasonably require in relation to liability insurance;

     (iii) operate on a worldwide basis subject to such limitations and
     exclusions as Lessor may agree;

     (iv) acknowledge the insurer is aware (and has seen a copy) of this
     Agreement and that the Aircraft is owned by the Lessor and is subject to
     Mortgage (so long as the Mortgage remains in effect with respect to the
     Aircraft);

     (v) provide that, in relation to the interests of each of the additional
     assureds, the Insurances will not be invalidated by any act or omission by
     Lessee, or any other person other than the respective additional assured
     seeking protection and shall insure the interests of each of the
     additional assureds regardless of any breach or violation by Lessee, or
     any other person other than the respective additional assured seeking
     protection of any warranty, declaration or condition, contained in such
     Insurances;

     (vi) provide that the insurers will hold harmless and waive any rights of
     recourse and/or

<PAGE>

     subrogation against the additional assureds;

     (vii) provide that the additional assureds will 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 offset or counter-claim in respect of any
     premium due against the respective interests of the additional assureds
     other than outstanding premiums relating to the Aircraft, any Engine or
     Part the subject of the relevant claim;

     (viii) provide that the Insurances will continue unaltered for the benefit
     of the additional assureds for at least 30 days after written notice by
     registered mail or facsimile of any cancellation, change, event of
     non-payment of premium or installment thereof has been sent to Lessor and
     to each Indemnitee, except in the case of war risks for which 7 days (or
     such lesser period as is or may be customarily available in respect of war
     risks or allied perils) will be given, or in the case of war between the 5
     great powers or nuclear peril for which termination is automatic;

     (ix) if reinsurance is a requirement of this Agreement such reinsurance
     will (i) be on the same terms as the original insurances and will include
     the provisions of this Schedule, (ii) provide that notwithstanding any
     bankruptcy, insolvency, liquidation, dissolution or similar proceedings of
     or affecting the reinsured that the reinsurers' liability will be to make
     such payments as would have fallen due under the relevant policy of
     reinsurance if the reinsured had (immediately before such bankruptcy,
     insolvency, liquidation, dissolution or similar proceedings) discharged
     its obligations in full under the original insurance policies in respect
     of which the then relevant policy of reinsurance has been effected; and
     (iii) contain a "cut-through" clause in the following form (or otherwise,
     satisfactory to Lessor): "The Reinsurer and the Reinsured hereby mutually
     agree that in the event of any claim arising under the reinsurances in
     respect of a total loss or other claim where as provided by the Aircraft
     Lease Agreement dated October 15, 1999 and made between Compass Capital
     Corporation and Aloha Airlines, Inc. such claim is to be paid to the
     person named as sole loss payee under the primary insurances, the
     Reinsurers will in lieu of payment to the Reinsured, its successors in
     interest and assigns pay to the person named as sole loss payee under the
     primary insurances effected by the Reinsured that portion of any loss due
     for which the Reinsurers would have otherwise be liable to pay the
     Reinsured (subject to proof of loss), it being understood and agreed that
     any such payment by the Reinsurers will (to the extent of such payment)
     fully discharge and release the Reinsurers from any and all further
     liability in connection therewith"; subject to such provisions not
     contravening any of the State of Incorporation;

     (x) contain a provision entitling Lessor, Lender (so long as the Mortgage
     remains in effect with respect to the Aircraft) or any insured party to
     initiate a claim under any policy in the event of the refusal or failure
     of Lessee to do so;

     (xi) accept and insure the indemnity provisions of this Agreement.

<PAGE>

                            AMENDMENT NO. I (N808AL)
                                       to
                            Aircraft Lease Agreement
                                 - relating to -
                             Boeing 737-2T4 Aircraft
                          Manufacturers Serial No: 23445
                          U.S. Registration Mark N808AL

                           ---------------------------
                             DATED as of May 1, 2000
                           ---------------------------

                           COMPASS CAPITAL CORPORATION

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

THIS AMENDMENT No. I HAS BEEN EXECUTED IN SEVERAL  COUNTERPARTS.  TO THE EXTENT,
IF ANY, THAT THE AIRCRAFT 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 THE  AIRCRAFT  LEASE  AGREEMENT  MAY BE
CREATED  THROUGH THE TRANSFER OR POSSESSION OF ANY  COUNTERPARTS  OTHER THAN THE
ORIGINAL  COUNTERPART  OF THE AIRCRAFT  LEASE  AGREEMENT  AND OF ALL  AMENDMENTS
THERETO AND OF  COUNTERPART  No. 1 OF THIS  AMENDMENT No. 1. THIS is COUNTERPART
No. 2.

<PAGE>

                                   RECORDED
                     FEDERAL AVIATION ADMINISTRATION
                       Date 7-21-00  Time 10:53 ??
                        Conveyance Number JJ33659
                             By [ILLEGIBLE]

                            AMENDMENT NO. 1 (N808AL)

            This AMENDMENT NO. 1 (N808AL), dated as of May 1, 2000 (this
"Amendment"), is between COMPASS CAPITAL CORPORATION, a California
corporation (the "Lessor"), and ALOHA AIRLINES, INC., a Delaware corporation,
as lessee ("Lessee").

 RECITALS:

(1)         Lessor and Lessee have entered into an Aircraft Lease Agreement
dated October 15, 1999 (as supplemented and assigned and as fully described
on the attached Schedule 1 (the "Lease Agreement")). The Lease Agreement has
been filed with the FAA as set forth on the attached Schedule 1.

(2)         The Lease Agreement relates to one Boeing Model 737-2T4 aircraft
bearing manufacturer's serial no. 23445 and U.S. registration mark N808AL,
including two Pratt & Whitney Model JT8D-9A engines bearing manufacturer's
serial nos. 665650 and 665603, each having 750 or more rated takeoff
horsepower or the equivalent thereof (the "Aircraft").

(3)         NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration whose receipt and sufficiency are
acknowledged, Lessor and Lessee agree as follows:

1.          DEFINITIONS. Capitalized terms used and not defined in this
Amendment have the meanings ascribed to such terms in the Lease Agreement.

2.          AMENDMENTS TO THE LEASE AGREEMENT Lessor and Lessee agree that
the Lease Agreement shall be amended as follows: On Schedule 1 to the Lease,
the reference to "JT8D-17A" is amended to be "JT8D-9A."

3.          ASSIGNMENT. This Amendment shall be binding upon and inure to the
benefit of each of the Lessee and Lessor and their respective successors and
permitted assigns.

4.          MISCELLANEOUS

            (a) Except as specifically amended by this Amendment, the Lease
Agreement shall remain in full force and effect in accordance with its terms.

            (b) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK BY
RESIDENTS OF SUCH STATE.

            (c) The provisions of this Amendment are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause, provision or part in such jurisdiction and shall not
in any manner affect such clause, provision or part in any other jurisdiction
or any other clause or provision in this Amendment in any jurisdiction.

<PAGE>

            (d)  This   Amendment   may  be  signed  in  any   number  of
counterparts  with the same effect as if all parties to this  Amendment
signed the same counterpart.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

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

                                        COMPASS CAPITAL CORPORATION, as
                                              Lessor

                                        By:    [ILLEGIBLE]
                                           --------------------------------
                                        Name:  [ILLEGIBLE]
                                        Title: [ILLEGIBLE]

                                        ALOHA AIRLINES, INC., as Lessee

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

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

<PAGE>

                                                                      Schedule 1

                         DESCRIPTION OF LEASE AGREEMENT

            Aircraft Lease Agreement dated as of October 15, 1999, between
Compass Capital Corporation as lessor and Aloha Airlines, Inc. as lessee,
recorded by the Federal Aviation Administration on November 17, 1999, as
Conveyance No. ZZ021143.

<PAGE>

                            AMENDMENT NO. 2 (N808AL)

                 This AMENDMENT NO. 2 (N808AL), dated as of September 29,
2001 (this "Amendment"), is between COMPASS CAPITAL CORPORATION, a California
corporation (the "Lessor"), and ALOHA AIRLINES, INC., a Delaware corporation,
as lessee ("Lessee").

RECITALS:

(1)  Lessor and Lessee have entered into an Aircraft Lease Agreement dated
October 15, 1999 (as supplemented and assigned and amended and as fully
described on the attached Schedule 1 (the "Lease Agreement")). The Lease
Agreement has been filed with the FAA as set forth on the attached Schedule 1.

(2)  The Lease Agreement relates to one Boeing Model 737-2T4 aircraft bearing
manufacturer's serial no. 23445 and U.S. registration mark N808AL, including
two Pratt & Whitney Model JT8D-9A engines bearing manufacturer's serial nos.
665650 and 665603, each having 750 or more rated takeoff horsepower or the
equivalent thereof (the "Aircraft").

(3)  NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration whose receipt and sufficiency are acknowledged, Lessor
and Lessee agree as follows:

1.   DEFINITIONS. Capitalized  terms used and not defined in this Amendment
have the meanings ascribed to such terms in the Lease Agreement.

2.   AMENDMENTS TO THE LEASE AGREEMENT. Lessor and Lessee agree that the Lease
Agreement is hereby amended as follows:

     (a)  In the definition of "Expiry Date" in Clause 1.1 of the Lease
Agreement, the reference to "29 September 2007" is amended to be "29 November
2007".

     (b)  Appendix A to the Lease Agreement is deleted in its entirety and a
new Appendix A in the form of Attachment 1 to this Amendment is substituted
therefor.

3.   ASSIGNMENT. This Amendment shall be binding upon and inure to the
benefit of each of the Lessee and Lessor and their respective successors and
permitted assigns.

4.   MISCELLANEOUS.

     (a)  Except as specifically amended by this Amendment, the Lease
Agreement shall remain in full force and effect in accordance with its terms.

<PAGE>

     (b)  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN
AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK BY RESIDENTS OF
SUCH STATE.

     (c)  The provisions of this Amendment are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause, provision or part in such jurisdiction and shall not in any
manner affect such clause, provision or part in any other jurisdiction or any
other clause or provision in this Amendment in any jurisdiction.

     (d)  This Amendment may be signed in any number of counterparts with the
same effect as if all parties to this Amendment signed the same counterpart.

                           [SIGNATURE PAGE FOLLOWS]

<PAGE>

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

                                       COMPASS CAPITAL CORPORATION, as Lessor

                                       By: /s/ Mark S. Maymar
                                          -----------------------------------
                                       Name: MARK S. MAYMAR
                                       Title: EXECUTIVE VICE PRESIDENT

                                       ALOHA AIRLINES, INC., as Lessee

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

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

<PAGE>

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

                                       COMPASS CAPITAL CORPORATION, as Lessor

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

                                       ALOHA AIRLINES, INC., as Lessee

                                       By: /s/ Glenn R. Zander
                                          -----------------------------------
                                       Name: GLENN R. ZANDER
                                       Title: PRESIDENT & CEO

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

<PAGE>

                                                                  Schedule 1

                         DESCRIPTION OF LEASE AGREEMENT

     Aircraft Lease Agreement dated as of October 15, 1999, between Compass
Capital Corporation as lessor and Aloha Airlines, Inc. as lessee, recorded by
the Federal Aviation Administration on November 17, 1999, as Conveyance No.
ZZ021143, as amended by Amendment No.1 (N808AL) dated as of May 1, 2000,
recorded on July 21, 2000, as Conveyance No. JJ33659.

<PAGE>

                                        Attachment 1 to Lease Amendment No. 2

                         Appendix A to Lease Agreement

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall, unless the context otherwise requires, have the following
respective meanings in this Agreement:

[This provision has been omitted as confidential information, and is
separately filed with the Commission.]

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