Document:

<PAGE>

                                                                   Exhibit 10.73

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

                               DATED: MAY 21, 1997

                             ACG ACQUISITION XII LLC

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                       ----------------------------------
                               LEASE AGREEMENT 809
                                 - relating to -
                             Boeing 737-2Q9 Aircraft
                         Manufacturers Serial No: 21720
                          U.S. Registration Mark N809AL
                       ----------------------------------

                        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.    DEFINITIONS and INTERPRETATION ......................................................1
      1.1 Definitions .....................................................................1
      1.2 Interpretation .................................................................15

2.    REPRESENTATIONS and WARRANTIES .....................................................15
      2.1   Lessee's Representations and Warranties ......................................15
      2.2   Lessee's Further Representations and Warranties ..............................17
      2.3   Repetition ...................................................................18
      2.4   Lessor's Representations and Warranties ......................................18
      2.5   Repetition ...................................................................19

3.    CONDITIONS PRECEDENT ...............................................................19
      3.1   Lessor's Documentary Conditions Precedent ....................................19
      3.2   Lessor's Other Conditions Precedent ..........................................20
      3.3   Lessor's Waiver ..............................................................21
      3.4   Lessee's Conditions Precedent ................................................21
      3.5   Lessee's Waiver ..............................................................22

4.    COMMENCEMENT; OPTIONS ..............................................................22
      4.1   Leasing ......................................................................22
      4.2   Delivery .....................................................................22
      4.3   Acceptance and Risk ..........................................................23
      4.4   Extension Option . ...........................................................23
      4.5   Early Termination Option .....................................................23

5.    PAYMENTS ...........................................................................23
      5.1   Security Deposit; Letter of Credit ...........................................23
      5.2   Rental Periods ...............................................................26
      5.3   Basic Rent ...................................................................26
      5.4   Payments .....................................................................26
      5.5   Gross-up .....................................................................26
      5.6   Taxation .....................................................................27
      5.7   Information ..................................................................28
      5.8   Taxation of Indemnity Payments ...............................................28
      5.9   Default Interest .............................................................29
      5.10  Contest ......................................................................29
      5.11  Absolute .....................................................................30

                                       -i-

<PAGE>

                               TABLE OF CONTENTS
                                   continued

CLAUSE                                                                                   PAGE

<S>   <C>                                                                                <C>
6.    MANUFACTURER'S WARRANTIES ..........................................................31
      6.1 Assignment .....................................................................31
      6.2 Proceeds .......................................................................31
      6.3 Parts ..........................................................................32
      6.4 Agreement ......................................................................32

7.    LESSOR'S COVENANTS and DISCLAIMERS .................................................32
      7.1   Quiet Enjoyment ..............................................................32
      7.2   Registration and Filings .....................................................33
      7.3   Agreed Maintenance Performers ................................................33
      7.4   Exclusion ....................................................................33
      7.5   Lessee's Waiver ..............................................................34
      7.6   Lessee's Confirmation ........................................................34

8.    LESSEE'S COVENANTS .................................................................34
      8.1   Duration .....................................................................34
      8.2   Information ..................................................................34
      8.3   Lawful and Safe Operation ....................................................37
      8.4   Taxes and Other Charges ......................................................38
      8.5   Sub-Leasing ..................................................................38
      8.6   Inspection ...................................................................39
      8.7   Protection of Title ..........................................................39
      8.8   General ......................................................................41
      8.9   Records ......................................................................42
      8.10  Registration and Filings .....................................................42
      8.11  Maintenance and Repair .......................................................42
      8.12  Removal of Engines and Parts .................................................44
      8.13  Installation of Engines and Parts ............................................44
      8.14  Non-Installed Engines and Parts ..............................................46
      8.15  Pooling of Engines and Parts .................................................47
      8.16  Equipment Changes ............................................................48
      8.17  Title to Engines and Parts ...................................................48
      8.18  Third Parties ................................................................49

9.    INSURANCE ..........................................................................49

                                      -ii-

<PAGE>

                               TABLE OF CONTENTS
                                   continued

CLAUSE                                                                                   PAGE
<S>   <C>                                                                                <C>

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

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

11.   EVENTS OF LOSS ......................................................................55
      11.1 Total Loss .....................................................................55
      11.2 Requisition ....................................................................57

12.   RETURN OF AIRCRAFT ..................................................................57
      12.1 Redelivery .....................................................................57
      12.2 Final Checks ...................................................................58
      12.3 Final Inspection ...............................................................59
      12.4 Non-Compliance .................................................................59
      12.5 Export Documentation ...........................................................60
      12.6 Acknowledgment .................................................................60
      12.7 Maintenance Program ............................................................60
      12.8 Storage ........................................................................61

13.   DEFAULT .............................................................................61
      13.1 Events .........................................................................61
      13.2 Rights .........................................................................66
      13.3 Export .........................................................................66
      13.4 Default Payments ...............................................................67

14.   ASSIGNMENT and TRANSFER .............................................................68
      14.1 No assignment by Lessee ........................................................68
      14.2 Lessor Assignment ..............................................................68
      14.3 Grants of Security Interests ...................................................70

                                      -iii-

<PAGE>

                               TABLE OF CONTENTS
                                   continued

CLAUSE                                                                                   PAGE

<S>   <C>                                                                                <C>
      14.4 Sale and Leaseback by Lessor ..................................................72
      14.5 Further Acknowledgments .......................................................72
      14.6 Certain Protections for Lessee's Benefit ......................................73

15.   MISCELLANEOUS ......................................................................73
      15.1  Waivers, Remedies Cumulative .................................................73
      15.2  Delegation ...................................................................73
      15.3  Appropriation ................................................................73
      15.4  Currency Indemnity ...........................................................74
      15.5  Payment by the Lessor ........................................................74
      15.6  Severability . ...............................................................74
      15.7  Remedy .......................................................................75
      15.8  Expenses .....................................................................75
      15.9  Time of Essence ..............................................................75
      15.10 Notices ......................................................................75
      15.11 Law and Jurisdiction .........................................................77
      15.12 Sole and Entire Agreement ....................................................78
      15.13 Indemnities ..................................................................78
      15.14 Counterparts .................................................................78
</Table>

SCHEDULES
<Table>
      <S>     <C>                                                                         <C>
      1.      Aircraft Specification                                                       80
      2.      Certificate of Acceptance 809                                                83
      3.      Operating Condition at Redelivery                                            87
      4.      Insurance Requirements                                                       94
      5.      Form of Legal Opinion                                                        99
      6.      Form of Letter of Credit                                                    100
      7.      Form of Semi-Annual Status Report                                           101
</Table>

                                      -iv-

<PAGE>

                                                          RECORDED

                                             Federal Aviation Administration

                                            Date   8-28-97      Time   7:53 am
                                                 --------------      ----------
                                             Conveyance Number   HK010357
                                                              -----------------
                                            By   Barbara Deepler
                                               ---------------------
                                               Conveyances Examiner

THIS LEASE AGREEMENT is made the 21st day of May, 1997

BETWEEN:

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

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

WHEREAS:

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

(B)    Pursuant to an Aircraft Purchase Agreement, dated as of May 21, 1997,
       between First Security Bank, National Association, not in its individual
       capacity but solely as owner trustee, as seller ("Seller"), and Lessor,
       as buyer (the "Purchase Agreement"), Lessor has purchased the Aircraft
       from Seller, and Lessor has agreed to lease the Aircraft to the Lessee
       with effect from the purchase of the Aircraft upon and subject to the
       covenants, terms and conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.     DEFINITIONS AND INTERPRETATION

1.1    DEFINITIONS

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

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

       AFFILIATE                            in relation to any person, any other
                                            person controlled directly or
                                            indirectly by that person, any other
                                            person that controls directly or
                                            indirectly that person or any other
                                            person under common control with
                                            that person.

                                      -1-
<PAGE>

                                            For this purpose "control" of any
                                            entity or person means ownership of
                                            a majority of the voting power of
                                            the entity or person.

       AGREED MAINTENANCE PERFORMER         the Lessee or any other reputable
                                            maintenance organization that is (i)
                                            experienced in maintaining aircraft
                                            and/or engines of the same type as
                                            the Aircraft and the Engines, (ii)
                                            duly certificated by the FAA under
                                            FAR Part 145, and (iii) not objected
                                            to by Lessor pursuant to Clause 7.3.

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

       AGREED VALUE                         $6,000,000.

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

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

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

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

                                      -2-
<PAGE>

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

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

       BASIC RENT                           all amounts payable pursuant to
                                            Clause 5.3.

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

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

       CYCLE                                one take-off and landing of an
                                            airframe.

       DAMAGE NOTIFICATION THRESHOLD        $500,000.

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

                                      -3-
<PAGE>

                                            combination of the foregoing would
                                            constitute an Event of Default.

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

       DELIVERY DATE                        the date on which Delivery takes
                                            place.

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

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

       EARLY TERMINATION OPTION             shall have the meaning assigned
                                            thereto in Section 4.5 hereof.

       ENGINE                               whether or not installed on the
                                            Aircraft:

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

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

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

       ENGINE LOSS                          the circumstances set forth in
                                            the definition of "Total Loss" as
                                            if that definition applied to an
                                            Engine.

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

                                      -4-
<PAGE>

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

         EVENT OF DEFAULT                   an event specified in Clause 13.1.

         EXPIRY DATE                        the day preceding the fourth
                                            anniversary of the Delivery Date, or
                                            the day this Agreement is terminated
                                            earlier pursuant to Section 4.5, or
                                            if this Agreement is extended
                                            pursuant to Section 4.4 the day
                                            preceding the fifth anniversary of
                                            the Delivery Date, or any other date
                                            on which:

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

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

         EXTENSION OPTION                   shall have the meaning assigned
                                            thereto in Section 4.4 hereof.

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

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

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

         FINANCIAL INDEBTEDNESS             any indebtedness in respect of:

                                            (a)        moneys borrowed;

                                      -5-
<PAGE>

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

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

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

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

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

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

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

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

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

                                      -6-
<PAGE>

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

         INDEMNITEES                        the Lessor Indemnitees and the
                                            Lender Indemnitees.

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

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

         LENDER                             SBCC, any other person or persons
                                            that may from time to time refinance
                                            the Aircraft for the Lessor and/or
                                            for whose benefit a security
                                            interest in respect of the Aircraft
                                            and/or this Agreement is granted by
                                            the Lessor, and any successor and
                                            permitted assign of any such person
                                            under the relevant loan
                                            documentation.

         LENDER INDEMNITEES                 for each Lender, such Lender, any of
                                            its successors and assigns and their
                                            respective shareholders, members,
                                            Affiliates, partners, contractors,
                                            directors, managers, officers,
                                            servants, agents and employees.

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

         LESSOR INDEMNITEES                 each of the Lessor, any of its
                                            successors and assigns and their
                                            respective shareholders, members,
                                            Affiliates, partners, contractors,
                                            directors, managers, officers,
                                            servants, agents and employees.

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

                                      -7-
<PAGE>

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

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

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

                                            (b)        Taxes imposed on the
                                                       net income, profits or
                                                       gains of the Lessor
                                                       and/or the Lender by
                                                       any Federal Government
                                                       Entity in the United
                                                       States of America or
                                                       by any Government
                                                       Entity of the States
                                                       where the Lessor
                                                       and/or the Lender are
                                                       incorporated or have
                                                       their principal place
                                                       of business, or by any
                                                       Government Entity in
                                                       any other jurisdiction
                                                       where the Lessor
                                                       and/or the Lender is
                                                       liable for such Taxes
                                                       but only to the extent
                                                       that such liability
                                                       has or would have
                                                       arisen in the absence
                                                       of the transactions
                                                       contemplated by this
                                                       Agreement;

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

                                            (d)        Taxes imposed as a direct
                                                       result of the sale or
                                                       other disposition of the
                                                       Aircraft, unless such

                                      -8-
<PAGE>

                                                       sale or disposition
                                                       occurs as a consequence
                                                       of an Event of Default;

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

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

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

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

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

                                      -9-
<PAGE>

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

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

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

         MINIMUM LIABILITY COVERAGE         $500,000,000 on each occurrence.

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

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

         PART                               whether or not installed on the
                                            Aircraft:

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

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

                                      -10-
<PAGE>

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

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

                                            (b)        any lien of a repairer,
                                                       mechanic, carrier, hangar
                                                       keeper, unpaid seller or
                                                       other similar lien
                                                       arising in the ordinary
                                                       course of business or by
                                                       operation of law in
                                                       respect of obligations
                                                       which are not overdue in
                                                       accordance with
                                                       applicable law (or, if
                                                       applicable, generally
                                                       accepted accounting
                                                       principles and practices
                                                       in the relevant
                                                       jurisdiction) or are
                                                       being contested in good
                                                       faith by appropriate
                                                       proceedings; and

                                            (c)        any Lessor Lien;

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

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

         RENT                               collectively, all Basic Rent and all
                                            Supplemental Rent.

         RENTAL PERIOD                      each period ascertained in
                                            accordance with Clause 5.2.

                                      -11-
<PAGE>

         RENT DATE                          the Delivery Date and the
                                            corresponding day of each calendar
                                            month during the Term or, for any
                                            calendar month that does not have a
                                            corresponding day, the last day of
                                            such calendar month.

         SBCC                               Sanwa Business Credit Corporation, a
                                            Delaware corporation, the initial
                                            "Lender" under this Agreement.

         SECURITY DEPOSIT                   the amount of $228,000.

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

         SELLER ENTITIES                    collectively, 1980 Aircraft
                                            Investors, a California limited
                                            partnership (the "Partnership"),
                                            First Security Bank, National
                                            Association, as owner trustee f/b/o
                                            the Partnership, each limited
                                            partner of the Partnership, Polaris
                                            Investment Management Corporation,
                                            Polaris Aircraft Leasing Corporation
                                            and GE Capital Aviation Services,
                                            Inc.

         STATE OF INCORPORATION             State of Delaware.

         STATE OF REGISTRATION              United States of America.

         SUBSIDIARY                         (a)        in relation to any
                                                       reference to accounts,
                                                       any company wholly or
                                                       partially owned by
                                                       Parent, including the
                                                       Lessee, whose accounts
                                                       are consolidated with the
                                                       accounts of the Parent in
                                                       accordance with GAAP; and

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

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

                                      -12-
<PAGE>

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

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

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

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

         TOTAL LOSS                         with respect to the Airframe:

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

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

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

                                      -13-
<PAGE>

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

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

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

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

                                            (d)        in the case of any of the
                                                       events described in
                                                       sub-paragraph (c) of the
                                                       definition of "Total
                                                       Loss", the date on which
                                                       the relevant requisition
                                                       of title or other
                                                       compulsory acquisition,
                                                       capture, seizure,
                                                       deprivation, confiscation
                                                       or detention occurs;

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

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

                                      -14-
<PAGE>

1.2    INTERPRETATION

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

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

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

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

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

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

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

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

2.     REPRESENTATIONS AND WARRANTIES

2.1    LESSEE'S REPRESENTATIONS AND WARRANTIES

       The Lessee represents and warrants to the Lessor as follows:

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

       (b)    POWER AND AUTHORITY: The Lessee has the corporate power to enter
              into and perform, and has taken all necessary corporate action to
              authorize the entry into,

                                      -15-
<PAGE>

              performance and delivery of, this Agreement and the transactions
              contemplated by this Agreement.

       (c)    LEGAL VALIDITY: This Agreement constitutes the Lessee's legal,
              valid and binding obligation, enforceable against Lessee in
              accordance with its terms.

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

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

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

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

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

       (f)    NO IMMUNITY:

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

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

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

              (i)    have been prepared in accordance with GAAP; and

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

                                      -16-
<PAGE>

       (h)    AIR CARRIER STATUS: the Lessee is a "citizen of the United States"
              as defined in Section 40102 of the Federal Aviation Law, an air
              carrier certified by the FAA under Chapter 447 of the Federal
              Aviation Law and a Person "holding an air carrier operating
              certificate issued by the Secretary of Transportation pursuant to
              Chapter 447 of title 49 for aircraft capable of carrying 10 or
              more individuals or 6,000 pounds or more of cargo" as that phrase
              is used in 11 U.S.C. ss.1110, as amended ("Section 1110").

       (i)    SECTION 1110: the Lessor and, by virtue of the assignment for
              collateral purposes of Lessor's right, title and interest in
              the Aircraft and this Agreement, the Lender are entitled to the
              benefits of Section 1110 with respect to any bankruptcy
              proceedings involving Lessee.

2.2    LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES

       The Lessee further represents and warrants to the Lessor that:

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

       (b)    REGISTRATION:

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

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

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

                                      -17-
<PAGE>

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

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

 2.3    REPETITION

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

 2.4    LESSOR'S REPRESENTATIONS AND WARRANTIES

        The Lessor represents and warrants to the Lessee that:

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

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

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

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

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

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

                                      -18-
<PAGE>

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

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

       (f)    NO IMMUNITY:

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

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

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

2.5    REPETITION

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

3.     CONDITIONS PRECEDENT

3.1    LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT

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

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

                                      -19-
<PAGE>

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

       (c)    OPINIONS: opinions, in the form set out in Schedule 5, in respect
              of the Lessee's obligations under this Agreement issued by
              independent legal counsel acceptable to the Lessor and the Lender;

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

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

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

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

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

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

       (h)    REGISTRATION: evidence that the Aircraft has been validly
              registered under the laws of the State of Registration and that
              all filings, registrations, recordings and other actions have been
              or will be taken which are necessary to ensure the validity,
              effectiveness and enforceability of this Agreement and the
              Mortgage and to protect the respective rights of the Lessor and
              the Lender in the Aircraft or any Part; and

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

3.2    LESSOR'S OTHER CONDITIONS PRECEDENT

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

                                      -20-

<PAGE>

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

       (b)    that all payments due to the Lessor under this Agreement on or
              before Delivery, including the first payment of Basic Rent and
              the Security Deposit (unless a Letter of Credit has been
              delivered), shall have been received by the Lessor;

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

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

3.3    LESSOR'S WAIVER

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

3.4    LESSEE'S CONDITIONS PRECEDENT

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

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

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

                                    -21-

<PAGE>

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

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

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

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

3.5     LESSEE'S WAIVER

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

4.      COMMENCEMENT; OPTIONS

4.1     LEASING

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

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

4.2     DELIVERY

       The Aircraft will be deemed to have been delivered to, and will be
       accepted by, the Lessee at the Delivery Location, or such other location
       as may be agreed, on the Delivery Date immediately following satisfaction
       of the conditions precedent specified in Clauses 3.1, 3.2 and 3.4 (or
       their waiver or deferral by the party entitled to grant such waiver or
       deferral).

                                    -22-

<PAGE>

  4.3    ACCEPTANCE AND RISK

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

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

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

  4.4    EXTENSION OPTION.

         Lessor shall have the right, in its sole discretion and with the
         consent of the Lender, to elect to extend the Term of this Agreement
         until the fifth anniversary of the Delivery Date (the "Extension
         Option"). Lessor shall exercise the Extension Option by giving Lessee
         written notice of such exercise at least six months before the fourth
         anniversary of the Delivery Date. During the extended Term, all of the
         terms and provisions of this Agreement shall remain in full force and
         effect, including the amount and payment of Basic Rent.

  4.5    EARLY TERMINATION OPTION.

         Lessor shall have the right, in its sole discretion and with the
         consent of the Lender, to terminate this Agreement on any date on or
         after April 1, 1998, upon giving 60 days prior written notice to Lessee
         (the "Early Termination Option"). Such written notice shall specify the
         date of return for the Aircraft. Lessee shall thereupon take all action
         necessary to redeliver the Aircraft in accordance with this Agreement.

  5.     PAYMENTS

  5.1    SECURITY DEPOSIT; LETTER OF CREDIT

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

                                    -23-

<PAGE>

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

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

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

               (iv)    To the fullest  extent  permitted by law and by way of
                       continuing  security the Lessee grants a security
                       interest  in the  Security  Deposit and all rights of
                       the Lessee to payment thereof,  the debt represented
                       thereby and all interest thereon and/or any and all
                       interest of the Lessee  therein to the Lessor by way
                       of first  priority  security interest as security for
                       the Lessee's  obligations  and liability under this
                       Agreement (the "Lessee's Liabilities").  Except as
                       expressly permitted under this Agreement, the Lessee
                       will not be entitled  to  repayment  of the  Security
                       Deposit,  and the Lessee agrees that it will enter
                       into any additional  documents and instruments
                       necessary or reasonably  requested  by Lessor or the
                       Lender to  evidence,  create or  perfect  the Lessor's
                       rights to and security interest in the Security
                       Deposit.

        (b)    LETTER OF CREDIT: the Lessee shall be entitled, instead of
               paying the Security Deposit in cash in accordance with
               sub-clause (a) above, to provide the Lessor with the Letter

                                    -24-

<PAGE>

               of Credit. In the event that the Lessee elects to provide the
               Letter of Credit,  the following provisions shall apply:

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

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

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

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

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

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

                                    -25-

<PAGE>

 5.2    RENTAL PERIODS

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

 5.3    BASIC RENT

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

        (b)    AMOUNT: The Basic Rent payable in respect of each Rental
               Period will be the amount of $114,000.

 5.4    PAYMENTS

        (a)    All payments of Rent by the Lessee to the Lessor under this
               Agreement will be made for value on the due date, for the full
               amount due, in Dollars and in immediately available funds,
               settled through the New York Clearing House System or such
               other funds as may for the time being be customary for the
               settlement in New York City of payments in Dollars by
               telegraphic transfer to the account of the Lender at Harris
               Trust and Savings Bank, 111 West Monroe Street, Chicago,
               Illinois 60690, Account No. 401-689-5, ABA No. 071-000-288,
               Ref.: "ACG Acquisition XII LLC", Attention: Ida Renaud.

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

 5.5    GROSS-UP

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

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

        (c)    If the Lessee is compelled by law to make payment to the
               Lessor under or in connection with this Agreement subject to
               any Tax and the Lessor does not actually

                                    -26-

<PAGE>

               receive for its own benefit on the due date a net amount equal
               to the full amount provided for under this Agreement, the
               Lessee will pay all necessary additional amounts to ensure
               receipt by the Lessor of the full amount (other than Lessor
               Taxes that Lessee is compelled by law to deduct or withhold)
               so provided for.

5.6     TAXATION

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

        (b)    If the Lessor or the Lender shall, based upon its own
               reasonable interpretation of any relevant laws or regulations,
               realize any Tax savings (by way of refund, deduction, credit
               or otherwise) in respect of any amount with respect to which
               the Lessee shall have made a payment (or increased payment)
               pursuant to Clause 5.5 or 5.8 or shall have indemnified the
               Lessor or the Lender pursuant to sub-clause (a) above, or in
               respect of the occurrence or transaction which gave rise to
               such payment or indemnification, and such Tax savings shall
               not have been taken into account previously in calculating any
               indemnity payment made by the Lessee, then the Lessor or the
               Lender (as the case may be) shall, to the extent. that it can
               do so without prejudice to the retention of the relevant
               savings and subject to the Lessee's obligations to repay such
               amount to the Lessor or the Lender (as applicable) if the
               relevant savings are subsequently disallowed or canceled, pay
               to the Lessee such amount as the Lessor or the Lender (as the
               case may be) shall in its opinion have concluded to be the
               amount of such Tax savings (together with, in the case of a
               refund, any interest received thereon); provided however that
               neither the Lessor nor the Lender shall be obliged to make any
               payment to the Lessee pursuant to this sub clause (b) to the
               extent that the amount of any Tax savings in respect of which
               such payment is to be made would exceed the aggregate amount
               of all prior payments made by the Lessee to, on behalf of or
               as indemnification of the Lessor or the Lender under this
               Agreement for Taxes less the amount of all prior payments made
               pursuant to this sub-clause (b) in respect of such Tax
               savings. The Lessee acknowledges that nothing contained in
               this sub-clause (b) shall interfere with the right of the
               Lessor or the Lender to arrange its tax affairs in whatsoever
               proper manner it thinks fit (or give the Lessee any right to
               investigate, or impose any obligation on the Lessor or the
               Lender to disclose, the same) and, in particular, neither the
               Lessor nor the Lender shall be under any obligation to claim
               any Tax savings in priority to any other

                                    -27-

<PAGE>

               savings available to it; provided, that subject to the
               foregoing Lessor shall use reasonable good faith diligence to
               realize Tax savings as described above.

5.7    INFORMATION

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

5.8    TAXATION OF INDEMNITY PAYMENTS

       (a)    If and to the extent that any sums payable to the Lessor or the
              Lender by the Lessee under this Agreement by way of indemnity
              are insufficient, by reason of any Taxes payable in respect of
              those sums, for the Lessor or the Lender to discharge the
              corresponding liability to the relevant third party (including
              any taxation authority), or to reimburse the Lessor or the
              Lender for the cost incurred by it to a third party (including
              any taxation authority) the Lessee will pay to the Lessor or
              the Lender (as the case may be) such sum as will, after the tax
              liability has been fully satisfied, leave the Lessor or the
              Lender (as the case may be) with the same amount as it would
              have been entitled to receive in the absence of that liability,
              together with interest on the amount of the deficit at the
              Default Rate in respect of the period commencing on the date on
              which the payment of taxation is finally due until payment by
              the Lessee (both before and after judgment).

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

                                    -28-

<PAGE>

  5.9    DEFAULT INTEREST

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

  5.10   CONTEST

         If written claim is made against Lessor or Lender for or with respect
         to any Taxes, Lessor shall, and shall cause Lender to, promptly notify
         the Lessee. If reasonably requested by the Lessee in writing within 30
         days after such notification, Lessor shall, upon receipt of indemnity
         satisfactory to Lessor or Lender, as the case may be, and at the
         expense of the Lessee (including all costs, expenses, losses, legal and
         accountants' fees and disbursements, penalties and interest), in good
         faith contest or to the extent permissible by law allow Lessee to
         contest in Lessee's, the Lessor's or the Lender's name, the validity,
         applicability or amount of such Taxes by either (i) resisting payment
         thereof if practicable and permitted by applicable law, or (ii) if
         payment is made, using reasonable efforts to obtain a refund thereof in
         appropriate administrative and judicial proceedings, and in the contest
         of any such claim by Lessor or Lender, Lessor or Lender (as the case
         may be) shall apprise the Lessee of all material developments with
         respect to such contest, shall forward copies of all material
         submissions made in such contest and shall materially comply in good
         faith with any reasonable request concerning the conduct of any such
         contest; provided, however, the Lessor or the Lender (as the case may
         be) will not be obliged to take any such action:

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

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

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

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

                                    -29-

<PAGE>

       If Lessor or Lender, in accordance with the foregoing, determines to
       pay such Taxes and seek a refund, Lessee will either pay such Taxes on
       Lessor's or Lender's behalf and pay Lessor or Lender, as the case may
       be, any amount due with respect to such payment or will promptly
       reimburse Lessor or Lender for such Taxes. If Lessor or Lender shall
       obtain a refund of all or any part of such Taxes paid by the Lessee,
       Lessor shall or shall cause Lender to pay the Lessee the amount of
       such refund; provided that such amount shall not be payable before
       such time as the Lessee shall have made all payments or indemnities to
       Lessor or Lender then due with respect to Taxes and so long as no
       Default has occurred and is continuing. If in addition to such refund
       Lessor or Lender shall receive an amount representing interest,
       attorneys fees or any other amount on the amount of such refund, the
       Lessee shall be paid that proportion of such interest, attorneys fees
       or any other amount which is fairly attributable to the Taxes paid by
       the Lessee prior to the receipt of such refund. Lessor and/or Lender
       shall not enter into a settlement or other compromise with respect to,
       or otherwise concede, any claim by a taxing authority on account of
       Taxes being contested by Lessee pursuant to this Clause 5.10 without
       the written consent of Lessee, which consent shall not be unreasonably
       withheld, unless Lessor waives its right and the right of Lender to be
       indemnified by Lessee with respect to such claim (but not with respect
       to any future claims).

5.11 ABSOLUTE

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

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

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

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

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

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

                                    -30-

<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 the Lessee under this Agreement;

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

6.     MANUFACTURER'S WARRANTIES

6.1    ASSIGNMENT

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

6.2    PROCEEDS

       Unless an Event of Default shall have occurred and be continuing, all
       proceeds of any such claim as is referred to in Clause 6.1 and which
       exceed $100,000 will be paid to the Lessor (or, so long as the
       Security Interest of the Mortgage remains in effect, the Lender), but
       if and to the extent that such claim relates:

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

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

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

                                    -31-

<PAGE>

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

6.3    PARTS

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

6.4    AGREEMENT

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

       (a)    pay the proceeds of any claim thereunder that exceed $100,000
              to the Lessor (or, so long as the Security Interest of the
              Mortgage remains in effect, the Lender) to be applied pursuant
              to Clause 6.2 and, pending such payment, will hold the claim
              and the proceeds as security for Lessee's obligations under
              this Agreement; and

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

7.     LESSOR'S COVENANTS AND DISCLAIMERS

7.1    QUIET ENJOYMENT

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

                                    -32-

<PAGE>

 7.2    REGISTRATION AND FILINGS

        The Lessor shall, at the Lessor's cost:

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

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

7.3     AGREED MAINTENANCE PERFORMERS

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

7.4     EXCLUSION

       THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS WITH ALL FAULTS"
       AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN
       THIS AGREEMENT, NEITHER LESSOR NOR LENDER WILL HAVE ANY LIABILITY IN
       RELATION TO, AND NEITHER LESSOR NOR LENDER HAS OR WILL BE DEEMED TO HAVE
       MADE OR GIVEN, ANY CONDITIONS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR
       IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:

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

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

                                    -33-

<PAGE>

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

7.5    LESSEE'S WAIVER

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

7.6    LESSEE'S CONFIRMATION

       LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.4
       AND 7.5 AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN
       CALCULATED NOTWITHSTANDING ITS PROVISIONS.

8.     LESSEE'S COVENANTS

8.1    DURATION

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

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

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

8.2    INFORMATION

       The Lessee shall:

       (a)     furnish to the Lessor and the Lender:

              (i)     within 60 days after the last day of the first three
                      fiscal quarters of each fiscal year of the Parent,
                      unaudited consolidated quarterly financial statements of
                      the Parent prepared for such quarter, including a
                      consolidated balance sheet of the Parent and its
                      Subsidiaries as of the last day of such quarter and

                                    -34-

<PAGE>

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

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

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

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

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

                                    -35-

<PAGE>

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

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

         (c)    promptly furnish to the Lessor and the Lender all information
                which the Lessor or the Lender from time to time reasonably
                requests regarding the Aircraft, any Engine or any Part and
                its use, location and condition, including the hours
                available on the Aircraft and any Engine until the next
                scheduled check, inspection, overhaul or shop visit, as the
                case may be;

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

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

         (f)    promptly notify the Lessor and the Lender of

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

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

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

                                      -36-

<PAGE>

  8.3    LAWFUL AND SAFE OPERATION

         The Lessee shall:

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

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

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

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

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

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

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

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

                (iv)    any illegal item or substance;

         (f)    not utilize the Aircraft for purposes of training, qualifying
                or re-confirming the status of cockpit personnel except for
                the benefit of the Lessee's cockpit personnel, and then

                                      -37-

<PAGE>

                only if the use of the Aircraft for such purpose is not
                disproportionate to the use for such purpose of other
                aircraft of the same type operated by the Lessee;

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

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

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

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

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

8.4    TAXES AND OTHER CHARGES

       The Lessee will promptly pay:

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

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

       except to the extent that such payment is being contested in good faith
       by appropriate proceedings in accordance with Clause 5.10 (but subject
       to the proviso contained in Clause 5.10).

8.5    SUB-LEASING

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

                                      -38-

<PAGE>

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

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

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

8.6    INSPECTION

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

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

       (c)    Neither Lessor nor Lender shall:

              (i)     have any duty to make, or liability arising out of, any
                      such visit, inspection or survey; and

              (ii)    unless a Default has occurred and is continuing,
                      exercise such right other than on reasonable notice and
                      so as not to disrupt unreasonably the maintenance or
                      operation of the Aircraft.

8.7    PROTECTION OF TITLE

       The Lessee shall:

       (a)    not do or knowingly permit to be done or omit or knowingly permit
              to be omitted to be done any act or thing which might reasonably
              be expected to jeopardize the respective rights, title and
              interest of the Lender as mortgagee of the Aircraft and

                                      -39-

<PAGE>

              assignee of this Agreement or the Lessor as owner of the Aircraft
              and lessor under this Agreement or the validity, enforceability or
              priority of the Mortgage;

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

       (c)    not at any time:

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

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

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

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

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

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

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

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

                                      -40-

<PAGE>

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

8.8   GENERAL

      The Lessee will:

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

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

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

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

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

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

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

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

                                          -41-

<PAGE>

8.9   RECORDS

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

8.10  REGISTRATION AND FILINGS

      The Lessee shall:

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

      (b)  do all acts and things (including making any filing or registration
           with the Aviation Authority or any other Government Entity) and
           executing and delivering all documents (including any amendment of
           this Agreement) as may be required by the Lessor following any
           modification of the Aircraft, any Engine or any Part or the
           permanent replacement of any Engine or Part in accordance with
           this Agreement, so as to ensure that the respective rights of the
           Lessor and the Lender under this Agreement apply with the same
           effect as before.

8.11  MAINTENANCE AND REPAIR

      The Lessee shall:

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

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

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

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

                                    -42-

<PAGE>

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

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

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

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

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

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

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

      (l)  subject to Clause 11.1(c), procure promptly the replacement of any
           Engine or Part which has become time, cycle or calendar expired,
           lost, stolen, seized, confiscated, destroyed, damaged beyond
           repair, unserviceable or permanently rendered unfit for use, with an
           engine or part complying with the conditions set out in
           Clause 8.13(a).

                                              -43-

<PAGE>

8.12  REMOVAL OF ENGINES AND PARTS

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

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

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

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

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

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

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

           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, in the case of an
           Engine, 90 days after removal of such Engine and, in the case of a
           Part, 45 days after removal of such Part.

8.13  INSTALLATION OF ENGINES AND PARTS

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

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

           (ii)  in the case of a part, it is in as good operating condition,
                 is of the same interchangeable modification status as the
                 replaced Part and has attached to it a current "serviceable
                 tag" issued by the manufacturer or supplier indicating

                                    -44-

<PAGE>

                 that the part is new, serviceable or overhauled, and the Lessee
                 shall retain all such tags;

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

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

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

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

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

           (iii) as soon as practicable after installation of any such engine
                 or part on the Aircraft but, in any event, no later than the
                 earlier of (1) 90 days after installation of such an engine
                 or 45 days after installation of such a part, and (2) the
                 Expiry Date, the Lessee removes any such engine or part and
                 replaces it with the Engine or Part previously removed or by an
                 engine or part complying with Clause 8.13(a).

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

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

           (ii)  the secured party, lessor or conditional vendor, as the case
                 may be, of such Lessee Installed Part has confirmed and
                 acknowledged in writing (which such

                                    -45-

<PAGE>

                 confirmation and acknowledgment may be contained in the
                 lease, conditional sale agreement or security agreement) to
                 the Lessor and the Lender, in form and substance
                 satisfactory to the Lessor, that it will recognize the
                 respective rights, title and interest of the Lessor and the
                 Lender in and to the Aircraft (including its Engines and
                 Parts) and that it will not seek to exercise any rights
                 whatever in relation thereto; and

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

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

8.14 NON-INSTALLED ENGINES AND PARTS

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

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

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

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

           (iii) acquired or financed by the Lessee and operated by the
                 Lessee on terms that ownership of that aircraft or engine,
                 as the case may be, pursuant to a lease,

                                    -46-

<PAGE>

                 conditional sale agreement or Security Interest is vested in
                 or held by any other person;

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

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

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

8.15  POOLING OF ENGINES AND PARTS

      The Lessee will not enter into nor permit any pooling agreement
      or arrangement in respect of an Engine or Part without the prior written
      consent of the Lessor and the Lender, such consent not to be unreasonably
      withheld in any case where an Engine or Part is leased, let on hire or
      otherwise made available by the Lessee (on terms conferring no more than
      a contractual right IN PERSONAM against the Lessee and not a right
      IN REM against such Engine or Part) pursuant to a normal pooling agreement
      customary in the airline industry and entered into in the ordinary course
      of the Lessee's business to which the Lessee is a party and:

      (a)  the other parties to which are reputable, solvent U.S. commercial
           air carriers (or, if the Aircraft has been subleased to a foreign air
           carrier in accordance with Clause 8.5, reputable, solvent U.S. or
           foreign commercial air carriers) or the manufacturers or suppliers
           of the Engine or Part(or other reputable, solvent organizations
           whose business includes the administration of and participation in
           such pooling agreements or arrangements); and

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

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

                                    -47-

<PAGE>

8.16  EQUIPMENT CHANGES

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

           (i)   is required by Lessor or Lender pursuant to Clause 12.3(d),

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

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

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

8.17 TITLE TO ENGINES AND PARTS

      (a)  Title to all engines and parts installed on the Aircraft, whether
           by way of replacement as the result of an Equipment Change or
           otherwise (except those installed pursuant to Clause 8.13(b) or
           8.13(c) above) will on installation, without further act, vest in
           the Lessor subject to this Agreement free and clear of all
           Security Interests. The Lessee will at its own expense take all
           such steps and execute, and procure the execution of, all such
           instruments that are necessary to ensure that title so passes to
           the Lessor and is subject to the Security Interest created by the
           Mortgage according to all applicable laws. At any time when
           requested by the Lessor, the Lessee will provide evidence to the
           Lessor's reasonable satisfaction (including the provision, if
           required, to the Lessor of one of more legal opinions) that title
           has so passed to the Lessor and is subject to the Security
           Interest created by the Mortgage.

      (b)  Except as referred to in Clause 8.16(b), any Engine or Part at any
           time removed from the Aircraft will remain the property of the Lessor
           until a replacement has been made in accordance with this Agreement
           and until title to that replacement has passed, according to
           applicable laws, to the Lessor subject to this Agreement 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 the Lessee free of Lessor Liens.

                                    -48-

<PAGE>

8.18  THIRD PARTIES

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

9.    INSURANCE

9.1   INSURANCES

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

9.2   REQUIREMENTS

      The Lessor's current requirements as to required Insurances are as
      specified in this Clause and in Part 1 of Schedule 4. Except for the
      amount of the Agreed Value, the Minimum Liability Coverage and the
      deductible under Lessee's hull and war risk insurance policies, the
      Lessor or the Lender may from time to time stipulate such other
      requirements for the Insurances as the Lessor or the Lender reasonably
      considers necessary to ensure that the scope and level of cover is
      maintained in accordance with the then prevailing industry practice in
      relation to aircraft of the same type as the Aircraft and in relation to
      operators of similar standing to the Lessee. In the event that the
      Lessor or the Lender proposes any such stipulation, Lessor or Lender
      shall notify the Lessee accordingly and the Lessor and/or its brokers
      will then consult in good faith with the Lessee and the Lessee's brokers
      (as for the time being approved by the Lessor and the Lender) with
      regard to such proposed stipulation. If, following the consultation, the
      Lessor and the Lender are satisfied that the stipulation should be made,
      the Lessee shall then comply with the stipulated requirements.

                                    -49-

<PAGE>

9.3   INSURANCE COVENANTS

      The Lessee shall:

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

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

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

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

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

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

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

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

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

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

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

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

                                    -50-

<PAGE>

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

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

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

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

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

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

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

9.4    FAILURE TO INSURE

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

      (a)   to pay the premiums due or to effect and maintain insurances
            satisfactory to it or otherwise remedy the Lessee's failure in
            such manner (including to  effect and maintain an "owner's
            interest" policy) as it considers appropriate. Any sums so
            expended by it will become immediately due and payable by the
            Lessee to such Indemnitee on demand (such demand being made as
            soon as reasonably practicable following the incurring of such
            expenditure), together with interest thereon at the Default Rate
            from the date of expenditure by it up to the date of
            reimbursement by the Lessee (before and after any judgment); and

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

                                    -51-

<PAGE>

9.5    CONTINUING INDEMNITY

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

9.6   APPLICATION OF INSURANCE PROCEEDS

      As between the Lessor and the Lessee:

      (a)  All insurance payments, up to the Agreed Value, received as the
           result of a Total Loss occurring during the Term will be paid to
           the Lender, so long as the Security Interest of the Mortgage
           remains in effect, and thereafter to the Lessor.

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

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

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

                                    -52-

<PAGE>

10.   INDEMNITY

10.1  GENERAL

      The Lessee shall defend, indemnify and hold harmless the Indemnitees, on
      an after-tax basis as set forth in Clause 5.5, from and against any and
      all claims, proceedings, losses, liabilities, suits, judgments, costs,
      expenses, penalties or fines (each a "CLAIM") regardless of when the same
      is made or incurred, whether during or after the Term (but not before):

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

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

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

      but excluding as to any Lessor Indemnitee or Lender  Indemnitee, as the
      case may be, any Claim to the extent that:

           (1)   with respect to a Lessor Indemnitee, it arises directly as
                 a result of the wilful misconduct or gross negligence of a
                 Lessor Indemnitee;

           (2)   with respect to a Lender Indemnitee, it arises directly as
                 a result of the wilful misconduct or gross negligence of a
                 Lender Indemnitee associated with the same Lender;

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

                                    -53-

<PAGE>

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

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

           (6)   it represents a Tax or loss of tax benefits (the Lessee's
                 liabilities for which, to the extent thereof, are set out in
                 Clauses 5.5, 5.6  and 5.8); provided, however, that this
                 exclusion shall not apply to gross-up or make-whole payments as
                 contemplated in Clause 5.8;

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

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

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

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

10.2 MITIGATION

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

                                    -54-

<PAGE>

           Lessee or, if the Claim is covered by Lessee's Insurances, the
           Lessee's insurers shall be entitled to select any counsel to
           represent it or them, the Lessor and such other Indemnitee in
           connection with any such action, subject in the case of Lessee to
           the approval of the Lessor and such other Indemnitee (such
           approval not to be unreasonably withheld) and any action taken by
           the Lessee shall be on a full indemnity basis in respect of the
           Lessor and such other Indemnitee.

      (b)  Any sums paid by the Lessee to the Lessor or any Indemnitee in
           respect of any Claim pursuant to Clause 10. 1 shall be paid
           subject to the condition that, in the event that the Lessor or such
           Indemnitee is subsequently reimbursed in respect of that Claim by
           any other person, the Lessor or such Indemnitee shall, provided no
           Default shall have occurred and be continuing, promptly pay to the
           Lessee an amount equal to the sum paid to it by the Lessee,
           including any interest on such amount to the extent attributable
           thereto and received by the Lessor or such Indemnitee, less any
           Tax payable by the Lessor or such Indemnitee in respect of such
           reimbursement.

10.3  DURATION

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

11.    EVENTS OF LOSS

11.1   TOTAL LOSS

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

      (b)  POST-DELIVERY: If a Total Loss occurs after Delivery, the Lessee
           will pay the Agreed Value to the Lender no later than 60 days
           after the Total Loss Date (the "SETTLEMENT DATE") unless the
           Aircraft is restored to the Lessor or the Lessee within that
           period (or, in the case of a Total Loss coming within paragraph
           (c) of the definition of Total Loss and involving the loss of the
           Lessor's title to the Aircraft, if both the Aircraft and the
           Lessor's title thereto are restored to the Lessor or, in the case
           of the Aircraft, to the Lessee and the Lender's rights under the
           Mortgage are fully restored). The receipt by the Lender, so long
           as the Security Interest of the Mortgage remains in effect, and
           thereafter by the Lessor of the insurance proceeds in respect of
           the Total Loss on or prior to the Settlement Date shall discharge
           the Lessee from its obligation to pay the Agreed Value to the
           Lessor pursuant to this sub-clause (b), provided such proceeds are
           not less than the Agreed Value. In the event that the insurance
           proceeds

                                    -55-

<PAGE>

              are paid initially to the Lessee and not to the Lender, they may
              be retained by the Lessee if the Lessee shall have paid the Agreed
              Value to the Lender, otherwise the Lessee shall pay the Agreed
              Value to the Lender not later than the next Business Day following
              receipt by the Lessee of such proceeds. In the event that the
              Lessee pays the Agreed Value to the Lessor in accordance with this
              sub-clause (b), the Lessor shall promptly assign to the Lessee its
              rights under the Insurances to receive the insurance proceeds in
              respect of the Total Loss to the extent that such proceeds shall
              not have been paid to the Lessee. Subject to the rights of any
              insurers or other third parties, upon irrevocable payment in full
              to the Lessor of that amount and all other amounts that may be or
              become payable to the Lessor or any other Person under this
              Agreement, the Lessor shall:

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

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

      (c)  ENGINE LOSS: Upon the occurrence of an Engine Loss (including, for
           the avoidance of doubt, at a time when the Engine is not installed
           on the Airframe) in circumstances in which there has not also
           occurred a Total Loss, the Lessee shall give the Lessor and the
           Lender written notice promptly upon becoming aware of the same and
           shall (unless the Lessor has received the insurance proceeds
           relating to such Engine Loss), within 60 days after the Engine
           Loss Date, convey or cause to be conveyed to the Lessor, as
           replacement for such Engine, title to a replacement engine that is
           in the same or better operating condition, has the same or greater
           value and utility as the lost Engine and that complies with the
           conditions set out in Clause 8.13(a). The Lessee shall, at the
           time of such conveyance, comply in all respects with Clause
           8.17(a) so that the replacement engine becomes an Engine,
           whereupon the leasing of the replaced Engine the subject of the
           Engine Loss shall cease and title to such replaced Engine shall
           (subject to any salvage rights of insurers) vest in the Lessee
           pursuant to Clause 8.17(b), free of Lessor Liens. If the Lessor or
           the Lender subsequently receives any insurance proceeds relating
           to such Engine Loss, the

                                    -56-

<PAGE>

                 Lessor shall promptly remit such proceeds or cause such
                 proceeds to be remitted to the Lessee. No Engine Loss with
                 respect to any Engine that is replaced in accordance with
                 the provisions of this Clause 11.1(c) shall result in any
                 increase or decrease in Basic Rent or the Agreed Value.
11.2  REQUISITION

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

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

      (b)  so long as no Default has occurred and is continuing, the Lessee
           will be entitled to any compensation payable by the
           requisitioning authority in respect of the Term. The Lessee will,
           as soon as practicable after the end of any such requisition (with
           the Term being extended if and to the extent that the period of
           requisition continues beyond the scheduled Expiry Date), cause the
           Aircraft to be put into the condition required by this Agreement.
           The Lessor will be entitled to all compensation payable by the
           requisitioning authority in respect of any change in the
           structure, state or condition of the Aircraft arising during the
           period of requisition, and the Lessor will apply such compensation
           in reimbursing the Lessee for the cost of complying with its
           obligations under this Agreement in respect of any such change,
           but so that, if any Default has occurred and is continuing, the
           Lessor may apply the compensation in or towards settlement of any
           amounts owing by the Lessee under this Agreement. All such sums
           shall be held by the Lender, so long as the Security Interest of
           the Mortgage remains in effect, and thereafter by the Lessor.

12.   RETURN OF AIRCRAFT

12.1  REDELIVERY

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

                                    -57-

<PAGE>

12.2 FINAL CHECKS

      Immediately prior to return of the Aircraft, Lessee shall perform the
      following at its sole cost and expense unless otherwise stated:

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

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

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

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

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

                                    -58-

<PAGE>

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

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

12.3 FINAL INSPECTION

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

      (b)  The Lessor and the Lender shall also be entitled, as part of the
           Final Inspection, to require the Lessee to perform an acceptance
           flight of up to three hours at the Lessee's cost (with the
           Lessor's and the Lender's representatives as on-board observers)
           and such further acceptance flights as may be necessary in the
           event that the first or subsequent flights do not confirm that the
           Aircraft complies with the requirements of this Agreement.

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

      (d)  Upon request by the Lessor or (so long as the Security Interest of
           the Mortgage is in effect) the Lender, the Lessee shall remove any
           Equipment Change and restore the Aircraft to its condition prior to
           that Equipment Change.

12.4 NON-COMPLIANCE

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

                                    -59-

<PAGE>

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

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

      During any extension of the Term pursuant to sub-clause (a), this
      Agreement will remain in full force and effect and the Lessee shall pay
      a rental on a PER DIEM them basis weekly in advance at a rate equal to
      125% of the Basic Rent in effect immediately before the Expiry Date;
      provided, however, that (i) Lessee shall not operate, or permit others
      to operate, the Aircraft after the Expiry Date except for acceptance
      flights pursuant to Clause 12.2 and a ferry flight to the Redelivery
      Location; and (ii) if the Expiry Date has occurred as a result of the
      exercise by Lessor of its Early Termination Option, during the first 60
      days of any extension of the Term pursuant to sub-clause (a), the
      Lessee shall pay a rental equal to 100% of the Basic Rent in effect
      immediately before the Expiry Date.

12.5 EXPORT DOCUMENTATION

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

12.6  ACKNOWLEDGEMENT

      Provided the Lessee has complied with its obligations under this
      Agreement, following redelivery of the Aircraft by the Lessee to the
      Lessor at the Redelivery Location, the Lessor will deliver to the Lessee
      an acknowledgment confirming that the Lessor is satisfied that the
      Aircraft is in the condition required by this Agreement and has been
      redelivered to the Lessor in accordance with this Agreement.

12.7  MAINTENANCE PROGRAM

      (a)  During the 60 day period preceding the scheduled Expiry Date and
           upon the Lessor's or the Lender's request, the Lessee will provide
           the Lessor and the Lender or their respective agents reasonable
           access to the Agreed Maintenance Program and the Aircraft
           Documents in order to facilitate the Aircraft's integration into any

                                    -60-

<PAGE>

           subsequent operator's fleet. The Lessor agrees that it will not
           disclose the contents of the Agreed Maintenance Program to any
           person or entity except to the extent necessary to monitor the
           Lessee's compliance with this Agreement and/or to bridge the
           maintenance program for the Aircraft from the Agreed Maintenance
           Program to another program after the Expiry Date.

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

12.8  STORAGE

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

13.   DEFAULT

13.1  EVENTS

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

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

                                      -61-

<PAGE>

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

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

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

      (e)  CROSS DEFAULT:

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

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

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

           provided always, in any such case, it shall not constitute an
           Event of Default under this Agreement if, in connection with
           Lessee"s one OR two principal working lines of credit/letters of
           credit facilities:

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

                                      -62-

<PAGE>

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

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

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

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

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

      (g)  INSOLVENCY:

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

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

      (h)  BANKRUPTCY AND SIMILAR PROCEEDINGS

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

                                      -63-

<PAGE>

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

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

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

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

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

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

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

                                      -64-

<PAGE>

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

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

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

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

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

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

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

                                      -65-

<PAGE>

13.2  RIGHTS

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

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

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

      (c)  either:

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

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

13.3  EXPORT

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

                                      -66-

<PAGE>

13.4  DEFAULT PAYMENTS

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

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

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

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

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

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

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

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<PAGE>

14.   ASSIGNMENT AND TRANSFER

14.1  NO ASSIGNMENT BY LESSEE

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

14.2  LESSOR ASSIGNMENT

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

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

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

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

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

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

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

                                      -68-

<PAGE>

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

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

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

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

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

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

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

                                      -69-

<PAGE>

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

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

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

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

14.3  GRANTS OF SECURITY INTERESTS

      (a)  The Lessee hereby consents to the Lessor's assignment of and grant
           of a security interest in the Lessor's right, title and interest
           in the Aircraft and this Agreement to SBCC contained in the
           Mortgage, and agrees that SBCC as "Lender" shall be entitled to
           rely on all representations and warranties made by Lessee in this
           Agreement or in any certificate or document furnished by Lessee in
           connection with this Agreement.

      (b)  The Lessor shall be entitled at any time after Delivery to grant a
           security interest in the Aircraft or its right, title and interest
           in this Agreement (each, an "ADDITIONAL MORTGAGE") in favor of any
           person (each, an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage
           may be a successor mortgage to the Security Interest granted to
           the Lender, or may be in addition to the Lender's Security
           Interest and previous Additional Mortgages and with a priority
           senior, equal or subordinate to the Lender's Security Interest and
           previous Additional Mortgages as the Lender and previous
           Additional Mortgagees may permit. In the case of any such grant by
           Lessor of an

                                      -70-

<PAGE>

           Additional Mortgage to an Additional Mortgagee in all or any
           portion of Lessor's rights, title and interest in and to the
           Aircraft and this Agreement, Lessee shall promptly, at the
           specific written request of Lessor and with Lessor paying all of
           Lessee's out-of-pocket costs and expenses:

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

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

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

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

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

                                      -71-

<PAGE>

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

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

14.4  SALE AND LEASEBACK BY LESSOR

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

14.5  FURTHER ACKNOWLEDGMENTS

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

                                      -72-

<PAGE>

14.6  CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT

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

15.   MISCELLANEOUS

15.1  WAIVERS, REMEDIES CUMULATIVE

      The rights of either party under this Agreement:

      (a)  may be exercised as often as necessary;

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

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

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

15.2  DELEGATION

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

15.3  APPROPRIATION

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

                                      -73-

<PAGE>

15.4  CURRENCY INDEMNITY

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

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

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

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

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

15.5  PAYMENT BY THE LESSOR

      The Lessor will not be obliged to pay any amounts to the Lessee under this
      Agreement so long as any sums which are then due from the Lessee under
      this Agreement remain unpaid or a Default has occurred and is continuing,
      and any such amounts which would otherwise be due will fall due only if
      and when the Lessee has paid all such sums and no Default is continuing.

15.6 SEVERABILITY

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

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

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

                                      -74-

<PAGE>

15.7  REMEDY

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

15.8 EXPENSES

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

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

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

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

15.9  TIME OF ESSENCE

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

15.10 NOTICES

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

                                      -75-

<PAGE>

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

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

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

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

                       with copies to:      Sanwa Business Credit Corporation
                                            One South Wacker Drive
                                            Chicago, Illinois 60606
                                            Attention: Senior Vice President,
                                                         Transportation Finance
                                            Telefax No.: 312-853-1458

                                            Vedder, Price, Kaufman & Kammholz
                                            222 N. LaSalle Street
                                            Chicago, Illinois 60601
                                            Attention: Dean N. Gerber, Esq.
                                            Telefax No.: 312-609-5005

           (ii)  if to the Lessee, to it at:  371 Aokea Street
                                              Honolulu, Hawaii 96819
                                              Attention: Senior Vice President,
                                                         Finance and Planning,
                                                         and Chief Financial
                                                         Officer

                                              Telefax No.: 1-808-833-3100

                                      -76-

<PAGE>

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

15.11 LAW AND JURISDICTION

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

      (b)  The Lessor and the Lessee hereby irrevocably agree to submit to the
           non-exclusive jurisdiction of the United States District Court for
           the Southern District of New York and the Supreme Court of the
           State of New York located in the Borough of Manhattan, County of
           New York (the "AGREED COURTS") in the event of any claims or
           disputes arising under this Agreement. Such submission to
           jurisdiction shall not be construed so as to limit the right of
           either party to take proceedings against the other in whatsoever
           jurisdiction shall to it seem fit nor shall the taking of
           proceedings in any one or more jurisdictions preclude the taking
           of proceedings in any other jurisdiction, whether concurrently or
           not. Final judgment against Lessor or Lessee in any such suit
           shall be conclusive and may be enforced in any other jurisdiction
           by suit on the judgment or as otherwise permitted by applicable
           law, a certified or true copy of which shall be conclusive
           evidence of the facts and of the amount of any indebtedness or
           liability of Lessor or Lessee. Each of Lessor and Lessee hereby
           irrevocably waives any objection which it may now or hereafter
           have to the laying of venue in any suit, action or proceeding
           brought in any Agreed Court, and irrevocably waives any claim that
           any such suit, action or proceeding brought in any Agreed Court
           has been brought in an inconvenient forum.

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

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

                                               -77-

<PAGE>

15.12 SOLE AND ENTIRE AGREEMENT

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

15.13 INDEMNITIES

      All rights expressed to be granted to any successors, assigns,
      shareholders, members, Affiliates, partners, contractors, directors,
      managers, officers, servants, agents and employees of the Lessor are given
      to the Lessor as agent for and on behalf of such Lessor Indemnitee, and
      all rights expressed to be granted to any successors, assigns,
      shareholders, Affiliates, partners, contractors, directors, officers,
      servants, agents and employees of the Lender are given to the Lender as
      agent for and on behalf of such Lender Indemnitee.

15.14 COUNTERPARTS

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

                                  [SIGNATURE PAGE FOLLOWS]

                                      -78-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 809 on
the date shown at the beginning of this Agreement.

                                                  SIGNED on behalf of
                                                  ACG ACQUISITION XII LLC

                                                  By: /s/ Benjamin Jung
                                                      ------------------------
                                                  Name: Benjamin Jung
                                                  Title: Manager

                                                  SIGNED on behalf of
                                                  ALOHA AIRLINES, INC.

                                                  By:_________________________
                                                  Name:
                                                  Title:

                                                  By:_________________________
                                                  Name:
                                                  Title:

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 809 on
the date shown at the beginning of this Agreement.

                                                  SIGNED on behalf of
                                                  ACG ACQUISITION XII LLC

                                                  By:_________________________
                                                  Name:
                                                  Title:

                                                  SIGNED on behalf of
                                                  ALOHA AIRLINES, INC.

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

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

<PAGE>

                                   SCHEDULE 1

                                     PART 1

                             AIRCRAFT SPECIFICATION

IDENTIFICATION:

<Table>
         <S>                          <C>
         Aircraft Type                Boeing B737-2Q9
         Registration                 N809AL
         Serial Number                       21720
         Date of Manufacture          January 1979
</Table>

WEIGHT DATA:

<Table>
         <S>                          <C>
         Maximum Taxi Weight           120,000 lbs.
         Maximum Takeoff Weight        119,500 lbs.
         Maximum Landing Weight        105,000 lbs.
         Maximum Zero Fuel Weight       95,000 lbs.
         Fuel Capacity                  34,592 U.S. Gals.
</Table>

AIRFRAME AND INTERIOR EQUIPMENT:

<Table>
         <S>                <C>    <C>           <C>
         Galleys            1      Locations:    G-1 forward
         Lavatories         3      Locations:    1 (deactivated) forward; 2 (1 deactivated) aft
         Air Stairs         1      Locations:    1 forward
         Passenger Seats    116    Types:        Seats manufactured by PTC (formerly known
                                                           as UOP), model nos. 860 and/or 861

         Overhead bins      Carry All bins
         Cargo Door
</Table>

ENGINES:

<Table>
         <S>                <C>            <C>
         Position           No. 1          No. 2
         Type               JT8D-15        JT8D-15
         Serial No.         P688676        P688677
</Table>

APU:

<Table>
         <S>                <C>
         Model:             Garret GTCP 85-129
         Serial No.         P35548
</Table>

                                     -80-

<PAGE>

LANDING GEAR:

<Table>
          <S>           <C>            <C>             <C>
          Position      Nose           Left Main       Right Main
          Type
          Serial No.    R9156-901      1249P663        0736P406
</Table>

MAJOR AVIONICS EQUIPMENT:

<Table>
<Caption>
          Description                 Manufacturer                Part No.
          -----------                 ------------                --------
          <S>                         <C>                          <C>
          Flight Director             Sperry                       FD 109
          Air Data Computer           Honeywell                    HG480B20
          VHF                         Collins                      618M-3
          Selcal                      Motorola                     NA134D2
          CVR                         Fairchild                    A-100A
          DFDR                        AlliedSignal                 980-4100-()
          ADF                         Collins                      51Y-()
          VHF Nav                     Collins                      51RV-4B
          DME                         Bendix/Collins               KDM-7000/860E-4
          LRRA                        Collins                      860F-4
          Marker Beacon               Collins                      61Z-4
          Weather Radar               Sperry                       P-90
          GPWS                        Sundstrand                   Mark VII
          ATC Transponder             Collins                      621A3
          Mode S Transponder          Bendix                       TRA-67
          TCAS                        Bendix                       TPA 81A
</Table>

                                     -81-

<PAGE>

                                    PART 2

                              AIRCRAFT DOCUMENTS

MANUALS

<Table>
<Caption>
Description                     Quantity                 Media
-----------                     --------                 -----
<S>                             <C>                      <C>
Maintenance Manual                  3                    Microfilm
Wiring Diagrams                     1                    Microfilm
Illustrated Parts Catalog           1                    Microfilm
Weight & Balance Manual             1                    Hard Copy
Rigging Document                    1                    Hard Copy
</Table>

TECHNICAL RECORDS

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

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

Engine Shop Visit history including disk sheets

Emergency Equipment Listing including location
Cabin Layout Drawing

RECORDS FOR:

       Last Compass Swing
       Last Altimeters Calibration
       Last ATC Transponder Calibration

                                     -82-

<PAGE>

                                  SCHEDULE 2

                         CERTIFICATE OF ACCEPTANCE 809

       This Certificate of Acceptance 809 is delivered on the date
       set forth in paragraph 1 below by Aloha Airlines, Inc. (the
       "LESSEE") to ACG Acquisition XII LLC (the "LESSOR") pursuant
       to Lease Agreement 809, dated May 21, 1997, between the Lessor
       and the Lessee (the "AGREEMENT"). Capitalized terms used but
       not defined in this Certificate of Acceptance 809 shall have
       the meaning given to such terms in the Agreement.

1.     DETAILS OF ACCEPTANCE

       The Lessee hereby confirms to the Lessor that the Lessee has
       at __:__ _m. H.S.T. on this ______ day of May, 1997, over
       international waters, accepted the following, in accordance
       with the provisions of the Agreement and the Annex:

       (a) Airframe: Boeing 737-2Q9 airframe, Manufacturer's Serial No. 21720
                and FAA Registration No. N809AL;

       (b) Engines: two Pratt & Whitney JT8D-15 Engines, bearing Manufacturer's
                Serial Nos. P688676 and P688677, each having 750 or more
                rated take-off horsepower;

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

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

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

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

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

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

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

                                     -83-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the date shown at the beginning of this Certificate.

                               SIGNED on behalf of
                               ACG ACQUISITION XII LLC

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

                               SIGNED on behalf of
                               ALOHA AIRLINES, INC.

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

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

                                     -84-

<PAGE>

                                                                         ANNEX 1

                        MAINTENANCE STATUS AT DELIVERY

                              DATE: MAY __, 1997

AIRFRAME TIME:

       Total Flight Hours
       Total Cycles

AIRFRAME LIMITS:

<Table>
       <S>                          <C>
       Type of Check:               C Check
       Check Interval:
       Time Since Last Check:
</Table>

ENGINE DATA:

<Table>
       <S>                                        <C>                  <C>
       Position                                   No. 1                No. 2
       Type                                       JT8D-15              JT8D-15
       Serial Number                              P688676              P688677

       Total Flight Hours:
       Total Cycles:
       Flight Hours Since Last Shop Visit:
       Cycles Since Last Shop Visit:
       Flight Hours to Next Hard Limit:
       Cycles to Next Hard Limit:
</Table>

APU:

<Table>
       <S>                   <C>
       Type:                 129H
       Serial Number:        P35548

       Total Flight Hours:
       Total Cycles:
       Flight Hours Since Last HSI Inspection:
       Cycles Since Last HSI Inspection:
       Flight Hours Remaining on Turbine and Compressor LLPs:
       Cycles Remaining on Turbine and Compressor LLPs:
</Table>

                                     -85-

<PAGE>

LANDING GEAR LIMITS:

<Table>
       <S>                         <C>         <C>         <C>
       Position:                   Nose        Left        Right
       Overhaul Interval:
       Time Since Overhaul:
       Time to Next Overhaul:
</Table>

                                     -86-

<PAGE>

                                  SCHEDULE 3

                       OPERATING CONDITION AT REDELIVERY

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

1.     GENERAL CONDITION

       The Aircraft will:

       (a) be clean by United States airline standards;

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

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

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

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

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

                                     -87-

<PAGE>

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

       (g) the Airframe shall have at least 75% of the Flight Hours, Cycles
           and calendar time (whichever is applicable and, if more than one
           are applicable, most limiting) remaining until the next block "D"
           check (or equivalent heavy maintenance check) under the Agreed
           Maintenance Program, and if the Flight Hours, Cycles or calendar
           time of the Airframe are less than 75% of the interval between "D"
           checks then the Lessee shall pay to the Lessor an amount equal to
           the product of (i) the number of Flight Hours, Cycles or calendar
           days (whichever is applicable and most limiting) by which the
           Airframe is less than 75% of the interval between "D" checks,
           multiplied by (ii) a fraction (1) the numerator of which is the
           average cost of a "D" check (including routine and non-routine
           items) for an airframe similar to the Airframe determined in
           accordance with the Appraisal Procedure and (2) the denominator of
           which is the number of Flight Hours, Cycles or calendar days
           (whichever is applicable and most limiting) between "D" checks;

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

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

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

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

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

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

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

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

                                     -88-

<PAGE>

2.     PARTS

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

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

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

3.     ENGINES

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

       (a) have a minimum of 4,000 Flight Hours and Cycles remaining to the
           next life limited part replacement and a minimum of 2,500 Flight
           Hours or Cycles remaining until the next scheduled hot section
           inspection under the Agreed Maintenance Program; provided,
           however, that in the event the Lessor exercises its Early
           Termination Option and pursuant thereto the Expiry Date occurs
           before the second anniversary of the Delivery Date, one Engine
           (the "Non-Conforming Engine") may have a minimum of 2,000 Flight
           Hours and Cycles remaining to the next life limited part
           replacement and a minimum of 2,000 Flight Hours and Cycles
           remaining to the next scheduled hot section inspection under the
           Agreed Maintenance Program;

       (b) be subject to the following financial adjustment: in the event
           that Lessor exercises its Early Termination Option and pursuant
           thereto the Expiry Date occurs before the second anniversary of
           the Delivery Date, to the extent that the number of Flight Hours
           or Cycles (whichever is more limiting) until the next life limited
           part replacement of any Engine on the Expiry Date is less than
           4,000, Lessee shall pay Lessor an amount (the "Engine Return
           Payment") computed as follows:

                      Engine Return Payment = [A minus B] x C

           where:

                                     -89-

<PAGE>

                      (i)    A = 4,000 minus the number of Flight Hours or
                             Cycles (whichever is more limiting) remaining
                             to the next life limited part replacement on
                             the Non-Conforming Engine;

                      (ii)   B = the number of Flight Hours or Cycles
                             (whichever is more limiting) until the next life
                             limited part replacement on the other Engine
                             (i.e., not the Non-Conforming Engine) minus 4,000;
                             provided however, if the difference is a negative
                             number, B shall be deemed to be zero, and further
                             provided that if the difference between A and B
                             (i.e., A - B) is a negative number, that difference
                             shall be deemed to be zero; and

                      (iii)  C = a fraction in which the numerator is the
                             average cost of the removal and overhaul
                             (including routine and non-routine items) for an
                             engine similar to such Engine determined in
                             accordance with the Appraisal Procedure and the
                             denominator is the number of Flight Hours or
                             Cycles, as the case may be, between scheduled
                             removals under the Agreed Maintenance Program;

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

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

4.     FUSELAGE, WINDOWS AND DOORS

       (a) the fuselage will not contain any dents, corrosion or abrasions
           that exceed the prescribed parameters under the SRM and shall be
           free of scab patches (except such scab patches as were present on
           the Aircraft on the Delivery Date) and loose, pulled or missing
           rivets;

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

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

5.     WINGS AND EMPENNAGE

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

                                     -90-

<PAGE>

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

       (c) wings will be free of fuel leaks.

6.     INTERIOR

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

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

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

7.     COCKPIT

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

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

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

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

8.     CARGO COMPARTMENTS

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

       (b) nets will be in good condition; and

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

9.     LANDING GEAR

       (a) The installed main and nose landing gear components and their
           associated actuators and parts will be cleared of all inspections
           for not less than 12 months.

                                     -91-

<PAGE>

       (b) The installed main and nose landing gear will have no more than
           7,500 Flight Hours since the last removal for inspection or
           overhaul under the Agreed Maintenance Program.

       (c) To the extent that the number of Flight Hours of any of the
           Landing Gear since its last removal for inspection or overhaul on
           the Expiry Date is more than the number of Flight Hours of such
           Landing Gear since its last removal for inspection or overhaul on
           the Delivery Date, then Lessee shall pay to Lessor an amount equal
           to the product of (i) the difference between the number of Flight
           Hours for such Landing Gear on the Delivery Date and on the Expiry
           Date, multiplied by (ii) $4.50 in the case of either of the main
           Landing Gear and $2.50 in the case of the nose Landing Gear.

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

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

10.    APU

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

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

       (c) To the extent that the Flight Hours since last removal for
           overhaul of the APU on the Expiry Date is more than the Flight
           Hours since last removal for overhaul of the APU on the Delivery
           Date, then Lessee shall pay to Lessor an amount equal to the
           product of (i) the difference between the number of Flight Hours
           for the APU on the Delivery Date and on the Expiry Date,
           multiplied by (ii) a fraction (1) the numerator of which is the
           average cost of a removal and overhaul of an auxiliary power unit
           similar to the APU determined in accordance with the Appraisal
           Procedure and (2) the denominator of which is the number of Flight
           Hours between such scheduled removals under the Agreed Maintenance
           Program.

11.    CORROSION

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

                                     -92-

<PAGE>

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

                                     -93-

<PAGE>

                                  SCHEDULE 4

                                    PART I

                           (INSURANCE REQUIREMENTS)

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

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

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

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

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

                                     -94-

<PAGE>

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

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

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

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

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

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

       (b) include a severability of interest clause;

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

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

4.     All Insurances will:

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

       (b) provide coverage on a worldwide basis subject to those territorial
           exclusions which are usual and customary for U.S. carriers
           similarly situated with Lessee in the case

                                     -95-

<PAGE>

           of War Risks and Allied Perils coverage which are advised to and
           approved by Lessor and Lender, such approval not to be
           unreasonably withheld;

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

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

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

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

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

       (h) include a services of suit clause.

                                     -96-

<PAGE>
                                    PART 2

                        (FORM OF BROKER'S UNDERTAKING)

                                     -97-

<PAGE>

                                    [LOGO]

THIS BROKER'S REPORT CANCELS AND REPLACES BROKER'S REPORT No. AQ-96-11-L(R)
                          DATED DECEMBER 27, 1996

                                                           NO. AQ-96-11-L(R-2)
DATE: May 21,1997

   TO; ACG Acquisition XII LLC ("Owner"/"Lessor")
              c/o Aviation Capital Group Corp.
              Three Stamford Landing
              46 Southfield Avenue
              Stamford, Connecticut 06902
              Ann. Managing Director

              Sanwa Business Credit Corporation ("Leader")
              One South Wicker Drive, 28th Floor
              Chicago, Illinois 60606

       Re:    Broker's Report
              Low Agreement 809 dated as of May 21, 1997 between ACG
              Acquisition XII LLC ("Owner"/"Lessor"), Sanwa Business
              Credit Corporation ("Lender") and Aloha Airlines, Inc.
              ("Lessee") (the "Lose) regarding One (1) B737-2Q9
              Aircraft, Registration Number N809AL, Serial Number
              21720 including two (2) Pratt 7 Whitney JT8D-15
              engines, Serial Numbers 698676 and 689677 (the
              "Engines") (hereinafter the "Aircraft")

To Whom It May Concern:

We hereby certify that as the independent aviation insurance brokers duly
appointed by Lessee, and acting on their behalf that, as of this date, the
insurance described In the attached Certificate of Insurance (No.
AQ-96-11(R-2)) complies with the requirements of the Lease as far as said
requirements relate to Coverages A, B and C described the said Certificate of
Insurance and that said insurance is in full force and affect on the Aircraft
and that all premiums due as of this date (per the accounting procedures
arranged between Lessee and ourselves) have been paid.

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

The perils, limits of liability, and insurers relating to the above mentioned
insurance, policies are more fully described in the attached Certificate of
Insurance, No. AQ-96-11(R-2).

<PAGE>

                                    [LOGO]

We undertake to advise you

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

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

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

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

The Above is given subject to:

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

      2.     Insurers, Right of cancellation all default in payment of
             premiums

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

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

Sincerely

/s/ [ILLEGIBLE]

Paul H. Yelavick
Director

<PAGE>

                                    PART 3

                       [FORM OF INSURANCE CERTIFICATE]

                                    -98-

<PAGE>

                                    [LOGO]

THIS CERTIFICATE OF INSURANCE CANCELS AND REPLACES CERTIFICATE OF INSURANCE NO.
                     AO-96-11(R) DATED DECEMBER 27, 1996

                           CERTIFICATE OF INSURANCE

                                                               No. AQ-96-11(R2)

This is to certify to:     ACG Acquisition XI LLC ("Owner"/"Lessor")
                           c/o Aviation Capital Group Corp.
                           Three Stamford Landing
                           46 Southfield Avenue
                           Stamford, Connecticut 06902
                           Attn: Managing Director

                           Sanwa Business Credit Corporation ("Lender")
                           One South Wacker Drive, 28th Floor
                           Chicago, Illinois 60606

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

NAMED INSURED:              Aloha Airlines, Inc.
NAMED INSURED'S ADDRESS:    Honolulu International Airport
                            P.O. Box 30028
                            Honolulu, HI 96920

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

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

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

<PAGE>

                                    [LOGO]

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

GEOGRAPHICAL LIMITS:      Worldwide*

* As respects Coverage B - War Risks Aircraft Hull Insurance, the
Geographical Limits of the policy are: Worldwide but excluding Africa,
Columbia, Peru, Iraq, Afghanistan, Former Republics of U.S.S.R. and Former
Republics of Yugoslavia.

* As respects Coverage C - AV.52C (War Risk Liability Clause), the
Geographical Limits of the policy are: Worldwide excluding Iraq.

<PAGE>

                                    [LOGO]

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

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

                         B)     As respects Aircraft Hulls: Agreed Value as
                                stated below. As respects Aircraft Spares
                                Parts: US$60,000,000.00 any one loss/any one
                                location, US$25,000,000.00 any one transit.
                                Subject to an annual aggregate of
                                US$150,000,000.00. Subject to all deductibles.

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

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

AIRCRAFT INSURED:               One (1) B737-2Q9 aircraft, Registration
                                Number: N809AL, Manufacturer's Serial Number:
                                21720, Agreed Value: US$7,400,000.00
                                inclusive of two (2) Pratt & Whitney JT8D-15
                                Engines, Manufacturers Serial Numbers 688576
                                and 688677 and any engine which becomes an
                                "Engine" as defined in the Lease (the
                                "Engines") while attached to the Aircraft or
                                removed from the Aircraft, but not replaced
                                (hereinafter, the "Aircraft").

<PAGE>

                                    [LOGO]

                                   SECURITY

                         AS RESPECTS COVERAGES A & C

<TABLE>
<CAPTION>
                                                                  QUOTA SHARE
                                                                 PARTICIPATION
INSURERS                                       POLICY NUMBER     (PART OF 100%)
--------                                       -------------     --------------
<S>                                            <C>               <C>
One or More Member Companies of
Associated Aviation Underwriters                 SP46-6093           30.00%

Certain Underwriters at Lloyds, London
and Various Insurance Company through
Sedgwick Aviation Limited                          V61175            28.00%

La Reunion Aerienne through La Concorde           96/23987           14.00%

Insurance Company of North America               ATA 016105          10.00%

Assurance France Aviation                          96.0969            8.00%

American Home Assurance Company
through AIG Aviation                            HL0532584-02          4.00%

Mutual Marine Office                           MM0-16017AV596         3.50%

Navigators Insurance Company through
Somerset Aviation                                A0070/01/96          2.50%
                                                                 --------------

TOTAL                                                               100.00%

</TABLE>

                          SEVERAL LIABILITY NOTICE

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

LSW 1001 (INSURANCE)

<PAGE>

                                    [LOGO]

                                   SECURITY

                            AS RESPECTS COVERAGE B

<TABLE>
<CAPTION>
                                                                  QUOTA SHARE
                                                                 PARTICIPATION
INSURERS                                       POLICY NUMBER     (PART OF 100%)
--------                                       -------------     --------------
<S>                                            <C>               <C>
Certain Underwriters at Lloyds, London
and Various Insurance Company through
Sedgwick Aviation Limited                          V61176            44.50%

Navigators Insurance Company
through Somerset Aviation                        W0070/01/96         25.00%

La Reunion Aerienne through
La Concorde                                       96/23987           14.00%

Mutual Marine Office                           MM0-16018AW596         8.50%

Assurance France Aviation                          96.0991            8.00%
                                                                 --------------

TOTAL                                                                  100%

</TABLE>

                          SEVERAL LIABILITY NOTICE

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

LSW 1001 (INSURANCE)

<PAGE>

                                    [LOGO]

                              SPECIAL PROVISIONS

Solely as respects coverages A, B and C and solely as respects the Lease
Agreement 809 dated as of May 21, 1997 between ACG Acquisition XII LLC
("Owner"/"Lessor"). Sanwa Business Credit Corporation ("Lender") and Aloha
Airlines, Inc. ("Lessee") (the "Lease) regarding the Aircraft, subject to
policy terms, conditions, limitations, deductibles, warranties and exclusions
the following provisions apply:

I.     SOLELY AS RESPECTS COVERAGES A AND B:

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

       2.     Hull All Risks insurers and Hult War Risks and Allied Perils
              insurers agree to a 50/50 claims settlement provision per the
              terms of AVS 103 (or its equivalent).

       3.     Underwriters am not entitled to replace the Aircraft in the
              event of a Total Lost of the Aircraft.

II.    SOLELY AS RESPECT COVERAGE C:

       1.     Lender, Owner/Lessor and their respective successors and
              assigns and their respective shareholders, affiliates,
              susidiaries, directors, officers, employees, members, managers,
              agents and indemnitees, and 1980 Aircraft Investors, a
              California Limited Partnership (Flit "Partnership"). First
              Security Bank, National Association. as owner trustee f/b/o the
              Partnership, each United partner of the Partnership, Polaris
              Investment Management Corporation, Polaris Aircraft Leasing
              Corporation and GE Capital Aviation Services, Inc.
              (collectively, the "Seller Entities") are included as
              Additional Insureds ("the Additional Insureds") as their
              respective interests my appear, warranted no operational
              interest. However, no

<PAGE>

                                    [LOGO]

              party shall be included as an Additional Insured as respects
              its legal liability as; manufacturer, repairer, supplier or
              servicing agent of the Aircraft or any part thereof.

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

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

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

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

       1.     Insurers waive their rights to any set-off or counter claim or
              any other deduction, whether by attachment or otherwise, in
              respect of my liability to the Additional Insureds.

       2.     The Additional Insured have no responsibility for premiums,
              commissions, assessments or calls.

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

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

<PAGE>

                                    [LOGO]

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

       6.     Insurers note the existence of the Lease and acknowledge ACG
              Acquisition XII LLC as Owner of the Aircraft and that the
              Aircraft is subject to the Lease and the Mortgage (as defined
              in the Lease).

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

DATE OF ISSUE                             SEDGWICK AVIATION, NORTH AMERICA

                                          [ILLEGIBLE]
                                          -------------------------------------
MAY 21, 1997                             AUTHORIZED REPRESENTATIVE

<PAGE>

                                 SCHEDULE 5

                            FORM OF LEGAL OPINION

                                      -99-

<PAGE>

                                                                       [LOGO]

  ___________________________,  1997

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

  SANWA BUSINESS CREDIT CORPORATION
  One South Wacker Drive, 28th Floor
  Chicago, Illinois 60606

  Re:   LEASE AGREEMENT 809 dated as of _____________________, 1997 ("Lease
        Agreement") between ACG ACQUISITION XII LLC ("Lessor") and ALOHA
        AIRLINES, INC. ("Lessee") relating to one (1) The Boeing Company
        Model 737-2Q9 Aircraft, bearing manufacturer's serial no. 21720 and
        U.S. registration no. N809AL, together with two (2) Pratt & Whitney
        Model JT8D-15 engines bearing engine manufacturer's serial nos.
        P688676 and P688677 (the "Aircraft").

  Gentlemen:

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

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

         1.     the Lease Agreement; and

         2.     the Acceptance Certificate dated as of ______________, 1997
                executed by Lessee;

  The documents listed above collectively referred to as the "Operative
  Documents." Except as otherwise expressly stated herein, words and
  expressions used herein shall bear the same meanings as defined in the
  Operative Documents.

  In rendering the opinions expressed below, we have examined the (a) the
  Operative Documents, (b) the Certificate of incorporation and By-Laws of
  Lessee, (c) certain certificates executed by officers of Lessee and (d)
  other documents, in our judgment and to our knowledge, necessary or
  appropriate to examine to enable us to give the opinions expressed below.

  Having reviewed the foregoing described documents, and having regard to the
  relevant laws of the State of Hawaii, the United States of America, and the
  general corporate laws of the State of Delaware it is our opinion that:

A LAW CORPORATION - SUITE 850, DAVIES PACIFIC CENTER, 841 BISHOP STREET,
HONOLULU, HAWAII 96813 - (808) 522-5133 - FACSIMILE: (808) 522-5144

<PAGE>

                                                                       [LOGO]

 ACG ACQUISITION XII LLC
 SANWA BUSINESS CREDIT CORPORATION
 ______________, 1997
 Page -2-

        A.     Lessee (i) is qualified to do business in the State of Hawaii
               as a foreign corporation; (ii) to our knowledge and without
               any inquiry except review of a certification as to the
               following provided by Lessee, is qualified to do business in
               all other jurisdictions in which the nature of its business or
               its properties requires it to be qualified, (iii) presently
               maintains its principal place of business and chief executive
               office in Honolulu, Hawaii, (iv) has full power to carry on
               its business as it is now being conducted and to enter into,
               legally bind itself by, and perform its obligations under the
               Operative Documents and (v) to our knowledge and without any
               inquiry except review of a certification as to the following
               provided by Lessee, has complied with all material statutory
               and other requirements relative to its businesses;

        B.     To our knowledge and without any inquiry except review of a
               certification as to the following provided by Lessee, (i) all
               consents, resolutions and authorizations necessary or
               advisable in order for Lessee to enter into the Operative
               Documents and to lease the Aircraft in accordance with the
               terms and conditions of the Operative Documents have been
               obtained, and (ii) no further consents or authorizations are
               necessary for the lease of the aircraft by Lessee pursuant to
               the provisions of the Operative Documents and for the
               performance by Lessee of all of its obligations pursuant to
               the provisions of the Operative Documents;

        C.     The Operative Documents (i) constitute valid and binding
               obligations of Lessee, enforceable against Lessee in
               accordance with their respective terms, (ii) are in full force
               and effect, and (iii) the provisions of the Operative
               Documents with respect to choice of substantive law to govern
               the interpretation and enforcement of such Operative Documents
               and consent to jurisdiction and choice of forum in connection
               with such interpretation and enforcement are legal, valid and
               binding; however, the state and federal courts in the state of
               Hawaii may not apply the procedural law, including without
               limitation, law relating to remedies or provisional remedies,
               of a non-forum state, such as, without limitation, New York;

                                                             A LAW CORPORATION

<PAGE>

                                                                       [LOGO]

   ACG ACQUISITION XII LLC
   SANWA BUSINESS CREDIT CORPORATION
    ______________, 1997
   Page -3-

          D.     The execution and delivery of and the performance of the
                 provisions of the Operative Documents and of the
                 transactions contemplated thereby do not contravene any of
                 the charter documents (including the certificate of
                 incorporation, and by-laws) of Lessee; and to our knowledge
                 and without any inquiry except review of a certification as
                 to the following provided by Lessee, the execution and
                 delivery of and the performance of the provisions of the
                 Operative Documents and of the transactions contemplated
                 thereby and hereby do not contravene in any material respect
                 any applicable law, regulation, decree, order, permit or
                 contractual or other restriction now existing and binding on
                 Lessee or on any of the properties of Lessee;

          E.     To our knowledge and without inquiry except review of a
                 certification as to the following provided by Lessee, (i)
                 there are no outstanding judgments against Lessee and (ii) no
                 action, claim, suit or proceeding pending or threatened
                 (including, but not limited to, tax liens or tax actions)
                 against or affecting Lessee or any of the property of Lessee
                 before any court, board of arbitration or administrative
                 agency which could reasonably be expected to result in any
                 material adverse change in the business or condition
                 (financial or otherwise) of Lessee;

          F.     To our knowledge and without inquiry except review of a
                 certification as to the following provided by Lessee, Lessee
                 is not in default under any agreement to which it is a party
                 or by which it may be bound, nor in default of any kind in
                 respect of any financial commitment or obligation (including
                 obligations under guarantees) which could have a material
                 adverse effect on the ability of Lessee to perform its
                 obligations under the Operative Documents nor is there any
                 fact which by giving of notice or by lapse of time or
                 otherwise might constitute such default by Lessee;

          G.     None of the Operative Documents or any other document
                 executed in connection with the Operative Documents or
                 contemplated thereby nor any filing required or permitted
                 thereunder is subject to any registration tax, any stamp
                 duty or similar tax;

          H.     To our knowledge and without inquiry except for review of a
                 certification as to the following provided by

                                                             A LAW CORPORATION

<PAGE>

                                                                       [LOGO]

  ACG ACQUISITION XII LLC
  SANWA BUSINESS CREDIT CORPORATION
   ______________, 1997
  Page -4-

                Lessee, Lessee has furnished Lessor and Sanwa business credit
                Corporation with consolidated financial statements of Aloha
                Airgroup, Inc., the corporate parent of Lessee, reflecting the
                financial results of Aloha Airgroup, Inc. and its subsidiaries
                (including Lessee) as of December 31, 1996.

          I.    Lessee is (i) a "United States citizen" as that term is used
                and defined in Section 40102(a)(15) of Title 49 of the
                United States Code, and (ii) a duly certified United States
                Air Carrier pursuant to the provisions of 14 C.F.R. 121;

         J.     To our knowledge and without inquiry except for review of a
                certification as to the following provided by Lessee, no
                written information given by Lessee in relation to the
                Operative Documents contains any misstatement of fact or omits
                to state a fact which would be adverse to the interest of
                Lessor or Sanwa Business Credit Corporation or which would be
                necessary to make any statement or representation or warranty
                contained herein or therein not misleading;

         K.     To our knowledge and without inquiry except for review of a
                certification as to the following provided by Lessee, there has
                occurred no event which, with the giving of notice or lapse of
                time or both, would constitute an Event of Default or Default
                under the Operative Documents;

         L.     To our knowledge and without inquiry except for review of a
                certification as to the following provided by Lessee, Lessee
                does not do business under any assumed or trade names;

         M.     Except for the filing of appropriate financing statements
                (UCC-1s) with the Bureau of Conveyances, State of Hawaii and
                the filing of the Lease Agreement with the Federal Aviation
                Administration, no further actions are necessary to record or
                perfect Lessor's interest in the Lease in the United States
                or in the State of Hawaii;

          N.    The Operative Documents do not violate any law relating to
                the charging, contracting for or payment or collection of
                interest or the like; and

                                                             A LAW CORPORATION

<PAGE>

                                                                       [LOGO]

 ACG ACQUISITION XII LLC
 SANWA BUSINESS CREDIT CORPORATION
  ______________, 1997
 Page -5-

        0.     In the event that Lessee files a petition for relief under
               Chapter 11 of the United States Bankruptcy Code, as amended,
               or has such a petition filed against it, Lessor and Sanwa
               Business credit corporation by virtue of the assignment of
               Lessor's interest in the Aircraft and Lease will be entitled
               to the benefits of Section 1110 of Title 11 of the United
               States Code.

 The opinions expressed above are qualified to the extent that:

        1.     We are members of the Bar of the State of Hawaii and do not
               hold ourselves out as being conversant with, and express no
               opinion as to, the laws of any jurisdiction other than those
               of the State of Hawaii, the United States of America, and the
               general corporate laws of the State of Delaware.

        2.     With regard to the opinion set forth in subpart A above, we
               are relying, in part, on the opinions rendered by Shearman &
               Sterling to Lessor and Lender in that certain letter dated
               _____________, 1997 and have made no inquiry into the accuracy
               of the opinions set forth in that letter; provided, however,
               that such reliance is limited to the specific opinions set
               forth in that letter.

        3.     With regard to the opinion set forth in subpart I above, we
               are relying, in part, on the opinions rendered by Squire
               Sanders & Dempsey to Aloha Airlines, Inc, in that certain
               letter dated January 14, 1997 addressed to Aloha Airlines,
               Inc. (a copy of which is appended hereto) and have made no
               inquiry into the accuracy of the opinions set forth in that
               letter; provided, however, that such reliance is limited to
               the specific opinions set forth in that letter.

        4.     The opinions expressed herein are solely for your benefit and
               may not be relied upon in any manner or for any purpose by any
               other person.

        5.     In conducting our examination, we have assumed the genuineness
               of all signatures (other than the signatures of Lessee), the
               correctness of all certificates, the authenticity of all
               documents submitted to us as originals, the conformity to
               original documents of all documents submitted to us as
               certified or photostatic copies and the authenticity of

                                                             A LAW CORPORATION

<PAGE>

                                                                       [LOGO]

 ACG ACQUISITION XII LLC
 SANWA BUSINESS CREDIT CORPORATION
  ______________, 1997
 Page -6-

               the originals of such copies, and the accuracy and
               completeness of all records made available to us by Lessee. In
               making our examination of documents and instruments, we have
               assumed that each party to such documents and instruments
               (other than Lessee and its affiliates) has: (i) the power and
               capacity to enter into and perform all its obligations under
               such documents and instruments, (ii) duly authorized all
               requisite action with respect to such documents and
               instruments, and (iii) duly executed and delivered such
               documents and instruments.

        6.     The opinions expressed above are qualified to the extent that
               (i) enforceability of the operative Documents and transactions
               contemplated thereby may be limited by bankruptcy, insolvency,
               reorganization, moratorium or similar laws of general
               application from time to time affecting the rights of
               creditors, lessors and secured parties generally and providing
               relief for debtors; and (ii) a particular court may refuse to
               grant certain equitable or legal remedies, including without
               limiting the generality of the foregoing, specific performance
               or foreclosure, with respect to the enforcement of any
               provisions of the operative Documents.

        7.     This opinion letter is limited to the matters stated herein
               and no opinion may be implied or inferred beyond the matters
               expressly stated herein.

        8.     The opinions given herein are as of the date hereof and we
               assume no obligation to update or supplement such opinions to
               reflect any facts or circumstances which may hereafter come to
               our attention or any changes in law which may hereafter occur.

 Very truly yours,

 CHAR SAKAMOTO ISHII LUM & CHING

 /s/ Elizabeth Ann Ishii
 -----------------------
 Elizabeth Ann Ishii

 cc:    Ms. Brenda F. Cutwright
        Mr. James M. King
        Mr. Timothy Ng

                                                             A LAW CORPORATION

<PAGE>

<Table>

<S>                                 <C>                                    <C>

                                    SQUIRE, SANDERS & DEMPSEY
                                               LLB
TELEPHONE (202) 626-6600                COUNSELLORS AT LAW                 DIRECT DIAL NUMBER

[ILLEGIBLE]                      1201 PENNSYLVANIA AVENUE, N.W.

TELEPHONE (202) 626-5720                   P.O. BOX 407                    202/626-6651
                                     Washington, D.C. 200440-407

                                          January 14, 1997
</Table>

VIA TELECOPIER 808/836-7472

Mr. Timothy Ing
Director, Development and Analysis
Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Re:  ALOHA AIRLINES, INC. AND ISLANDAIR, INC. REINCORPORATION IN DELAWARE

Dear Mr. Ing:

     Aloha Airlines, Inc. ("Aloha") and its sister corporation, IslandAir,
Inc. ("IslandAir") have requested our opinion on whether the change of the
state of incorporation for both Aloha and IslandAir will require the U.S.
Department of Transportation ("DOT") or the Federal Aviation Administration
("FAA") to reissue or otherwise amend the economic operating authority issued
by the DOT to Aloha and IslandAir or the air carrier certificates issued by
the FAA to Aloha and IslandAir. Except for the communication which has
already been sent to the DOT's Office of General Counsel and the possible
exception of Aloha and IslandAir simply advising their respective Principal
Operations Inspectors in Honolulu by letter that Aloha and IslandAir have
been reincorporated in the State of Delaware, the Offices of the General
Counsel of the DOT and of the Chief Counsel of the FAA have advised the
undersigned that no application or other formal document has to be filed with
either the DOT or the FAA.

     On the basis of our conveying to the DOT's Office of General Counsel the
information received from you that the name, assets, liabilities, directors,
officers, key personnel and shareholders of both Aloha and IslandAir will

<PAGE>

Mr. Timothy Ing
January 14, 1997
Page 2

remain unchanged by reason of this change in their state of incorporation,
DOT's Office of General Counsel has stated that the undersigned need only
send such Office a letter confirming the fact of the continuation of the
status quo with respect to each of the just described elements except for the
state of incorporation. That letter was sent on December 26, 1996.

     In our discussion with the FAA's Office of Chief Counsel, the
undersigned was told that no formal communication to the FAA was required,
but that, out of an abundance of caution, Aloha and IslandAir may wish to
send letters to their respective Principal Operations Inspectors in Honolulu
simply informing these FAA employees of the change in the state of
incorporation. It is the undersigned's understanding that such letters are in
preparation and will shortly be sent.

     Even apart from the advice received from the Offices of General Counsel
and Chief Counsel of the DOT and FAA, respectively, the undersigned had also
concluded and so advised you that no application or other formal process
would be required to preserve the legal validity of the economic operating
authority and air carrier certificates previously issued to Aloha and
IslandAir. The DOT and FAA have traditionally only evidenced interest in
matters such as reincorporation when they are also accompanied by other
substantial changes in the ownership, management, financial condition or name
of the air carrier. On the basis of the information conveyed to us by your
office, we understand that that did not occur in this instance and thus no
application or other formal process is required.

     The undersigned understands that the firm of Char, Sakamato, Ishii and
Lum has requested and intends to rely on this opinion. The undersigned agrees
that this opinion may be shared with and relied on by Char, Sakamato, Ishii
and Lum.

                                       Very truly yours,

                                       /s/ Marshall S. Sinick
                                       ----------------------
                                       Marshall S. Sinick

MSS/nlh

<PAGE>

                                  SCHEDULE 6
                           FORM OF LETTER OF CREDIT

                                    -100-

<PAGE>

                         [GRAPHIC] First Hawaiian Bank
                             International Banking
                                 P.O. Box 3200
                             Honolulu, Hawaii 98847

                                  May 20, 1997

BENEFICIARY:

Sanwa Business Credit Corporation
Attention: Senior Vice President, Transportaion Finance
One South Wacker Drive
Chicago, IL 60606

Gentlemen:

          Effective May 21, 1997, we hereby establish our Irrevocable Standby
Letter of Credit No. S/B 970039 to Sanwa Business Credit Corporation
("Lender") in accordance with the terms of that certain Security Agreement
(21720) dated as of May 1, 1997 between Lender and Lessor, available by your
draft(s) on First Hawaiian Bank, International Banking, Honolulu, Hawaii at
sight for the account of Aloha Airlines, Inc., P.O. Box 30028, Honolulu,
Hawaii 96820, up to an aggregate amount of U.S.$228,000.00 (Two Hundred
Twenty-Eight Thousand United States Dollars) accompanied by:

              1)    A statement purportedly signed by a duly authorized officer
                    of Sanwa Business Credit Corp. certifying:

                    "An "Event of Default" has occurred and is continuing
                    under that certain Lease Agreement 809 dated as of
                    _______, 19__, by and between Aloha Airlines, Inc. and
                    ACG Acquisition XII LLC ("Lessor"), as assigned to Lender
                    in accordance with the terms of that certain Security
                    Agreement (21720) dated as of May 1, 1997 between Lender
                    and Lessor."

              2)    This Letter of Credit.

         Payment of amounts under this Letter of Credit shall be made in full
without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable
to the Lessor or the Lender by the Lessee have been irrevocably paid in full,
we shall not by virtue of this Letter of Credit be subrogated to any of the
Lessor's or the Lender's rights or claim in competition with the Lessor or
the Lender against the Lessee.

         It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year from the present or each future expiration date unless at least thirty
(30) days prior to any such expiry date, we shall notify you in writing by
certified mail at the above address, that we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us at sight
accompanied by this Letter of Credit and your written certification stating:

<PAGE>

Aloha Airlines, Inc.
S/B 970039
Page 2

              "Sanwa Business Credit Corporation has received a notice of
              non-renewal from First Hawaiian Bank, Honolulu, Hawaii to its
              Letter of Credit No. S/B 970039."

         Partial drawings permitted.

         All drafts must bear the clause "Drawn under Credit No. S/B 970039
of First Hawaiian Bank, Honolulu, Hawaii dated May 20, 1997."

         This Letter of Credit is transferable only by Beneficiary. Notice of
such Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, P.O. Box 3200, Honolulu, Hawaii 96847.

         All banking charges relating to this Letter of Credit are for the
account of the Aloha Airlines, Inc.

         Alternatively, drawings may be sent via fax to our International
Banking at Fax No. (808) 525-5791, originals to follow by mail. Drawings by
fax or by presentment of original documents must be received by First
Hawaiian Bank, International Banking on or before 3:00 P.M. Hawaii Standard
Time on December 31, 1997, the expiration date or any automatically extended
date.

         Except as otherwise expressly stated, this Credit is subject to the
"Uniform Customs and Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.

         We hereby engage with you that all drafts drawn under and in
compliance with the terms and conditions of this Credit shall be duly honored
if drawn and presented on or before December 31, 1997, the expiration date,
or any automatically extended date, at our International Banking counters in
Honolulu, Hawaii.

                                       Sincerely,

                                       FIRST HAWAIIAN BANK

/s/ [ILLEGIBLE]                        /s/ [ILLEGIBLE]
------------------------------------   ------------------------------------
  Authorized Signature                   Authorized Signature

<PAGE>

                                       SCHEDULE 7

                          FORM OF SEMI-ANNUAL STATUS REPORT

<TABLE>
<CAPTION>

        AIRCRAFT TYPE                  REG. MARK       SERIAL NO.         MONTH ENDING
<S>     <C>                            <C>             <C>                <C>
        Boeing 737-2Q9                  N809AL           21720              ..........

1.      AIRCRAFT UTILIZATION:

(a)     Airframe Total Flight Hours                    .............................

(b)     Airframe Total Cycles                          .............................

(c)     Airframe Flight Hours for Month                .............................

(d)     Airframe Flight Cycles for Month               .............................

2.      POWERPLANT STATUS:                                NO.1                NO.2

(a)     Serial Nos. of Delivered Engines                  ......              ......

(b)     Serial Nos. of Replacement Engines                ......              ......
        (if applicable)

(c)     Serial Nos. of Installed Engines                  ......              ......
        (if different from (a) or (b) above)

(d)     Current Location of Delivered or                  ......              ......
        Replacement Engines (as applicable)
        (if not installed on Airframe)

(e)     Total Time Since New of Delivered                 ......              ......
        or Replacement Engines (as applicable)

(f)     Total Cycles Since New of Delivered               ......              ......
        or Replacement Engines (as applicable)

</TABLE>

                                            -101-

<PAGE>

<TABLE>

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

(g)     Total Flight Hours for the Month for           ......              ......
        each Delivered or Replacement Engine
        (as applicable)

(h)     Total Cycles for the Month for each            ......              ......
        Delivered or Replacement Engine
        (as applicable)

(i)     Serial No. of Delivered APU                        ........

(j)     Serial No. of Replacement APU                      ........
        (if applicable)

(k)     Serial No. of Installed APU                        ........
        (if different from (a) or (b) above)

(l)     Current Location of Delivered or                   ........
        Replacement APU (as applicable)
        (if not installed on Airframe)

(m)     Total Time Since New of Delivered                  ........
        or Replacement APU (as applicable)

(n)     Total Cycles Since New of Delivered                ........
        or Replacement APU (as applicable)

(o)     Total Hours for the Month for                      ........
        Delivered or Replacement APU
        (as applicable)

(p)     Total Cycles for the Month for                     ........
        Delivered or Replacement APU
        (as applicable)

</TABLE>

3.      ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:

(a)     Routine Checks (A and above) performed during Month:

(b)     Airworthiness Directives complied with during Month:

                                    -102-

<PAGE>

(c)     Service Bulletins complied with during Month:

4.      AIRCRAFT DAMAGE OR ENGINE CHANGES:

        Details of any repairs carried out to the Aircraft beyond SRM limits
        and Engine changes, giving reasons for repair or change:

5.      UPCOMING MAINTENANCE CHECKS

(a)     Maintenance Checks (C segment and above) scheduled or expected to be
        performed on the Airframe during the next 12 months:

(b)     Scheduled shop visits or heavy maintenance visits scheduled or
        expected to be performed on the Engines during the next 12 months:

(c)     Overhauls, or replacements scheduled or expected to be performed on
        the APU or Landing Gear during the next 12 months:

Date: __________, ____                 CERTIFIED FOR AND ON BEHALF OF
                                       ALOHA AIRLINES, INC.

                                       By: _________________________________
                                       Name:
                                       Title:

                                    -103-

<PAGE>

                          CERTIFICATE OF ACCEPTANCE 809

       This Certificate of Acceptance 809 is delivered on the date set forth in
       paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
       Acquisition XII LLC (the "LESSOR") pursuant to Lease Agreement 809, dated
       May 21, 1997, between the Lessor and the Lessee (the "AGREEMENT").
       Capitalized terms used but not defined in this Certificate of Acceptance
       809 shall have the meaning given to such terms in the Agreement.

1.     DETAILS OF ACCEPTANCE

       The Lessee hereby confirms to the Lessor that the Lessee has at 10:27
       a.m. H.S.T. on this 21st day of May, 1997, over international
       waters, accepted the following, in accordance with the provisions of
       the Agreement and the Annex:

       (a)    Airframe: Boeing 737-2Q9  airframe, Manufacturer's Serial
                     No. 21720 and FAA Registration No. N809AL;

       (b)    Engines: two Pratt& Whitney JT8D-15 Engines, bearing
                     Manufacturer's Serial Nos. P688676 and P688677, each
                     having 750 or more rated take-off horsepower;

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

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

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

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

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

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

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

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the date shown at the beginning of this Agreement.

                                       SIGNED on behalf of
                                       ACG ACQUISITION XII LLC

                                       By:    /s/ Benjamin Jung
                                              --------------------------------
                                       Name:  Benjamin Jung
                                       Title: Manager

                                       SIGNED ON behalf of
                                       ALOHA AIRLINES, INC.

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

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

                                             -2-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the data shown at the beginning of this Certificate.

                                 SIGNED on behalf of
                                 ACG ACQUISITION XII LLC

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

                                 SIGNED on behalf of
                                 ALOHA AIRLINES, INC.

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

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

                                     -2-

<PAGE>

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

                          SECURITY AGREEMENT (21720)

                           dated as of May 1, 1997

                                   between

                           ACG ACQUISITION XII LLC,
                                 as Borrower

                                    and

                      SANWA BUSINESS CREDIT CORPORATION,
                                 as Lender

-------------------------------------------------------------------------------
                      VEDDER, PRICE, KAUFMAN & KAMMHOLZ
                                  CHICAGO

<PAGE>

                                       TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>
1.   Defined Terms .........................................................................1

2.   Grant of Security Interest ............................................................6

3.   Limitations on Lender's Obligations ..................................................10

4.   Representations and Warranties .......................................................10
          (a)     Title; No Other Security Interests ......................................10
          (b)     Perfected First Priority Security Interest ..............................10
          (c)     Contracts
5.   Covenants
          (a)     Further Documentation; Pledge of Instruments and Chattel Paper ..........11
          (b)     Indemnification .........................................................12
          (c)     Notices .................................................................12
          (d)     Pledge of Collateral ....................................................12

6.   Lender's Appointment as Attorney-in-Fact .............................................12
          (a)     Powers ..................................................................12
          (b)     Other Powers ............................................................13
          (c)     No Duty on Lender's Part ................................................14

7.   Performance by Lender of Borrower's Obligations ......................................14

8.   Proceeds .............................................................................14

9,   Remedies .............................................................................14

10.  Limitation on Duties Regarding Preservation of Collateral ............................15

11.  Powers Coupled with an Interest ......................................................16

12.  Severability .........................................................................16

13.  Paragraph Headings ...................................................................16

14.  No Waiver- Cumulative Remedies .......................................................16

                                      i

<PAGE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>

15.  Waivers and Amendments; Successors and Assigns; Governing Law ........................16

16.  Submission to Jurisdiction; Waivers ..................................................16

17.  Notices ..............................................................................17
</TABLE>

                                     ii

<PAGE>

                             SECURITY AGREEMENT (21720)

               THIS SECURITY AGREEMENT (21720), dated as of May 1,
1997, is made by ACG ACQUISITION XII LLC, a Delaware limited liability
company (the "Borrower"), in favor of SANWA BUSINESS CREDIT
CORPORATION, a Delaware corporation (the "Lender").

                            W I T N E S S E T H :

               WHEREAS, the Borrower and the Lender are parties to that
certain Loan Agreement (21720), dated as of May 1, 1997 (as amended,
supplemented or otherwise modified from time to time, the "LOAN AGREEMENT").

               WHEREAS, pursuant to the Loan Agreement, the Lender has agreed
to make a loan to the Borrower upon the terms and subject to the conditions
set forth therein, to be evidenced by the Note issued by the Borrower
thereunder, and it is a condition precedent to the obligation of the Lender
to make its loan to the Borrower under the Loan Agreement that the Borrower
shall have executed and delivered this Security Agreement to the Lender.

               NOW, THEREFORE, in consideration of the premises and to induce
the Lender to enter into the Loan Agreement and to make its loan to the
Borrower thereunder, the Borrower hereby agrees with the Lender as follows:

               1.  DEFINED TERMS. For purposes hereof, the following terms
shall have the following meanings:

               "AFFILIATE": with respect to any Person, any other Person who,
      directly or indirectly, controls or is controlled by or is under common
      control with, such Person. For purposes of this definition, "CONTROL"
      (including, with correlative meanings, the terms "CONTROLLED BY" and
      "UNDER COMMON CONTROL WITH"), with respect to any Person, means the
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person, whether
      through the ownership of voting securities or by contract or otherwise.

               "AIRCRAFT":  the Aircraft specified by make, model, serial
      number and U.S. Registration Number in the Lease.

               "AIRCRAFT DOCUMENTS": all books, manuals, logs, records,
      writings, data, information and other like property (and any and all
      additions, renewals, revisions and replacements) relating to the
      Aircraft, Engines or any Part (including, without limitation, any
      warranties).

               "AIRFRAME": as defined in the Lease.

<PAGE>

                                                  [Security Agreement (21720)]

               "BASIC AGREEMENTS": this Agreement, the Note, the Loan
      Agreement, the Pledge Agreement, the Guarantee, the Purchase Agreement,
      the Lease, the Bill of Sale, the FAA Bill of Sale and the Letter of
      Credit (if any), together with all notices, consents, certificates and
      other documents from time to time issued or entered into by the
      Borrower pursuant to or in connection with any thereof.

               "BILL OF SALE": the full Warranty Bill of Sale (substantially
      in the form attached to the Purchase Agreement as Exhibit A) for the
      Aircraft, dated the Closing Date, executed by the Seller and the Seller
      Beneficiary in favor of Borrower specifically referencing the Airframe
      and each Engine constituting a part of the Aircraft.

               "BUSINESS DAY": a day, other than a Saturday or Sunday or a
      day on which banks in Chicago, Illinois, New York, New York or
      Honolulu, Hawaii are required or authorized to be closed.

               "CITIZEN OF THE UNITED STATE": as defined in Section
      40102(a)(15) of Title 49 of the United States Code.

               "CLOSING DATE". the date on which the Loan is made under the
      Loan Agreement.

               "CODE" means the Uniform Commercial Code as from time to time
      in effect in the State of Illinois.

               "COLLATERAL" shall have the meaning assigned to it in
      Section 2 of this Security Agreement.

               "CONTRACTUAL OBLIGATION": as to any Person, any provision of
      any security issued by such Person or of any agreement, instrument or
      other undertaking to which such Person is a party or by which it or any
      of its property is bound.

               "DEFAULT": any "Default" under the Loan Agreement.

               "DEFAULT RATE": the prime rate for the time being charged by
      Citibank, N.A., plus 3.0 % (compounded monthly and calculated on the
      basis of a 360-day year and the actual number of days elapsed).

               "EARLY TERMINATION OPTION": as defined in the Lease.

               "ENGINE"  or "ENGINES":  as defined in the Lease.

               "ENGINE LOSS": as defined in the Lease.

                                      2

<PAGE>

                                                  [Security Agreement (21720)]

               "ERISA":  the Employee Retirement Income Security Act of 1974,
      as amended from time to time.

               "EVENT OF DEFAULT": ally "Event of Default" under the Loan
      Agreement.

               "EVENT OF LOSS PROCEEDS": the proceeds of any insurance, or
      any compensation, requisition, or similar payment, arising in respect
      of a Total Loss or and Engine Loss.

               "EXCLUDED PAYMENTS" means (i) indemnity payments paid or
      payable to or in respect of the Borrower, its Affiliates, successors
      and permitted assigns and its directors, officers, employees, servants
      and agents pursuant to Section 10 of the Lease, (ii) proceeds of public
      liability insurance in respect of the Aircraft payable as a result of
      insurance claims made, or losses suffered, by the Borrower, which are
      payable directly to or in respect of the Borrower, or its Affiliates,
      successors and permitted assigns and its directors, officers,
      employees, servants and agents, respectively, for its own account,
      (iii) proceeds of insurance maintained with respect to the Aircraft by
      the Borrower or any Affiliate thereof for its or their own account or
      benefit, (iv) any interest that pursuant to the Basic Agreements may
      from time to time accrue in respect of any of the amounts described in
      clauses (i) through (iii) above, (v) the proceeds from the enforcement
      of any right to enforce the payment of any amount described in clauses
      (i) through (iv) above (provided that the rights referred to in this
      clause (v) shall not be deemed to include the exercise of any remedies
      provided for in the Lease other than the right to sue for specific
      performance of any covenant to make such payment or to sue for damages
      in respect of the breach of any such covenant), and (vi) any right to
      exercise any election or option or make any decision or determination,
      or to give or receive any notice, consent, waiver or approval, or to
      take any other action in respect of, but in each case, only to the
      extent relating to, any Excluded Payments (provided that the rights
      referred to in this clause (vi) shall not be deemed to include the
      exercise of any remedies provided for in the Lease other than the right
      to sue for specific performance of any covenant to make such payment or
      to sue for damages in respect of the breach of any such covenant),

               "FAA": the United States Federal Aviation Administration and
      any successor agency or agencies thereto.

               "FAA BILL OF SALE": the Bill of Sale for the Aircraft on AC
      Form 8050-2 or such other form as may be approved by the FAA on the
      Closing Date executed by the Seller in favor of Borrower.

               "FAIR MARKET SALES VALUE": the value which would be obtained
      in an arm's-length sale between an informed and willing buyer (other
      than the Borrower or an Affiliate

                                      3

<PAGE>

                                                  [Security Agreement (21720)]

      thereof) under no compulsion to buy and an informed and willing seller
      unaffiliated with such buyer under no compulsion to sell.

               "GOVERNMENTAL AUTHORITY": any nation or government, any state
      or other political subdivision thereof and any entity exercising
      executive, legislative, judicial, regulatory or administrative
      functions of or pertaining to government.

               "GUARANTOR": Aviation Capital Group Corp., a Delaware
      corporation.

               "GUARANTEE": that certain Guarantee Agreement (21720),
      substantially in the form of Exhibit E to the Loan Agreement, dated as
      of the date hereof, executed by Guarantor in favor of Lender.

               "LEASE": Lease Agreement 809 dated May 21, 1997, between
      Borrower, as lessor, and Lessee, as lessee, with respect to one 1979
      Boeing 737-2Q9 aircraft bearing Manufacturer's Serial Number 21720 and
      U.S. Registration Number N809AL, as amended, modified or supplemented
      from time to time.

               "LEASE EVENT OF DEFAULT": has the same meaning as an "Event of
      Default" as defined in the Lease,

               "LENDER": Sanwa Business Credit Corporation and each other
      Lender party hereto from time to time, and their respective successors
      and assigns.

               "LESSEE": Aloha Airlines, Inc., a Delaware corporation.

               "LESSOR LIEN(S)": as defined in the Lease.

               "LETTER OF CREDIT": as defined in the Lease.

               "LOAN": the loan made by Lender to Borrower pursuant to
      Section 2.1 of the Loan Agreement.

               "MANUFACTURER": The Boeing Company, a Delaware corporation.

               "OBLIGATIONS" means the unpaid principal amount of, and
      interest on (including, without limitation, interest accruing after the
      maturity of the Loan and interest accruing after the filing of any
      petition in bankruptcy, or the commencement of any insolvency,
      reorganization or like Proceeding, relating to the Borrower, whether or
      not a claim for post-filing or post-petition interest is allowed in
      such proceeding) the Loan and any and all other obligations and
      liabilities of the Borrower to the Lender, whether direct or

                                      4

<PAGE>

                                                  [Security Agreement (21720)]

      indirect, absolute or contingent, recourse or non-recourse, due or to
      become due; or now existing or hereafter incurred, which may arise
      under, out of, or in connection with, the Loan Agreement, the Note,
      this Security Agreement or any other Basic Agreement and any other
      document made, delivered or given by the Borrower in connection
      therewith or herewith, whether on account of principal, interest,
      reimbursement obligations, fees, indemnities, costs, expenses
      (including, without limitation, all fees and disbursements of counsel
      to the Lender that are required to be paid by the Borrower pursuant to
      the terms of the Loan Agreement) or otherwise.

               "PART": as defined in the Lease.

               "PERMITTED LIEN(S)": as defined in the Lease.

               "PERSON": an individual, partnership, corporation, business
      trust, joint stock company, trust, unincorporated association, joint
      venture, Governmental Authority or other entity of whatever nature,

               "PLEDGE AGREEMENT": that certain Pledge Agreement and
      Irrevocable Proxy (21720), dated as of the date hereof, between the
      Pledgors and Lender, substantially in the form of Exhibit D to the Loan
      Agreement.

               "PLEDGORS": collectively, Pacific Mutual Life Insurance
      Company, PM Group Life Insurance Company, ACG/MM II LLC and ACG
      Acquisition VI LLC,

               "PROCEEDS" shall have the meaning specified in the Code.

               "PURCHASE AGREEMENT": that certain Aircraft Purchase Agreement
      dated as of May 21, 1997 between Borrower, as buyer, and Seller, as
      seller, as modified, amended or supplemented in accordance with the
      terms of the Basic Agreements.

               "RENTAL": Basic Rent and any payment of interest as a result
      of the late payment of the foregoing required pursuant to the Lease.

               "REQUIRMENT OF LAW": as to any Person, the organizational or
      governing documents of such Person, and any law, treaty, rule or
      regulation or determination of an arbitrator, court, or other
      Governmental Authority, in each case applicable to or binding upon such
      Person or any of its property or to which such Person or any of its
      property is subject.

               "SECURITY AGREEMENT" or "AGREEMENT" means this Security
      Agreement, as amended, supplemented or otherwise modified from time to
      time.

                                      5

<PAGE>

                                                  [Security Agreement (21720)]

               "SECURITY DOCUMENTS": this Security Agreement, the Guarantee
      and the Pledge Agreement.

               "SECURITY INTEREST". any mortgage, charge, pledge,
      hypothecation, assignment, deposit arrangement, right of possession or
      detention, right of set-off (but excluding any right of set-off,
      consolidation, merger or combination of accounts arising in flavor of
      a bank by operation of law), encumbrance, lien (statutory or other), or
      preference, priority or other security agreement or preferential
      arrangement of any kind or nature whatsoever (including, without
      limitation, any conditional sale or other title retention agreement,
      any lease having substantially the same economic effect as any of the
      foregoing, and the filing of any financing statement under the Uniform
      Commercial Code or comparable law of any jurisdiction in respect of any
      of the foregoing).

               "SELLER", First Security Bank, National Association, not in
      its individual capacity but solely as owner trustee.

               "SELLER BENEFICIARY": 1980 Aircraft Investors, a California
      limited partnership.

               "STATE OF REGISTRATION": the United States or any other state
      in which the Aircraft may be registered in accordance with the terms of
      the Lease.

               "SUBSIDIARY": as to any Person, a corporation, partnership or
      other entity of which shares of stock or other ownership interests
      having ordinary voting power (other than stock or such other ownership
      interests having such power only by reason of the happening of a
      contingency) to elect a majority of the board of directors or other
      managers of such corporation, partnership or other entity are at the
      time owned, or the management of which is otherwise controlled,
      directly or indirectly through one Or more intermediaries, or both, by
      such Person.

               "TAXES": all present and future taxes, levies, imposts,
      duties or charges of any nature whatsoever, and wheresoever imposed,
      and any franchise, transfer, sales, use, business, occupation, excise,
      personal property, real property, stamp, withholding or other tax
      imposed by any national or regional taxing or fiscal authority or
      agency, together with tax imposed by any national or regional taxing or
      fiscal authority or agency, together with any penalties, additions to
      tax, fines or interest thereon; and "taxes" and "taxation" shall be
      construed accordingly.

               "TOTAL LOSS": as defined in the Lease.

               "US$" AND "DOLLARS": the lawful currency of the United States
      of America.

                2.  GRANT OF SECURITY INTEREST.

                                      6

<PAGE>

                                                   [Security Agreement (21720)]

               (a)  GRANT OF SECURITY INTEREST. As collateral security for the
      prompt and complete payment and performance when due (whether at the
      stated maturity, by acceleration or otherwise) of the Obligations, the
      Borrower hereby grants to the Lender a security interest in all of the
      following property now owned or at any time hereafter acquired by the
      Borrower or in which the Borrower now has or at any time in the future
      may acquire any right, title or interest (collectively, the
      "COLLATERAL"):

               (1)  The Aircraft (being one 1979 Boeing Model 737-2Q9 aircraft
      bearing Manufacturer's Serial Number 21720 and U.S. Registration Number
      N809AL, together with two Pratt & Whitney Model JT8D-15 Engines bearing
      Manufacturer Serial Numbers P688676 and P688677, respectively, each of
      which Engines is of 750 or more rated takeoff horsepower or the
      equivalent of such horsepower as the same is now and will hereafter be
      constituted, whether now owned by the Borrower or hereafter acquired,
      leased or intended to be leased under the Lease, and in the case of
      such Engines, whether or not any such Engine shall be installed in or
      attached to the Airframe or any other airframe, together with (a) all
      avionics and parts of whatever nature, which are from time to time
      incorporated or installed in or attached to the Aircraft and Engines,
      whether now owned or hereafter acquired, and all substitutions,
      renewals and replacements of and additions, improvements, accessions
      and accumulations to the Airframe and Engines and (b) all logs, manuals
      and data and inspection,, modification and overhaul records maintained
      in respect of the Aircraft, including the Engines, including, without
      limitation, all such logs, manuals, data and records required to be
      maintained by the FAA or by the applicable regulatory agency or body of
      any other jurisdiction in which the Aircraft may then be registered;

               (2)  All of Borrower's right, title and interest in, to and under
      the Lease, including, but not limited to:

                    (a)  any and all Rentals, insurance and condemnation
           proceeds, warranty payments, payments in the nature of maintenance
           or other reserves, payments upon a Total Loss or Engine Loss. and
           other moneys due or to become due (including, without limitation,
           any and all amounts owed by Lessee pursuant to Section 12.4(b) of
           the Lease in connection with the redelivery of the Aircraft), and
           any and all claims, rights, powers, remedies, title and interest
           of the Borrower in and to or under or arising out of the Lease
           (including, without limitation, all claims for damages or other
           sums arising upon the sale or other disposition of or loss of use
           of or requisition of title or use of the Aircraft, Engines, Parts
           and related equipment and Aircraft Documents at any time subject
           to the Lease) and any and all credit support or collateral
           security of whatever type or description (whether in the nature of
           cash, a guarantee, letter of credit, credit insurance, lien on or
           security interest in any property or otherwise) (including,
           without limitation,

                                       7

<PAGE>

                                                    (Security Agreement (21720)]

           the Security Deposit (as defined in the Lease) and the Letter of
           Credit (as defined in the Lease)) which the Borrower now or
           hereafter may hold to further assure or secure the obligations of
           the Lessee under the Lease,

                    (b)  all rights, powers, privileges, remedies and other
           benefits of the Borrower under the Lease and all rights to make
           determinations, exercise options or elections, give or withhold
           consents, waivers and approvals, give notices and exercise
           remedies (including the right to declare or exercise remedies with
           respect to a Default or an Event of Default under the Lease and to
           repossess any property), to appoint any appraiser or to take any
           other action under or in respect of the Lease or accept any
           surrender or redelivery of the Aircraft, Engines or Parts or
           Aircraft Documents, as well as all the rights, powers and remedies
           on the part of the Borrower, whether arising under the Lease or by
           statute or at law or in equity or otherwise: as a result of any
           Default or Event of Default under the Lease, and

                    (c)  all the Borrower's rights and interests in any sublease
           under the Lease;

               (3)  All right, title, interest, claims and demands of the
      Borrower in, to and under

                    (a)  the Purchase Agreement,

                    (b)  the Bill of Sale and the FAA Bill of Sale, and

                    (c) any and all other contracts, agreements and instruments
           relating to the Aircraft and Engines or any rights or interests
           therein to which the Borrower is now or may hereafter be a party,

      together with all rights, powers, privileges, licenses, easements,
      options and other benefits of the Borrower under each contract,
      agreement and instrument referred to in this clause (3), including,
      without limitation, the right to receive and collect all payments to
      the Borrower thereunder now or hereafter payable to or receivable by
      the Borrower pursuant thereto and the right to make all waivers and
      agreements, to give and receive notices and other instruments or
      communications, or to take any other action under or in respect of any
      thereof or to take such action upon the occurance of a default
      thereunder, including the commencement, conduct and consummation of
      legal, administrative or other proceedings, as shall be permitted
      thereby or by law, and to do any and a) I other things which the
      Borrower is or may be entitled to do thereunder and any right to

                                      8

<PAGE>

                                                    [Security Agreement (21720)]

      restitution from the Lessee or any other Person in respect of any
      determination of invalidity of any thereof;

               (4)  All rents, issues, profits, revenues and other income of the
      property subjected or required to be subjected to the Security Interest
      of this Security Agreement including all payments or proceeds payable
      to the Borrower after termination of the Lease with respect to the
      Aircraft as the result of the sale, lease or other disposition thereof,
      and all estate, right, title and interest of every nature whatsoever of
      the Borrower in and to the same;

               (5)  Without limiting the generality of the foregoing, all
      insurance and requisition proceeds with respect to the Aircraft or any
      part thereof, including but not limited to the insurance required under
      Section 9 of the Lease;

               (6)  Without limiting the generality of the foregoing, all monies
      and securities from time to time deposited or required to be deposited
      with the Lender pursuant to any terms of this Security Agreement or the
      Lease or required hereby or by the Lease to be held by the Lender
      hereunder as security for the obligations of the Lessee under the Lease
      or of the Borrower hereunder or under the Loan Agreement; and

               (7)  All Proceeds of the foregoing.

               Notwithstanding the foregoing, in no event shall Collateral
include Excluded Payments. Concurrently with the delivery hereof, the
Borrower is delivering to the Lender the original executed chattel paper
counter-part of the Lease and initial Lease Supplement (to each of which a
chattel paper receipt is attached), the Security Deposit or, if applicable,
the Letter of Credit, and an executed copy of the Purchase Agreement.

               TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Lender, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the holders, from time to time, of one
or more Notes, without any preference, distinction or priority of any one
Note over any other by reason of priority of time of issue, sale,
negotiation, date of maturity thereof or otherwise for any reason whatsoever,
and for the uses and purposes and in all cases and as to all property
specified in paragraphs (1) through (6), inclusive, above, subject to the
terms and provisions set forth in this Security Agreement.

                    (b)  RESERVED RIGHTS. Notwithstanding the provisions of
           clause (a) hereof, whether or not an Event of Default shall have
           occurred and be continuing: the Borrower shall have the right
           (together Aith and not to the exclusion of the Lender) (i) to
           receive from the Lessee copies of all notices, certificates,
           reports, filings, opinions of counsel and other documents and all
           information which any thereof is permitted or required to give or

                                                9

<Page>

                                                    [Security Agreement (21720)]

           furnish to the Borrower pursuant to any Basic Agreement, (ii) to
           exercise inspection rights pursuant to the Lease, (iii) to provide
           or carry insurance in addition to that required to be carried by
           the Lessee pursuant to the Lease and (iv) to consent or to
           withhold consent to any amendment, modification or waiver of the
           provisions of the Lease.

                3.  LIMITATIONS OF LENDER'S OBLIGATIONS. Notwithstanding
anything to the contrary contained herein, the Borrower shall remain liable
under each of the agreements pledged hereby to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with and pursuant to the terms and provisions of each such
agreement, to die same extent as if this Security Agreement had not been
executed. The Lender shall have no obligation or liability under any such
agreement by reason of or arising out of this Security Agreement or the
receipt by the Lender of any payment relating to such agreement pursuant
hereto, nor shall the Lender be obligated in any manner to perform any of the
obligations of the Borrower under or pursuant to any agreement, to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any such agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.

                4.  REPRESENTATIONS AND WARRANTIES, The Borrower hereby
represents and warrants that:

                    (a)  Title: No Other Security Interests. Except for the
           Security Interest granted to the Lender pursuant to this Security
           Agreement and the other Security Interests permitted to exist on
           the Collateral pursuant to the Loan Agreement, the Borrower has
           not granted any Security Interest in, or other claims in respect
           of, the Collateral. No security agreement financing statement or
           other public notice with respect to all or any part of the
           Collateral has been placed by the Borrower on file or of record in
           any public office, except such as may have been filed in favor of
           the Lender, pursuant to this Security Agreement.

                    (b)  PERFECTED FIRST PRIORITY SECURITY INTEREST. The
           Borrower will take such action as the Lender reasonably determines
           necessary in order to perfect a first priority (subject, in the
           case of the Aircraft, to Permitted Liens (other than Lessor Liens
           arising by, through or under the Borrower) and any other Security
           Interest created by Seller, Seller Beneficiary, Lessee or arising
           through or under any such Person) Security Interest in the
           Collateral in favor of the Lender.

                    (c)  CONTRACTS. Other than consents obtained and delivered
           to the Lender pursuant to the Loan Agreement, to the Borrower's
           knowledge no consent of any party (other than the Borrower) to any
           agreement pledged hereby is required, or is purported to

                                      10

<PAGE>

                                                    [Security Agreement (21720)]

           be required, in connection with the execution, delivery and
           performance of this Security Agreement. Assuming the due
           authorization, execution and delivery by the other parties
           thereto, each agreement pledged hereby to which the Borrower is a
           party is in full force and effect and constitutes a legal, valid
           and binding obligation of the Borrower, enforceable against the
           Borrower in accordance with its terms, except as enforceability
           may be limited by bankruptcy, insolvency, reorganization,
           moratorium or similar laws affecting the enforcement of creditors'
           rights generally. No consent or authorization of, filing with or
           other act by or in respect of any Governmental Authority
           applicable to it is required in connection with the execution,
           delivery and performance by the Borrower or the validity or
           enforceability against the Borrower of any of such agreements
           other than those which have been duly obtained, made or performed.
           The Borrower is not in default or likely to become in default in
           the performance or observance of any of the terms thereof. The
           Borrower has fully performed all of its obligations owing up to
           this date under each such agreement. No defense, offset,
           counterclaim or claim has been asserted or alleged against the
           Borrower as to any such agreement. The Borrower has delivered to
           the Lender a complete and correct copy of each such agreement,
           including all amendments, supplements and other modifications
           thereto.

                5.  COVENANTS. The Borrower covenants and agrees with the Lender
that, from and after the date of this Security Agreement until the Obligations
are paid in full:

                    (a)    FURTHER DOCUMENTATION, PLEDGE OF INSTRUMENTS AND
           CHATTEL PAPER. At any time and from time to time, upon, the
           written request of the Lender, and at the sole expense of the
           Borrower, the Borrower will promptly and duly execute and deliver
           such further instruments and documents and take such further
           action as the Lender may reasonably request for the purpose of
           obtaining or preserving the full benefits of this Security
           Agreement and of the rights and powers herein granted, including,
           without limitation, the filing of financing or continuation
           statements under the Uniform Commercial Code in effect in the
           applicable jurisdiction with respect to the Security Interests
           created hereby to the extent permitted by applicable law. A
           carbon, photographic or other reproduction of this Security
           Agreement shall be sufficient as a financing statement for filing
           in any jurisdiction, to the extent permitted by applicable law. If
           any amount payable under or in connection with any of the
           Collateral shall be or become evidenced by any Instrument or
           Chattel Paper (as such terms are defined under the Code), such
           Instrument or Chattel Paper shall be immediately delivered to the
           Lender, duly endorsed in a manner satisfactory to the Lender, to
           be held as Collateral pursuant to this Security Agreement. The
           Borrower shall not assign, delegate, pledge, grant a Security
           Interest in or otherwise encumber any of its rights or obligations
           with respect to the Collateral, except for the Security Interest
           granted to Lender pursuant to this Security Agreement, Permitted
           Liens (other than Lessor Liens arising by, through or under the

<PAGE>

                                                   (Security Agreement (21720)]

           Borrower) and any other Security Interest permitted to exist on
           the Collateral pursuant to the Loan Agreement.

                    (b)    INDCMNIFICATION. In any suit, proceeding or action
           brought by the Lender with respect to any of the Collateral for
           any sum owing thereunder, or to enforce any provisions of any
           contract pledged hereby, the Borrower will save, indemnify and
           keep the Lender harmless for, from and against any and all
           expenses (including, without limitation, reasonable attorneys'
           fees), loss or damage suffered by reason of any defense, setoff,
           counterclaim, recoupment or reduction or liability whatsoever of
           the account debtor or obligor thereunder, arising out of a breach
           by the Borrower of any obligation thereunder or arising out of any
           other agreement, indebtedness or liability at any time owing to or
           in favor of such account debtor or obligor or its successors from
           the Borrower other than expenses, loss or damage to the extent
           caused by the gross negligence or willful misconduct of the Lender.

                    (c)    NOTICES. The Borrower will advise the Lender
           promptly, in reasonable detail, at its address set forth in the
           Loan Agreement, of any Security Interest (other than Security
           Interests created hereby or permitted under the Loan Agreement)
           on, or claim asserted against, any of the Collateral known to it.

                    (d)    PLEDGE OF COLLATERAL. The Borrower hereby covenants
           that it shall not, so long as this Security Agreement shall remain
           in effect, assign, pledge, grant a Security Interest in or
           otherwise encumber, any of its right, title or interest with
           respect to the Collateral, to anyone other than the Lender, or
           delegate any of its obligations with respect to the Collateral,
           and that it shall not, without the prior written consent of the
           Lender and subject to Section 2(b) hereof, enter into any
           agreement amending or supplementing the Lease, execute any waiver
           or modification of, or consent under, the terms of, or exercise
           any rights, powers or privileges under, the Lease, settle or
           compromise, any claim arising under the Lease, terminate the Lease
           (including, without limitation, by way of exercise of the Early
           Termination Option) or submit or consent to the submission of any
           dispute, difference or other matter arising tinder or in respect
           of the Lease to arbitration thereunder.

                    6.     LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.

                    (a)    POWERS. The Borrower hereby irrevocably constitutes
           and appoints the Lender and any officer or agent thereof, with
           full power of substitution, as its true and lawful
           attorney-in-fact with full irrevocable power and authority in the
           place and stead of the Borrower and in the name of the Borrower or
           in its own name, from time to time ill the Lender's discretion,
           for the purpose of carrying out the terms of this Security
           Agreement, to take any and all appropriate action and to execute
           any and all documents

                                      12

<PAGE>

                                                   [Security Agreement (21720)]

           and instruments which may be necessary or desirable to accomplish
           the purposes of this Security Agreement, and, without limiting the
           generality of the foregoing, the Borrower hereby gives the Lender
           the power and right, on behalf of the Borrower, without notice to
           or assent by the Borrower, to do the following:

                           (i) in the case of any Collateral, at any time
                       when any Event of Default shall have occurred and is
                       continuing, in the name of the Borrower or its own name,
                       or otherwise, to take possession of and endorse and
                       collect any checks, drafts, notes, acceptances or other
                       instruments for the payment of moneys due under any part
                       of the Collateral or with respect to any other Collateral
                       and to file any claim or to take any other action or
                       proceeding in any court of law or equity or otherwise
                       deemed appropriate by the Lender for the purpose of
                       collecting any and all such moneys due under any part of
                       the Collateral or with respect to any other Collateral
                       whenever payable;

                           (ii) to pay or discharge taxes and Security
                       Interests levied or placed on or threatened against the
                       Collateral to the extent that the Borrower is obligated
                       under any of the Basic Agreements to pay or discharge
                       such taxes and Security Interests, and such taxes or
                       Security Interests are not timely paid or satisfied by
                       the Borrower; and

                           (iii) subject to Section 2(b) hereof, upon the
                       occurrence and during the continuance of any Event of
                       Default (A) to direct any party liable for any payment
                       under any of the Collateral to make payment of any and
                       all moneys due or to become due thereunder directly to
                       the Lender or as the Lender shall direct; (B) to ask or
                       demand for, collect, receive payment of and receipt for,
                       any and all moneys, claims and other amounts due or to
                       become due at any time in respect of or arising out of
                       any Collateral; (C) to commence and prosecute any suits,
                       actions or proceedings at law or in equity in any court
                       of competent jurisdiction to collect the Collateral or
                       any thereof and to enforce any other right in respect of
                       any Collateral; and (D) to defend any suit, action or
                       proceeding brought against the Borrower with respect to
                       any Collateral; and to do, at the Lender's option and the
                       Borrower's expense, at any time, or from time to time,
                       all acts and things which the Lender deems necessary to
                       protect, preserve or realize upon the Collateral
                       (including, without limitation, to perform, Or cause to
                       be performed, all or any part of the obligations and
                       agreements of the Borrower under the Lease, without
                       releasing the Borrower therefrom) and the Lender's
                       Security Interests thereon and to effect the intent of
                       this Security Agreement, all as fully and effectively as
                       the Borrower might do and subject to the standard of care
                       set forth in paragraph 10 hereof.

                                      13

<PAGE>

                                                   [Security Agreement (21720)]

                         This power of attorney is a power coupled with an
                         interest and shall be irrevocable.

                    (b)    OTHER POWERS. The Borrower also authorizes the
           Lender, at any time and from time to time, to execute, in
           connection with the sale provided for in Section 9 hereof, any
           endorsements, assignments or other instruments of conveyance or
           transfer with respect to the Collateral.

                    (c)    NO DUTY ON LENDER'S PART. The powers conferred on
           the Lender hereunder are solely to protect the Lender's interests
           in the Collateral and shall not impose any duty upon the Lender to
           exercise any such powers. The Lender shall be accountable only for
           amounts that it actually receives as a result of the exercise of
           such powers, and neither it nor any of its officers, directors,
           employees or agents shall be responsible to the Borrower for any
           act or failure to act hereunder, except for its own gross
           negligence or willful misconduct.

                    7.     PERFORMANCE BY LENDER OF BORROWER'S OBLIGATIONS. If
           the Borrower fails to perform or comply with any of its
           agreements contained herein and the Lender, as provided for by
           the terms of this Security Agreement, shall itself perform or
           comply, or otherwise cause performance or compliance, with such
           agreement, the expenses of the Lender incurred in connection with
           such performance or compliance, together with interest thereon at
           the Default Rate, shall be payable by the Borrower to the Lender
           on demand and shall constitute Obligations secured hereby.

                    8.     PROCEEDS. It is agreed that if an Event of Default
           shall occur and be continuing (a) all proceeds received by the
           Borrower consisting of cash, checks and other near-cash items
           shall be held by the Borrower in trust for the Lender, segregated
           from other funds of the Borrower, and shall, forthwith upon
           receipt by the Borrower, be turned over to the Lender in the exact
           form received by the Borrower (duly endorsed by the Borrower to
           the Lender, if required), and (b) any and all such proceeds
           received by the Lender (whether from the Borrower or otherwise)
           may, in the sole discretion of the Lender, be held by the Lender
           as collateral security for, and/or then or at any time thereafter
           may be applied by the Lender against, the Obligations (whether
           matured or unmatured) in accordance with the provisions of the
           Loan Agreement.

                    9.     REMEDIES. If an Event of Default shall occur and be
           continuing, the Lender may exercise, in addition to all other
           rights and remedies granted to it in this Security Agreement and
           in any other instrument or agreement securing, evidencing or
           relating to the Obligations, all rights and remedies of a secured
           party under the Code. Without limiting the generality of the
           foregoing, the Lender, without demand of performance or other
           demand, presentment, protest, advertisement or notice of any kind
           (except any notice required by law

                                      14

<PAGE>

                                                   (Security Agreement (21720)]

           referred, to below) to or upon the Borrower or any other Person
           (all and each of which demands, defenses, advertisements and
           notices Borrower hereby waives), may in such circumstances, and
           subject in all respects to the rights of Lessee (and any
           sublessee) under the Lease, forthwith collect, receive,
           appropriate and realize upon the Collateral, or any part thereof,
           including; without limitation entering upon the premises where all
           or any part of the Collateral is located and taking immediate
           possession of and removing the same (together with any engine or
           any part which is not an Engine or a Part but which is installed
           on an Aircraft subject to the rights of the owner, lessor or
           secured party of such engine or part, provided that such engine or
           part shall be held for the account of any such owner, lessor or
           secured party or, if owned by Borrower, such engine or pan may at
           the option of Lender, be exchanged for an Engine or Part) by
           summary proceedings or otherwise (and/or, at Lender's option,
           storing the same at Lessee's premises (at Borrower's expense)
           until disposal thereof by Lender), all without liability accruing
           to Lender, and/or may forthwith sell, lease, amend, assign, give
           option or options to purchase, or otherwise dispose of and deliver
           the Collateral or any part thereof (or contract to do any of The
           foregoing), in one or more parcels at public or private sale or
           sales, at any exchange, broker's board or office of the Lender or
           elsewhere upon such terms and conditions as it may deem advisable
           and at such prices as it may deem best, for cash or on, credit or
           for future delivery without assumption of any credit risk. The
           Lender shall have the right upon any such public sale or sales,
           and, to the extent permitted by law, upon any such private sale or
           sales, to purchase the whole or any part of the Collateral so
           sold, free of any right or equity of redemption in the Borrower,
           which right or equity is hereby waived. or released. The Borrower
           further agrees, at the Lender's request, to assemble the
           Collateral and make it available to the Lender at places which
           the Lender shall reasonably select, whether at the Borrower's
           premises or elsewhere. If any notice of a proposed sale or other
           disposition of Collateral shall be required by law, such notice
           shall be deemed reasonable and proper if given, and the Lender
           agrees to give such notice to the Borrower in any event, at least
           20 days before such sale or other disposition. The Borrower shall
           remain liable for any deficiency if the proceeds of any sale or
           other disposition of the Collateral are insufficient to pay the
           Obligations and the reasonable fees and disbursements of any
           attorneys employed by the Lender to collect such deficiency.
           Notwithstanding any other provision of this Section 9 to the
           contrary, it is understood and agreed that if the Lender shall
           proceed to foreclose the Security Interest of this Agreement, it
           shall, to the extent that it is then entitled to do so under (and
           always subject to the provisions of) the Lease, and is not then
           stayed or prevented from doing so by operation of law or
           otherwise, proceed (to the extent it has not already done so) to
           exercise one or more of the remedies, as determined by the Lender
           in the Lender's sole discretion, referred to in Section 13 of the
           Lease; and if the Lender is unable to exercise any right or remedy
           under the Lease by reason of any such stay or legal prohibition as
           described above, the Lender shall not proceed to foreclose the
           Security Interest of this Agreement (i) until the earlier of (x)
           90 days from the date of such stay or legal prohibition, if any,
           and (y) actual repossession of the Aircraft from the Lessee (such
           period, as described in (x) or (y), as applicable, the "Stay
           Period") so long as, during the Stay Period, the Borrower is
           making all payments due the Lender under the Loan Agreement, and
           the Aircraft is being maintained and insured in accordance with
           the provisions of

                                      15

<PAGE>

                                                   [Security Agreement (21720)]

           the Lease or (ii) so long as the Lessee is performing all of its
           obligations under the Lease pursuant to an agreement under 11
           U.S.C. ss. 1110 (a)(1)(A) (or any similar successor provision)
           and no Lease Event of Default has occurred and is continuing other
           than Under Clause 13.1(g) or (h) of the Lease.

                    10.    LIMITATION ON DUTIES REGARDING PRESERVATION OF
           COLLATERAL. The Lender's sole duty with respect to the custody,
           safekeeping and physical preservation of the Collateral in its
           possession, under Section 9-207 of the Code or otherwise, shall be
           to deal with it in the same manner as the Lender deals with
           similar property for its own account. Neither the Lender nor any
           of its directors, officers, employees or agents shall be liable
           for failure to demand, collect or realize upon all or any part of
           the Collateral or for any delay in doing so or shall be under any
           obligation to sell or otherwise dispose of any Collateral upon the
           request of the Borrower or otherwise.

                    11.    POWERS COUPLED WITH AN INTEREST. All
           authorizations and agencies herein contained with respect to the
           Collateral are irrevocable and powers coupled with an interest.

                    12.    SEVERABILITY. Any provision of this Security
           Agreement which is prohibited or unenforceable in any jurisdiction
           shall, as to such jurisdiction, be ineffective to the extent of
           such prohibition or unenforceability without invalidating the
           remaining provisions hereof, and any such prohibition or
           unenforceability in any jurisdiction shall not invalidate or
           render unenforceable such provision in any other jurisdiction.

                    13.    PARAGRAPH HEADINGS. The paragraph headings used in
           this Security Agreement are for convenience of reference only and
           are not to affect the construction hereof or be taken into
           consideration in the interpretation hereof.

                    14.    NO WAIVER: CUMULATIVE REMEDIES. The Lender shall not
           by any act (except by a written instrument pursuant to Section 15
           hereof), delay, indulgence, omission or otherwise be deemed to
           have waived any right or remedy hereunder or to have acquiesced in
           any Default or Event of Default or in any breach of any of the
           terms and conditions hereof. No failure to exercise, nor any delay
           in exercising, on the part of the Lender, any right, power or
           privilege hereunder shall operate as a waiver thereof. No single or
           partial exercise of any right, power or privilege hereunder shall
           preclude any other or further exercise thereof or the exercise of
           any other right, power or privilege. A waiver by the Lender of any
           right or remedy hereunder on any one occasion shall not be
           construed as a bar to any right or remedy which the Lender would
           otherwise have on any future occasion. The rights and remedies
           herein provided are cumulative, may be exercised singly or
           concurrently and are not exclusive of any rights or remedies
           provided by law.

                                      16

<PAGE>

                                                   [Security Agreement (21720)]

                    15.    WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS;
           GOVERNING LAW. None of the terms or provisions of this Security
           Agreement may be waived, amended, supplemented or otherwise
           modified except by a written instrument executed by the Borrower
           and the Lender, PROVIDED that any provision of this Security
           Agreement may be waived by the Lender in a written letter or
           agreement executed by the Lender or by facsimile transmission from
           the Lender. This Security Agreement shall be binding upon the
           successors and permitted assigns of the Borrower and shall inure
           to the benefit of the Lender and its successors and permitted
           assigns.

                    16.    SUBMISSION TO JURISDICTION, WAIVERS. THIS AGREEMENT
           HAS BEEN DELIVERED IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY
           AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
           THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. THE
           BORROWER HEREBY (I) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
           ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
           THIS AGREEMENT; (II) IRREVOCABLY SUBMITS TO THE JURISDICTION OF
           ANY STATE OR FEDERAL COURT LOCATED IN COOK COUNTY, ILLINOIS, OVER
           ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
           FROM OR RELATED TO THIS AGREEMENT; (III) IRREVOCABLY WAIVES, TO
           THE FULLEST EXTENT THE BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE
           OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
           PROCEEDING; (IV) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
           OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
           JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
           PROVIDED BY LAW; AND (V) AGREES NOT TO INSTITUTE ANY LEGAL ACTION
           OR PROCEEDING AGAINST LENDER OR ANY OF LENDER'S DIRECTORS,
           OFFICER, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER
           ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER
           THAN ONE LOCATED IN COOK COUNTY, ILLINOIS. NOTHING IN THIS
           PARAGRAPH SHALL AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL
           PROCESS IN ANY MANNER PERMITTED BY LAW OR LENDER'S RIGHT TO BRING
           ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTIES IN
           THE COURTS OF ANY OTHER JURISDICTION.

                    17.    NOTICES. All notices, requests and demands to or
           upon the respective parties hereto to be effective shall be in
           writing (including telecopy) and sent by personal delivery,
           reputable overnight courier or telecopy (any such telecopied
           notice to be followed within 24 hours by written notice by
           personal delivery or reputable overnight courier), and unless
           otherwise expressly provided herein, shall be deemed to have been
           duly given or made upon receipt thereof (which, in the case of a
           telecopy, shall be deemed to be the time of receipt by the sender
           of a confirmation report that all pages of the telecopy
           transmission were properly transmitted; provided, however, that if
           the telecopy was transmitted later than 5:30 p.m., the recipient's
           local time, the telecopy shall be deemed to have been received on
           the succeeding Business Day), addressed as follows, or to such
           other address as may be hereafter notified by the respective
           parties hereto and any future holders of the Notes:

                                      17

<PAGE>

                                                   [Security Agreement (21720)]

           The Borrower;         c/o Aviation Capital Group Corp.
                                 Three Stamford Landing
                                 46 Southfield Avenue
                                 Stamford, CT 06902
                                 Ann. Managing Director
                                 Telecopier: (203) 967-3287

                With a copy to:

                                 Aviation Capital Group Corp.
                                 345 California Street
                                 Suite 1230
                                 San Franciso, CA 94104

                                 Telecopier:    (415) 433-0525

           The Lender:           Sanwa Business Credit Corporation
                                 One South Wacker Drive
                                 Chicago, IL 60606
                                 Attn: Senior Vice President, Transportation
                                       Finance
                                 Telecopier: (312) 853-1458

                With a copy to:

                                 Vedder, Price, Kaufman & Kammholz
                                 222 N. LaSalle Street
                                 Chicago, IL 60601
                                 Attn: Dean N. Gerber, Esq.
                                 Fax: (312) 609-5005

                                  *  *  *

                                      18

<PAGE>

                                                   [Security Agreement (21720)]

              IN WITNESS WHEREOF, the Borrower has caused this Security
Agreement to be duty executed and delivered as of the date first above written.

                                       ACG ACQUISITION XII LLC, as Borrower

                                       By: /s/ Richard Baudoin
                                           -----------------------------------
                                       Name: Richard Baudoin
                                            ----------------------------------
                                       Title: Manager
                                             ---------------------------------

                                       SANWA BUSINESS CREDIT CORPORATION,
                                       as Lender

                                       By:____________________________________
                                       Name: _________________________________
                                       Title: ________________________________

<PAGE>

                                                   [Security Agreement (21720)]

              IN WITNESS WHEREOF, the Borrower has caused this Security
Agreement to be duly executed and delivered as of the date first above written.

                                       ACG ACQUISITION XII LLC,
                                       as Borrower

                                       By: ___________________________________
                                       Name: _________________________________
                                       Title: ________________________________

                                       SANWA BUSINESS CREDIT CORPORATION,
                                       as Lender

                                       By: /s/ Thomas W. Hemsoth
                                           -----------------------------------
                                       Name: Thomas W. Hemsoth
                                             ---------------------------------
                                       Title: Vice President
                                              --------------------------------

<PAGE>

                         LEASE AGREEMENT ASSIGNMENT

     This Lease Agreement Assignment (the "Assignment"), dated as of May 1,
2000, is between First Security Bank, National Association, a national
banking association, not individually but as Owner Trustee ("Assignee"), and
ACG Acquisition XII LLC, a Delaware limited liability company ("Assignor").

                                  RECITALS

     WHEREAS, Assignor and Aloha Airlines, Inc., a Delaware corporation
("LESSEE"), are parties to a Lease Agreement 809 (the "LEASE AGREEMENT")
dated May 21, 1997, as supplemented by Certificate of Acceptance 809
(recorded by the Federal Aviation Administration on August 28, 1997, as
Conveyance No. HK010357) and the other agreements relating thereto as more
fully described in Schedule 1 hereto (collectively, the "LEASE DOCUMENTS"),
pursuant to which Assignor leases to Lessee one used Boeing 737-2Q9 aircraft
bearing manufacturer's serial number 21720 and FAA registration number
N809AL, and two Pratt & Whitney Model JT8D-15 engines bearing, respectively,
manufacturer's serial numbers P688676 and P688677 (each of which engines has
750 or more rated takeoff horsepower or the equivalent of such horsepower)
(collectively, the "AIRCRAFT").

     WHEREAS, Assignor has agreed to sell the Aircraft to Assignee (the
"PURCHASE") pursuant to the terms of that certain Purchase and Sale Agreement
dated as of May 1, 2000 (the "PURCHASE AGREEMENT"; capitalized terms used
herein and defined in the Purchase Agreement shall have the same meaning
herein unless otherwise defined herein), subject to the Lease Agreement, and
to assign the Lease Agreement and the Lease Documents, except the Assignor's
Rights (as defined below), to Assignee.

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

     1.  EFFECTIVENESS. This Assignment, and the rights and obligations of
Assignor and Assignee hereunder, shall become effective upon, but only upon,
the occurrence of the Closing (as defined in the Purchase Agreement) of the
Purchase, or upon filing of this assignment with the Federal Aviation
Administration. Assignor and Assignee shall notify Lessee (a) of the
occurrence of this Assignment pursuant to a notice given on the date hereof
substantially in the form of Annex A hereto (the "NOTICE OF ASSIGNMENT"), and
(b) of the occurrence of the Purchase immediately upon delivery of the
Aircraft under the Purchase Agreement pursuant to a notice substantially in
the form of Attachment A to the Notice of Assignment.

     2.  ASSIGNMENT. In consideration of the payment of US$1.00 by Assignee
to Assignor and for other good and valuable consideration, the adequacy and
receipt of which are

<PAGE>

           FILED WITH FAA
        AIRCRAFT REGISTRATION

        00 MAY 1      PM 2:31

            OKLAHOMA CITY
               OKLAHOMA

             [ILLEGIBLE]

<PAGE>

hereby acknowledged, Assignor hereby sells, assigns, delegates, conveys,
transfers and sets over to Assignee all rights and obligations of Assignor
under the Lease Agreement and the Lease Documents, subject to the rights of
Lessee under the Lease Agreement and the Lease Documents and subject to the
reservation by Assignor (on a non-exclusive basis) of the Assignor's Rights
as defined below, which Assignor's Rights Assignor shall continue to benefit
from after the Purchase. "ASSIGNOR'S RIGHTS" means and includes the rights of
the "Lessor" under the Lease Agreement and the Lease Documents: (a) to each
and every defense (whether arising by contract, law or equity) under or with
respect to the Lease Agreement and the Lease Documents; (b) under the
liability insurance provisions of the Lease Agreement, and (c) under all
indemnities made by the Lessee, and all disclaimers made by the Lessor, under
the Lease Agreement, in each case, to the extent such rights vested, or
relate to events occurring, prior to the time of Closing. The retention by
Assignor of the Assignor's Rights shall not prejudice Assignee's right to the
benefit of the Assignor's Rights (including, without limitation, liability
insurance under the Lease Agreement, or the right to enforce any of the
foregoing) in each case to the full extent applicable to the Assignee
(whether or not relating to the period after the assignment of the Lease
Agreement).

     3.  ASSIGNEE ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts and
assumes all of Assignor's rights (other than the Assignor's Rights) and
obligations under the Lease Agreement and the Lease Documents. Assignee shall
be deemed to be a party to the Lease Agreement and the Lease Documents in
place of Assignor and agrees to be bound by all of the terms of, and to
undertake all of the obligations of, "Lessor" under the Lease Agreement and
the Lease Documents.

     4.  ENTIRE AGREEMENT. This Assignment and the Purchase Agreement
constitutes the entire agreement between the parties in relation to the
subject matter hereof and supersedes all previous proposals, agreements and
other written and oral communications in relation hereto.

     5.  GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY
AND CONSTITUTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

     6.  COUNTERPARTS. This Assignment may be executed in any number of
counterparts and by either party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

     7.  FURTHER ASSURANCES. Assignor agrees from time to time after the
execution and delivery of this Agreement, it shall upon the request of
Assignee and at Assignee's expense duly execute and deliver such further
documents and instruments and take such further action as Assignee may
reasonably request in order to effectuate fully the intent and purposes of
this Agreement.

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.

                                  ACG ACQUISITION XII LLC
                                  as Assignor

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

                                  FIRST SECURITY BANK, NATIONAL
                                  ASSOCIATION, AS OWNER TRUSTEE
                                  as Assignee

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

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.

                                  ACG ACQUISITION XII LLC
                                  as Assignor

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

                                  FIRST SECURITY BANK, NATIONAL
                                  ASSOCIATION, AS OWNER TRUSTEE
                                  as Assignee

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

<PAGE>

                                                                   SCHEDULE 1

                                 LEASE DOCUMENTS

Letter of Credit dated May 20, 1997

UCC financing statement # 97-067398 filed in Hawaii on May 22, 1997

Insurance Certificate dated May 21, 1997

Insurance Broker's Undertaking dated May 21, 1997

Opinion of Lessee's Counsel dated May 21, 1997

Certificate of Incorporation, By-laws and Good Standing Certificate of Lessee
certified on May 21, 1997

Incumbency Certificate of Lessee dated May 21, 1997

Certified Resolutions of board of directors of Lessee dated May 21, 1997

Officer's Certificate of Lessee dated May 21, 1997

Lease Termination Certificate- Lease A - FAA dated November 14, 1994, signed
by Phoenix Ventures Inc. (Lessor) and Luchtvaartmaatschappij Transavia
Holland B.V. (Lessee)

Lease Termination Certificate- Lease B - FAA dated November 14, 1994, signed
by First Security Bank of Utah (Lessee) and Phoenix Ventures Inc. (Lessor)

Lease Termination Certificate- Lease C - FAA dated May 21, 1997, signed by
First Security Bank of Utah (Lessor) and Aloha Airlines, Inc. (Lessee)

Evidence of FAA Aircraft Registration dated May 21, 1997

Lessee's financial statements

Semi-Annual Status Reports delivered by Lessee to Assignor

Certificate of Acceptance of Lessee

Letter of Assignor to Lessee exercising Lease extension option

<PAGE>

                                                                       Annex A

                                                 to Lease Agreement Assignment

                   NOTICE OF AND CONSENT TO ASSIGNMENT

                            April ____, 2000

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Attention:  Senior Vice President Finance and Planning

       Re:  NOTICE OF AND CONSENT TO ASSIGNMENT OF LEASE AGREEMENT

Ladies and Gentlemen:

       Reference is hereby made to that certain Lease Agreement dated May 21,
1997 between Aloha Airlines, Inc. ("LESSEE") and ACG Acquisition XII LLC, as
amended, modified and supplemented (the "LEASE AGREEMENT"), pursuant to which
ACG Acquisition XII LLC ("ASSIGNOR") is leasing to you one Boeing 737-2Q9
aircraft bearing manufacturer's serial number 21720 including the two Pratt &
Whitney model JT8D-15 engines bearing manufacturer's serial numbers P688676
and P688677 ( "AIRCRAFT")

       You are hereby notified that Assignor has assigned and delegated all
of its rights (other than Assignor's Rights) and obligations under the Lease
Agreement and related documents to First Security Bank, as Owner Trustee
("ASSIGNEE") pursuant to a Lease Agreement Assignment between Assignor and
Assignee (a copy of which Lease Agreement Assignment is attached hereto (the
"ASSIGNMENT")). Such assignment and delegation shall become effective upon
consummation of the purchase of the Aircraft by Assignee from Assignor.
Assignor and Assignee shall give you notice of consummation of the purchase
of the Aircraft by Assignee (the "PURCHASE NOTICE") in the form attached
hereto as Attachment A.

       Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Lease Agreement Assignment. Lessee,
Assignee and Assignor hereby agree as follows:

<PAGE>

    Section 1. LEASE PROVISIONS. With effect from the date of the Purchase
Notice:

        (a) PAYMENTS. All rental payments and other payments due from Lessee
under the Lease will be paid to Southern Pacific Bank, Torrance, California,
ABA No. 322 286 476, Account Name: Coast Business credit, Attention Jack
Leaver, reference First Security Bank/Aloha/BCI 809 (Client Loan Name) until
further notice from Lessor.

        (b) NOTICES. All notices and other communications from Lessee to
"Lessor" under the Lease Agreement and the other Lease Documents shall be
delivered to:

            First Security Bank, National
            Association, as Owner Trustee
            Corporate Trust Services
            79 South Main Street
            Salt Lake City, Utah 84111

 Copy to:   BCI 2000, L.L.C.
            236 South Washington Street, Second Floor
            Naperville, Illinois 60540
            Attn: President

        (c) INSURANCE. Lessee shall modify the insurance policies covering
the Aircraft to acknowledge First Security Bank, National Association, as
Owner Trustee, as owner and Lessor of the Aircraft and BCI 2000, L.L.C. as
additional loss payee as its interests may appear.

    Section 2. LESSEE CONSENT. With effect from the date of the Purchase
Notice, Lessee consents to the Assignment and consummation of the
transactions contemplated thereby.

    Section 3. ASSIGNOR RELEASE. With effect from the date of the Purchase
Notice Assignor shall have no further obligations under the Lease Agreement
or the Lease Documents and is hereby released therefrom.

    Section 4. LESSEE'S REPRESENTATIONS AND AGREEMENTS. Lessee hereby
represents, warrants and agrees that:

            (a) Other than as listed in the documents listed in Schedule 1 to
the Assignment, there has been no amendment or modification of the Lease
Agreement and the Lease Documents.

            (b) The Basic Rent and Supplemental Rent (as defined in the
Lease Agreement) have each been paid through April 21, 2000 and no Basic Rent
or Supplemental Rent has been prepaid.

<PAGE>

            (c) Lessee has no claim against Assignor by reason of the
condition of the Aircraft as of the date hereof.

            (d) The Lessee Agreement and the Lease Documents are in full force
and effect.

            (e) No "Event of Default" has occurred and is continuing under
the Lease Agreement.

            (f) Assignor is in full compliance with the provisions of the
Lease Agreement and the Lease Documents and Lessee has no claims for
unperformed obligations or liabilities of Assignor.

            (g) With effect from the date of the Purchase Notice, Lessee will
perform, observe and comply with all of its obligations and undertakings
under the Lease Agreement and the Lease documents in favor of the Assignee
and for the benefit of Assignee as if Assignee were named as "Lessor" therein
instead of the Assignor.

            (h) Lessee acknowledges the retention by Assignor of the
Assignor's Rights as provided in the Lease Assignment and that such retention
shall not prejudice Assignee's rights to the benefits of the relevant
provisions of the Lease AGreement and the Lease Documents to the extent
applicable to Assignee (whether or not relating to the period after the date
of the Purchase Notice).

            (i) The Expiry Date of the Lease is May 20, 2002.

            (j) Assignee shall be entitled to rely on all representations and
warranties of Lessee in the Lease Agreement and in any certificate or
document furnished by Lessee in connection with the Lease Agreement as though
the Assignee were the Assignor.

            (k) Lessee acknowledges that for purposes of Section 2.5 of the
Lease Agreement, the words, "Delaware" in Section 2.4(a) and 2.4(e) shall be
deemed to be the word "Illinois".

            (l) Lessee will, on the date of the Purchase Notice, deliver or
cause to be delivered to Assignee (i) the financing statements referred to in
Section 14.2(c)(ii) of the Lease Agreement, (ii) the certificate referred to
in Section 14.2(c)(iii) of the Lease Agreement, (iii) the certificates of
insurance and broker's letter of undertaking referred to in Section 14(c)(iv)
of the Lease Agreement, (iv) the opinion referred to in Section 14.2 (c)(v)
of the Lease Agreement, (v) documents referred to in Section 14.2 (c)(vii) of
the Lease Agreement.

<PAGE>
            (m) Lease will, on the date of the Purchase Notice, deliver or
cause to be delivered such agreements, certificates, opinions and other
documents as Assignee shall request pursuant to Section 14.3 (b) of the Lease
Agreement.

    Section 6. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
SECTION.

    Section 7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by any party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

     If you are in agreement with the foregoing, please do indicate by
signing and returning a copy of this letter to the undersigned.

Thank you for your cooperation.

                            Very truly yours,

                            ACG ACQUISITION XII LLC

                            By:  ___________________
                                 Name:
                                 Title:

                             FIRST SECURITY BANK, NATIONAL
                             ASSOCIATION, AS OWNER TRUSTEE

                            By:  ___________________
                                 Name:
                                 Title:

Accepted and Agreed:

ALOHA AIRLINES, INC.

By:  ___________________
     Name:
     Title:

<PAGE>

                                                               Attachment A to
                                                          Notice of Assignment

                            April ____, 2000

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Attention:  Senior Vice President Finance and Planning

       Re:  NOTICE OF EFFECTIVENESS OF SALE

Ladies and Gentlemen:

       Reference is hereby made to that certain Lease Agreement (the
"AGREEMENT") dated as of April __, 2000 between ACG Acuisition XII LLC and
First Security Bank, National Association, as Owner Trustee, relating to one
Boeing 737-2Q9 aircraft bearing manufacturer's serial number 21720 (and U.S.
registration number N809AL).

       Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Agreement.

       Pursuant to the Notice to Lessee delivered under the Agreement, you
are hereby notified that the Purchase has occurred and the Agreement is,
consequently, effective.

       This letter may be executed in any number of counterparts and by
either party on one or more of such counterparts.

Very truly yours,

<Table>

<S>                               <C>
ACG ACQUISITION XII LLC           FIRST SECIRITY BANK,
                                  NATIONAL ASSOCIATION,
                                  AS OWNER TRUSTEE

By:  __________________           By:  _________________
     Name:                             Name:
     Title:                            Title:

</Table>

<PAGE>

                                                                     F&J 4/26/00

                 ASSIGNMENT OF LEASE 809 AND LETTER OF CREDIT

     This ASSIGNMENT OF LEASE 809 AND LETTER OF CREDIT, dated as of May 1,
2000 (this "Agreement"), is between FIRST SECURITY BANK, NATIONAL ASSOCIATION
("FSB"), a national banking association, 79 South Main Street, Salt Lake
City, Utah 84111, as owner trustee under the Trust Agreement, dated as of
May 1, 2000, between BCI 2000, L.L.C. (the "Beneficiary") and FSB ("Debtor"),
and COAST BUSINESS CREDIT, a division of Southern Pacific Bank, a California
corporation, 12121 Wilshire Boulevard, Suite 1400, Los Angeles, California
90025 (the "Secured Party").

                             W I T N E S S E T H :

     WHEREAS, Debtor is the Lessor (as transferee of ACG Acquisition XII LLC)
under that certain Aircraft Lease Agreement 809 dated as of May 21, 1997,
between ACG Acquisition XII LLC and Aloha Airlines, Inc., a Delaware
corporation (the "Lessee"), as supplemented by the Notice of Lease Extension
dated as of March 15, 2000 by Lessor as further described on Schedule F
(together with all amendments, modifications, supplements, addenda and
extensions thereto from time to time, the "Lease 809"), covering one Boeing
model 737-2Q9 airframe, manufacturer's serial number 21720, United States
registration number N809AL, together with two (2) Pratt & Whitney model
JT8D-15A aircraft engines, manufacturer's serial numbers 688676 and 688677
(the "Engines" and, collectively, the "Aircraft 809");

     WHEREAS, the Letter of Credit has been furnished by the Lessee as
security for the performance of the obligations of the Lessee under the
Lease 809, and has been amended to name the Secured Party as beneficiary;

     WHEREAS, in connection with financing from the Secured Party, Debtor has
entered into (i) the Loan Agreement 809, dated as of May 1, 2000 (the "Loan
Agreement") among the Debtor, as Borrower, the Beneficiary, as Beneficiary
and Secured Party, as Lender, pursuant to which Secured Party has advanced
some or all of the Loan 809 (as defined therein) to the Debtor and (ii) the
Aircraft Security Agreement 809 dated as of the date hereof between Debtor
and Secured Party (the "Aircraft Security Agreement 809"); and

     WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have the meanings provided therefor in the Lease 809 of the Loan
Agreement 809, PROVIDED, FURTHER, that any definition of a document used
herein shall refer to such document as it may nor or later be amended or
supplemented;

<PAGE>

           FILED WITH FAA
        AIRCRAFT REGISTRATION

        00 MAY 1      PM 2:32

            OKLAHOMA CITY
               OKLAHOMA

             [ILLEGIBLE]

<PAGE>

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

     1.  As security for the payment and performance of the Liabilities
(whether as scheduled, upon acceleration or otherwise, including, without
limitation, repayment of the Loans made or to be made by the Secured Party
under the Loan Agreement 809 as they may be outstanding from time to time,
accrued interest thereon, the Prepayment Fee and all other interest, fees and
expenses payable by the Debtor pursuant to the Loan Agreement 809 and the
other Operative Documents) and of all costs of collection and enforcement of
the Liabilities, the Debtor hereby collaterally assigns, transfers, conveys
and sets over to the Secured Party all of its right, title and interests in,
to and under, the Lease 809 and the Letter of Credit and any replacements or
renewals thereof furnished under the terms of Section 29 of the Lease 809
(but none of Debtor's obligations thereunder), including, without limitation,
the right under the Lease 809(i) to collect all Basic Rent, Supplemental
Rent, and other income, proceeds (including, but not limited to insurance
proceeds), awards, revenues and other sums payable by Lessee to Debtor
pursuant to the Lease, and (ii) after the occurrence and during the
continuance of a Lease Event of Default, to enforce all of Debtor's other
rights and remedies under the Lease 809 and the Letter of Credit, but not
limited to the right to apply any of the Lease 809 payments in accordance
with the terms of the Lease 809.

     2.  All notices, demands and other communications made by one party to
the other party in connection with this Agreement shall be in writing and
given to or made upon such party as provided in Section 11.01 of the Loan
Agreement 809.

     3.  This Agreement shall be binding upon and inure to the benefit of the
Debtor and the Secured Party and their respective successors and permitted
assigns. This Agreement may not be assigned by the Debtor, in whole or in
part, without the prior written consent of the Secured Party. The parties
hereto acknowledge and agree that the Secured Party may assign its rights
hereunder to a Transferee (as defined in the Loan Agreement 809) as provided
in Section 11.08 of the Loan Agreement 809.

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

     5.  This Agreement has been delivered in the State of New York. Each
party hereto agrees that, to the maximum extent permitted by the law of the
State of New York, this Agreement, and the rights and duties of the parties
hereunder, shall be governed by, and construed in accordance with, the laws
of the State of New York (including sections 5-1401 and 5-1402 of the New
York General Obligations Law) in all respects, including in respect of all
matters of construction, validity and performance but without giving effect
to any provision thereof that may require application of the laws of another
jurisdiction.

                                    - 2-

<PAGE>

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

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

                                    - 3 -

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease 809
to be executed by their duly Authorized Officers as of the day first above
written.

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

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

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

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

Assignment of Lease and Letter of Credit 809
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease 809
to be executed by their duly Authorized Officers as of the day first above
written.

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

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

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

                                  By:           /s/ Joseph N. Sammons
                                       -------------------------------------
                                       Name:   Joseph N. Sammons
                                       Title:  Vice President

Assignment of Lease and Letter of Credit 809
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL

<PAGE>

                                                                      SCHEDULE I

                             DESCRIPTION OF LEASE

Lease Agreement dated May 21, 1997, between ACG Acquisition XII, LLC as
lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate of
Acceptance 809, recorded by the Federal Aviation Administration ("FAA") on
August 28, 1997, as Conveyance No. HK010357, as supplemented by Notice of
Lease Extension N809AL dated March 15, 2000, by ACG Acquisition XII, LLC as
lessor, which was not filed with the FAA, as assigned by the Lease Agreement
Assignment dated as of May 1, 2000, between ACG Acquisition XII, LLC as
assignor and First Security Bank, National Association of Owner Trustee,
assignee, which is being filed with the FAA contemporaneously herewith.

Assignment of Lease
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL

<PAGE>

                                                            EXECUTION VERSION

                             AGREEMENT 809

     THIS AGREEMENT 809 (this "Agreement" dated the 5th day of November,
2001, is by and among Aloha Airlines, Inc. (the "Lessee"), Wells Fargo Bank
Northwest, National Association (formerly known as First Security Bank,
National Association), as Owner Trustee (the "Lessor") and Coast Business
Credit, a division of Southern Pacific Bank (the "Secured Party"), and
consented to by BCI 2000, L.L.C. (the "Beneficiary") and BCI Aircraft
Leasing, Inc. (the "Guarantor"). Capitalized terms used herein and not
otherwise defined are used as defined in Appendix A to the Loan Agreement (as
defined below).

     WHEREAS, Lessee and Lessor (as assignee of ACG Acquisition XII LLC) are
parties to Lease Agreement 809 dated May 21, 1997 (as extended, amended and
supplemented from time to time, the "Lease'), as collaterally assigned by
Lessor to Secured Party pursuant to the Assignment of Lease 809 and Letter of
Credit dated as of May 1, 2000 between Lessor and Secured Party (the "Lease
Assignment") which Lease Assignment has been consented to by Lessee pursuant
to the Consent and Agreement 809 dated as of May 1, 2000 among Lessee, Lessor
and Secured Party (the "Lessee Consent"), each such document relates to one
Boeing model 737-2Q9 Aircraft bearing manufacturer's serial number 21720 and
United States Registration No. N809AL together with two Pratt & Whitney model
JT8D-15A aircraft engines bearing manufacturer's serial numbers P688676 and
P688677 (collectively, the "Aircraft");

     WHEREAS, Lessor, Beneficiary and Secured Party are parties to Loan
Agreement 809 dated as of May 1, 2000 (the "Loan Agreement"), pursuant to
which Secured Party provided financing for Lessor's purchase of the Aircraft;

     WHEREAS, Guarantor executed and delivered in favor of the Secured Party
a Guaranty dated May 1, 2000 (the "Guaranty") with respect to certain
obligations of the Lessor under the Loan Agreement;

     WHEREAS, an Event of Default (as defined in the Lease) has occurred and
is continuing under Clause 13.1(a) of the Lease by reason of Lessee's failure
to make payment of Basic Rent on September 20, 2001 (a Rent Date) pursuant to
Clause 5.3 of the Lease; and

     WHEREAS, an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing under each of Sections 9.01(a) and 9.01(f) of the
Loan Agreement by reason of, among other things, Lessor's failure to make
payment of principal and interest (including, but not limited to, Interest
Deficiency) on September 20, 2001 (a Payment Date) pursuant to Section 2.04
of the Loan Agreement Guarantor's failure to make payment of Interest
Deficiency on September 20, 2001 (a Payment Date) pursuant to Section 1.1 of
the Guaranty and Lessee's

------------------------
*Indicates that information has been omitted as confidential information,
and is filed separately with the Commission.

                                       1
<PAGE>

failure to make payment of Basic Rent on September 20, 2001 (a Rent Date)
pursuant to Clause 5.3 of the Lease.

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

     1. On or about November 5, 2001, Secured Party shall call and draw on the
irrevocable Standby Letter of Credit No. S/B 970039 issued by First Hawaiian
Bank on May 20, 1997 in favor of the Secured Party (as extended, amended and
supplemented from time to time, the "Letter of Credit") in the amount of
US$* and use or apply the proceeds (net of any cost or expense to be
incurred in connection therewith) in or towards satisfaction of all sums due and
payable to the Secured Party under the Loan Agreement as of September 20, 2001
and October 20, 2001, each a Payment Date under the Loan Agreement and a Rent
Date under the Lease. In the event of any excess amount remaining after the use
or application of the proceeds (net of any cost or expense to be incurred in
connection therewith) of the Letter of Credit pursuant to the preceding
sentence, such excess amount shall be retained by the Secured Party and applied
by the Secured Party, in or towards satisfaction of the outstanding amount of
principal and interest of the Loan under the Loan Agreement, as a mandatory
prepayment thereof, provided that no Prepayment Fee shall be payable in
connection with such mandatory prepayment and the amount of the excess will be
applied to the next payments due upon the Loan in chronological order.

     2. Provided that the Secured Party shall have actually received the
amount of US$* in connection with its drawing under the Letter of
Credit pursuant to clause 1 above, Secured Party and Lessor agree as follows:
notwithstanding the requirement set out in Clause 5.1(b)(ii) of the Lease
which provides that the Lessee shall immediately, on demand of the Lessor or
the Secured Party, procure the issuance of a new Letter of Credit (as defined
in the Lease) acceptable to the Lessor and the Secured Party for an amount
equal to the amount used or applied pursuant to clause 1 above, Secured Party
and Lessor agree that Lessee may, and Lessee shall, within twelve (12) months
from the date that the Secured Party shall have actually received the amount
of US$* in connection with its drawing under the Letter of Credit
pursuant to clause 1 above, procure the issuance of a new clean Letter of
Credit (as defined in the Lease), satisfying the requirements set forth in
the definition of "Letter of Credit" in Clause 1.1 of the Lease, in an amount
drawable thereunder equal to US$*, or shall pay to the Secured Party an
amount in cash equal to US$* to be held pursuant to Clause 5.1(a) of
the Lease (as assigned pursuant to the Lease Assigmnent).

     3. (a) Lessor and Lessee hereby agree that:

                                        2

<PAGE>

               (i) the Lease is hereby amended by replacing the number
"$*" which appears in the definition of "Agreed Value" in Section 1.1 of
the Lease with the number "$*";

               (ii) the amendment to the Lease as set forth in clause 3(a)(i)
above shall not be effective until execution and delivery of this Agreement by
the Secured Party; and

               (iii) except as expressly provide herein, all of the provisions
of the Lease as heretofore amended and supplemented and as further amended and
supplemented by clause 3(a)(i) above are hereby ratified and confirmed and
shall, as so amended and supplemented, remain in full force and effect. From and
after the date hereof, all references in any document or instrument to the Lease
shall mean the Lease as heretofore amended and supplemented by clause 3(a)
above.

          (b) By executing this Agreement, the Secured party hereby
consents to the amendment to the Lease as set forth in clause 3(a)(i) above;
provided that Secured Party does not waive, and should not be deemed to waive,
any of its rights, powers or remedies under the Loan Agreement or any other
Operative Document by virtue of its consent hereunder.

     4. This Agreement shall be effective following execution and delivery of
this Agreement by each of the parties hereto and upon Secured Party's actual
receipt of US$* following the drawing under the Letter of Credit pursuant
to clause 1 above.

     5. Except with respect to any payment defaults cured by application of the
drawings under the Letter of Credit, Secured Party does not waive, and should
not be deemed to waive, any of its rights or remedies with respect to existing
or future Events of Default under the Loan Agreement and the other Operative
Documents by virtue of this Agreement or any negotiations that it may engage in
regarding the Events of Default described herein and Secured Party hereby
expressly reserves the right to pursue its rights and remedies at a time and in
a manner of its choosing with respect to the Events of Default described above
and any other Event of Default that has occurred or may occur in the future.
Pursuant to Section 9.02(c) of the Loan Agreement, Lessor is responsible for all
of Secured Partys reasonable out-of-pocket costs and expenses incurred in
connection with the Events of Default described in this Agreement, including,
without limitation, reasonable fees and expenses of Secured Party's counsel.

     6. Except with respect to any Payment defaults cured by application of the
drawings under the Letter of Credit, Lessor does not waive, and should not be
deemed to waive, any of its rights or remedies with respect to existing or
future Events of Default under the Lease by virtue of this Agreement or any
negotiations that it may engage in regarding the Events of Default described
herein and Lessor hereby expressly reserve the right to pursue its rights and
remedies at a time and in a manner of its choosing with respect to the Events of
Default described above and

                                        3

<PAGE>

any other Event of Default that has occurred or may occur in the future.
Pursuant to Clause 13.4 of the Lease, Lessee is responsible for all of Lessor's
and Secured Party's (as Lessor's assignee pursuant to the Lease Assignment and
Lessee Consent) loss, damage, expense, cost or liability which the Lessor or
Secured Party (as Lessor's assignee pursuant to the Lease Assignment and Lessee
Consent) may sustain or incur directly or indirectly as a result of the
occurrence of a Default (as defined in the Lease).

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

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

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

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

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

                            [Signature Pages Follow]

                                        4

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

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

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

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

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

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

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

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

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

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

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

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

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

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

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

<PAGE>

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

BCI 2000, L.L.C., as Beneficiary
by BCI Aircraft Leasing, Inc., as Manager

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

BCI AIRCRAFT LEASING, INC., as Guarantor

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

                                                                   Exhibit 10.74

                                                               EXECUTION VERSION
                                                               -----------------

            TO THE EXTENT THAT THIS AIRCRAFT LEASE AGREEMENT CONSTITUTES CHATTEL
            PAPER (AS 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 TRANSFER OR POSSESSION OF ANY
            COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE
            IDENTIFIED AS THE COUNTERPART DESIGNATED AS THE ORIGINAL ON THE
            SIGNATURE PAGE OF THIS AGREEMENT BY GE CAPITAL AVIATION SERVICES,
            INC.

                            AIRCRAFT LEASE AGREEMENT

                          DATED AS OF DECEMBER 14, 2001

                                     BETWEEN

                               AIRCRAFT 28654 LLC

                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

                  IN RESPECT OF AIRCRAFT: BOEING MODEL 737-700

                                SERIAL NO: 28654

             U.S. REGISTRATION NO.: N316ML (TO BE CHANGED TO N743AL)

                        INCORPORATING THE PROVISIONS OF A

                             COMMON TERMS AGREEMENT

                             DATED AS OF MAY 12, 2000

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

   THIS AIRCRAFT LEASE AGREEMENT is made as of December 14, 2001 and is

   BETWEEN:

   (1)  AIRCRAFT 28654 LLC, a limited liability company organized under the
        Laws of the State of Delaware having its principal place of business
        and chief executive office at 201 High Ridge Road, Stamford,
        Connecticut 06927 ("LESSOR"); and

   (2)  ALOHA AIRLINES, INC., a corporation incorporated under the Laws of
        the State of Delaware with its principal place of business at 371
        Aokea Street, Honolulu, Hawaii 96819 and its chief executive office
        at 500 Ala Moana Blvd., Two Waterfront Tower, Suite 500, Honolulu,
        Hawaii 96813 ("LESSEE").

   WHEREAS:

   (A) Lessee wishes to lease the Aircraft (as defined below) from Lessor,
       and Lessor wishes to lease the Aircraft to Lessee, on the terms and
       subject to the conditions provided herein;

   (B) General Electric Capital Corporation ("GECC"), an Affiliate of
       Lessor, and Lessee have entered into the Common Terms Agreement (as
       defined below) in respect of aircraft that may be leased from time
       to time by Lessee or one of its Affiliates from GECC or one of its
       Affiliates; and

   (C) Lessor and Lessee wish to incorporate by reference such Common Terms
       Agreement, as well as Schedules A and B attached hereto, into this
       Aircraft Lease Agreement for the Aircraft and a true and complete
       copy of such Common Terms Agreement is attached hereto as Schedule
       C;

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

   1.       INTERPRETATION

            DEFINITIONS: In this Aircraft Lease Agreement, the following
            capitalized words and expressions have the respective meanings set
            forth below:

            AIRCRAFT means the Airframe and Engines described on Schedule A
            hereto.

            AIRFRAME STRUCTURAL CHECK, AIRFRAME SUPPLEMENTAL RENT, ANNUAL
            SUPPLEMENTAL RENT ADJUSTMENT, and APU SUPPLEMENTAL RENT have the
            meaning specified in Schedule B.

            ASSUMED RATIO has the meaning specified in Schedule B.

                                      -1-

<PAGE>

            COMMON TERMS AGREEMENT means the "Aircraft Lease Common Terms
            Agreement" dated as of May 12, 2000 executed by GECC and Lessee (as
            in effect on the date hereof without, unless Lessor and Lessee
            otherwise expressly agree, giving any effect to any subsequent
            amendment, supplement, waiver or other modification thereto), and
            which forms part of this Aircraft Lease Agreement.

            DELIVERY CONDITION REQUIREMENTS means the requirements specified in
            Part II of Schedule A.

            DELIVERY LOCATION means Abbotsford, British Columbia, Canada or such
            other location as Lessor and Lessee mutually agree in order to
            minimize any Taxes that may be applicable to the Delivery.

            DEPOSIT means all amounts payable pursuant to Section 3.1 hereof.

            ENGINE SUPPLEMENTAL RENT AND ENGINE LLP SUPPLEMENTAL RENT have the
            meanings specified in Schedule B.

            FINAL DELIVERY DATE means the date that is 90 days after the last
            day of the Scheduled Delivery Month.

            FINANCING DOCUMENTS means the documents, if any, relating to any
            indebtedness of Lessor secured, in whole or in part, by Lessor's
            interest in the Aircraft and this Aircraft Lease Agreement.

            FINANCING DOCUMENTS CONTEST RIGHTS, FINANCING DOCUMENTS INDEMNITY
            AMOUNTS and FINANCING DOCUMENTS TAX AMOUNTS are all inapplicable.

            FINANCING PARTIES means the Persons, if any, that hold the
            indebtedness of Lessor evidenced by the Financing Documents, and
            shall include the Financing Parties Representative.

            FINANCING PARTIES' REPRESENTATIVE the Person, if any, identified by
            Lessor to Lessee in writing as the representative of the Financing
            Parties and the beneficiary of the Security Interest in the Aircraft
            and this Aircraft Lease Agreement created by the Financing
            Documents, and its successors and assigns.

            GUARANTOR is inapplicable.

            INDEMNITEE means each of Lessor, Owner, GECC, GECAS, the Financing
            Parties and their respective successors and permitted assigns, and
            each of their respective shareholders,

                                      -2-

<PAGE>

            subsidiaries, affiliates, partners, contractors, directors,
            officers, representatives, agents and employees.

            LANDING GEAR SUPPLEMENTAL RENT has the meaning specified in Schedule
            B.

            MANUFACTURER means the manufacturer of the Airframe or an Engine, as
            the case may be, as set forth on Schedule A hereto.

            OWNER means Lessor.

            PBH PERIOD has the meaning specified in Schedule B.

            PBH RATE has the meaning specified in Schedule B.

            PRE-APPROVED BANK means (i) First Hawaiian Bank for so long as its
            long-term unsecured Dollar denominated debt carries a rating from
            S&P of A- or better, and (ii) any bank organized under the laws of
            the United States or any State thereof, or the New York branch of a
            major international bank for only so long as its long-term Dollar
            denominated unsecured debt (or if it does not have long-term
            unsecured Dollar denominated debt, its parent corporation's
            long-term unsecured Dollar denominated debt) carries a rating from
            S&P of A or better.

            REDELIVERY LOCATION means any location in the State of Washington,
            Oregon or California as Lessor may designate to Lessee or such other
            location as may be agreed in writing by Lessor and Lessee.

            RENT COMMENCEMENT DATE means the date on which Lessor tenders the
            Aircraft under Clause 4.3.(a) of the Common Terms Agreement and the
            Lessee Conditions Precedent are met or could reasonably be expected
            to be met if the Delivery of the Aircraft had occurred.

            SCHEDULED DELIVERY DATE means the date that Aircraft is scheduled to
            be delivered by Lessor to Lessee under the Lease, as notified by
            Lessor to Lessee pursuant to Section 4.1 of the Common Terms
            Agreement, and, notwithstanding any subsequent delays in delivery,
            the "Scheduled Delivery Date" shall remain the first such date
            notified by Lessor to Lessee pursuant to Section 4.1 of the Common
            Terms Agreement.

            SCHEDULED DELIVERY MONTH means January, 2002.

            SCHEDULED DELIVERY WEEK means the week during which the Scheduled
            Delivery Date occurs.

            SCHEDULED EXPIRY DATE means the day immediately preceding the
            fifteenth (15th) anniversary of the Rent Commencement Date (or in
            the event that such date is a day that is

                                       -3-

<PAGE>

            not a Business Day, the immediately preceding Business Day), which
            date shall be specifically set forth in Lease Supplement No. 1;
            provided, however, that Lessee shall receive a credit for Rent
            actually paid by Lessee to Lessor, on a per diem basis, against
            other obligations owed by Lessee to Lessor at the Return Occasion in
            respect of any non-Business Days which are truncated from the Term
            based on this provision.

            STATE OF DESIGN means the United States.

            TAX INDEMNITEE means each of Owner, Lessor, and each member of the
            consolidated group of which Lessor or Owner is a member for United
            States Federal Income Tax purposes, and their successors and
            permitted assigns.

    1.2     INTERPRETATION: Unless otherwise defined herein, words and
            expressions defined in the Common Terms Agreement have the same
            respective meanings for the purposes of this Aircraft Lease
            Agreement. The construction provisions of Section 1.2 of the Common
            Terms Agreement shall apply to this Aircraft Lease Agreement.

    2.      LEASING

    2.1     AGREEMENT TO LEASE: Subject to the terms and conditions of the
            Lease, Lessor will lease the Aircraft to Lessee and Lessee will take
            delivery of and lease the Aircraft from Lessor in accordance with
            the Lease for the duration of the Term.

   2.2      TERM: Subject to Sections 4.1 through 4.4 of the Common Terms
            Agreement, Delivery of the Aircraft will occur at the Delivery
            Location, whereupon Lessee shall accept the Aircraft hereunder and
            evidence such Delivery and acceptance by executing and delivering
            Lease Supplement No. 1 as provided in Section 4.3 of the Common
            Terms Agreement. The Tenn will commence on the Delivery Date, which
            Delivery Date is scheduled to occur in the Scheduled Delivery Month,
            and will expire on the Scheduled Expiry Date, subject to the
            following:

            2.2.1   LESSEE'S EARLY TERMINATION OPTION: Lessee may at its sole
                    option terminate the Lease at the first yearly anniversary
                    of the Delivery Date by providing written notice of its
                    election to terminate under this Section 2.2.1 to Lessor not
                    less than 180 days prior to the first yearly anniversary of
                    the Delivery Date. Upon such termination, Lessee shall
                    return the Aircraft to Lessor at the first yearly
                    anniversary of the Delivery Date in accordance with all of
                    the requirements of the Lease, including without limitation
                    those set forth in Part III of Schedule A hereto.

            2.2.2   LESSOR'S   EARLY   TERMINATION   OPTION: Lessor  may
                    terminate  the Lease at any time at or  prior  to the  first
                    yearly anniversary  of  the  Delivery  Date  by providing
                    written

                                       -4-

<PAGE>

            notice ("LESSOR'S NOTICE") of its election to terminate under this
            Section 2.2.2 to Lessee not less than 60 days prior to the
            termination date specified in such notice; provided, however, Lessee
            may elect to nullify the early termination of the Lease by Lessor
            under this Section 2.2.2 if, within fifteen (15) days following
            Lessee's receipt of Lessor's Notice, Lessee delivers to Lessor a
            written instrument in form and substance satisfactory to Lessor
            ("LESSEE'S COMMITMENT AND WAIVER") by which Lessee confirms its
            commitment to keep the Aircraft for the full Term and waives forever
            Lessee's right to terminate the Lease at the first yearly
            anniversary of the Delivery Date under Section 2.2.1 above. Upon
            receipt of Lessee's Commitment and Waiver, Lessor's election to
            terminate the Lease under this Section 2.2.2 shall be deemed null
            and void and the Lease shall continue in full force and effect
            (subject, however, to Lessee's waiver of its rights pursuant to
            Lessee's Commitment and Waiver) as though Lessor's Notice had never
            been delivered. If Lessor delivers a Lessor's Notice and Lessee does
            not deliver Lessee's Commitment and Waiver within fifteen (15) days
            following Lessee's receipt of Lessor's Notice, then Lessee shall
            return the Aircraft to Lessor at the termination date specified in
            Lessor's Notice in accordance with all of the requirements of the
            Lease, including without limitation those set forth in Part III of
            Schedule A hereto.

   3.       PAYMENTS

   3.1      DEPOSIT AND LETTER OF CREDIT: Lessee shall pay to Lessor the Deposit
            in cash (to which Deposit Section 5.13 of the Common Terms Agreement
            shall apply) in the amount and at the times provided in Schedule B
            hereto. Lessee shall be permitted to deliver to Lessor an
            irrevocable Letter of Credit in lieu of a portion of the Deposit in
            an amount up to the amount provided in Schedule B as the LC Amount,
            which Letter of Credit shall comply with the provisions of Section
            5.14 of the Common Terms Agreement

   3.2      RENT: Lessee shall pay Rent to Lessor on each Rent Date during the
            Term in the amount provided in Schedule B hereto and as provided in
            Sections 5.2 and 5.3 of the Common Terms Agreement. The first
            installment of Rent shall be due and payable on the Rent
            Commencement Date as defined herein.

   3.3      SUPPLEMENTAL RENT: Lessee shall pay Supplemental Rent to Lessor on
            each applicable date during the Term in the amounts provided in
            Schedule B hereto and as provided in Section 5.4 of the Common Terms
            Agreement.

                                       -5-

<PAGE>

   3.4     LESSOR'S MAINTENANCE CONTRIBUTION:

             3.4.1   Provided that no Default has occurred and is continuing,
                     Lessor will pay (as a separate and independent obligation
                     and not as a return of Supplemental Rent) the following
                     amounts to Lessee by way of contribution to the cost of
                     maintenance of the Aircraft, UPON RECEIPT BY LESSOR, WITHIN
                     SIX MONTHS AFTER COMMENCEMENT OF SUCH MAINTENANCE AND
                     BEFORE THE EXPIRY DATE, of an invoice and supporting
                     documentation reasonably satisfactory to Lessor evidencing
                     performance of the following work by the Maintenance
                     Performer:

                     (a)      AIRFRAME: With respect to the Airframe, the
                              completion, in accordance with the Lease, of the
                              Airframe Structural Check, the lesser of (aa) the
                              amount of that invoice and (bb) an amount equal to
                              the aggregate amount of the Airframe Supplemental
                              Rent paid under the Lease at the date such work
                              starts less the aggregate amount previously paid
                              by Lessor under this sub-clause;

                     (b)      ENGINE LIFE-LIMITED PARTS: With respect to
                              life-limited Parts within any Engine, the
                              performance, in accordance with the Lease, of any
                              replacement or repair of those Parts ("Engine LLP
                              Replacement"), the lesser of (x) the amount of
                              that invoice and (y) an amount equal to the
                              aggregate amount of the Engine LLP Supplemental
                              Rent paid in respect of that Engine under the
                              Lease at the date such work starts less the
                              aggregate amount previously paid in respect of
                              that Engine by Lessor under this sub-clause;

                     (c)      ENGINE REFURBISHMENT: With respect to any Engine,
                              the performance, in accordance with the Lease, of
                              Engine Refurbishment in respect of that Engine the
                              lesser of (x) the amount of that invoice and (y)
                              an amount equal to the aggregate amount of the
                              Engine Supplemental Rent paid under the Lease in
                              respect of that Engine at the date such work
                              starts less the aggregate amount previously paid
                              in respect of that Engine by Lessor under this
                              sub-clause;

                     (d)      APU: With respect to the APU, the performance, in
                              accordance with the Lease, of all shop visits
                              requiring APU removal and disassembly, the lesser
                              of (x) the amount of that invoice and (y) an
                              amount equal to the aggregate amount of the APU
                              Supplemental Rent paid under the Lease at the date
                              such work starts less the aggregate amount
                              previously paid by Lessor under this sub-clause;
                              and

                                       -6-

<PAGE>

                     (e)      LANDING GEAR: With respect to the Landing Gear,
                              the performance in accordance with the Lease, of
                              all work on the landing gear in the nature of
                              overhaul and requiring removal and disassembly,
                              the lesser of (x) the amount of that invoice and
                              (y) an amount equal to the aggregate amount of the
                              Landing Gear Supplemental Rent paid under the
                              Lease at the date such work starts less the
                              aggregate amount previously paid by Lessor under
                              this sub-clause.

            PROVIDED THAT Lessor will not pay any such contribution:

            3.4.2    in respect of paragraphs (a)-(e) above, for repairs arising
                     as a result of accidents or incidents (whether or not
                     eligible for recovery under Lessee's insurance),
                     operational or maintenance mishandling or airworthiness
                     directive work; nor

            3.4.3    in respect of paragraphs (b) and (c) above, for repairs
                     arising as a result of foreign object damage, the removal,
                     installation, maintenance and repair of QEC (Quick Engine
                     Change Kits) and/or any replacement of parts not required
                     under the Lessee's Maintenance Program to be replaced as
                     part of the maintenance described in clause (a) through (e)
                     above, as the case may be.

    3.5     LESSOR'S BANK ACCOUNT: For the purposes of Section 5.5 of the Common
            Terms Agreement, Lessor's bank account and wire transfer
            particulars, to which all payments to Lessor shall be made, are at
            the date hereof: Bankers Trust Company, New York, ABA 021 001 033,
            For the account of: Aircraft 28654 LLC., Account Number: 50-259-862.

    3.6     MACRS: Lessor has assumed that MACRS Deductions shall be available
            in respect of the leasing of the Aircraft and accordingly the
            provisions of Section 5.7(d) of the Common Terms Agreement and the
            related provisions of Schedule B shall apply under this Agreement.

    4.      CONDITION OF THE AIRCRAFT AT DELIVERY

    4.1     On the Delivery Date, as a condition to Lessee's obligation to
            accept delivery thereof, the Aircraft shall be in the condition
            provided in Part II of Schedule A hereto.

    5.      CONDITION OF THE AIRCRAFT AT REDELIVERY

    5.1     On the Return Occasion, Lessee shall redeliver the Aircraft to
            Lessor at the Redelivery Location and at such redelivery the
            Aircraft shall be in the condition provided in Part III of Schedule
            A hereto and in the Common Terms Agreement, including Schedule 6 of
            the Common Terms Agreement.

                                      -7-

<PAGE>

    6.      ADDRESSES FOR NOTICES

            The addresses and facsimile and telephone numbers of Lessor and
            Lessee are as follows:

            Lessor:          Aircraft 28654 LLC
            Address:         c/o GE Capital Aviation Services
                             201 High Ridge Road
                             Stamford, CT 06927
            Attention:       Contracts Leader
            Facsimile:       (203) 357-3201
            Telephone:       (203) 357-4482

            Lessee:          Aloha Airlines, Inc.
            Address:         371 Aokea Street
                             Honolulu, Hawaii 96819
            Attention:       Executive Vice President and Chief Financial
                             Officer
            Facsimile:       (808) 833-3100
            Telephone:       (808) 836-4245

    7.      THE SCHEDULES AND COMMON TERMS AGREEMENT

            ALL THE PROVISIONS OF SCHEDULE A HERETO, SCHEDULE B HERETO, AND THE
            COMMON TERMS AGREEMENT, ARE INCORPORATED BY REFERENCE HEREIN AND ARE
            PART OF THIS AIRCRAFT LEASE AGREEMENT AS IF THEY WERE SET OUT IN
            FULL HEREIN. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BY
            ITS SIGNATURE BELOW, THE LESSEE ACKNOWLEDGES AND AGREES THAT THE
            LEASE OF THE AIRCRAFT HEREUNDER IS ON AN "AS IS, WHERE IS" BASIS AND
            THAT THE DISCLAIMERS, EXCULPATIONS AND LIMITATIONS OF LIABILITY,
            INDEMNITIES, THE CHOICE OF NEW YORK LAW AS THE GOVERNING LAW, THE
            LESSEE'S SUBMISSION TO PERSONAL JURISDICTION IN NEW YORK, AND THE
            WAIVER OF ANY RIGHT TO A TRIAL BY JURY PROVIDED FOR IN THE COMMON
            TERMS AGREEMENT ARE INCORPORATED HEREIN BY SUCH REFERENCE AND ARE
            PART OF THIS AIRCRAFT LEASE AGREEMENT AS IF THE SAME WERE SET OUT IN
            FULL HEREIN.

   8.       NO AMENDMENT EXCEPT IN WRITING

            No provision of this Lease, including any provision of Schedule A,
            Schedule B or the Common Terms Agreement, may be amended, rescinded,
            changed, waived, discharged, terminated or otherwise modified in any
            way whatsoever, except by a writing signed by the party to be
            charged. Lessor and Lessee acknowledge their agreement to the
            provisions of this Section 8 by their signatures below.

                                      -8-

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Aircraft Lease
      Agreement, each by their duly authorized representative(s), as of the date
      shown at the beginning of this Aircraft Lease Agreement.

      LESSOR:                          LESSEE:

      AIRCRAFT 28654 LLC               ALOHA AIRLINES, INC.

      BY: AFS Investments I, Inc.
          Its Member

      By: /s/ Charles H. Meyer         By: ____________________________________
           --------------------------
      Name:   Charles H. Meyer         Name: __________________________________
           --------------------------
       Title: Vice President           Title: _________________________________
           --------------------------
                                       By: ____________________________________

                                       Name: __________________________________

                                       Title: _________________________________

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Aircraft Lease
      Agreement, each by their duly authorized representative(s), as of the date
      shown at the beginning of this Aircraft Lease Agreement.

      LESSOR:                          LESSEE:

      AIRCRAFT 28654 LLC               ALOHA AIRLINES, INC.

      By: ___________________________  By: /s/ Brenda F. Cutwright
                                           ------------------------------------
      Name: _________________________  Name: Brenda F. Cutwright
                                             ----------------------------------
      Title: ________________________  Title: Exec. Vice President & CFO
                                              ---------------------------------

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

<PAGE>

                                   SCHEDULE A

                     PART I-AIRFRAME AND ENGINES DESCRIPTION

   AIRCRAFT

            Manufacturer:          Boeing

            Model:                 737-700 ETOPS

            Serial Number:         28654

            U.S. Registration No.  N316ML (To be changed to N743AL)

   ENGINES (each of which has 750 or more rated takeoff horsepower or the
   equivalent of such horsepower)

            Engine Type:           CFM56-7B26

            Serial Nos:            888639 and 889655

                                       A-1

<PAGE>

                                   SCHEDULE A

                     PART II-DELIVERY CONDITION REQUIREMENTS

    Set forth below is a description of the condition in which the Aircraft must
    be in order for Lessee to be obligated to accept the Aircraft under the
    Lease. It is solely a description of such condition precedent and shall not
    be construed as a representation, warranty or agreement of any kind
    whatsoever, express or implied, by Lessor with respect to the Aircraft or
    its condition, all of which have been disclaimed by Lessor and waived by
    Lessee as set forth in the Lease, including in the Common Terms Agreement.

    DELIVERY CONDITION REQUIREMENTS:

    This "DELIVERY CONDITION REQUIREMENTS" are as follows:

             Airframe,               Configured in accordance with GECAS Detail
             Engines,                Specification D6-38808-34 (Revision D) as
             Components:             modified for the Boeing 737-700 aircraft
                                     bearing manufacturer's serial number
                                     30830 ("Aircraft 30830") pursuant to that
                                     certain Aircraft Lease Agreement dated as
                                     of May 12; 2000 between Lessee and an
                                     affiliate of Lessor, with the following
                                     differences from the configuration of
                                     30830: (i)SATCOM partial provisions are
                                     not installed; (ii) location of cockpit
                                     printer in sidewall; (iii) hand rails to
                                     overhead bin doors are not installed;
                                     (iv)installation of six (rather than
                                     five) attendants seats; (v) dual
                                     aspirated TAT probes not installed; (vi)
                                     airstairs not installed but Lessor will
                                     provide airstairs and data kit free of
                                     charge after Delivery.

                                      For the avoidance of doubt, Lessor and
                                      Lessee acknowledge and agree that,
                                      although the Aircraft 30830 was new from
                                      the Manufacturer at the time of delivery
                                      to Lessee, the Aircraft will undergo
                                      certain modification work, both at the
                                      Manufacturer and at a third party
                                      maintenance facility, in order to bring it
                                      into the configuration specified above,
                                      prior to Delivery to Lessee.

                                       A-2

<PAGE>

              Livery Painting:         Lessee's current livery as in effect on
                                       the date of this Aircraft Lease
                                       Agreement or such other livery as Lessee
                                       may specify in writing to Lessor so long
                                       as Lessee provides to Lessor, reasonably
                                       in advance of the Scheduled Delivery
                                       Month so as to permit Lessor to make all
                                       necessary arrangements for such painting,
                                       all technical specifications necessary
                                       in order to complete the painting of the
                                       Aircraft in such livery

                                       A-3

<PAGE>

                                  SCHEDULE A

         PART III- PROCEDURES AND OPERATING CONDITION AT REDELIVERY

             On the Return Occasion the Aircraft, subject to ordinary wear and
             tear of a kind and to an extent consistent with similar aircraft
             engaged in commercial airline operations, will be redelivered to
             Lessor by Lessee in accordance with the procedures and in any event
             in the condition set out below. For the avoidance of doubt, any
             damage assessment and/or rectification criteria used in assessing
             the redelivery condition shall be as prescribed in the
             Manufacturer's structural repair manual ("SRM") and/or the
             Manufacturer's Maintenance Planning Document as appropriate. Any
             damage outside the scope of the SRM shall require FAA 8110-3
             certification.

    1.1      FINAL INSPECTION

             Immediately prior to the Return Occasion, Lessee will make the
             Aircraft available to Lessor and Owner for inspection ("FINAL
             INSPECTION") in order to verify that the condition of the Aircraft
             complies with the Lease. The Final Inspection will include, and be
             long enough to permit Lessor to:

             (a)      inspect the Aircraft Documents and Records;

             (b)      inspect the Aircraft (with Lessee to open or remove
                      panels as reasonably requested by Lessor or Owner based
                      on essor's or Owner's visual observation of the
                      Aircraft and/or their respective review of the Aircraft
                      Documents and Records), uninstalled Parts and the APU
                      (including a complete video borescope inspection of the
                      APU);

             (c)      inspect the Engines, including (i) a complete video
                      borescope inspection   of (A) the low pressure and high
                      pressure compressors and (B) turbine area and (ii)
                      power assurance runs (including full take-off power
                      engine run-up performed in accordance with the
                      performance test in the Engine Manufacturer's test
                      specifications, and the Engines shall not exceed
                      corrected limits for all parameters using temperature
                      corrected charts); and

             (d)      observe a two hour demonstration flight at Lessee's
                      cost (with up to three (to the extent permitted by
                      FARS) of Lessor's and Owner's representatives as
                      on-board observers).

             Furthermore, Lessee acknowledges that a purchaser or the next
             operator of the Aircraft may need to inspect the Aircraft, the
             Engines and the Aircraft Documents and Records prior to redelivery
             and Lessee hereby agrees to cooperate reasonably at all times
             during the Term

                                     A-4

<PAGE>

             with Lessor, Owner and/or such purchaser or such next operator in
             order to coordinate, assist and grant access for the above
             inspections and/or sale or subsequent lease as applicable.

             Lessor or Owner, as the case may be, is responsible for and will
             indemnify Lessee against all Losses arising from the death or
             injury to any observer or any employee of Lessor or Owner, as the
             case may be, in connection with the inspection of the Aircraft
             under this Section 1.1.

    1.2      GENERAL CONDITION

             The Aircraft will:

             (a)      be in the same configuration as at Delivery after
                      giving effect to any post-Delivery modifications to the
                      Aircraft paid for or otherwise provided by or on behalf
                      of Lessor (or as permitted by the Lease or as otherwise
                      mutually agreed), be in as good operating condition and
                      appearance as when delivered to Lessee (after giving
                      effect to any such post-Delivery modifications), except
                      for ordinary wear and tear and alterations and
                      modifications authorized or required under the Lease
                      and paid for by Lessee or a Sub-Lessee, and be clean by
                      major passenger airline standards;

             (b)      have installed the full complement of equipment, parts,
                      accessories, furnishings and loose equipment as when
                      originally delivered to Lessee (subject to Lessee's
                      rights under Section 8.12 to reverse certain Equipment
                      Changes, after giving effect to all modifications,
                      repairs or maintenance performed during the Term,
                      regardless of whether paid for by Lessee or Lessor) and
                      the Aircraft (including the Aircraft Documents and
                      Records) shall be in a condition suitable for immediate
                      registration with the FAA (assuming that the Owner
                      qualifies for such registration) and immediate
                      operations under FAR Part 121 with a new operator,
                      without waiver, unless the benefit of such waiver is
                      applicable to the next operator of the Aircraft; and if
                      any of the engines or parts tendered for redelivery
                      with the Aircraft is not one of the Engines or Parts
                      referred to in the Certificate of Technical Acceptance
                      or a Replacement Engine installed pursuant to Section
                      8.11(b) following an Engine Event of Loss, Lessor
                      shall have no obligation to accept such engine or part
                      unless Lessee furnishes to Lessor all the documents and
                      evidence in respect of such engine or part in
                      accordance with Section 8.11(b), as if such engine
                      were a Replacement Engine or replacement Part, and
                      otherwise complies with such Section 8.11(b) with
                      respect thereto;

             (c)      have in existence a valid and effective certificate of
                      airworthiness (and if required by Lessor, a valid and
                      effective export certificate of airworthiness) with
                      respect to

                                     A-5

<PAGE>

                      the Aircraft issued by the Air Authority (in the case
                      of an export certificate of airworthiness no earlier
                      than 30 days prior to the redelivery);

             (d)      comply with the Manufacturer's original specifications
                      as at the Delivery, except as modified during the Term
                      in accordance with the Manufacturer's service bulletins
                      or letters, Airworthiness Directives, Air Authority
                      approved data or otherwise as permitted by the Lease;

             (e)      be fresh out of a "C" Check (or higher check if
                      applicable) in block format (which shall be the next
                      sequential "C" Check under Lessee's Maintenance Program
                      following the last regularly scheduled "C" Check
                      performed by Lessee prior to the Return Occasion if
                      Lessee's Maintenance Program is based on the then
                      current Manufacturer's Maintenance Planning Document in
                      block format. If Lessee's Maintenance Program is not
                      based on the Manufacturer's Maintenance Planning
                      Document in block format, then Lessee shall integrate
                      the Aircraft Maintenance Program onto the then current
                      Manufacturer's Maintenance Planning Document Block
                      Maintenance Program such that all airframe inspections
                      falling due within the "C" check interval (which shall
                      not be less than 4,000 Flight Hours) as defined in and
                      in accordance with the Manufacturer's Maintenance
                      Planning Document have been accomplished;

             (f)      have had accomplished all outstanding Airworthiness
                      Directives affecting that model of Aircraft issued by
                      the FAA requiring action during the Term or within 180
                      days after the Return Occasion or the Scheduled Expiry
                      Date, whichever is later; for this purpose, compliance
                      shall be by terminating action if:

                     (i)      Lessee has complied by terminating action for
                              sixty-five percent (65%) of the aircraft of the
                              same model and series then operated by Lessee; or

                     (ii)     the latest date permitted by such Airworthiness
                              Directive for required compliance by
                              terminating action falls within 180 days after
                              the Return Occasion or the Scheduled Expiry
                              Date, whichever is later.

                     (iii)    In no event shall there be any non-transferable
                              time extensions, waivers, deviations or
                              alternative means of compliance with any
                              Airworthiness Directions or other Regulations.

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

                                     A-6

<PAGE>

             (h)      have the fuselage, empennage, wings painted in Lessee's
                      livery;

             (i)      have all signs and decals clean, secure and legible;

             (j)      [NOT APPLICABLE];

             (k)      have no open, deferred, continued, carry over or
                      placarded maintenance items or watch items or placarded
                      log book items, and all other log book discrepancies
                      shall be cleared;

             (l)      all discrepancies discovered during the inspections
                      described above which exceed the Manufacturer's
                      maintenance manual allowable limits for in-service
                      aircraft shall have been repaired in accordance with
                      FAA-approved procedures;

             (m)      all repairs of a temporary or interim nature, requiring
                      repetitive inspections or future upgrading, including
                      external doublers with blind fasteners, shall be
                      upgraded to permanent repair in accordance with the
                      Manufacturer's Maintenance Planning Document or
                      structural repair manual; and

             (n)      all systems shall be fully operational for their intended
                      functions in accordance with the Manufacturer's
                      Maintenance Planning Document specifications.

    1.3     COMPONENTS

             (a)      If the Aircraft Lease Agreement specifies Minimum
                      Component Flight Hours and/or Minimum Component Cycles,
                      each Airframe Flight Hour and Cycle controlled Hard
                      Time Component (other than the APU) shall have not less
                      than the Minimum Component Flight Hours and the Minimum
                      Component Cycles of life remaining to the next
                      scheduled removal, in accordance with the Lessee's
                      Maintenance Program and shall be supported by
                      appropriate certification documentation indicating TSN,
                      CSN, TSO and CSO such as FAA form 8130-1; for this
                      purpose "Hard Time Component" means any component
                      which has a limited on-wing life in accordance with the
                      Manufacturer's Maintenance Planning Document and which
                      can have life fully restored through appropriate
                      maintenance;

             (b)      If the Aircraft Lease Agreement specifies a Minimum
                      Component Calendar Life, each calendar-limited
                      component including safety equipment will have not less
                      than its Minimum Component Calendar Life remaining to
                      the next scheduled removal in accordance with the
                      Lessee's Maintenance Program;

             (c)      Each "on-condition" and "condition-monitored" component
                      will be serviceable;

                                     A-7

<PAGE>

             (d)      The installed components as a group will have an average
                      of total flight time since new of not more than that of
                      the Airframe;

             (e)      If the Aircraft Lease Agreement specifies Minimum
                      Component Flight Hours and/or Minimum Component Cycles,
                      each Airframe Life-Limited Component will have not less
                      than the Minimum Component Flight Hours and the Minimum
                      Component Cycles remaining to next scheduled removal
                      and will be supported by certification documentation
                      necessary to demonstrate back-to-birth traceability;
                      for this purpose "Airframe Life-Limited Component"
                      means a component with an ultimate life which cannot be
                      restored through appropriate maintenance.

    1.4     ENGINES

            Each Engine (or a Replacement Engine as and to the extent permitted
            by Section 1.2(b)) will be installed on the Aircraft and comply with
            the following:

            (a)       If the Aircraft Lease Agreement specifies a Minimum
                      Engine Flight Hours and/or Minimum Engine Cycles, each
                      Engine will have not less than the Minimum Engine
                      Flight Hours and Minimum Engine Cycles expected life
                      remaining to the next expected removal. The expected
                      life remaining will be determined by third party
                      mutually acceptable to both Lessor and Lessee (at
                      Lessor's cost) or by the Engine Manufacturer, in each
                      case based on the inspection and checks to be performed
                      at the Return Occasion in accordance with the Lease;

            (b)       Each Engine shall have just completed at the location
                      for Lessor's acceptance on the Return Occasion a hot
                      (including combustion chamber) and cold section video
                      borescope inspection, which inspection shall be
                      performed at Lessor's expense, and a power assurance
                      run performed at Lessee's expense in accordance with
                      the Lessee's Maintenance Program or Manufacturer's
                      Maintenance Planning Document and any defects
                      discovered in such inspections which exceed the Engine
                      manufacturer's in-service limits shall be corrected at
                      Lessee's expense. Lessee shall cause such borescope
                      inspections to be performed and to be recorded on
                      videotape by an agency selected by Lessor and shall
                      provide Lessor with a copy of such videotape on the
                      Return Occasion. No Engine shall be on "watch" for any
                      reason requiring any special or out of sequence
                      inspection. Each Engine shall comply with the
                      operations specification of Lessee without waiver or
                      exceptions. All items beyond the Engine manufacturer's
                      in-service limits shall be repaired;

            (c)       If the Aircraft Lease Agreement specifies Minimum
                      Component Cycles, each Engine Life-Limited Component
                      will have not less than the Minimum Component Cycles
                      remaining per the manufacturer's then current
                      limitations for the part

                                     A-8

<PAGE>

                      number in question, and will be supported by
                      certification documentation necessary to demonstrate
                      back-to-birth traceability; for this purpose "Engine
                      Life-Limited Component" means a component with an
                      ultimate life which cannot be restored through
                      appropriate maintenance; and

    1.5      FUSELAGE, WINDOWS AND DOORS

             (a)      The fuselage will be free of major dents and abrasions
                      in excess of the limits specified in Manufacturer's
                      Maintenance Planning Document or structural repair
                      manual; loose or pulled or missing rivets shall be
                      replaced;

             (b)      Windows will be free of delamination, blemishes and
                      crazing, in excess of the limits specified in the
                      Manufacturer's Maintenance Planning Document or
                      structural repair manual and will be properly sealed;
                      and

             (c)      Doors will be free moving, correctly rigged and be
                      fitted with serviceable seals.

    1.6      WINGS AND EMPENNAGE

             (a)      Leading edges will be free from damage in excess of the
                      limits specified in the Manufacturer's Maintenance
                      Planning Document or structural repair manual; and

             (b)      Unpainted surfaces of the wings and empennage will be
                      polished.

    1.7      INTERIOR AND COCKPIT

             All soft furnishings, including but not limited to carpets, seat
             covers and curtains, will be in good condition, clean and free of
             stains and meet FAR fire resistance regulations.

    1.8      LANDING GEAR; WHEELS AND BRAKES

             (a)      The Landing Gear and wheel wells will be clean, free of
                      leaks and repaired as necessary;

             (b)      Each installed Landing Gear shall have no more Cycles
                      accumulated than the Airframe and, if the Aircraft
                      Lease Agreement specifies Minimum Landing Gear Flight
                      Hours and/or Minimum Landing Gear Cycles and Minimum
                      Landing Gear Calendar Time, not less than the Minimum
                      Landing Gear Flight Hours and the Minimum Landing Gear
                      Cycles and the Minimum Landing Gear Calendar Time shall
                      be remaining to the next scheduled overhaul or removal,
                      as the case may be, of each installed Landing Gear in
                      accordance with the then current Manufacturer's
                      Maintenance Planning Document and Lessee's Maintenance
                      Program; and

             (c)      The wheels and brakes will have not less than half of
                      their useful life remaining.

                                     A-9

<PAGE>

    1.9      RETURN OF AUXILIARY POWER UNIT (APU)

             The APU shall have just completed a borescope inspection and shall
             meet all air outputs and temperature limitations under load in
             accordance with the Lessee's Maintenance Program and the APU
             manufacturer's maintenance manual, and any defects discovered in
             such inspection, which exceed the APU manufacturer's in-service
             limits, shall be corrected at Lessee's expense. If the Aircraft
             Lease Agreement specifies a Minimum APU Limit, the APU shall have
             not more than the Minimum APU Limit since the last gas path
             refurbishment. If the Aircraft Lease Agreement specifies a Minimum
             APU LLP Limit, APU Life Limited Parts shall have not less than the
             Minimum APU LLP Limit of useful life remaining on average.

    1.10     CORROSION

             (a)      The Aircraft shall be in compliance with the
                      Manufacturer's corrosion prevention and control program
                      (CPCP) requirements. All CPCP inspections which would
                      normally be accomplished while access is provided
                      during structural inspection in accordance with the
                      Lessee's Maintenance Program during the Term shall have
                      been accomplished;

             (b)      The entire fuselage will be substantially free from
                      corrosion and will be adequately treated in accordance
                      with Lessee's corrosion prevention program and the
                      Manufacturer's Maintenance Planning Document; and

             (c)      Fuel tanks will be free from contamination and corrosion
                      and a tank treatment program will be in operation.

    1.11     FUEL

             If the Aircraft Lease Agreement specifies a Minimum Measurable Fuel
             Requirement, at redelivery, the Aircraft fuel tanks shall contain
             at least enough fuel to meet the Minimum Measurable Fuel
             Requirement.

    1.12     MAINTENANCE PROGRAM

             (a)      Prior to the Return Occasion and upon Lessor's or
                      Owner's request, Lessee will provide Lessor or Owner or
                      its agent reasonable access to the Lessee's Maintenance
                      Program and the Aircraft Documents and Records in order
                      to facilitate the Aircraft's integration into any
                      subsequent operator's fleet; and

             (b)      Lessee will, if requested by Lessor or Owner to do so,
                      provide sufficient access to Lessee's Maintenance
                      Program in order to integrate the Aircraft to the next
                      operator's maintenance program. Lessor and any Person
                      to whom Lessor grants

                                     A-10

<PAGE>

                      access to Lessee's Maintenance Program shall agree that it
                      will not disclose the contents of the Lessee's Maintenance
                      Program to any Person except to the extent necessary to
                      monitor Lessee's compliance with the Lease and/or to
                      bridge the maintenance program for the Aircraft from the
                      Lessee's Maintenance Program to another program after the
                      Return Occasion.

     1.13    AIRCRAFT DOCUMENTS

             At redelivery Lessee will deliver to Lessor and Owner all current
             and complete historical records required to be maintained relevant
             to the Aircraft, including documents, manuals, data, overhaul
             records, life limited part traceability to "zero time since new",
             log books, original delivery documents serviceable parts tags, FAA
             forms, modification records and inspection records, and including
             each of the Aircraft Documents and Records.

     1.13.   ETOPS:

             The Aircraft shall be certified by the FAA for 180 minutes ETOPS
             operation or shall be in such condition as to be eligible for
             certification by the FAA for 180 minutes ETOPS operation.

                                   SCHEDULE B
                                COMMERCIAL TERMS

     Lessor and Lessee hereby agree that the definitions and other commercial
and financial terms set forth in this Schedule B shall apply to the leasing of
the Aircraft under the Lease.

     In addition, Lessor and Lessee understand and agree that the commercial and
financial information contained in this Schedule B are considered by Lessor and
Lessee as proprietary and confidential. Lessor and Lessee each hereby agree, and
any of their assignees, upon becoming such shall agree that it will treat this
Schedule B as proprietary and confidential and will not, without the prior
written consent of the other, disclose or cause to be disclosed, the terms
hereof or thereof to any Person, except to its agents, representatives,
advisors, employees, counsel, underwriters, auditors, investors, financing
parties, head lessors and sub-lessees as necessary or appropriate for the
leasing transaction which is the subject hereof, or except (a) as may be
required by applicable Law or pursuant to an order, or a valid and binding
request, issued by any court or other Government Entity having jurisdiction over
Lessor, Lessee or the assignee of either of them, as the case may be, or (b) as
necessary to enable Lessor or its assignee to make transfers, assignments or
other dispositions to potential transferees, assignees or participants of its
interest in and to the Lease.

     In connection with any such disclosure or any filing of the information
contained herein or therein pursuant to any such applicable Law, Lessor, Lessee
or the assignee of either of them, as the case may be, shall request and use its
best reasonable efforts to obtain confidential

                                      A-11

<PAGE>

treatment of this Schedule B and the other party will cooperate in making and
supporting any such request for confidential treatment.

     PART I         CASUALTY OCCURRENCE DEFINITIONS

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

     PART II        DEPOSIT; DISCOUNT RATE; LC AMOUNT; INTEREST RATE

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

     PART III       RENT

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

                                       A-2

<PAGE>

     PART IV        TAX DEFINITIONS; SPECIAL TAX INDEMNITY

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

                                       A-4

<PAGE>

     PART V         SUPPLEMENTAL RENT

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

                                       A-5

<PAGE>

     PART VI        MAINTENANCE AND RETURN CONDITION DEFINITIONS;
                    AIRWORTHINESS DIRECTIVE SHARING PAYMENTS

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

                                       A-6

<PAGE>

     PART VII       SUBLEASE FEE

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

     PART VIII      UTILIZATION RATIO

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

                                       A-8

<PAGE>

                                  SCHEDULE C
                   AIRCRAFT LEASE COMMON TERMS AGREEMENT
                                     AND
              AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT

SF1 #86850 v9

                                     A-2

<PAGE>

                                                             EXECUTION VERSION
                                                             -----------------

                                   AIRCRAFT LEASE
                               COMMON TERMS AGREEMENT

                             DATED AS OF MAY 12,2000

                                      BETWEEN

                       GENERAL ELECTRIC CAPITAL CORPORATION

                                        And

                                 ALOHA AIRLINES, INC.

<PAGE>

                                       CONTENTS

<Table>
<Caption>
 SECTION                                                                   PAGE
 -------                                                                   ----
 <S>                                                                       <C>

 1.        INTERPRETATION...............................................     1

 2.        REPRESENTATIONS AND WARRANTIES...............................     2

 3.        CONDITIONS PRECEDENT.........................................     2

 4.        COMMENCEMENT.................................................     3

 5.        PAYMENTS ....................................................     5

 6.        MANUFACTURER'S WARRANTIES....................................    19

 7.        LESSOR'S COVENANTS...........................................    20

 8.        LESSEE'S COVENANTS...........................................    20

 9.        INSURANCE....................................................    38

 10.       INDEMNITY....................................................    39

 11.       EVENTS OF LOSS...............................................    41

 12.       RETURN OF AIRCRAFT ..........................................    42

 13.       DEFAULT......................................................    45

 14.       TRANSFER.....................................................    52

 15.       MISCELLANEOUS................................................    54

 16.       DISCLAIMERS AND WAIVERS......................................    58

 17.       BROKERS AND OTHER THIRD PARTIES..............................    61
</Table>

<PAGE>

Schedule 1                   Definitions
Schedule 2                   Representations and Warranties
Schedule 3                   Conditions Precedent
Schedule 4                   Pre-Delivery Procedures and Delivery Condition
Schedule 5                   Certificate of Technical Acceptance
Schedule 6                   [NOT APPLICABLE]
Schedule 7                   Insurance Requirements
Schedule 8                   Form of Lessee's Legal Opinion
Schedule 9                   Events of Default
Schedule 10                  [NOT APPLICABLE]
Schedule 11                  Form of Lease Termination Certificate
Schedule 12                  Form of Lease Supplement No. 1
Schedule 13                  Form of Letter of Credit
Schedule 14                  Maintenance Performers
Schedule 15                  Technical Report

<PAGE>

                             COMMON TERMS AGREEMENT

  THIS COMMON TERMS AGREEMENT (this "CTA") is made as of May 12, 2000 BETWEEN:

  (1)     GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL") and

  (2)     ALOHA AIRLINES, INC. ("ALOHA")

  WHEREAS:

          (A)      From time to time, Aloha or one of its Affiliates may wish
                   to lease commercial aircraft from GE Capital or one of its
                   Affiliates, and GE Capital or one of its Affiliates may
                   wish to lease commercial aircraft to Aloha or one of its
                   Affiliates;

          (B)      Each party hereto wishes to provide in one document for
                   certain common terms and conditions, as hereinafter provided
                   in this CTA, that will be applicable, unless otherwise
                   stated, to each such lease referred to in Recital (A); and

           (C)     Each such lease transaction will be concluded only on the
                   terms of an agreement entitled "Aircraft Lease Agreement,"
                   which together with this CTA (which will be incorporated
                   into and become part of such Aircraft Lease Agreement), will
                   constitute the lease for the applicable aircraft as
                   identified therein;

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

  1.       INTERPRETATION

  1.1      Definitions

           All references herein to "Lease" mean the integrated agreement
           consisting of the various documents comprising the Lease as defined
           in Schedule 1. In the Lease, capitalized words and expressions have
           the meanings set out for them in Schedule 1 and in the Aircraft Lease
           Agreement.

   1.2     Construction

           (a)      In the Lease, unless otherwise stated, a reference to:

                    (i)     "Lessor," "Lessee," "GECAS," "Owner" or any other
                            Person includes any of their successors and
                            assignees;

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

<PAGE>

                   (iii)    any document (except this CTA unless Lessor and
                            Lessee otherwise expressly agree) shall include any
                            changes to that document and any replacement for it;

                    (iv)    a Section or a Schedule is a reference to a clause
                            of or a schedule to this CTA;

                     (v)    any Regulation shall include any changes to that
                            Regulation and any replacement for it;

                    (vi)    an obligation of a Person refers to any obligation
                            that Person has under or in relation to the Lease;
                            and

                   (vii)    "includes," "including", "include" or similar terms
                            shall not be construed as limiting and shall mean
                            "including, without limitation."

         (b)       Headings to Sections and Schedules in the Lease are not
                   intended to affect their meaning.

 2.      REPRESENTATIONS AND WARRANTIES

 2.1     Lessee's Representations and Warranties

         Lessee hereby makes the representations and warranties set out in
         Section 1.1 of Schedule 2 as of the date of execution of the Aircraft
         Lease Agreement and as of the Delivery Date, and Lessee understands
         that these statements must be true, both when the Aircraft Lease
         Agreement is executed and on the Delivery Date.

 2.2     Lessor's Representations and Warranties

         Lessor hereby makes the representations and warranties set out in
         Section 1.2 of Schedule 2 as of the date of execution of the Aircraft
         Lease Agreement and as of the Delivery Date, and Lessor understands
         that these statements must be true, both when the Aircraft Lease
         Agreement is executed and on the Delivery Date.

 3.      CONDITIONS PRECEDENT

 3.1     Conditions Precedent

         Lessor need not deliver and start the leasing of the Aircraft under the
         Lease unless each of the Lessor Conditions Precedent is satisfied or
         waived in writing by Lessor. Lessee need not accept and start the
         leasing of the Aircraft under the Lease unless each of the Lessee
         Conditions Precedent is satisfied or waived in writing by Lessee;
         provided, however, in the event that Lessee fails to accept and start
         the leasing of the Aircraft under the Lease, any Lessee Condition
         Precedent which reasonably could be expected to be met if the Delivery
         of the Aircraft had

                                          -2-

<PAGE>

          occurred shall be deemed to have been satisfied or waived for purposes
          of determining Lessee's liability for Rent in respect of the Aircraft
          in accordance with Section 4.1(b) below.

 3.2      Waiver

          If any Lessor Condition Precedent is not satisfied, or waived in
          writing by Lessor, on or before the Delivery Date, and Lessor (in its
          absolute discretion) nonetheless agrees to deliver the Aircraft to
          Lessee and to start the leasing of the Aircraft, Lessee will ensure
          that such Lessor Condition Precedent is fulfilled within 15 days after
          the Delivery Date, and Lessor may treat as an Event of Default the
          failure of Lessee to do so.

  4.      COMMENCEMENT

  4.1     Leasing

          (a)      Lessor shall notify Lessee of the Scheduled Delivery Week as
                   soon as possible, but no later than at least thirty (30) days
                   prior to the Scheduled Delivery Month, and Lessor shall
                   notify Lessee of the Scheduled Delivery Date as soon as
                   possible, but no later than at least one (1) week prior to
                   the Scheduled Delivery Week. Subject to Sections 3.1 and 4.4,
                   Lessor will lease the Aircraft to Lessee and Lessee will take
                   the Aircraft on lease for the Term, which shall commence on
                   the Delivery Date, and which shall be evidenced by Lessee's
                   execution of Lease Supplement No. 1.

          (b)      If (i) Lessee is unwilling or unable to accept delivery of
                   the Aircraft on the date on which Lessor tenders the Aircraft
                   for Delivery to Lessee under and in accordance with Section
                   4.3(a), or Lessee fails to fulfil any Lessor Condition
                   Precedent on or before such date, and (ii) the Lessee
                   Conditions Precedent are met (or could reasonably be expected
                   to be met if Delivery had occurred), then the Rent
                   Commencement Date for the Aircraft shall be deemed to have
                   occurred on the date on which it is tendered by Lessor for
                   Delivery in accordance with subclause (ii) of this Section
                   4.1(b), and Lessee shall be obligated to pay Rent for the
                   Aircraft on and from such date regardless of whether the
                   Delivery Date occurs or whether Lessee executes Lease
                   Supplement No. 1, but Lessor shall have no obligation to
                   deliver, and Lessee shall have no lease interest in the
                   Aircraft or other right to possession of the Aircraft, unless
                   and until Lessee fulfils all Lessor Conditions Precedent as
                   and when provided in the Lease and Lessee accepts delivery of
                   the Aircraft as evidenced by its execution of Lease
                   Supplement No. 1, and so long as no Default has occurred and
                   is continuing.

          (c)      Lessee will be responsible for all risks associated with any
                   loss of or damage to the Aircraft from the Rent Commencement
                   Date until possession of the Aircraft is returned

                                               -3-

<PAGE>

                   to Lessor on the Return Occasion and Lessor executes and
                   delivers to Lessee the acknowledgement contemplated by
                   Section 12.4.

   4.2     Procedure before Delivery

           Lessor and Lessee will follow the Pre-Delivery Procedure.

   4.3     Delivery and Acceptance

           (a)      After the Pre-Delivery Procedure has been carried out:

                    (i)      Subject to Section 3.1, Lessor will tender delivery
                             of the Aircraft to Lessee at the Delivery Location.

                    (ii)     Subject to Section 3.1, Lessee will accept the
                             Aircraft. Upon such acceptance, Lessee must also
                             provide evidence of its acceptance by signing Lease
                             Supplement No. 1 and delivering it to Lessor.

           (b)      Lessee's acceptance of the Aircraft shall be regarded as
                    absolute, unconditional and irrevocable.

   4.4     Delayed Delivery

           If Delivery takes place after the Scheduled Delivery Date or does not
           happen due to an Unforeseen Event or for any other reason (other than
           Lessor's willful misconduct in the performance of its obligation to
           deliver the Aircraft under and subject to the conditions in the
           Lease):

           (a)      Lessor will not be responsible for any Losses that Lessee
                    suffers resulting from the delay or from the non-delivery of
                    the Aircraft;

           (b)      Lessee will not, except in the circumstances described in
                    Section 4.4(c), be entitled to terminate the Lease or to
                    reject the Aircraft when it is offered for Delivery because
                    of the delay.

           (c)      If the Aircraft has not been tendered for Delivery, in
                    accordance with Section 4.3, by the Final Delivery Date,
                    either party may terminate the Lease by delivering notice to
                    the other party within 10 days of such Final Delivery Date
                    (and if such notice is not delivered within such 10-day
                    period the Final Delivery Date will be deemed extended for
                    one additional period of 90 days). Upon the delivery of any
                    such notice or automatically on the expiration of such
                    90-day period if no such notice has been delivered, all
                    obligations of each party under the Lease will end on the
                    date of such notice or the date of the

                                            -4-

<PAGE>

                  expiration of such period, as the case may be, except that
                  Lessor will repay to Lessee the Deposit (if any) or return to
                  Lessee or cancel any Letter of Credit and Lessee will remain
                  obligated under its indemnity set forth in Section 3 of
                  Schedule 4.

          (d)     Lessee hereby agrees that its only right or remedy for a delay
                  in or failure of delivery of the Aircraft due to an Unforeseen
                  Event or for any other reason (other than Lessor's willful
                  misconduct in the performance of its obligation to deliver
                  the Aircraft under and subject to the conditions in the Lease)
                  is the remedy set forth in Section 4.4(c) above and Lessee
                  hereby waives any rights it may have under Section 2A-406 of
                  the UCC or otherwise for any delay in or failure of delivery.

 5.      PAYMENTS

 5.1     Deposit

         Lessee shall pay Lessor any Deposit that is specified in Section 3 of
 the Aircraft Lease Agreement.

 5.2     Rental Periods

         The first Rental Period will start on the Rent Commencement Date and
         each subsequent Rental Period will start on the date immediately
         following the last day of the previous Rental Period. Each Rental
         Period will end on the date immediately before the numerically
         corresponding day in the next month, except that:

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

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

 5.3      Rent

          (a)     TIME OF PAYMENT: Lessee will pay to Lessor or its order Rent
                  in advance on each Rent Date. Lessor must receive value for
                  the payment on each Rent Date. If a Rental Period begins on a
                  day which is not a Business Day, the Rent payable in respect
                  of that Rental Period shall be paid on the Business Day
                  immediately following that day.

          (b)     AMOUNT: The Rent payable during the Term shall be calculated
                  in accordance with Schedule B of the Aircraft Lease Agreement.

                                               -5-

<PAGE>

 5.4      Supplemental Rent

          (a)      AMOUNT: If, under the Aircraft Lease Agreement, Lessee is
                   required to pay Supplemental Rent, Lessee will pay that
                   Supplemental Rent, at the rates referred to in Section 3 of
                   the Aircraft Lease Agreement, to Lessor in relation to each
                   calendar month (or part of a month) of the Term, on the
                   fifteenth day following the end of that calendar month
                   (except that the last payment of Supplemental Rent during
                   the Term shall be paid on the Expiry Date).

          (b)      ADJUSTMENT: If, under the Aircraft Lease Agreement, Lessee
                   is required to pay Supplemental Rent, the Supplemental Rent
                   rates shall be adjusted after the Delivery Date in the manner
                   provided in the Aircraft Lease Agreement.

          (c)      LESSOR'S PROPERTY: Lessee acknowledges and agrees that
                   Supplemental Rent is additional rent for the leasing of the
                   Aircraft and not cash collateral or other collateral security
                   for Lessee's maintenance obligations under the Lease. Once
                   paid all Supplemental Rent is the property of Lessor, it
                   is not refundable to Lessee under any circumstances
                   whatsoever and Lessee has no interest therein whatsoever.

 5.5      Payments

          All payments by Lessee to Lessor under the Lease will be made for
          value on the due date in Dollars and in immediately available funds by
          wire transfer to the Lessor's Account as specified in the Aircraft
          Lease Agreement.

 5.6      Withholding and Tax Credit

          (a)     WITHHOLDING: Lessee must not deduct any amount from any of its
                  payments under the Lease, for or on account of any Taxes,
                  unless it is required by law to do so, in which case Lessee
                  must:

                  (i)      deduct the minimum amount necessary to comply with
                           the Law;

                  (ii)     pay Lessor an extra amount so that Lessor receives
                           a net amount on the relevant payment date, that is
                           equal to the amount that it would have received if
                           the reduction had not been made (provided that Lessee
                           shall have no obligation to pay Lessor an extra
                           amount on account of withholding in relation to any
                           Taxes with respect to which Lessee is not required to
                           indemnify Lessor under Section 5.7). The amount of
                           any such payment to Lessor must take into account the
                           tax treatment of that payment to Lessor applying the
                           principles of Section 5.10 such that Lessor shall be
                           in no worse position than it would have been if the
                           deduction had not applied in the first place;

                                             -6-

<PAGE>

                    (iii) pay the Tax to the relevant taxing authority according
                          to the relevant Law; and

                    (iv)  obtain a receipt (if one is available) from the
                          relevant taxing authority and give it to Lessor.

           (b)     TAX CREDIT: If Lessor, in good faith, determines that it has
                   realized a tax benefit (by way of deduction, credit or
                   otherwise) as a result of any payment for which Lessee is
                   liable under Section 5.6(a), Section 5.7, Section 5.10,
                   Section 5.21 or Section 10, Lessor shall pay to Lessee as
                   soon as practicable after the tax benefit has been realized
                   (but not before Lessee has made all payments and indemnities
                   to Lessor required under this Section or Section 5.7), an
                   amount which will ensure that (after taking account of the
                   payment itself) Lessor is in no better and no worse position
                   than it would have been if the Tax giving rise to the payment
                   hereunder had not been incurred.

                   Nothing in this Section 5.6(b) shall:

                   (i)      interfere with the right of Lessor to arrange its
                            tax affairs in whatever manner it thinks fit; or

                   (ii)     oblige Lessor to disclose any information relating
                            to its Tax affairs or any Tax computations (other
                            than information reasonably necessary for Lessee to
                            verify Lessor's determination, which information
                            may be supplied on a confidential basis to an
                            independent third party reasonably acceptable to
                            Lessor and Lessee).

  5.7      Tax Indemnity

           (a)      General:

                    (i)    Except as provided in Section 53(c), Lessee will on
                           demand pay and indemnify each Tax Indemnitee against
                           any and all Taxes levied or imposed against or upon
                           or payable by such Tax Indemnitee or Lessee and
                           arising from, with respect to or in connection with
                           the transactions pursuant to the Lease, including all
                           Taxes relating or attributable to Lessee, the Lease
                           or the Aircraft, directly or indirectly, in
                           connection with the importation, exportation,
                           registration, ownership (but only to the extent
                           relating to or attributable to or arising as a result
                           of the possession, operation, use or maintenance of
                           the Aircraft by Lessee), leasing, sub-leasing,
                           purchase, delivery, possession, use, operation,
                           repair, maintenance, overhaul, transportation,
                           landing, storage, presence or redelivery of the
                           Aircraft or any part thereof or any rent, receipts,
                           insurance proceeds, income, indemnification payment
                           or other amounts arising therefrom, or the making of
                           any Equipment Change or the permanent replacement of
                           any Engine.

                                         -7-

<PAGE>

                   (ii)     All Taxes indemnified pursuant to this Section
                            5.7(a) shall be paid by Lessee directly to the
                            appropriate taxing authority (to the extent
                            permitted by applicable Law) at or before the time
                            prescribed by applicable Law. After any payment by
                            Lessee of any Tax directly to a taxing authority,
                            Lessee shall furnish to Lessor, on request, a
                            certified copy of a receipt for Lessee's payment of
                            such Tax or such other evidence of payment of such
                            Tax as is reasonably obtainable by Lessee and
                            reasonably acceptable to Lessor.

                   (iii)    Any amount payable by Lessee to a Tax Indemnitee
                            pursuant to Section 5.7(a) shall be paid within ten
                            days after receipt of a written demand therefor from
                            the relevant Tax Indemnitee accompanied by a written
                            statement describing in reasonable detail the basis
                            for such indemnity and the computation of the amount
                            so payable, provided that if an amount of any
                            indemnified Tax is being contested in accordance
                            with Section 5.9 and Lessee shall have duly
                            performed (and shall  continue to perform) all its
                            obligations under Section 5.9 with respect to such
                            contest, then payment of the indemnity with respect
                            to such Tax under Section 5.7(a) shall, at Lessee's
                            election, be deferred until the date the contest has
                            been completed.

          (b)      Sales and Use Taxes:

                   (i)      Without limiting Section 5.7(a) above, Lessee shall
                            pay to Lessor (or, if permitted by applicable Law
                            and if requested by Lessor, Lessee shall pay to the
                            relevant tax authority for the account of Lessor):

                            (y)    all sales, use, excise, rental, value added,
                                   goods and services and similar taxes
                                   ("SALES TAXES") required to be paid to
                                   the tax authority of the jurisdiction in
                                   which the Delivery Location is situated or to
                                   the jurisdiction of the Habitual Base or the
                                   State of Incorporation with respect to the
                                   lease of the Aircraft to Lessee pursuant to
                                   the Lease unless Lessee delivers to Lessor on
                                   or prior to the Delivery Date such exemption
                                   certificate or other document as may be
                                   required by applicable law to evidence
                                   Lessor's entitlement to exemption from all
                                   Sales Taxes imposed by each such jurisdiction
                                   with respect to the lease of the Aircraft
                                   pursuant to the Lease; and

                           (z)      all Sales Taxes required to be paid to the
                                    tax authority of any jurisdiction in which
                                    the Aircraft may be used, operated or
                                    otherwise located from time to time unless
                                    Lessee deliver to Lessor such exemption
                                    certificates or other documents as may be
                                    required by applicable law to evidence
                                    Lessee's entitlement to exemption from all
                                    Sales Taxes imposed by each

                                      -8-

<PAGE>

                                    such jurisdiction with respect to the lease
                                    of the Aircraft pursuant to the Lease.

                   (ii)    Lessee and Lessor will cooperate with each other in
                           connection with the preparation and filing of any
                           exemption application or similar document that is
                           reasonably necessary or desirable under applicable
                           Law to avoid the imposition of any Sales Taxes with
                           respect to the transactions contemplated by the
                           Lease.

                   (iii)   The specific obligations with respect to sales and
                           use taxes set forth in this Section 5.7(b) are in
                           addition to, and are not in substitution for,
                           Lessee's obligation to indemnify for sales and use
                           taxes pursuant to Section 5.7(a).

          (c)      Lessee is not required to indemnify a Tax Indemnitee under
                   Section 5.7(a) or Section 5.7(b) to the extent that the Tax
                   arises because of:

                   (i)     the willful misconduct or gross negligence of the Tax
                           Indemnitee seeking indemnity under Section 5.7;

                   (ii)    a Tax liability a Tax Indemnitee has which would have
                           arisen even if the Lease had not been entered into;

                   (iii)   a Tax liability charged on or measured by a Tax
                           Indemnitee's net income, profits or gains by any
                           Government Entity in the United States; but excluding
                           any Tax (A) that is a Sales Tax (other than a Sales
                           Tax that is enacted by a Government Entity as a
                           substitute for or replacement of a Tax charged on or
                           measured by net income, profits, or gains, as a
                           revenue source for that Government Entity (a
                           "Replacement Sales Tax")) or (B) that is imposed
                           by any government or taxing authority of any
                           jurisdiction (other than the United States federal
                           government) if and to the extent that such Tax
                           (including a Replacement Sales Tax) results from
                           (x) the use, operation, presence, registration or
                           location of the Aircraft, the Airframe, any Engine or
                           any Part in the jurisdiction imposing the Tax, or (y)
                           the situs of organization, any place of business or
                           any activity of Lessee or any other Person having
                           use, possession or custody of the Aircraft, the
                           Airframe, any Engine or any Part in the jurisdiction
                           imposing the Tax;

                    (iv)   a Tax liability charged with respect to the period,
                           or an event occurring, (x) prior to the Delivery Date
                           or (y) after the Expiry Date and, in either case,
                           unrelated to Lessor's dealings with Lessee or to the
                           transactions contemplated by the Lease;

                    (v)    a Tax liability arising out of any voluntary transfer
                           or disposition by a Tax Indemnitee of any equitable
                           or legal interest in the Aircraft or any part thereof
                           or

                                          -9-

<PAGE>

                            this Agreement to any Person (including a transfer
                            or disposition by way of security but excluding a
                            transfer or disposition pursuant to the exercise of
                            remedies in connection with an Event Default),
                            provided, however, that Lessor shall in connection
                            with an Event of Default comply with any request as
                            Lessee shall make concerning the appropriate
                            jurisdiction in which such disposition shall be
                            made unless Lessor reasonably determines (and
                            advises Lessee) that compliance with such request by
                            Lessee would generate an adverse consequence or
                            prejudice Lessor; or

                    (vi)    a Tax liability with respect to a Tax based on or
                            measured by the value or principal amount of any
                            loan or promissory note (or security therefor)
                            entered into by a Tax Indemnitee or anyone claiming
                            an interest in the Aircraft or any portion thereof
                            through a Tax Indemnitee; or

                    (vii)   a Tax liability arising out of a Replacement Sales
                            Tax as described in Section 5.7(c)(iii), but
                            excluding a Replacement Sales Tax described in
                            Section 5.7(c)(iii)(B).

           (d)      Lessee will also indemnify each Tax Indemnitee, on an
                    After-Tax Basis, as set forth in the Section entitled
                    "Special Tax Indemnity" in Schedule B of the Aircraft Lease
                    Agreement, and the provisions of Section 5.9 (TAX CONTEST
                    AND INFORMATION) shall apply thereto.

   5.8     [NOT APPLICABLE]

   5.9     Tax Contest and Information

           (a)     If a Tax Indemnitee receives a notice of an audit or a
                   written claim for any Tax for which Lessee would be required
                   to pay an indemnity pursuant to Section 5.6 or Section 5.7,
                   Lessor or such Tax Indemnitee shall notify Lessee promptly of
                   such audit or claim, provided that any failure to provide
                   such notice will not relieve Lessee of any indemnification
                   obligation pursuant to Section 5.6 or 5.7 except to the
                   extent that such failure precludes the right to contest such
                   Taxes. If requested by Lessee in writing promptly after
                   receipt of notice hereunder, Lessor shall or Lessor shall
                   cause, to the extent that it has the ability to do so through
                   relationship or contractual privity, such Tax Indemnitee to,
                   upon receipt of indemnity satisfactory to it and at the
                   expense of Lessee (including all costs, expenses, legal and
                   accountants' fees and disbursements, and penalties, interest
                   and additions to tax incurred in contesting such claim)
                   permit Lessee to contest such audit or claim, or, if such
                   contest (w) relates to an income tax, (x) involves Taxes in
                   addition to those for which Lessee is responsible hereunder,
                   (y) may not, under applicable law be conducted by Lessee, or
                   (z) is one for which Lessee requests in writing

                                         -10-

<PAGE>

                    that Lessor or the Tax Indemnitee conduct such contest,
                    Lessor shall, or Lessor shall cause, to the extent that it
                    has the ability to do so through relationship or contractual
                    privity, the appropriate Tax Indemnitee to in good faith
                    contest such audit or claim, by (i) resisting payment
                    thereof if practicable and appropriate, (ii) not paying the
                    same except under protest if protest is necessary and
                    proper, or (iii) if payment is made, using reasonable
                    efforts to obtain a refund of such Taxes, in appropriate
                    administrative and judicial proceedings. Lessor or the Tax
                    Indemnitee shall determine the method of any contest
                    conducted by Lessor or the Tax Indemnitee and (in good faith
                    consultation with Lessee) control the conduct thereof,
                    except that with respect to matters described in clause (y)
                    or in clause (z) above which are not also described in
                    clause (w) or clause (x) above Lessor shall and Lessor shall
                    cause, to the extent that it has the ability to do so
                    through relationship or contractual privity, the Tax
                    Indemnitee to comply with the reasonable instructions of
                    Lessee regarding the method of any contest conducted by
                    Lessor or the Tax Indemnitee and Lessee shall (in good faith
                    consultation with Lessor) control the conduct thereof.
                    Lessee shall determine the method of any contest conducted
                    by Lessee and (in good faith consultation with Lessor or the
                    Tax Indemnitee) control the conduct thereof. Lessee shall
                    pay in full all payments of Rent and other amounts payable
                    pursuant to the Lease, without reduction for or on account
                    of any Tax (except as provided in Section 5.6), while such
                    contest is continuing. Lessor shall not be required to
                    contest, or to continue to contest, a claim for Taxes under
                    this Section 5.9 if (x) such contest would result in a risk
                    of criminal penalties or risk of a sale, forfeiture or loss
                    of, or the imposition of a Security Interest (other than a
                    Permitted Lien) on, the Aircraft, or (y) Lessee shall not
                    have furnished, at Lessee's expense, an opinion of
                    independent tax counsel selected by Lessor and reasonably
                    satisfactory to Lessee, that a reasonable basis exists for
                    such contest, or (z) a Default shall be continuing (unless
                    Lessee shall have provided security reasonably satisfactory
                    to Lessor securing Lessee's performance of its obligations
                    under this Section 5.9). If Lessor or any Tax Indemnitee
                    contests any claim for Taxes by making a payment and seeking
                    a refund thereof, then Lessee shall advance to Lessor or
                    such Tax Indemnitee, on an interest-free basis, an amount
                    equal to the Taxes to be paid by Lessor or such Tax
                    Indemnitee in connection with the contest and shall
                    indemnify Lessor or such Tax Indemnitee on an After-Tax
                    Basis for any adverse tax consequences to Lessor or such Tax
                    Indemnitee of such interest-free advance. Upon the final
                    determination of any contest pursuant to this Section 5.9 in
                    respect of any Taxes for which Lessee shall have made an
                    advance to Lessor or a Tax Indemnitee in accordance with the
                    immediately preceding sentence, the amount of Lessee's
                    obligation shall be determined as if such advance had not
                    been made; any indeminty obligation of Lessee to Lessor or a
                    Tax Indemnitee under this Section 5.9 and Lessor's or such
                    Tax Indemnitee's obligation to repay the advance will be
                    satisfied first by setoff against each other, and any
                    difference owing by either party shall be paid within ten
                    days after such final determination.

                                            -11-

<PAGE>

          (b)      If Lessor or any Tax Indemnitee obtains a refund or
                   reimbursement of all or any part of any Taxes for which a
                   full indemnity was paid by Lessee, Lessor shall and Lessor
                   shall cause such Tax Indemnitee to pay Lessee the amount of
                   such refund or reimbursement, reduced by any Taxes imposed
                   on Lessor or such Tax Indemnitee on receipt or accrual of
                   such refund or reimbursement and increased by any Taxes saved
                   by Lessor or such Tax Indemnitee by reason of the
                   deductibility of such payment by Lessor or such Tax
                   Indemnitee. If, in addition to such refund or reimbursement,
                   Lessor or such Tax Indemnitee receives an amount of interest
                   on such refund or reimbursement or a recovery of costs or
                   attorney's fees with respect thereto that were paid by
                   Lessee, Lessor or such Tax Indemnitee shall pay to Lessee the
                   portion of such interest or recovered costs or attorney's
                   fees which is fairly attributable to such refund, reduced by
                   any Taxes imposed by Lessor or such Tax Indemnitee on receipt
                   or accrual of such interest and increased by any Taxes saved
                   by reason of the deductibility of such payment by Lessor or
                   such Tax Indemnitee. Neither Lessor nor the Tax Indemnitee
                   shall be required to make any payment to Lessee pursuant to
                   this Section 5.9 if, and for so long as, a Default shall have
                   occurred and be continuing.

          (c)      Lessor or a Tax Indemnitee in its sole discretion (by written
                   notice to Lessee) may waive its rights to indemnification
                   pursuant to Section 5.7 with respect to any claim for any Tax
                   and may refrain from contesting or continuing the contest of
                   such claim, in which event Lessee shall have no obligation to
                   indemnify Lessor for the Taxes that are the subject of such
                   claim. If Lessor agrees to a settlement of any contest
                   conducted pursuant to this Section 5.9 without the prior
                   written consent of Lessee, which consent shall not be
                   unreasonably withheld, then Lessor shall be deemed to have
                   waived its rights to the indemnification provided for in
                   Section 5.7 with respect to the Tax liability accepted in
                   such settlement or with respect to which Lessee's ability to
                   avoid or minimize, directly or by instruction to the Lessor
                   or such Tax Indemnitee regarding how to avoid or minimize,
                   Taxes has been materially impaired as a result of failure of
                   the Lessor or such Tax Indemnitee to so contest or continue
                   to contest.

          (d)      Information:

                    (i)    If Lessee is required by any applicable Law, or by
                           any third party, to deliver any report or return in
                           connection with any Taxes for which Lessee would be
                           obligated to indemnify Lessor or any other Tax
                           Indemnitee under the Lease, Lessee will complete the
                           same and, on request, supply a copy of the report or
                           return to Lessor.

                   (ii)    If any report, return or statement is required to be
                           made by Lessor or any other Tax Indemnitee with
                           respect to any Tax for which there is an indemnity
                           obligation of Lessee under the Lease, and Lessee
                           knows of, or reasonably should

                                          -12-

<PAGE>

                           have known of, such return, report or statement,
                           Lessee will promptly notify Lessor of the
                           requirement and:

                           (y)      if permitted by applicable Law, make and
                                    timely file such report, return or statement
                                    (except for any report, return or statement
                                    that Lessor has notified Lessee that Lessor
                                    or any other Tax Indemnitee intends to
                                    prepare and file), prepare such return in
                                    such manner as will show Lessor as lessor
                                    of the Aircraft and the ownership of the
                                    Aircraft in Lessor if required or
                                    appropriate, and provide Lessor upon request
                                    a copy of each such report, return or
                                    statement filed by Lessee, or

                            (z)     if Lessee is not permitted by applicable
                                    Law to file any such report, return or
                                    statement, Lessee will prepare and deliver
                                    to Lessor a proposed form of such report,
                                    return or statement within a reasonable
                                    time prior to the time such report, return
                                    or statement is to be filed.

                   (iii)   Lessee will provide such information and documents
                           as Lessor may reasonably request to enable Lessor or
                           any other Tax Indemnitee to comply with its tax
                           filing, audit and litigation obligations. Lessor or
                           any other Tax Indemnitee will provide such
                           information or documents, at Lessee's expense, that
                           Lessee does not otherwise have as Lessee may
                           reasonably request and which are necessary to enable
                           Lessee to comply with its obligations under the Lease
                           (including Sections 5.6 and 5.7 of the CTA and
                           Schedule B of the Aircraft Lease Agreement) or to
                           minimize Taxes that are the subject of any filing,
                           audit, or contest under this Section 5.9.

 5.10     Indemnity Payments - After-Tax Basis

          The amount of any payment made under Section 5.7 (TAX INDEMNITY)
          (including Section 5.7(d)), Section 5.21 (EXPENSES) or Section 10
          (INDEMNITY) to or for the benefit of any Indemnitee shall include such
          amount as may be necessary to hold such Indemnitee harmless on an
          After-Tax Basis from all Taxes required to be paid by such Indemnitee
          with respect to such payment or indemnity (including any payments
          pursuant to this Section 5.10.

 5.11     Lessor Obligations Following Expiry Date

          Within 91 days (or such shorter period after the Expiry Date to which
          Lessor may agree after Lessee demonstrates to Lessor's reasonable
          satisfaction that Lessee has a net worth, determined in accordance
          with GAAP, of not less than Five Million Dollars ($5,000,000.00) as of
          the Expiry Date) after:

                                         -13-

<PAGE>

           (a)      redelivery of the Aircraft to Lessor in accordance with and
                    in the condition required by the Lease; or

           (b)      payment to Lessor of the Agreed Value following an Event of
                    Loss after the Delivery Date;

           and in each case so long as all amounts which may then be due and
           payable under the Lease and the Other Agreements shall have been paid
           in full and (no other Default has occurred and is continuing:

                    (i)      Lessor will pay to Lessee the balance of the
                             Deposit (if any);

                    (ii)     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; and

                   (iii)     Lessor will return to Lessee or cancel any Letter
                             of Credit.

  5.12    Net Lease

          The Lease is a net lease. The Lessee's obligation to pay Rent and to
          perform all of its other obligations under the Lease is absolute and
          unconditional no matter what happens and no matter how fundamental or
          unforeseen the event, including any of the following: (a) any right of
          set-off, counterclaim, recoupment, defense or other right which either
          party to the Lease may have against the other (including any right of
          reimbursement) or which Lessee may have against the Manufacturer, any
          manufacturer or seller of or any Person providing services with
          respect to the Aircraft, any Engine or any Part or any other Person,
          for any reason whatsoever, (b) any unavailability of the Aircraft for
          any reason, including 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 (whether or not
          the same would, but for this provision, result in the termination of
          the Lease by operation of law); (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, Lessee or any other Person; (e) any invalidity or
          unenforceability or lack of due authorization of, or other defect in,
          the Lease; (f) any Security Interests or Taxes; and/or (g) any other
          cause or circumstance which but for this provision would or might
          otherwise have the effect of terminating or in any way affecting any
          obligation of Lessee under the Lease. Lessee acknowledges and agrees
          that it has used its own judgement in selecting the Aircraft, and has
          not relied on Lessor or

                                        -14-

<PAGE>

          on any information supplied by Lessor, that Lessor is not a
          manufacturer of or dealer in aircraft and that Lessor has all of the
          rights and benefits of a lessor under a lease to which Section 2A-407
          of the UCC applies as provided in such Section 2A-407.

          Except as expressly set forth elsewhere in the Lease, Lessee hereby
          waives, to the extent permitted by applicable Law, any and all right
          which it may now have or which at any time hereafter may be conferred
          upon it, by statute or otherwise, to terminate, abate, cancel, quit,
          reduce, defer, suspend or surrender the Lease or the Aircraft or any
          obligation imposed upon Lessee under the Lease (including payment of
          Rent or Supplemental Rent).

          Each payment of Rent or Supplemental Rent made by Lessee shall be
          final. Lessee will not seek to recover all or any part of any payment
          of Rent or Supplemental Rent for any reason whatsoever except manifest
          error.

          If for any reason whatsoever the Lease shall be terminated in whole or
          in part by operation of Law, except as specifically provided in the
          Lease, Lessee waives all rights (if any) to any termination or
          diminution in its Rent or Supplemental Rent obligations hereunder and
          nonetheless agrees to pay to Lessor, an amount equal to each Rent and
          Supplemental Rent payment at the time such payments would have become
          due and payable in accordance with the terms thereof had the Lease not
          been terminated in whole or in part and so long as such payments are
          made and all other terms and conditions hereof are complied with by
          Lessee, Lessor and Lessee will deem the Lease to remain in full force
          and effect and Lessee shall continue in possession of the Aircraft
          under the terms and conditions of the Lease.

          Nothing in this Section 5.12 will be construed to limit Lessee's right
          to institute separate legal proceedings against Lessor in the event of
          Lessor's breach of the Lease as and to the extent permitted by
          Sections 7.1 and 16.3 of this CTA, or to limit Lessee's rights and
          remedies against any other Person.

 5.13     Further Provisions regarding Deposit

          (a)     If, under the Lease, Lessee is required to pay a Deposit,
                  Lessee hereby grants a security interest in the Deposit to
                  Lessor and the remaining provisions of this Section shall
                  apply. Lessee agrees that Lessor shall be entitled to
                  commingle the Deposit with Lessor's general or other funds,
                  Lessor will have no obligation to pay any interest thereon
                  and Lessor will not hold any such funds as agent or in trust
                  for Lessee or in any similar fiduciary capacity. In this
                  regard, Lessee acknowledges and agrees that it is not located
                  in the State of New York within the meaning of Section 7-101
                  1-c. (b) of the New York General Obligations Law and,
                  therefore, the requirements of Section 7-101 of the New York
                  General Obligations Law to the effect that Lessor hold the
                  Deposit in a separate, interest bearing account do not apply.

                                            -15-

<PAGE>

           (b)     If any Event of Default or any Default under clause (g) of
                   Schedule 9 shall have occurred and be continuing, in addition
                   to all rights and remedies accorded to Lessor elsewhere in
                   the Lease or under Law in respect of the Deposit, Lessor may
                   immediately or at any time thereafter, without prior notice
                   to Lessee, apply all or part of the Deposit in or towards the
                   payment or discharge of any matured obligation owed by Lessee
                   or any affiliate or associate of Lessee under the Lease or
                   the Other Agreements, in such order as Lessor sees fit,
                   and/or exercise any of the rights of set-off described in
                   Section 5.20 against all or part of the Deposit.

           (c)     If Lessor exercises the rights described in Section 5.13(b)
                   above, Lessee shall, following a demand in writing from
                   Lessor, immediately restore the Deposit to the level at
                   which it stood immediately prior to such exercise.

  5.14     Letter of Credit

           (a)     If, under the Lease, Lessee is required or elects to provide
                   Lessor with a Letter of Credit, the provisions of this
                   Section shall apply. Any Letter of Credit provided by Lessee
                   to Lessor will be issued and payable by a Pre-Approved Bank
                   or another bank acceptable to Lessor in its sole and absolute
                   discretion and in substantially the form of Schedule 13, or
                   in another form and substance acceptable to Lessor in its
                   sole and absolute discretion, and, if not issued by a
                   Pre-Approved Bank or by the New York branch of a major
                   international bank acceptable to Lessor in its sole and
                   absolute discretion from time to time, will be confirmed by
                   and payable at the New York branch of a major international
                   bank acceptable to Lessor in its sole and absolute discretion
                   from time to time, and will be issued as security for all
                   payment obligations of Lessee or any its Affiliates under the
                   Lease and each Other Agreement (including any and all Losses
                   suffered or incurred by Lessor or any of its Affiliates in
                   respect of which Lessee or any if its Affiliates is obligated
                   under the Lease or each Other Agreement), which shall remain
                   in full force and effect until the Required LC Expiry Date
                   and may be drawn down by Lessor upon demand at any time or
                   times prior to the Required LC Expiry Date following (i) the
                   occurrence of an Event of Default or a Default under clause
                   (g) of Schedule 9, or (ii) the receipt by Lessor of notice of
                   non-renewal of the Letter of Credit under Section 5.14(b)
                   below.

          (b)      The Letter of Credit may have a validity period or periods
                   ending prior to the Required LC Expiry Date, provided that
                   (i) the Letter of Credit shall be renewed automatically,
                   without further act or deed by any party, until such time as
                   Lessor receives notice of non-renewal of the Letter Credit,
                   (ii) notice of non-renewal of the Letter of Credit shall be
                   provided to Lessor no less than 30 Business Days prior to its
                   then scheduled expiry date, (iii) Lessor shall be entitled to
                   draw the full amount of the Letter of Credit immediately in

                                           -16-

<PAGE>

                   the event that Lessor receives any notice of non-renewal of
                   the Letter of Credit; and (iv) a Letter of Credit shall
                   remain in force at all times up to the Required LC Expiry
                   Date.

           (c)     If at any time during the Term, the current issuing or
                   confirming bank for the Letter of Credit ceases to meet the
                   requirements set forth in the definition of Pre-Approved
                   Bank, Lessee shall within five (5) Business Days after the
                   date of notice from Lessor of such decrease in credit
                   rating, cause the Letter of Credit to be replaced by a
                   Letter of Credit issued by another bank that meets the
                   definition of a Pre-Approved Bank and (if, requested by
                   Lessor in its sole and absolute discretion) that such
                   replacement Letter of Credit is confirmed by another bank
                   that meets the requirement of a Pre-Approved Bank.

          (d)      If Lessor makes a drawing under the Letter of Credit, Lessee
                   shall, following a demand in writing by Lessor, immediately
                   cause the maximum amount available for drawing under the
                   Letter of Credit to be restored to the level at which it
                   stood immediately prior to such drawing.

  5.15     Guarantee

          If, under the Aircraft Lease Agreement, Lessee is required to provide
          Lessor with a Guarantee, Lessee will on or prior to the Delivery Date
          provide Lessor with the Guarantee.

  5.16    Late Payment Interest

          If Lessee fails to pay any amount payable under the Lease on the due
          date, Lessee will pay on demand from time to time to Lessor interest
          (both before and after judgement) on that amount, from the due date to
          the date of payment in full by Lessee to Lessor, at the Interest Rate.
          All such interest will be compounded monthly and calculated on the
          basis of the actual number of days elapsed in the month, assuming a 30
          day month and a 360 day year.

  5.17    Currency

          (a)      Except for Losses and expenses suffered or incurred by
                   Lessor, which shall be payable by Lessee to Lessor in the
                   currency and in the amount in which such Loss is suffered or
                   incurred, all amounts payable to Lessor under the Lease shall
                   be payable in Dollars in New York and payment in Dollars in
                   New York is of the essence. Lessee must indemnify Lessor
                   against any Loss Lessor suffers if:

                   (i)      Lessor receives an amount relating to Lessee's
                            obligations in a different currency from that in
                            which payments should be made under the Lease; or

                   (ii)     Lessee pays a judgement or claim in a different
                            currency from that in which payments should be made
                            under the Lease.

                                            -17-

<PAGE>

            (b)     Lessee relinquishes any right to pay any amount under the
                    Lease in a currency which is different from the currency
                    provided in the Lease. Notwithstanding any such receipt,
                    judgement or claim described in Section 5.17(a), Lessee
                    shall have a separate obligation to pay, and Lessor shall
                    have a separate claim against Lessee for, amounts to be
                    indemnified by Lessee under this Section 5.17.

   5.18    Certificates

           Except where expressly provided in the Lease, any certificate or
           determination by Lessor as to any rate of interest or as to any other
           amount payable under the Lease will, in the absence of manifest
           error, be presumed to be correct.

   5.19    Appropriation

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

   5.20    Set-off

           (a)      In this sub-clause, references to Lessee will also include
                    Lessee Affiliates.

           (b)      Lessor may, without notice, set-off any obligations owed by
                    Lessee under the Lease or under the Other Agreements against
                    any obligation Lessor or any of its Affiliates owes Lessee
                    under the Lease or under the Other Agreements, regardless
                    of the place of payment or currency. Promptly after making
                    any such set-off, Lessor shall notify Lessee thereof,
                    including in such notice such information about the set-off
                    as may be reasonably required to enable a reasonable person
                    to identify the claims so set off and to verify the
                    calculation of the set-off, but neither failure to give such
                    notice nor any alleged defect in such notice shall affect
                    the effectiveness of any such set-off.

           If the obligations are in different currencies, Lessor may convert
           either obligation at the market rate of exchange available in New
           York. If the amount of an obligation is unknown, Lessor may estimate
           the amount. Any difference between the estimated obligation and the
           actual obligation will be paid by either Lessor or Lessee, as
           appropriate, when the amount becomes known.

   5.21    Expenses

           Lessee will pay to Lessor on demand all reasonable expenses
           (including all legal fees and expenses and the fees and expenses of
           other professional advisers) that the Lessor suffers or incurs:

                                           -18-

<PAGE>

          (a)      to deal with any amendments, extensions, consents or
                   waivers that are required in connection with the Lease
                   (but excluding any expenses incurred by Lessor or Owner in
                   connection with any change in the ownership or financing
                   of the Aircraft or a change in the Lease that is otherwise
                   requested by Lessor or Owner, and in each case unrelated
                   to any consent, waiver or amendment requested by Lessee or
                   any other act or omission of Lessee) or to deal with any
                   replacement of any Engine or Part (except for the
                   replacement of an Engine by or at the request of Lessor
                   prior to the Delivery Date);

          (b)      for FAA counsel and otherwise to act upon any advice and
                   obtain assistance to perfect the Lease in the State of
                   Registry and the State of Incorporation (and any other
                   appropriate place); and

          (c)      in contemplation of, or otherwise in connection with, the
                   enforcement or preservation of any of Lessor's rights
                   under the Lease (including under Section 10) or in respect
                   of the repossession of any Aircraft.

          All amounts payable pursuant to this Section 5.21 will be paid in the
          currency in which they are incurred by Lessor.

 6.       MANUFACTURER'S WARRANTIES

          (a)      So long as no Default has occurred which is continuing,
                   Lessor shall make available to Lessee during the Term the
                   benefit of all manufacturer's warranties in relation to
                   the repair or remedy of any defect in the Aircraft
                   (including compensation for loss of use of the Aircraft)
                   to the extent that it is permitted to do so. In
                   furtherance of the foregoing, Lessor shall take such
                   actions, at Lessee's cost and expense, as Lessee may
                   reasonably request to make such warranties available to
                   Lessee.

          (b)      If a Default has occurred and is continuing Lessor may
                   immediately recover from Lessee the proceeds of any
                   warranty claims previously paid to Lessee to the extent
                   that such claims relate to any defect in the Aircraft not
                   fully and completely rectified by Lessee before such
                   Default and Lessor may:

                   (i)     retain for its own account any such proceeds
                           previously paid to Lessor which would have been
                           remitted to Lessee under this Section 6 in the
                           absence of such Default; and

                   (ii)    cause any proceeds of any pending claims to be paid
                           to Lessor, rather than Lessee.

                                     -19-

<PAGE>

          (c)      Lessee will take all steps at the end of the Term as may be
                   reasonably required to ensure that the benefit of any
                   warranties relating to the Aircraft which have not expired
                   is vested in Lessor.

 7.       LESSOR'S COVENANTS

 7.1      Quiet Enjoyment

          So long as no Default has occurred and is continuing, Lessor will not
          interfere with Lessee's right to quiet use and possession of the
          Aircraft during the Term. Exercise by Lessor of its rights of
          inspection or other rights provided to it under the Lease in the
          absence of a Default shall not be considered to be a breach of the
          foregoing covenant. Lessee agrees that its only right with respect to
          a default by Lessor under the Lease is to make a claim against Lessor
          for actual damages resulting directly therefrom and in any event
          subject to Section 16.3 hereof, and Lessee hereby waives any and all
          other rights or remedies it may have under Section 2A-211 of the UCC
          or Sections 2A-508 through 2A-522 of the UCC or otherwise.

 7.2      Maintenance Contributions

          If, under the Aircraft Lease Agreement for the Aircraft, Lessee is
          required to pay Supplemental Rent, then provided no Default has
          occurred and is continuing, Lessor will pay such amounts, if any, as
          may be specified in the Aircraft Lease Agreement to Lessee by way of
          contribution to the cost of maintenance of the Aircraft, which
          payments, if any, shall be made in the amounts and in the manner
          specified in the Aircraft Lease Agreement.

 8.       LESSEE'S COVENANTS

 8.1      Duration: Lessee shall perform and comply, or cause its Permitted
          Sub-Lessee or maintenance contractor to perform and comply, with
          its undertakings and covenants in the Lease at all times during the
          Term. All such undertakings and covenants shall, except where
          expressly otherwise stated, be performed at the expense of Lessee.

 8.2      Information

          Lessee will:

          (a)     provide Lessor with a Technical Report for the Aircraft
                  within 15 days after the end of each calendar month
                  throughout the Term and otherwise provide Lessor with a
                  Technical Report for the Aircraft within thirty (30) days
                  after Lessor's request therefor;

          (b)     provide Lessor with the Financial Information;

                                     -20-

<PAGE>

           (c)    (i) notify Lessor of any Event of Loss and of any event
                  which is likely to result in an insurance claim in excess
                  of the Damage Notification Threshold promptly after the
                  occurrence of any such event, (ii) consult with Lessor in
                  the course of, and keep Lessor fully apprised as to the
                  details of, any negotiations with its insurers or insurance
                  brokers (and, in the case of repairable damage, with any
                  applicable repair facility) with respect to any insurance
                  claim arising out of such event, and (iii) obtain Lessor's
                  prior approval before agreeing to any disposition of any
                  insurance claim in excess of the Damage Notification
                  Threshold;

          (d)     upon the occurrence of any event which is likely to give
                  rise to an insurance claim under any of the Insurances
                  relating to the Aircraft, Lessee shall promptly execute and
                  deliver all documents and instruments and take all such
                  other action as may reasonably be required to initiate ate
                  and process any such claim under the applicable insurance,
                  and in any event, Lessee shall initiate such claim, execute
                  such documents or instruments and take such other action
                  promptly following a written request by Lessor that Lessee
                  initiate such claim, execute such document or instrument or
                  take such other action;

          (e)     provide Lessor, upon request, with evidence that all Taxes
                  and charges that are due and payable and were incurred by
                  Lessee in connection with the Aircraft, its location and
                  its operations, including those invoiced by airports and
                  air traffic control authorities have been paid in full (or
                  are 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 risk of the Aircraft or any interest therein
                  being sold, forfeited or otherwise lost or of criminal
                  liability on the part of Lessor or Owner);

          (f)     provide Lessor with such other information concerning the
                  location, condition, use and operation of the Aircraft or
                  concerning the business or financial affairs of Lessee, as
                  Lessor may from time to time reasonably request;

          (g)     [NOT APPLICABLE];

          (h)     [NOT APPLICABLE);

                   notify Lessor promptly as to any material modification to
                   Lessee's Maintenance Program (including, without limitation,
                   any change from maintenance on a block format to maintenance
                   on a phase-basis); provided, however, that Lessee shall not
                   make any modifications to Lessee's Maintenance Program which
                   may adversely affect the return conditions specified in Part
                   III of Schedule A to the Aircraft Lease Agreement without
                   prior consultation with Lessor. For the avoidance of doubt,
                   changes to Lessee's Maintenance Program extending or
                   shortening times between scheduled overhaul of Parts

                                     -21-

<PAGE>

                   shall not be deemed to be material modification or to
                   adversely affect the return conditions;

  8.3     Lawful and Safe Operation

          Lessee will operate the Aircraft for commercial purposes from the
          Delivery Date until the Return Occasion from a base within the State
          of Registry or from such other base outside the State of Registry
          pursuant to a sub-lease or a wet-lease complying with Section 8.4(a),
          provided, always that Lessee must not use or operate the Aircraft or
          suffer or, permit the Aircraft to be used or operated:

          (a)     in violation of any applicable Regulations or in a manner
                  causing Lessor, Owner, any Financing Party or GECAS to be
                  in violation of (i) any applicable Regulations of the
                  United States, (ii) any applicable Regulations of any
                  jurisdiction of which Lessee is notified in writing by
                  Lessor as a jurisdiction applicable to Lessor, Owner, GECAS
                  or any Financing Party, or (iii) any applicable Regulations
                  of any other jurisdiction into which or over which the
                  Aircraft is operated; provided, however, that nothing in
                  Section 8.3(a)(ii) shall be deemed to require Lessee to
                  comply with any Regulations of any jurisdiction other than
                  the United States which pertain to the maintenance or
                  modification of aircraft.

          (b)     for any purpose for which the Aircraft was not designed or
                  which is illegal;

          (c)     to carry cargo which could reasonably be expected to damage
                  the Aircraft;

          (d)     in any circumstances or place where the Aircraft is not
                  covered by the Insurances; or

          (e)     for purposes of training, qualifying or re-confirming the
                  status of cockpit personnel except for the benefit of
                  Lessee's or a Permitted Sub-Lessee's cockpit personnel,
                  and then only if the use of the Aircraft for such purpose
                  is not disproportionate to the use for such purpose of
                  other aircraft of the same type operated by Lessee or such
                  Permitted Sub Lessee, as the case may be.

  8.4     Subleasing

          (a)     AT NO TIME PRIOR TO THE RETURN OCCASION WILL LESSEE
                  SUB-LEASE, WET-LEASE OR OTHERWISE GIVE POSSESSION OR
                  CONTROL OF THE AIRCRAFT OR ANY ENGINE TO, OR OTHERWISE
                  PERMIT THE AIRCRAFT OR ANY ENGINE TO BE IN THE POSSESSION
                  OR CONTROL OF, ANY PERSON EXCEPT:

                                     -22-

<PAGE>

                  (i)      when the prior written consent of Lessor has been
                           obtained, which consent shall not be unreasonably
                           withheld (it being expressly acknowledged by
                           Lessor and Lessee that the withholding of Lessor's
                           consent in respect of any sub-lease or wet lease
                           shall not be deemed to be unreasonable if the
                           terms of such sub-lease do not comply with the
                           conditions set out in Section 8.4(b) or the terms
                           of such wet lease do not comply with Section
                           8.4(c), as the case may be); or

                   (ii)    where the Aircraft or Engine is delivered to a
                           manufacturer or Maintenance facility for work to be
                           done on it as required or permitted under the Lease;
                           or

                   (iii)   to a sub-lessee of the Aircraft to which Lessor
                           consents in writing (a "PERMITTED SUB-LESSEE"),
                           pursuant to a sub-lease to which Lessor consents in
                           (a "PERMITTED SUB-LEASE"), which complies with the
                           conditions set out in Section 8.4(b), and provided
                           that no Default shall have occurred and be
                           continuing at the commencement of such sub-lease;

                   (iv)    on a wet-lease which complies with Section 8.4(c);
                           or

                   (v)     with respect to an Engine, as permitted under
                           Section 8.11.

          (b)     If Lessor grants its consent to a proposed sub-lessee and a
                  proposed sub-lease, in addition to any conditions required
                  by Lessor as part of any such consent of Lessor, each of
                  the following conditions shall be required to be satisfied
                  in relation to any Permitted Sub-Lease prior to any
                  sub-leasing pursuant to this Section:

                  (i)      NOTIFICATION: at least 30 days prior to entering
                           into any Permitted Sub-Lease, Lessee shall give
                           Lessor written notice, specifying the identity of
                           the Permitted Sub-Lessee, the term of the
                           Permitted Sub-Lease, the delivery date under the
                           Permitted Sub-Lease and the habitual base of the
                           Permitted Sub-Lessee;

                   (ii)    TERM: the term of the Permitted Sub-Lease shall
                           not be capable of extending beyond one month (or
                           such shorter period as Lessor may agree (which
                           agreement shall not be unreasonably withheld) in
                           giving its consent to such Permitted Sub Lease)
                           before the Scheduled Expiry Date;

                   (iii)   FORM: a Permitted Sub-Lease shall:

                           (aa)     not contain provisions inconsistent with the
                                    provisions of the Lease (but may impose
                                    additional or more stringent obligations on
                                    any Permitted Sub-Lessee than are imposed on
                                    Lessee under the Lease);

                                     -23-

<PAGE>

                             (bb)    provide that no further subleases of the
                                     Aircraft by such Permitted Sub-Lessee are
                                     permitted; and

                             (cc)    include provisions substantially identical
                                     to or having substantially the same effect
                                     as Sections 2.1, 5.6, 5.7, 5.10, 5.12,
                                     5.16, 5.17, 5.21, 8, 9, 10, 11, 13, 15.1,
                                     15.8 and 16 and Schedules 2 (Section 1.1),
                                     7 and 9 of the Lease (but the Permitted
                                     Sub-Lease may impose additional or more
                                     stringent obligations on any Permitted
                                     Sub-Lessee than are imposed on Lessee under
                                     the Lease);

                    (iv)   SUBORDINATION  AND  ASSIGNMENT: the Permitted
                           Sub-Lease  shall provide that (aa) the Permitted
                           Sub- Lease is subject and  subordinate to the
                           Lease in all respects and the rights of the
                           Permitted  Sub-Lessee  under the  Permitted
                           SubLease  are  subject and subordinate  in all
                           respects to the rights of Lessor  under the Lease;
                           and (bb) prior to delivery of the  Aircraft to
                           the  Permitted  Sub-Lessee  (as a condition
                           precedent thereof),  the Permitted  Sub-Lessee
                           shall provide an  acknowledgement  to Lessor and
                           Owner in a form reasonably  satisfactory  to
                           Lessor,  confirming its agreement to this
                           provision and confirming that,  except to the
                           extent, if any, that it receives a quiet enjoyment
                           letter  from  Lessor  pursuant  to Section
                           8A(b)(v)  below,  its rights to possession of the
                           Aircraft under the Permitted  Sub-Lease  will
                           terminate  immediately upon the termination of the
                           Lease,  and that it will redeliver the Aircraft to
                           Lessor, upon  notification  from Lessor that an
                           Event of Default has occurred and that it has, as
                           a result  thereof,  terminated  Lessee's  right to
                           possession of the Aircraft under the Lease (the
                           "SUBORDINATION  ACKNOWLEDGEMENT").  The Permitted
                           Sub-Lease  shall be assigned,  as security,  to
                           Lessor for Lessee's obligations under the Lease,
                           pursuant to an agreement reasonably acceptable to
                           Lessor (the "SUB-LEASE  ASSIGNMENT") (and, if
                           applicable,  Lessor's  interest in such Sub-Lease
                           Assignment  may be  reassigned,  as security, to,
                           Owner and/or the Financing Parties'
                           Representative);

                    (v)    QUIET ENJOYMENT: the Permitted Sub-Lease shall
                           provide that the Permitted Sub-Lessee shall have
                           the right to quiet enjoyment of the Aircraft for
                           so long as no Event of Default has occurred under
                           the Lease; provided, however, that, upon request
                           by a Permitted Sub-Lessee, Lessor shall, and shall
                           cause the Financing Parties Representative (if
                           applicable) to, execute and deliver to the
                           Permitted Sub-Lessee a letter of quiet enjoyment
                           in respect of the Permitted Sub-Lessee's use and
                           possession of the Aircraft for so long as no event
                           of default occurs under the Permitted Sub-Lease,
                           notwithstanding the occurrence of an Event of
                           Default under the Lease, in a form substantially
                           similar to Section 7.1 hereof if Lessor is
                           satisfied in its sole discretion as to (i) the
                           creditworthiness of the Proposed Sub-

                                     -24-

<PAGE>

                           Lessee at the time of such request, (ii) the
                           sufficiency of the rentals and other payment
                           obligations, including indemnities under the
                           Permitted Sub-Lease to discharge in full the Rent and
                           the indemnity obligations of Lessee under the Lease,
                           (iii) the installment frequency of the rent payable
                           under the Permitted Sub-Lease, (iv) the
                           acknowledgment of and agreement by the Permitted Sub
                           Lessee to be bound by the provisions of Section 16
                           hereof, (v) the acknowledgment by each of the
                           Permitted Sub-Lessee and the Lessee that Lessor shall
                           have no greater liability to either Permitted
                           Sub-Lessee or the Lessee in respect of Lessor's
                           obligations under Section 7.1 hereof or under such
                           letter than Lessor would have had under Section 7.1
                           in the absence of the Permitted Sub-Lease, (vi) the
                           form and substance of the Subordination
                           Acknowledgment, and (vii) the terms of the Permitted
                           Sub-Lease in respect of the matters contemplated by
                           this Section 8.4(b);

                    (vi)   OBLIGATIONS OF LESSEE: Lessee shall remain
                           primarily liable under the Lease for the
                           performance and observance of all its obligations
                           to the same extent as if no Permitted Sub-Lease
                           had been entered into. To the extent that the
                           Permitted Sub-Lessee properly performs an
                           obligation under the Permitted Sub-Lease, Lessor
                           agrees that such performance shall also be
                           regarded as discharging (to such extent) Lessee's
                           corresponding obligation;

                    (vii)  INSURANCES: all insurance requirements herein
                           shall be complied with either by Lessee or by the
                           Permitted Sub-Lessee as if references in the
                           insurance provisions of the Lease to "Lessee" were
                           references to "the Permitted Sub Lessee", and
                           Lessee shall provide or cause the Permitted
                           Sub-Lessee to provide the insurance certificate
                           and brokers' letter of undertaking referred to in
                           Section 9.3(c)(ii) at least five (5) Business Days
                           prior to the commencement of the Permitted
                           Sub-Lease;

                    (viii) REGISTRATION: there shall be no change in the
                           registration of the Aircraft from its State of
                           Registry;

                    (ix)   REPOSSESSION OR POLITICAL RISK INSURANCE: if
                           reasonably required by Lessor or if required of
                           Lessor by Owner or the Financing Parties'
                           Representative, repossession or political risk
                           insurance, as the case may be, shall be obtained
                           by Lessor at Lessee's cost, provided that
                           repossession or political risk insurance , as the
                           case may be, will not be required if the Permitted
                           Sub-Lessee meets the requirements of Sections
                           8.7(iv) and (v). If repossession or political risk
                           insurance is required, the Permitted Sub-Lease
                           must provide that, if any such repossession or
                           political risk, as the case may be, insurance
                           cannot be obtained or renewed, a termination event
                           will occur upon notice by Lessor to Lessee or the

                                     -25-

<PAGE>

                           Permitted Sub-Lessee of an inability to procure
                           repossession or political risk, as the case may be,
                           insurance;

                    (x)    LEGAL OPINIONS: as a condition precedent to the
                           effectiveness of the Permitted Sub-Lease, Lessee
                           shall provide to Lessor the following legal
                           opinions (at Lessee's or Permitted Sub-Lessee's
                           expense) addressed to Lessor, Owner and the
                           Financing Parties' Representative from counsel
                           reasonably acceptable to Lessor;

                           (aa)      a legal opinion in relation to the
                                     Permitted Sub-Lease in form and substance
                                     reasonably satisfactory to, and containing
                                     such other matters set out in Schedule 8
                                     requested by, Lessor and confirming further
                                     that each of the Subordination
                                     Acknowledgement, the Permitted Sub-Lease
                                     and the Sub-Lease Assignment is valid,
                                     binding and (except as limited by any
                                     equitable principles and applicable
                                     bankruptcy, insolvency, reorganization,
                                     moratorium or similar laws affecting
                                     creditors' or lessors' rights generally)
                                     enforceable against Permitted Sub-Lessee
                                     and, in the case of the Sub-Lease
                                     Assignment, properly perfected as against
                                     Lessee;

                            (bb)     if the Habitual Base is not in the United
                                     States, one or more legal opinions in form
                                     and from counsel reasonably acceptable to
                                     Lessor to the effect, inter alia, that
                                     Lessor's, Owner's and Financing Parties'
                                     Representative's interests in the Aircraft
                                     will be recognized under the laws of such
                                     country or countries (it being expressly
                                     understood that there shall be no
                                     requirement that any single legal point or
                                     issue be covered in opinions from more than
                                     one counsel except to the extent, if any,
                                     that the laws of more than one
                                     jurisdiction may be at issue); and

                            (cc)     such opinions as may be required under
                                     the Financing Documents.

                            Final forms of the foregoing opinion or opinions (x)
                            shall be forwarded promptly to Lessor at least five
                            Business Days prior to the effective date of the
                            Permitted Sub-Lease, and (y) may, if different
                            opinions are required hereunder, be made by a single
                            counsel qualified to render opinions in each such
                            country;

                    (xi)   FILINGS: Lessee shall co-operate with Lessor (at
                           no cost to Lessor) in connection with the
                           execution and filing of any documents reasonably
                           required by Lessor to be executed and filed from
                           time to time with any registry or authority in the
                           Habitual Base, the State of Registration and State
                           of Incorporation (of each of Lessee and the
                           Permitted Sub-Lessee) in order to protect the
                           interests of Lessor, Owner and Financing Parties'
                           Representative in and to the Aircraft, the Lease or

                                     -26-

<PAGE>

                           the Permitted Sub-Lease and/or to ensure the
                           validity, enforcement or priority thereof;

                   (xii)    EXPENSES: Lessee will pay to Lessor on demand all
                            reasonable out of pocket expenses (including legal,
                            survey and other costs) and Taxes payable or
                            incurred by Lessor, Owner or Financing Parties'
                            Representative in connection with the review and
                            approval of the documentation required pursuant to
                            this Section or otherwise incurred in connection
                            with any requested sub-lease or the sub-leasing of
                            the Aircraft thereunder, and will pay any Sublease
                            Fee specified in the Aircraft Lease Agreement for
                            such Aircraft;

                    (xiii)  PERMITTED SUB-LEASE: Promptly after its execution,
                            Lessee shall provide Lessor with a copy of the
                            signed Permitted Sub-Lease;

                    (xiv)   ACKNOWLEDGEMENT BY GUARANTOR: If a Guarantee is
                            required under the Aircraft Lease Agreement, Lessee
                            shall provide to Lessor at least five Business Days
                            prior to the effective date of the Permitted
                            Sub-Lease an acknowledgement by Guarantor of the
                            Permitted Sub-Lease and confirmation that the
                            Guarantee will remain in full force and effect
                            during the term of such Permitted Sub-Lease;

                   (xv)     FINANCING RESTRICTIONS AND REQUIREMENTS: If Lessee
                            requests Lessor's consent to a sub-lease, it will
                            not be unreasonable for Lessor to decline its
                            consent to such sub-lease, if such sub-lease would
                            result in a breach by Lessor of the restrictions
                            contained in or give rise to any liability or
                            adversely affect Lessor's rights or obligations or
                            otherwise result in a detriment under any of the
                            Financing Documents; and

                   (xvi)    MAINTENANCE PROGRAM: Lessee shall, or shall cause
                            the Permitted Sub-Lessee to, provide Lessor with
                            such information as Lessor may reasonably request
                            with respect to the Maintenance Program of the
                            Permitted Sub-Lessee, and Lessor shall be
                            reasonably satisfied with the Maintenance Program
                            of the Permitted SubLessee.

          (c)     Notwithstanding Section 8.4 (a), Lessee shall be permitted
                  to wet lease the Aircraft provided such wet lease
                  constitutes an arrangement whereby Lessee agrees to furnish
                  the Aircraft to a third party pursuant to which the
                  Aircraft (i) shall be operated solely by regular employees
                  of Lessee possessing all current certificates and licenses
                  that are required by applicable Regulations, including by
                  the State of Registry, and shall remain in the operational
                  control and possession of Lessee, (ii) shall be subject to
                  insurance coverage as provided for in the Lease, (iii)
                  shall be used and operated in accordance with the Lease and
                  shall be maintained or caused to be maintained by Lessee in
                  accordance

                                     -27-

<PAGE>

                  with Lessee's Maintenance Program and Lessee's normal
                  maintenance practices, (iv) shall not be subject to any
                  change in its State of Registry, and (v) shall not be
                  operated out of a Habitual Base located outside the United
                  States; and provided always that, such arrangement is
                  expressly subordinated to the Lease and the rights of Lessor
                  and Owner thereunder and to the Aircraft, and Lessee provides
                  Lessor with all opinions, certificates and other documents
                  requested by Lessor which are required to be provided, and
                  takes all other action requested by Lessor which is required
                  of Lessee or Lessor under any Financing Document in
                  connection with such a wet lease.

  8.5     Inspection

          (a)     Lessee will permit Lessor's, Owner's and the Financing
                  Parties' Representative representatives to inspect the
                  Aircraft at any time. Unless a Default has occurred and is
                  continuing, any such Person will give Lessee reasonable
                  notice of inspection and will ensure that it does not
                  result in a disruption to the scheduled operation or
                  maintenance of the Aircraft. Lessee shall comply with the
                  reasonable requests of Lessor's, Owner's and the
                  Financing Parties' Representative representatives during
                  the course of an inspection, including any request to
                  travel on the flight deck of the Aircraft as an observer,
                  subject, to any applicable Regulations and insurance
                  requirements.

          (b)     The cost of conducting an inspection shall be borne by
                  Lessor, Owner or the Financing Parties, as the case may be,
                  unless, as a result of that inspection, Lessee is found to
                  be 'in material default of its obligations under the Lease
                  in which case the cost shall be borne by Lessee.

          (c)     No liability or obligation will be incurred by Lessor,
                  Owner, Financing Parties' Representative or the Financing
                  Parties, as the case may be, by reason of non-exercise by
                  any of them of the inspection rights referred to in this
                  Section.

  8.6     Ownership; Property Interests; Related Matters

          (a)     Lessee will:

                  (i)      fix and maintain Nameplates containing the
                           Nameplate Inscription in a prominent position in
                           the cockpit or cabin of the Aircraft and on each
                           Engine;

                  (ii)     in any circumstance where such interests are
                           relevant, take all reasonable steps to make sure
                           that all relevant Persons know about the interests
                           of Owner, Lessor and Financing Parties
                           Representative in the Aircraft; and

                  (iii)    pay all navigation charges, air traffic control
                           charges, landing charges or other amounts of any
                           nature imposed by any Government Entity with respect
                           to

                                     -28-

<PAGE>

                           Lessee, the Aircraft and/or the Lease except to the
                           extent that, in the reasonable opinion of Lessor,
                           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
                           Owner.

          (b)     Lessee will not:

                  (i)      represent that it is the owner of the Aircraft or
                           that it has an economic interest (equivalent to
                           ownership) in the Aircraft for Tax treatment or
                           other purposes;

                   (ii)    take any action or fail to take any action, other
                           than action required under the Lease (including
                           under Section 7.1) to be taken by Lessor,
                           Affiliates of Lessor, Owner or a Financing Party,
                           if such action or omission could result in a
                           forfeiture or seizure of the Aircraft or otherwise
                           similarly put Owner's and/or Lessor's and/or
                           Financing Parties' Representative's rights or
                           interests at risk;

                   (iii)   represent to others that Owner, Lessor or Financing
                           Parties' Representative is associated with or
                           responsible for the business activities and/or
                           flight operations of Lessee;

                   (iv)    allow the Aircraft or Owner's, Lessor's or
                           Financing Parties' Representative's interest in it
                           or the Lease to become or remain subject to any
                           Security Interest (other than a Permitted Lien); or

                   (v)     allow the name of any Person to be placed on the
                           Aircraft or any Engine as a designation that could
                           reasonably be interpreted as a claim of ownership
                           or, as a Security Interest; provided, that Lessee
                           may place thereon, or allow a Permitted Sub-Lessee
                           to place thereon, its customary livery, insignia
                           and colors.

  8.7  General

                   Lessee will:

                   (i)     maintain its business as a commercial scheduled
                           airline, will preserve its corporate existence
                           (other than as permitted in Section 8.7 (vii)
                           below) and will maintain all rights, privileges,
                           licenses and franchises material thereto or
                           material to performing its obligations under the
                           Lease;

                   (ii)    not operate, maintain, insure or deal with, or
                           keep records with respect to, the Aircraft in a
                           manner which discriminates against the Aircraft
                           adversely insofar as

                                     -29-

<PAGE>

                           Lessor's, Owner's or Financing Parties' interests are
                           concerned, when compared with the manner in which
                           Lessee operates, maintains, insures or deals with, or
                           keep records with respect to, similar aircraft,
                           engines or parts in Lessee's fleet; provided,
                           however, in the event that Lessee determines that any
                           particular expenditure or modification may not be
                           prudent during the last nine months prior to the
                           Scheduled Expiry Date, then Lessor and Lessee shall
                           discuss the issue and negotiate in good faith to
                           agree on a mutually acceptable solution.

                   (iii)   not change the location of its chief executive office
                           from that described in the heading of the Aircraft
                           Lease Agreement or otherwise be located (as defined
                           in Section 9-103(3)(d) of the UCC) at any place in
                           the United States other than the location described
                           the heading of the Aircraft Lease Agreement, except
                           upon 30 days prior written notice thereof to Lessor;

                   (iv)    remain a Certificated Air Carrier and maintain its
                           status so as to fall within the purview of Section
                           1110 of Title 11 of the U.S.C. or any analogous
                           statute;

                   (v)     remain a "citizen of the United States" as defined
                           in Section 40102(a)(15)(c) of Title 49 of the
                           U.S.C.;

                   (vi)    not liquidate or dissolve; and

                   (vii)   not  consolidate  with or merge  into or with any
                           other  corporation  or other  Person,  and not
                           convey, transfer,  lease or otherwise  dispose of
                           all or substantially all of its property and other
                           assets to, or acquire  all or any  substantial
                           part of the  property  or  other  assets  or
                           capital  stock of (if such acquisition is
                           analogous in either purpose or effect to a
                           consolidation  or merger),  any  corporation or
                           other Person,  unless Lessee provides Lessor with
                           written notice of such  transaction  promptly
                           following Lessee's  execution of a binding
                           agreement or commitment to enter into any such
                           transaction,  which notice shall in any event be
                           provided no later than 30 days prior to the
                           effectiveness  or  consummation  of any such
                           transaction and which notice shall describe such
                           transaction in reasonable  detail and contain or
                           be accompanied by evidence reasonably
                           satisfactory to Lessor demonstrating that such
                           transaction will comply with the following
                           requirements of this Section and unless:

                           (x)      such transaction shall not have any
                                    material adverse effect on the rights of
                                    Lessor, Owner or the Financing Parties'
                                    Representative under or in respect of the
                                    Lease or the Aircraft; and all applicable
                                    requirements of the Financing Documents
                                    shall have been complied with in
                                    connection therewith;

                                     -30-

<PAGE>

                           (y)      the Person formed by or surviving such
                                    consolidation or merger or the Person
                                    which acquires by conveyance, transfer,
                                    lease or other disposition all or
                                    substantially all of such property and
                                    other assets or stock (the "SUCCESSOR
                                    ENTITY"): (A) shall be a corporation
                                    organized and existing under the laws of
                                    the United States or any State thereof or
                                    the District of Columbia; (B) immediately
                                    after giving effect to such transaction,
                                    shall be Lessee or shall have acquired or
                                    succeeded to all or substantially all of
                                    the property and other assets of Lessee
                                    (if such assets are being transferred) as
                                    an entirety, and shall have a tangible
                                    net worth (determined in accordance with
                                    GAAP) of not less than Lessee's tangible
                                    net worth (determined in accordance with
                                    GAAP) immediately prior to such
                                    transaction; (C) shall be a "citizen of
                                    the United States" of America as defined
                                    in Section 40102(a)(15)(c) of Title 49 of
                                    the U.S.C. and a Certificated Air
                                    Carrier; and (D) shall execute and
                                    deliver to Lessor such recordations and
                                    filings with any Governmental Entity and
                                    such other documents as Lessor determines
                                    shall be reasonably necessary or
                                    advisable to evidence, or in connection
                                    with, such consolidation, merger, sale,
                                    lease, transfer or other disposition and
                                    an agreement, in form and substance
                                    reasonably satisfactory to Lessor which
                                    is a legal, valid, binding and
                                    enforceable assumption by such Successor
                                    Entity of the due and punctual
                                    performance and observance of each
                                    covenant and condition of the Lease and
                                    the other related documents to which
                                    Lessee is a party, and an officer's
                                    certificate to such effect and to the
                                    effect that the other requirements of
                                    this Section have been satisfied, and a
                                    legal opinion from counsel to such effect
                                    and otherwise in such form and substance
                                    reasonably satisfactory to Lessor; and

                           (z)      no Default shall have occurred and be
                                    continuing or shall occur as a result
                                    thereof.

 8.8     Records

         Lessee will keep all Aircraft Documents and Records:

         (a)      in English;

         (b)      according to good United States airline practice; and

         (c)      so they meet the requirements of applicable Regulations
                  (including FAR 91.417) and Lessee's Maintenance Program.

                                     -31-

<PAGE>

  8.9      Protection

           Lessee will:

           (a)    take all actions requested by Lessor that are within
                  Lessee's control to keep the Aircraft registered with the
                  Air Authority in the name of Owner and, if applicable,
                  subject to the first-priority Security Interest in favor of
                  Financing Parties' Representative; and

           (b)    make any and all filings required to be made with the Air
                  Authority registry that are within its control and take all
                  other actions within its control that are necessary or
                  advisable to reflect on the Air Authority registry any
                  change in the ownership of the Aircraft, or in the
                  interests of Lessor, Owner or the Financing Parties'
                  Representative in the Lease or the Aircraft, any
                  modification to the Aircraft (such as the permanent
                  replacement of any Engine or Part in accordance with the
                  Lease) or as a result of any change in applicable
                  Regulation. Lessor will bear any costs incurred as a
                  consequence of a transfer by Lessor, Owner or the Financing
                  Parties' Representative of the interests of Lessor, Owner
                  or the Financing Parties' Representative in the Lease or
                  the Aircraft or a change in the identity of Lessor, Owner
                  or the Financing Parties' Representative (in each case,
                  unrelated to the replacement of any Engine or Part or a
                  Default), and Lessee will bear any other costs incurred in
                  complying with this Section, including in connection with
                  the replacement of any Engine or Part.

  8.10    Maintenance and Repair

          Lessee will maintain, overhaul and repair the Aircraft (or arrange for
          the Aircraft to be maintained, overhauled and repaired, through the
          Maintenance Performer), so that:

           (a)    the Aircraft is kept in as good operating condition and
                  repair as the condition of the Aircraft as at Delivery and
                  after giving effect to any post-Delivery modifications,
                  repairs or maintenance paid for or otherwise provided by or
                  on behalf of Lessor, except for ordinary wear and tear;

           (b)    the Lessee has a current certificate of airworthiness
                  (issued by the Air Authority in the appropriate public
                  transport category) for the Aircraft;

          (c)     the Aircraft complies with (i) all applicable Regulations
                  including the standard stipulated by FAR Part 121 Subpart L
                  and any other rules and regulations of the FAA and, subject
                  to the provisions of ss.8.10(d), in at least the same
                  manner and with at least the same care, including record
                  keeping, 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 and continue operating the Aircraft
                  in its fleet after

                                     -32-

<PAGE>

                  the Expiry Date, including all maintenance to the Airframe,
                  any Engine or any Part required to maintain all warranties,
                  performance guaranties or service life policies that are
                  assigned by Lessor to Lessee n full force and effect; and
                  (ii) the requirements of all Airworthiness Directives and
                  all service bulletins designated by the State of Design or
                  State of Registry as "mandatory," and to be carried out
                  before the Return Occasion or the Scheduled Expiry Date,
                  whichever is later, or within a period of 180 days after
                  the Return Occasion or the Scheduled Expiry Date, whichever
                  is later; and

          (d)     all maintenance is carried out according to Lessee's
                  Maintenance Program in at least the same manner and with at
                  least the same care, including maintenance scheduling,
                  modification status and technical condition, as is the case
                  with respect to similar aircraft owned or otherwise
                  operated by Lessee; provided, however, in the event that
                  Lessee determines that any particular expenditure or
                  modification may not be prudent during the last nine months
                  prior to the Scheduled Expiry Date, then Lessor and Lessee
                  shall discuss the issue and negotiate in good faith to
                  agree on a mutually acceptable solution.

  8.11    Removal of Engines and Parts

          (a)     GENERAL: Lessee must replace, within one hundred and five
                  (105) days thereof any Engine that has suffered an Engine
                  Event of Loss in accordance with Section 8.11(b), and any
                  Part which is permanently removed from the Aircraft must be
                  replaced in accordance with Section 8.11(b). Any Part which
                  otherwise is lost, stolen, destroyed, seized, obsolete,
                  confiscated, damaged beyond repair or permanently rendered
                  unfit for any reason, must be replaced in accordance with
                  Section 8.11(b). Any Engine or Part may be installed on
                  another aircraft Lessee owns or leases in accordance with
                  Section 8.11(c). Lessee may temporarily install an. engine
                  or part in accordance with Section 8.11(d). Lessee shall
                  obtain from any Person to whom possession of an Engine is
                  given (other than (i) any Maintenance Performer to whom an
                  Engine is delivered for maintenance, repair or overhaul,
                  (ii) the Engine Manufacturer, or (iii) any other Person to
                  whom an Engine is given solely for purpose of transporting
                  the Engine), and from the lessor of any airframe on which
                  an Engine is installed and from any holder of a Security
                  Interest in any airframe on which an Engine is installed,
                  an agreement in writing (which agreement, in the case of a
                  lease or Security Interest, may be contained in the
                  applicable lease or Security Interest agreement covering
                  such airframe) that such Person will not acquire or claim
                  any rights, title or interest in such Engine as a result of
                  such Engine being installed on such other airframe at any
                  time while such Engine is subject to the Lease. In the
                  event Lessee shall have received from a lessor of or
                  secured party holding a Security Interest in any airframe
                  leased to Lessee or owned by Lessee a written agreement
                  pursuant to the foregoing sentence and the lease or
                  Security Interest covering such airframe also covers an
                  engine or engines owned by the lessor under such lease or
                  subject to such Security

                                     -33-

<PAGE>

                  Interest in favor of the secured party under such Security
                  Interest, Lessor hereby agrees for the benefit of such lessor
                  or secured party that Lessor will not acquire or claim as
                  against such lessor or secured party, any rights, title or
                  interest in any such engine as a result of such engine being
                  installed on the Airframe at any time while such engine is
                  owned by such lessor and subject to such lease or such
                  Security Interest in favor of such secured party.

          (b)     PERMANENT REPLACEMENT: If Lessee permanently replaces an
                  Engine or Part:

                  (i)      in the case of an Engine, the replacement engine must
                           be of the same manufacturer and model, or at Lessee's
                           option an engine of an improved model, and have
                           equivalent or better remaining useful life and
                           modification status as the Engine it replaces, and is
                           otherwise of an equivalent or better value and
                           utility and suitable for installation and use on the
                           Airframe without impairing the value or utility of
                           the Airframe and compatible with the remaining
                           installed Engine(s);

                  (ii)     in the case of a Part, the replacement part must
                           be in good operating condition, have a value and
                           utility the same or better than the Part it is
                           replacing, be of the same or a more advanced make
                           and model and be of the same interchangeable
                           modification status as the Part it is replacing;

                   (iii)   the replacement engine or part must have become
                           and remain, until replaced in accordance with this
                           Section, the property of Owner free from Security
                           Interests (other than Permitted Liens), and
                           subject to the applicable Financing Documents;

                  (iv)     Lessee must have full details of the source and
                           maintenance records of the replacement engine or
                           part and in the case of serialized rotable parts,
                           also have a complete service history; and

                  (v)      Lessee must comply with the requirements of the
                           Financing Documents in connection with any such
                           replacement including to provide such legal
                           opinions and other documents as may be required
                           under the Financing Documents.

          (c)     OTHER AIRCRAFT: An Engine or Part may be installed on an
                  aircraft which Lessee owns or leases if:

                  (i)     no Event of Default has occurred and is continuing;

                  (ii)    Lessee or a Permitted Sub-Lessee has operational
                          control over the aircraft;

                  (iii)    Owner keeps the ownership of the Engine or Part
                           concerned until replaced in accordance with Section
                           8.11(b);

                                     -34-

<PAGE>

                  (iv)     the Engine or Part does not become subject to a
                           Security Interest and the applicable airframe is
                           not subject to any Security Interest except a
                           Permitted Lien or a lease or Security Interest
                           described in Section 8.11(a) above; and

                  (y)      the Engine or Part is replaced in accordance with
                           Section 8.11(b) or is removed from the aircraft
                           as soon as practicable under Lessee's engine
                           rotation program but not later than the Expiry
                           Date.

            (d)   TEMPORARY REPLACEMENT: Lessee may install any engine or part
                  on the Aircraft as a temporary replacement if:

                     (i)     no Event of Default has occurred and is continuing;

                     (ii)    there is not available an engine or part complying
                             with the requirements of the Lease for a
                             replacement Engine or Part;

                     (iii)   it would result in an unreasonable disruption of
                             the operation of the Aircraft or the business of
                             Lessee to have the Aircraft grounded until such
                             time as an engine or part complying with the
                             requirements of the Lease for a replacement Engine
                             or Part becomes available for installation;

                     (iv)    as soon as practicable (under Lessee's engine
                             rotation program in the case of an engine) after
                             an engine or part is installed on the Aircraft,
                             but before the earlier of sixty (60) days after
                             such temporary replacement or the Expiry Date,
                             Lessee removes that engine or part and replaces
                             it with the original Engine or Part (or by an
                             engine or part which is allowed by Section
                             8.11(b)); and

                     (v)     the Insurances for the Aircraft are not adversely
                             affected.

           (e)       POOLING/INTERCHANGE: Lessee shall not subject any Engine
                     or Part to any pooling, interchange, lease or similar
                     arrangement unless Lessee obtains Lessor's prior written
                     consent thereto, which consent shall not be unreasonably
                     withheld.

           (f)       ENGINES: Notwithstanding anything to the contrary set
                     forth in Sections 8.11(c) and (d) above, so long as no
                     Default shall have occurred and be continuing, any
                     Engine may remain installed on an aircraft other than
                     the Aircraft, and any auxiliary power unit may remain
                     installed on the Aircraft indefinitely during the Term;
                     provided, however, (i) upon the occurrence of any
                     Default, Lessee shall promptly, and in any case within
                     sixty (60) days following the occurrence of such
                     Default, cause each Engine to be re-installed on the
                     Aircraft, or, at Lessee's election, cause any of the
                     Engines to be replaced by a replacement Engine meeting
                     the requirements of, and in accordance with, Section
                     8.11(b), and (ii) in any event Lessee shall cause such
                     Engine to be either re-installed on the Aircraft or

                                     -35-

<PAGE>

                 replaced by a replacement Engine meeting the requirements of,
                 and in accordance with, Section 8.11(b) on or before the
                 Expiry Date.

         (g)     APU: Notwithstanding anything to the contrary set forth in
                 Sections 8.11(c) and (d) above, so long as no Default shall
                 have occurred and be continuing, the APU may remain
                 installed on an aircraft other than the Aircraft, and any
                 auxiliary power unit may remain installed on the Aircraft
                 indefinitely during the Term; provided, however, (i) upon
                 the occurrence of any Default, Lessee shall promptly, and in
                 any case within sixty (60) days following the occurrence of
                 such Default, cause the APU to be re-installed on the
                 Aircraft, or, at Lessee's election, cause the APU to be
                 replaced by a replacement auxiliary power unit meeting the
                 requirements of, and in accordance with, Section 8.11(b),
                 and (ii) in any event Lessee shall cause the APU to be
                 either re-installed on the Aircraft or replaced by a
                 Replacement APU meeting the requirements of, and in
                 accordance with, Section 8.11(b) on or before the Expiry
                 Date.

 8.12            Equipment Changes

                 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 or required by the Lease; or

                 (ii)    has (x) a cost (including labor) of less than the
                         Modification Approval Amount or (y) the prior
                         written approval of Lessor, and (z) in either case,
                         does not' diminish the condition, utility,
                         airworthiness or value of the Aircraft.

                 So long as no Default has occurred and is continuing, Lessee
                 may remove or reverse any Equipment Change provided that the
                 Equipment Change is not required pursuant to the terms of
                 the Lease or to maintain the Insurances and removal or
                 reversal does not diminish the value, utility, airworthiness
                 or condition of the Aircraft assuming that such Equipment
                 Change was not made and that Aircraft is maintained in
                 accordance with the Lease. Furthermore, Lessor may require
                 Lessee to remove or reverse any Equipment Change on the
                 Expiry Date and to restore the Aircraft to its condition
                 prior to that Equipment Change. Any Equipment Change not so
                 removed or reversed becomes the property of Lessor or Owner,
                 as the case may be, at the Expiry Date.

 8.13            Tide on an Equipment Change

                 Title to any equipment that is installed on the Airframe
                 shall, except in the case of an engine or an auxiliary power
                 unit or a temporary replacement of a Part or any In-Flight
                 Equipment, vest in Owner solely by virtue of its attachment
                 to the Airframe or an Engine and it shall then be subject

                                     -36-

<PAGE>

          to the Lease and, if applicable, the Financing Documents, as if it
          were attached to the Aircraft at Delivery. In the case of any
          replacement of an Engine or the APU pursuant to Section 8.11(b), and
          otherwise if so requested by Lessor, Lessee will provide a properly
          executed bill of sale or similar instrument to evidence the vesting of
          good and marketable title, free and clear of Security Interest (except
          Lessor Liens), to any such Replacement Engine, Replacement APU or
          other equipment in Owner and all documents required under the
          Financing Documents. After Lessor has determined that Lessee has
          permanently replaced an Engine or the APU in accordance with Section
          8.11(b) and this Section 8.13, Lessor will, or will procure that
          Owner will, without recourse or warranty (except as to the absence of
          Lessor's Liens), transfer to Lessee or will procure that Owner will
          transfer to Lessee all of Lessor's or Owner's, as the case may be,
          rights to the engine or the auxiliary power unit that has been
          replaced, on an AS IS, WHERE IS basis, and will at Lessee's expense
          provide or will procure that Owner provides a bill of sale or similar
          instrument as Lessee may reasonably request to evidence such transfer.
          Lessee shall indemnify, on an After-Tax Basis, Lessor, Owner and each
          other Tax Indemnitee for all fees, expenses and Taxes incurred by
          Lessor, Owner or any other Tax Indemnitee in connection with any such
          transfer.

  8.14    Inflight Equipment

          (a)    Notwithstanding any other provision of this Agreement,
                 Lessor acknowledges that Lessee may at any time during the
                 Term install a telephone system and/or an inflight
                 entertainment system for passenger use (collectively, the
                 Inflight Equipment) on the Aircraft notwithstanding that the
                 Inflight Equipment may not be owned by Lessee provided that:

                 (i)      Lessee shall give Lessor notice of the installation
                          of any Might Equipment on the Aircraft and the name
                          and address of the owner of such Inflight Equipment;

                 (ii)     the documents pursuant to which the owner of the
                          Might Equipment installs same on the Aircraft shall
                          provide that such owner shall not have any lien,
                          security interest, claim or other encumbrance on or
                          against the Aircraft, and such owner's only right
                          with respect to the Aircraft shall be to remove the
                          Inflight Equipment from the Aircraft and, such
                          documents shall also provide that such owner shall
                          remove the Inflight Equipment from the Aircraft not
                          later than the earlier of (A) thirty (30) days
                          after notice from Lessor of the occurrence of an
                          Event of Default, and (B) the Expiry Date;

                 (iii)    such right of removal is subject to and conditioned
                          upon such owner restoring, or causing Lessee to
                          restore, all alterations made to the Aircraft in
                          connection with the installation of the Inflight
                          Equipment to the condition prior to the
                          installation thereof (ordinary wear and tear
                          excepted).

            (b)  Lessor acknowledges that at all times:

                 (i)      the owner of the Inflight Equipment has and will
                          retain sole and exclusive right and title to and in
                          the Inflight Equipment;

                 (ii)     the Inflight Equipment shall not constitute a Part
                          or a part of the Aircraft;

                                     -37-

<PAGE>

                 (iii)    title to the Inflight Equipment shall not transfer to
                          or from Lessor pursuant to Clauses 8.12 and 8.13; and

                 (iv)     the Inflight Equipment shall not become subject to
                          the Security Interest of any Person to whom Lessor
                          grants a Security Interest in the Aircraft pursuant
                          to Clause 14.1.

  9.      INSURANCE

 9.1      Insurance

          Lessee will maintain the Insurance in full force during the Term, and
          thereafter as expressly required in the Lease, which Insurance shall
          be of the type usual and customary in the industry for comparable
          operators operating similar equipment in similar circumstances, and
          shall be through reputable brokers and insurers of recognized standing
          in the commercial aviation insurance industry. The Insurance shall in
          any event meet the requirements set forth in Schedule 7.

 9.2      [NOT APPLICABLE]

 9.3      Insurance Undertakings and Information: Lessee will:

          (a)     comply with the terms and conditions of each policy of any
                  Insurance and not do, consent or agree to any act or
                  omission which:

                  (i)      invalidates or may invalidate any Insurance; or

                  (ii)     renders or may render void or voidable the whole or
                           any part of any Insurance; or

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

          (b)     not take out any insurance or reinsurance in respect of the
                  Aircraft other than that which is required under the Lease
                  which adversely affects the Insurance required to be
                  maintained hereunder; provided, however, Lessee may
                  purchase a separate "hull total loss" policy with respect
                  to the Aircraft in such amount as Lessee may desire;

          (c)     commence renewal procedures at least 30 days prior to expiry
                  of any of the Insurance and provide to Lessor:

                  (i)      if requested by Lessor in writing, a written status
                           report of renewal negotiation as of the time of the
                           request;

                  (ii)     [NOT APPLICABLE];

                                     -38-

<PAGE>

                  (iii)   receipt of certificates of insurance (and where
                          appropriate certificates of reinsurance), and broker's
                          (and any reinsurance broker's) letter of undertaking
                          in a form acceptable to Lessor, detailing the coverage
                          and confirming compliance with the specified insurance
                          requirements of the Lease and, in the case of the
                          broker's letter of undertaking, opining that the
                          Insurance complies with the requirements of the Lease
                          on or before each renewal date;

         (d)      on reasonable request, provide to Lessor copies of documents
                  or other information evidencing the Insurances; and

         (e)      provide any other insurance and reinsurance related
                  information, or assistance, in respect of the Insurance as
                  Lessor may reasonably require.

 9.4     Failure to Insure

         If Lessee fails to maintain any of the Insurance in compliance with the
         Lease:

         (a)     each of the Indemnitees will be entitled but not bound (without
                 prejudice to any other rights of Lessor under the Lease) to pay
                 the premiums due or to effect and maintain insurance
                 satisfactory to such Indemnitee or otherwise remedy Lessee's
                 failure in such manner (including, without limitation to effect
                 and maintain an "owner's interest" policy) as such Indemnitee
                 considers appropriate. Any sums so expended by any such
                 Indemnitee will become immediately due and payable by Lessee
                 on demand by Lessor together with interest thereon at the
                 Interest Rate, from the date of expenditure by such Indemnitee
                 up to the date of reimbursement by Lessee; and

         (b)     Lessor at any time while such failure is continuing may requite
                 the Aircraft to remain at any airport or to proceed to and
                 remain at any airport designated by Lessor until the failure is
                 remedied to Lessor's reasonable satisfaction.

 9.5    Continuing Indemnity

        Lessee shall effect and maintain product legal liability insurance after
        the Expiry Date with respect to its liability under Section 10
        (INDEMNITY) for two years, and such insurance shall name each Indemnitee
        as an additional insured.

 10.     INDEMNITY

         (a)     Except as provided in Section 10(b) below, Lessee agrees to
                 assume liability for and to indemnify each of the Indemnitees
                 against and agrees to pay on demand any and all Losses which an
                 Indemnitee may at any time suffer or incur at any time, whether
                 directly or indirectly, arising out of, related to or in any
                 way connected with:

                                             -39-

<PAGE>

                  (i)      the ownership, maintenance, overhaul, service,
                           repair, delivery, possession, transfer of ownership
                           or possession, import, export, registration, control,
                           storage, modification, leasing, insurance,
                           inspection, testing, design, date processing, sub
                           leasing, use, condition, redelivery or other matters
                           relating to the Aircraft, any Engine or any Part
                           (regardless of whether in the air or on the ground,
                           and regardless of whether such Losses are based on
                           strict liability in tort, any act or omission,
                           including the negligence, of any Indemnitee, or
                           otherwise); or

                  (ii)     any breach by the Lessee of any of its obligations
                           under the Lease; or

                  (iii)    the design, testing or use of or any article or
                           material in, the Aircraft, any Engine or any Part or
                           its use or operation, including any defect in design
                           and regardless of whether it is discoverable, and any
                           infringement of patent, copyright, trademark, design
                           or other proprietary right claimed by any Person or a
                           breach of any obligation of confidentiality claimed
                           to be owed to any Person.

                           For the avoidance of doubt, the reference to
                           "ownership" in clause (i) shall not require Lessee to
                           indemnify Lessor in respect of (y) any defect in
                           Lessor's or Owner's title to the Aircraft or (z) any
                           decline in residual value of the Aircraft if Lessee
                           shall have fully complied with its obligations under
                           the Lease.

         (b)      Lessee is not required to indemnify any particular Indemnitee
                  (provided that (i) Lessor and its Subsidiaries and Affiliates
                  and its and their officers, directors, representatives,
                  agents, partners, contractors and employees shall be treated
                  as a single Indemnitee, and (ii) each Financing Party and its
                  shareholders, subsidiaries, affiliates, partners, contractors,
                  directors, officers, representatives, agents and employees
                  shall be treated as a single Indemnitee) under this Section,
                  to the extent a particular Loss is:

                  (i)     caused solely by the willful misconduct of that
                          Indemnitee or gross negligence of that Indemnitee,
                          other than gross negligence imputed to that Indemnitee
                          by reason of its interest in the Aircraft or the
                          Lease;

                  (ii)    caused solely by Lessor's breach of the Lease which
                          does not result from a Default;

                  (iii)   related to any Taxes (but without prejudice to any
                          Indemnitee's rights under any other provision of this
                          Lease relating to Taxes);

                  (iv)    caused solely by an event which occurs before the
                          commencement of the Term (except where the Loss is
                          suffered during the Term as a result of a pre-Delivery
                          defect in or such Loss otherwise arises out of or
                          relates to or is any way

                                            -40-

<PAGE>

                          connected with the manufacture, design, maintenance,
                          repair, rebuilding, overhaul or modification of the
                          Aircraft);

                  (v)     caused solely by an event which occurs after the
                          redelivery of the Aircraft to Lessor in compliance
                          with the Lease and is not attributable to any act,
                          omission, event or circumstance occurring prior to
                          such redelivery;

                  (vi)    caused solely as a result of any sale, assignment,
                          transfer or other disposition (whether voluntary or
                          involuntary) by such Indemnitee of the Aircraft or
                          Engine or any interest therein that is not a
                          replacement' thereof under the Lease or is otherwise
                          not contemplated under the Lease, and unless such
                          sale, transfer or other disposition has resulted from
                          or occurred following a Default; or

                 (vii)    consists of normal administrative costs and expenses
                          of such Indemnitee (but excluding any such costs or
                          expenses resulting from the occurrence of any
                          Default); or

                (viii)    consists of costs or expenses for which Lessor has
                          expressly agreed to be responsible under any other
                          provision of the Lease.

  11.             EVENTS OF LOSS

  11.1            Events of Loss

                  (a)     If an Event of Loss occurs prior to Delivery of the
                          Aircraft, the Lease will immediately terminate and
                          except as expressly stated in the Lease neither party
                          will have any further obligation other than pursuant
                          to Section 5.21 and Section 3 of Schedule 4, except
                          that Lessor will return the Deposit (if any) to Lessee
                          and return to Lessee or Cancel any Letter of Credit.

                  (b)     If an Event of Loss occurs after Delivery, Lessee will
                          pay the Agreed Value to Lessor on or prior to the
                          earlier of (i) sixty (60) days after the Event of Loss
                          and (ii) the date of receipt of insurance proceeds in
                          respect of that Event of Loss.

                  (c)     Subject to the rights of any insurers and reinsurers
                          or other third party, upon irrevocable payment in full
                          to Lessor of the Agreed Value and all other amounts
                          which may be or become payable to Lessor under the
                          Lease, and if Lessee requests such transfer, Lessor
                          will, or will procure that Owner will, without
                          recourse or warranty (except as to the absence of
                          Lessor's Liens) transfer to Lessee or will procure
                          that Owner transfers to Lessee or to Lessee's designee
                          legal and beneficial title, subject to no Lessor's
                          Liens (but otherwise without warranty), to the
                          Aircraft, on an AS IS, WHERE IS basis, and will at
                          Lessee's expense, execute and deliver or will procure
                          that Owner executes and delivers

                                               -41-

<PAGE>

                          such bills of sale and other documents and instruments
                          as Lessee may reasonably request to evidence (on the
                          public record or otherwise) such transfer, free and
                          clear of all rights of Lessor and Owner and Lessor
                          Liens. Lessee shall indemnify, on an After-Tax Basis,
                          Lessor, Owner and each other Tax Indemnitee for all
                          fees, expenses and Taxes incurred A by Lessor, Owner
                          or any other Tax Indemnitee in connection with any
                          such transfer.

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

         (b)      so long as no Default has occurred and is continuing, Lessee
                  will be entitled to any compensation paid by the
                  requisitioning authority in respect of such authority's use of
                  the Aircraft, such Engine or such Part during 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 the Lease. 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 the Lease in
                  respect of any such change, but, if any Default has occurred
                  and is continuing, Lessor may apply the compensation in or
                  towards settlement of any amounts owing by Lessee under the
                  Lease and/or under any Other Agreement.

 12.     RETURN OF AIRCRAFT

 12.1    Return

         On the Expiry Date or redelivery of the Aircraft pursuant to Section
         13.2 or termination of the leasing of the Aircraft under the Lease,
         Lessee will, unless an Event of Loss has occurred, redeliver the
         Aircraft and the Aircraft Documents and Records at Lessee's expense to
         Lessor at the Redelivery Location, in accordance with the procedures
         and in compliance. with the conditions set forth in the Aircraft Lease
         Agreement, free and clear of all Security Interests (other than Lessor
         Liens) and in a condition qualifying for and having a valid and fully
         effective certification of airworthiness under FAR Part 121. Lessor
         shall commence the Final Inspection in accordance with the Aircraft
         Lease Agreement promptly upon Lessee making the Aircraft and the
         Aircraft Documents and Records available for the Final Inspection
         provided that Lessee gives

                                           -42-

<PAGE>

          Lessor no less than thirty (30) days prior written notice of the
          availability of the Aircraft and the Aircraft Documents and Records
          for such inspection.

  12.2    Non-Compliance

          If at the time of Final Inspection Lessee has not fully complied with
          any of its obligations under the Lease (including, without limitation,
          Part III of Schedule A to the Aircraft Lease Agreement), or Lessee
          fails to make the Aircraft available to Lessor on a timely basis for
          inspection and redelivery pursuant to Section 12.1 and Part III of
          Schedule A to the Aircraft Lease Agreement (whether such failure is
          due to any act or omission of Lessee or any other circumstance
          whatsoever), the Term shall be extended until the time when the
          Aircraft has been redelivered to Lessor in full compliance with the
          Lease, for the sole purpose of enabling such non-compliance or failure
          to be promptly rectified, and during such extension period:

          (a)     Lessee shall not use the Aircraft in flight operations except
                  those related directly to the redelivery of the Aircraft to
                  Lessor;

          (b)     all Lessee's obligations and covenants under the Lease will
                  remain in full force until Lessee so redelivers the Aircraft;
                  and

          (c)     Lessee shall pay Rent to Lessor at a rate per month equal to
                  the amount of Rent payable in respect of the last scheduled
                  Rental Period plus 50 per cent thereof, calculated on a per
                  diem basis; provided, however, with respect to the portion of
                  such extension, if any, attributable solely to a good faith
                  dispute between Lessor and Lessee as to the meaning of some
                  particular language in the Lease applicable to the return of
                  the Aircraft, whether set forth in Part III of Schedule A to
                  the Aircraft Lease Agreement or elsewhere (but not, for the
                  avoidance of doubt, in respect of any dispute as to the result
                  or outcome of any inspection or check required in connection
                  with the Final Inspection under the Lease), Lessee shall pay
                  to Lessor Rent, calculated on a per them basis, at 50% of the
                  rate otherwise applicable, which rate shall be equal to (i)
                  50% of the rate applicable to the last scheduled Rental
                  Period, without giving effect to the 50% premium required in
                  the introductory clause of this paragraph (c), if as of the
                  Scheduled Expiry Date the Aircraft is in full compliance with
                  the requirements of the Lease for return to Lessor (other than
                  the item in dispute), and (ii) 50% of the rate specified in
                  the introductory clause of this paragraph (c), or 75% of the
                  rate applicable to the last scheduled Rental Period, if the
                  rate specified in the introductory clause of this paragraph
                  (c) becomes applicable as of the Scheduled Expiry Date due to
                  Lessee's failure to comply with its obligations in respect of
                  the Final Inspection in a timely manner or the Aircraft
                  otherwise fails to comply as of the Scheduled Delivery Date
                  with the requirements of the Lease for return to Lessor in any
                  respect other than in reference to the disputed language. For
                  so long as the Aircraft remains non-compliant with any
                  requirements of the Lease other than those that are the

                                           -43-

<PAGE>

                   subject of the disputed language, Lessee shall pay to Lessor
                   Rent in the amount specified in the introductory clause of
                   this paragraph (c), and the Rent rate specified in this
                   clause (ii) shall become applicable, if at all, only from and
                   after such time as the Aircraft is brought into compliance
                   with all requirements of the Lease for return to Lessor
                   (including, but not limited to, Part III of Schedule A to the
                   Aircraft Lease Agreement) other than the with respect to the
                   items that are the subject of the disputed language, such
                   that the disputed language remains as the sole cause in the
                   delay in the return of the Aircraft to Lessor.

          Any such extension shall not prejudice Lessor's right to treat such
          non-compliance or failure as an Event of Default at any time, and to
          enforce such rights and remedies as may be available to Lessor in
          respect thereof under the terms of the Lease or applicable Law.
          Without limiting the generality of the foregoing, Lessee's Rent
          obligation under paragraph (c) above shall be without prejudice to
          Lessor's rights to terminate the letting of the Aircraft and to
          indemnification pursuant to Section 13.3.

          Lessor may elect (either on first tender of the Aircraft by Lessee or
          at any time during the said extension period) to accept redelivery of
          the Aircraft notwithstanding non-compliance with Section 12.1 or Part
          III of Schedule A to the Aircraft lease Agreement, in which case
          Lessee will indemnify Lessor on an After-Tax Basis, and provide cash
          to Lessor (in an amount satisfactory to Lessor) as security for that
          indemnity, in respect of the cost to Lessor of putting the Aircraft
          into the condition required by the Lease.

 12.3     Redelivery

          Upon redelivery Lessee will provide to Lessor, upon Lessor's request,
          all documents necessary to export the Aircraft from the United States
          (including a valid and subsisting export certificate of airworthiness
          for the Aircraft) or required in relation to the deregistration of the
          Aircraft with the Air Authority.

 12.4     Acknowledgement

          Provided Lessee has complied with its obligations under Section 12
          hereof and Part III of Schedule A to the Aircraft Lease 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 the Lease which acknowledgement shall be without
          prejudice to Lessor's accrued and continuing rights under the Lease or
          any Other Agreement.

                                            -44-

<PAGE>

   13.     DEFAULT

   13.1    Events

           The occurrence of any of the Events of Default will constitute a
           repudiation (but not a termination) of the Lease by Lessee (whether
           the occurrence of any such Event of Default is voluntary or
           involuntary or occurs by operation of Law or pursuant to or in
           compliance with any judgement, decree or order of any court or any
           order, rule or regulation of any Government Entity).

   13.2    Rights and Remedies

           If an Event of Default occurs, Lessor may at its option (and without
           prejudice to any of its other rights under the Lease), 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 cancel the leasing of the Aircraft (but
                    without prejudice to the continuing obligations of Lessee
                    under the Lease), whereupon all rights of Lessee under the
                    Lease shall cease; and/or

           (b)      proceed by appropriate court action or actions to enforce
                    performance of the Lease including the payment of all Rent
                    and all other amounts payable to Lessor or any Indemnitee
                    pursuant to the terms of the Lease; and/or

           (c)      proceed by appropriate court action or actions to recover
                    damages for the breach of the Lease which shall include:

                    (i)     all Rent and other amounts which are or become due
                            and payable hereunder prior to the earlier to occur
                            of the date Lessor sells or re-leases the Aircraft
                            or receives payment of the amount calculated
                            pursuant to clause (ii) below;

                   (ii)     an amount equal to the aggregate Rent for the
                            remainder of the Term (determined without reference
                            to any right of Lessor to cancel the leasing of the
                            Aircraft, whether or not such right is exercised),
                            discounted periodically (equal to installment
                            frequency) to present worth at the Discount Rate to
                            the date of payment by Lessee to Lessor, less the
                            applicable amount set forth below:

                            A.   in the event that Lessor has re-let the
                                 Aircraft on terms (other than rental
                                 payment terms) which, taken as a whole,
                                 Lessor reasonably regards as being
                                 substantially similar to the material
                                 economic terms of the Lease (taking into
                                 account factors affecting the degree of risk
                                 associated with such re-lease and/or the
                                 residual value of the Aircraft thereunder,
                                 but

                                           -45-

<PAGE>

                                  excluding the rental payment terms), an amount
                                  equal to the aggregate basic rental payments
                                  to become due under such re-lease for the
                                  period coinciding with the remainder of the
                                  Term (determined without reference to any
                                  right of Lessor to cancel the leasing of the
                                  Aircraft, whether or not such right is
                                  exercised), discounted periodically (equal to
                                  installment frequency) to present worth at the
                                  Discount Rate to the date of payment by
                                  Lessee; or

                          B.      in the event that Lessor has not re-let the
                                  Aircraft or has sold the Aircraft or
                                  has re-let the Aircraft on terms which,
                                  taken as a whole, Lessor does not reasonably
                                  regard as being substantially similar to the
                                  material economic terms of the Lease (taking
                                  into account factors affecting the degree of
                                  risk associated with such re-lease and/or the
                                  residual value of the Aircraft thereunder, but
                                  excluding the rental payment terms), an amount
                                  equal to the fair market rental value
                                  (determined pursuant to the Appraisal
                                  Procedure) of the Aircraft for the period
                                  commencing with the date that Lessor
                                  reasonably anticipates that the Aircraft could
                                  be re-let at such rental rate and ending with
                                  the date that the Term was scheduled to expire
                                  (determined without reference to any right of
                                  Lessor to cancel the leasing of the Aircraft,
                                  whether or not such right is exercised),
                                  discounted periodically (equal to installment
                                  frequency) to present worth at the Discount
                                  Rate to the date of payment by Lessee.

                 (iii)    all costs and other incidental damages associated
                          with Lessor's exercise of its remedies
                          hereunder or otherwise incurred by Lessor as
                          a result of an Event of. Default, including
                          repossession costs, legal fees, Aircraft storage,
                          maintenance and insurance costs, Aircraft re-lease or
                          sale costs (including, in the case of a re lease, any
                          costs incurred to transition the Aircraft to the next
                          operator's maintenance program) and Lessor's internal
                          costs and expenses (including the cost of personnel
                          time calculated based upon the compensation paid to
                          the individuals involved on an annual basis and a
                          general Lessor overhead allocation), all such costs
                          and incidental damages being referred to herein
                          collectively as "Enforcement and Remarketing Costs";

                (iv)      any loss, premium, penalty or expense which may be
                          incurred in repaying funds raised to finance the
                          Aircraft or in unwinding any financial instrument
                          relating in whole or in part to Lessor's financing of
                          the Aircraft, all such amounts being referred to
                          herein collectively as "Unwind Expenses";

                (v)       any loss, cost, expense or liability, or damage to
                          Lessor's residual interest in the Aircraft, sustained
                          by Lessor due to Lessee's failure to maintain the
                          Aircraft in

                                              -46-

<PAGE>

                          accordance with the terms of this Agreement or
                          Lessee's failure to redeliver the Aircraft in the
                          condition required by this Agreement, including any
                          consequential loss of revenues or profits, all such
                          amounts being referred to herein collectively as
                          "Aircraft Condition Damages"; and

                  (vi)    such additional amount, if any, as may be necessary
                          to place Lessor in the same economic position, on an
                          After-Tax Basis, as Lessor would have been in if
                          Lessee had timely performed each of its obligations
                          under this Agreement; and/or

         (d)      either:

                  (i)     enter upon the premises where all or any part of the
                          Aircraft is located and take immediate possession of
                          and, at Lessor's sole option, remove the same (and/or
                          any engine which is not an Engine but which is
                          installed on the Airframe, subject to the rights of
                          the lessor or secured party thereof), all without
                          liability accruing to Lessor for or by reason of such
                          entry or taking of possession whether for the
                          restoration of damage to property, conversion or
                          otherwise, caused by such entry or taking, except
                          damages caused by gross negligence or willful
                          misconduct; or

                 (ii)     by delivering notice to Lessee, require Lessee to
                          redeliver the Aircraft to Lessor at Phoenix Sky Harbor
                          International Airport in Phoenix, Arizona (or such
                          other location as Lessor may require) on the date
                          specified in such notice and in all respects in the
                          condition required by the Lease upon the Return
                          Occasion (it being understood that Lessee shall not
                          delay any such return for the purpose of placing the
                          Aircraft in such condition, but shall nevertheless be
                          liable to Lessor for the failure of the Aircraft to be
                          in such condition); and/or

         (e)     sell at private or public sale, as Lessor may determine, or
                 hold, use, operate or lease to others the Aircraft as Lessor in
                 its sole discretion may determine, all free and clear of any
                 rights of Lessee; and/or

         (f)     by written notice to Lessee specifying a payment date (which
                 shall be a date not earlier than five (5) Business Days
                 following the date of such notice), Lessor may demand that
                 Lessee pay to Lessor, and Lessee shall pay to Lessor on the
                 payment date specified in such notice (in lieu of the Rent due
                 for the period commencing after the date specified for payment
                 in such notice) the sum of the following amounts:

         (i)     all Rent and other amounts which are or are expected to become
                 due and payable hereunder prior to the payment date specified
                 by Lessor;

                                            -47-

<PAGE>

         (ii)              an amount equaling the aggregate Rent for the
                           remainder of the Term (determined without reference
                           to any right of Lessor to cancel the leasing of the
                           Aircraft, whether or not such right is exercised),
                           discounted periodically (equal to installment
                           frequency) to present worth at the Discount Rate to
                           the payment date specified by Lessee to Lessor, less
                           the applicable amount set forth below:

                           A.       in the event that Lessor has re-let the
                                    Aircraft on terms (other than rental
                                    payment terms) which, taken as a whole,
                                    Lessor reasonably regards as being
                                    substantially similar to the material
                                    economic terms of the Lease (taking into
                                    account factors affecting the degree of risk
                                    associated with such re-lease and/or the
                                    residual value of the Aircraft thereunder,
                                    but excluding the rental payment terms), an
                                    amount equal to the aggregate basic rental
                                    payments to become due under such re-lease
                                    for the period coinciding with the remainder
                                    of the Term (determined without reference to
                                    any right of Lessor to cancel the leasing of
                                    the Aircraft, whether or not such right is
                                    exercised), discounted periodically (equal
                                    to installment frequency) to present worth
                                    at the Discount Rate to the date of payment
                                    by Lessee; or

                           B.       in the event that Lessor has not re-let the
                                    Aircraft or has sold the Aircraft
                                    or has re-let the Aircraft on terms which,
                                    taken as a whole, Lessor does not reasonably
                                    regard as being substantially similar to the
                                    material economic terms of the Lease (taking
                                    into account factors affecting the degree of
                                    risk associated with such release and/or the
                                    residual value of the Aircraft thereunder,
                                    but excluding the rental payment terms), an
                                    amount equal to the fair market rental value
                                    (determined pursuant to the Appraisal
                                    Procedure) of the Aircraft for the period
                                    commencing with the date that Lessor
                                    reasonably anticipates that the Aircraft
                                    could be re-let at such rental rate and
                                    ending with the date that the Term was
                                    scheduled to expire (determined without
                                    reference to any right of Lessor to cancel
                                    the leasing of the Aircraft, whether or not
                                    such right is exercised), discounted
                                    periodically (equal to installment
                                    frequency) to present worth at the Discount
                                    Rate to the date of payment by Lessee;

                 (iii)     an amount equal to Lessor's reasonably anticipated
                           Enforcement and Remarketing Costs, Unwind Expenses
                           and Aircraft Condition Damages; and

                  (iv)     such additional amount, if any, as may be necessary
                           to place Lessor in the same economic position, on an
                           After-Tax Basis, as Lessor would have been in if
                           Lessee had timely performed each of its obligations
                           under this Agreement;

                                               -48-

<PAGE>

                   (v)     it being understood that, to the extent that any of
                           the foregoing amounts represents an estimate by
                           Lessor of losses, damages, costs or expenses which
                           Lessor expects to incur, (y) Lessor shall adjust the
                           amount thereof as needed to reflect the actual amount
                           of such losses, damages, costs or expenses incurred
                           by Lessor when substantially all of such amounts
                           become known to Lessor, but Lessee shall nevertheless
                           be obligated to pay the amount demanded by Lessor
                           (subject to such subsequent adjustment in which (i)
                           amounts, if any, actually paid by Lessee to Lessor
                           upon such demand as may exceed the actual amount of
                           losses, damages, costs or expenses incurred by
                           Lessor as finally determined by Lessor are refunded
                           to Lessee or otherwise credited to the account of
                           Lessee and (ii) additional amounts, if any, as may
                           be required to cure any shortfall between the
                           estimated amounts paid by Lessee and the actual
                           amount of losses, damages, costs or expenses incurred
                           by Lessor as finally determined by Lessor are paid by
                           Lessee to Lessor), and (z) notwithstanding the amount
                           specified in such demand, Lessor shall be entitled to
                           claim such other (and greater) amount in any action
                           against Lessee hereunder; and/or

          (g)      draw upon the Deposit or the Letter of Credit and apply such
                   amounts to any amounts owing to Lessor hereunder and/or make
                   demand against any Guarantor for any or all of the foregoing.

          In addition to the foregoing, Lessor shall be entitled to exercise
          such other rights and remedies as may be available under applicable
          Law and Lessee shall be liable on an After-Tax Basis for, and shall
          pay Lessor on demand: (i) interest on all unpaid amounts at the
          Interest Rate, from the due date until the date of payment in full;
          (ii) all reasonable legal fees and other reasonable costs and expenses
          incurred by Lessor by reason of the occurrence of any Event of Default
          or the exercise of Lessor's remedies with respect thereto; and (iii)
          all reasonable expenses, disbursements, costs and fees incurred in (A)
          reposessing, storing, preserving, shipping, maintaining, repairing and
          refurbishing the Aircraft, the Airframe, any Engine or Part to the
          condition required by Section 12 hereof and (B) preparing the
          Aircraft, the Airframe, an Engine or Part for sale or lease,
          advertising the sale or lease of the Aircraft, the Airframe, an Engine
          or Part and selling or releasing the Aircraft, the Airframe, an Engine
          or Part.

          Lessor is hereby authorized and instructed, but shall have no
          obligation, to make any expenditures which Lessor, in its sole
          discretion, considers advisable to repair and restore the Aircraft,
          the Airframe, an Engine or Part to the condition required by Section
          12 hereof (it being understood that Lessee shall be liable for all
          such expenditures).

          Lessee hereby agrees that, in the event of the return to or
          repossession by Lessor of the Aircraft, the Airframe, an Engine or
          Part, any rights in any warranty (express or implied) previously

                                           -49-

<PAGE>

          assigned to Lessee or otherwise held by Lessee shall without further
          act, notice or writing be assigned or reassigned to Lessor, if
          assignable.

          No remedy referred to in this Section 13 is intended to be exclusive,
          but, to the extent permissible under the Lease or under applicable
          Law, 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 of such other remedies; provided,
          however, that nothing in this Section 13 shall be construed to permit
          Lessor to obtain a duplicate recovery of any element of damages to
          which Lessor is entitled. No express or implied waiver by Lessor of
          any Default or Event of Default shall in any way be, or be construed
          to be, a waiver of any future or subsequent Default or Event of
          Default.

                                            -50-

<PAGE>

  13.3    Power of Attorney: Lessee hereby appoints Lessor as the
          attorney-in-fact of Lessee, with full authority in the place and stead
          of Lessee and in the name of Lessee or otherwise, for the purpose of
          carrying out the provisions of the Lease and taking any action and
          executing any instrument that Lessor may deem necessary or advisable
          to accomplish the purposes hereof; provided, however, that Lessor may
          only take action or execute instruments under this Section 13 after an
          Event of Default has occurred and is continuing. Lessee hereby
          declares that the foregoing powers are granted for valuable
          consideration, constitute powers granted as security for the
          performance of the obligations of Lessee hereunder and are coupled
          with an interest and shall be irrevocable. Without limiting the
          generality of the foregoing or any other rights of Lessor under the
          Lease, upon the occurrence and during the continuation of an Event of
          Default, Lessor shall have the sole and exclusive right and power to
          (i) settle, compromise, adjust or defend any actions, suits or
          proceedings relating to or pertaining to the Aircraft, Airframe or any
          Engine, or the Lease and (ii) make proof of loss, appear in and
          prosecute any action arising from any policy or policies of insurance
          maintained pursuant to the Lease, and settle, adjust or compromise any
          claims for loss, damage or destruction under, or take any other action
          in respect of, any such policy or policies.

  13.4    Sale or Re-Lease

          If an Event of Default occurs, Lessor may sell or re-lease or
          otherwise deal with the Aircraft at such time and in such manner and
          on such terms as Lessor considers appropriate in its absolute
          discretion, free and clear of any interest of Lessee, as if the Lease
          had never been entered into. Lessor shall have no duty or obligation
          to sell the Aircraft, and Lessor shall be obligated to attempt to
          re-lease the Aircraft only to the extent, if any, that it is required
          to do so under Article 2A of the UCC, and Lessee hereby disclaims any
          right to compel Lessor to sell or otherwise re-lease the Aircraft.

  13.5    Removal of Lease from FAA Registry

          If an Event of Default occurs, Lessee will at the request of Lessor
          immediately take all steps necessary to enable the Aircraft to be
          redelivered to Lessor in accordance with and free and clear of the
          Lease and Lessee hereby irrevocably and by way of security for its
          obligations under the Lease appoints (which appointment is coupled
          with an interest) Lessor as its attorney-in-fact to execute and
          deliver any documentation and to do any act or thing not prohibited by
          Law required in connection with the foregoing during the continuance
          of an Event of Default. Without limiting the foregoing, Lessor may
          file with the FAA the Lease Termination Certificate provided to Lessor
          under the Lease.

                                         -51-

<PAGE>

 14.     TRANSFER

 14.1    Lessee

         LESSEE WILL NOT ASSIGN, DELEGATE OR OTHERWISE TRANSFER (VOLUNTARILY,
         INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE) ANY OF ITS RIGHTS OR
         OBLIGATIONS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT OR
         THIS CTA), OR CREATE OR PERMIT TO EXIST ANY SECURITY INTEREST OVER ANY
         OF ITS RIGHTS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT
         OR THIS CTA), AND ANY ATTEMPT TO DO SO SHALL BE NULL AND VOID. The
         foregoing shall not be construed to prohibit a Permitted Sub-Lease.

 14.2    Lessor

         Lessee acknowledges and agrees that Lessor will, if applicable under
         the Financing Documents, assign as security Lessor's interest in the
         Lease as described in the Acknowledgement and Agreement referred to in
         Schedule 3.

         In addition insofar as Lessee is concerned, Lessor may, without the
         consent of Lessee, further transfer all or any of its rights or
         obligations under the Lease or all or any of its right, title or
         interest in and to the Aircraft, including pursuant to:

         (a)     a sale and leaseback, or

         (b)     a novation or assignment of the Lease and/or a sale of the
                 Aircraft (including to a special purpose or securitization or
                 monetization trust, fund, limited liability company,
                 corporation, partnership or other vehicle or in connection
                 with any other direct or indirect raising of capital); or

         (c)     a secured loan financing.

         Lessor will promptly notify Lessee of any transfer and Lessee agrees
         promptly to execute and deliver in connection with any transfer such
         documents and assurances (including an acknowledgement of the transfer
         and a certificate as to the absence of any Default under the Lease)
         and to take such further action as Lessor may reasonably request to
         establish or protect the rights and remedies created or intended to be
         created in favor of the transferee in connection with any transfer.
         After any transfer, the transferee shall be entitled to be an
         Indemnitee and to such other rights under the Lease as Lessor shall
         specify. Upon an assignment or novation described in clause (b), Lessor
         shall be released from all obligations and liabilities under the Lease
         to the extent such obligations and liabilities are assumed by such
         transferee, and the Lease, including this CTA as in effect at that time
         and as incorporated in the Aircraft Lease Agreement, shall be

                                      -52-

<PAGE>

         deemed applicable as between Lessee and the transferee of the Lease and
         may be amended, supplemented or otherwise modified without the consent
         of the transferor (if this CTA is applicable to the Other Agreements
         not so transferred, it shall remain in full force and effect and may be
         amended, supplemented or otherwise modified without the consent of the
         transferee). Notwithstanding any such assignment or novation, Lessor,
         Owner, Financing Parties' Representative and each other Indemnitee
         shall continue to be entitled to indemnification under Section 10, and
         shall continue to be named as an additional insured under all
         Insurances referred to in Section 9 for a period of not less than two
         years after such transfer. The agreements, covenants, obligations and
         liabilities contained in the Lease, including all obligations to pay
         Rent and indemnify each Indemnitee, are made for the benefit of Lessor
         (and, in the case of Section 10, each other Indemnitee) and its or
         their respective successors and assigns, notwithstanding the
         possibility that any such Person was not originally a party to the
         Lease or may, at the time such enforcement is sought, not be a party to
         the Lease.

 14.3    Conditions

         In connection with any such transfer by Lessor:

         (a)      QUIET ENJOYMENT: as a condition precedent to such transfer
                  becoming effective, Lessor will procure that the transferee
                  or any new owner of the Aircraft or any new holder of a
                  Security Interest in the Aircraft or any holder of an interest
                  in the Aircraft or the Lease (by way of security or
                  otherwise), as the case may be, shall in the case of a
                  transferee that is the "Lessor" acknowledge Lessor's
                  obligation under Section 7.1 or, if not the Lessor, execute
                  and deliver to Lessee a letter of quiet enjoyment in respect
                  of Lessee's use and possession of the Aircraft in a form
                  substantially similar to Section 7.1 hereof;

          (b)     COSTS: Lessor shall reimburse to Lessee its reasonable
                  out-of-pocket expenses (including reasonable legal fees
                  and expenses) actually incurred in connection with
                  co-operating with Lessor in relation to any such transfer
                  referred to in this Section 14, provided that such expenses
                  are substantiated to Lessor's reasonable satisfaction;

         (c)      RIGHTS OF LESSEE: as a condition precedent to any transfer
                  becoming effective, such transfer shall not, at the time of
                  the transfer, materially expand Lessee's obligations under the
                  Lease or materially reduce Lessee's rights under the Lease,
                  in each case as compared to what such obligations and rights
                  would have been in the absence of such transfer; provided,
                  however, that no transfer to any Person that meets the
                  requirements of a "citizen of the United States" under 49
                  U.S.C. Section 40102(a)(15) shall be deemed to materially
                  expand Lessee's obligations or materially restrict Lessee's
                  rights under the Lease.

                                           -53-

<PAGE>

 15.     MISCELLANEOUS

 15.1    Survival

         Lessee's obligations under Section 3 of Schedule 4, under Sections 5.6,
         5.7, 5.10, 5.21, 9.5, 10, 12, and 13.2 and under any other provision of
         the Lease providing for an obligation on the part of the Lessee to
         indemnify Lessor or any other Indemnitee shall survive the expiration
         or any termination of the Lease and continue in full force and effect.

 15.2    Waivers, Remedies Cumulative

         The rights of Lessor under the Lease may be exercised as often as
         necessary, are cumulative and not exclusive of its rights under any
         Law; and may be waived only in writing and specifically. Delay by
         Lessor in exercising, or non-exercise of, any such right will not
         constitute a waiver of that right.

 15.3    Delegation

         Lessor may delegate to any Person all or any of the rights, powers or
         discretion vested in it by the Lease, 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.

 15.4    Severability

         If a provision of the Lease 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 the Lease; or

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

 15.5    Remedy

         If Lessee fails to comply with any provision of the Lease, 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 such
         non-compliance as a 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 fees and expenses) in connection with the non-compliance.

                                         -54-

<PAGE>

 15.6    Time of Essence

         The time stipulated in the Lease for all payments payable by Lessee and
         the prompt, punctual performance of Lessee's other obligations under
         the Lease are of the essence of the Lease.

 15.7    Notices

         All notices under, or in connection with, the Lease will, unless
         otherwise stated, be given in writing by means of a overnight courier
         service or facsimile. Any such notice is deemed effectively to be given
         when received by the recipient (or if receipt is refused by the
         intended recipient, when so refused).

         The addresses and facsimile and telephone numbers of Lessee and Lessor
         are as set forth in the Aircraft Lease Agreement.

 15.8    Governing Law; Jurisdiction; WAIVER OF JURY TRIAL

          (a)     PURSUANT TO AND IN ACCORDANCE WITH SECTION 5-1401 OF THE NEW
                  YORK GENERAL OBLIGATIONS LAW, THE PARTIES HERETO AGREE THAT
                  THE LEASE IN ALL RESPECTS SHALL BE GOVERNED BY, AND CONSTRUED
                  IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED
                  STATES, AS APPLIED TO CONTRACTS TO BE PERFORMED WHOLLY WITHIN
                  THE STATE OF NEW YORK (EXCLUSIVE OF SECTION 7-101 OF THE NEW
                  YORK GENERAL OBLIGATIONS LAW WICH IS INAPPLICABLE TO THE
                  LEASE). THE PARTIES AGREE THAT THE LEASE WAS EXECUTED AND
                  DELIVERED IN THE STATE OF NEW YORK.

         (b)      Pursuant to and in accordance with Section 5-1402 of the
                  New York General Obligations Law, Lessee and Lessor each agree
                  that the United States District Court for the Southern
                  District of New York and any New York state court sitting in
                  the County of New York, New York, and all related appellate
                  courts, are to have non-exclusive jurisdiction to settle any
                  disputes arising out of or relating to the Lease and submits
                  itself and its property to the non-exclusive jurisdiction of
                  the foregoing courts with respect to such disputes.

         (c)      Without prejudice to any other mode of service, Lessee:

                  (i)     appoints CT Corporation System, 1633 Broadway,
                          New York, New York 10019, as its agent for service of
                          process relating to any proceedings before the
                          New York courts in connection with the Lease and
                          agrees to maintain the process agent in New York
                          notified to Lessor,

                                            -55-

<PAGE>

                           (ii)    agrees that failure by a process agent to
                                   notify Lessee of the process shall not
                                   invalidate the proceedings concerned;

                           (iii)   consents to the service of process relating
                                   to any such proceedings by prepaid mailing of
                                   a copy of the process to Lessee's agent at
                                   the address identified in paragraph (i) or by
                                   prepaid mailing by air mail, certified or
                                   registered mail of a copy of the process to
                                   Lessee at the address set forth in Section
                                   15.7.

                  (d)      [NOT APPLICABLE.]

                  (e)      Each of Lessor and Lessee:

                           (i)     waives to the fullest extent permitted by Law
                                   any objection which it may now or hereafter
                                   have to the courts referred to in Section
                                   15.8(b) above on grounds of inconvenient
                                   forum or otherwise as regards proceedings in
                                   connection with the Lease;

                          (ii)     waives to the fullest extent permitted by Law
                                   any objection which it may now or hereafter
                                   have to the laying of venue of any suit,
                                   action or proceeding arising out of or
                                   relating to the Lease brought in the courts
                                   referred to in Section 15.8(b); and

                          (iii)    agrees that a judgement or order of any court
                                   referred to in Section 15.8(b) in connection
                                   with the Lease is conclusive and binding on
                                   it and may be enforced against it in the
                                   courts of any other jurisdiction.

                  (f)     Nothing in this Section 15.8 limits the right of
                          either party to bring proceedings against the other in
                          connection with the Lease:

                          (i)      in any other court of competent jurisdiction;
                                   or

                          (ii)     concurrently in more than one jurisdiction.

                  (g)     Each of Lessee and Lessor irrevocably and
                          unconditionally:

                          (i)     agrees that if the other brings legal
                                  proceedings against it or its assets in
                                  relation to the Lease no sovereign or other
                                  immunity from such legal proceedings (which
                                  will be deemed to include suit, court
                                  jurisdiction, attachment prior to judgement,
                                  attachment in aid of execution of a judgement,
                                  other attachment, the obtaining of judgement
                                  execution of a judgement or other enforcement
                                  or legal process or remedy) will be claimed by
                                  or on behalf of itself or with respect to its
                                  assets; and

                                          -56-

<PAGE>

                    (ii)    waives any such right of immunity which it or its
                            assets now has or may in the future acquire and
                            agrees that the foregoing waiver shall have the
                            fullest extent permitted under the Foreign Sovereign
                            Immunities Act of 1976 of the United States and is
                            intended to be irrevocable for the purposes of such
                            Act.

           (h)      EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND
                    UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL IN
                    RESPECT OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
                    ARISING OUT OF THE LEASE OR ANY DEALINGS BETWEEN THEM
                    RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS
                    CONTEMPLATED THEREBY OR THE LESSOR/LESSEE RELATIONSHIP
                    BEING ESTABLISHED, including, without limitation, contract
                    claims, tort claims, breach of duty claims and other common
                    law and statutory claims. Each of Lessor and Lessee
                    represents and warrants that each has reviewed and
                    voluntarily waives its jury trial rights following
                    consultation with its legal counsel. THIS WAIVER IS
                    IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
                    AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE
                    LEASE. In the event of litigation, this Section may be filed
                    as a written consent to a trial by the court.

   15.9    Sole and Entire Agreement; True Lease; Section 1110

           (a)     ENTIRE AGREEMENT: The Lease 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. Any amendments to the Lease must be made in
                   writing and signed on behalf of Lessor and Lessee.

           (b)     TRUE LEASE: The parties intend and agree that the Lease:

                   (i)      constitutes a "true lease", and not a "security
                            interest" as defined in Section 1201(37) of the
                            UCC;

                   (ii)     constitutes a "true lease" for United States Federal
                            income tax purposes; and

                   (iii)    confers only a leasehold interest on Lessee in and
                            to the Aircraft on and subject to the terms of the
                            Lease, and no ownership or other interest with
                            respect to the Aircraft is provided to Lessee under
                            the Lease.

                   Lessee shall not file a tax return that is inconsistent with
                   the provisions of this Section 15.9(b).

          (c)      SECTION 1110: Lessee acknowledges that Lessor would not have
                   entered into the Lease unless it had available to it the
                   benefits of a lessor under Section 1110 of Title 11 of the

                                          -57-

<PAGE>

                  U.S.C. Lessee covenants and agrees with Lessor that to better
                  ensure the availability of such benefits, Lessee shall not
                  oppose 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, except in a situation in which
                  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 the Lease and take such other action not
                  inconsistent with the Lease as Lessor reasonably requests 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.

 15.10   Indemnitees

         All rights expressed to be granted to each Indemnitee (other than
         Lessor) under the Lease are given to Lessor on behalf of that
         Indemnitee, and each Indemnitee is an express third party beneficiary
         thereof.

 15.11   Counterparts

         The Lease (including the Aircraft Lease Agreement and this CTA) may be
         executed in two or more counterparts, each of which shall be deemed an
         original, but all of which together shall constitute one and the same
         instrument. To the extent, if any, that the Lease constitutes chattel
         paper (as such term is defined in the Uniform Commercial Code as in
         effect in any applicable jurisdiction), no security interest in the
         Lease may be created through the transfer or possession of any
         counterpart other than the original counterpart, which shall be
         identified as the counterpart designated as the "original" on the
         signature page of the Aircraft Lease Agreement by Financing Parties'
         Representative, Owner or Lessor, as the case may be.

 15.12   Language

         All notices to be given under the Lease will be in English. All
         documents delivered to Lessor pursuant to the Lease (including any
         documents to be delivered pursuant to the Conditions Precedent) will be
         in English.

 16.     DISCLAIMERS AND WAIVERS

         LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND CONFIRMATIONS
         SET FORTH IN CLAUSES 16.1 TO 16.4 BELOW SHALL APPLY AT ALL TIMES DURING
         THE TERM. LESSEE'S ACCEPTANCE OF THE AIRCRAFT IN ACCORDANCE WITH
         SECTION 4.3 SHALL BE CONCLUSIVE EVIDENCE THAT

                                          -58-

<PAGE>

         LESSEE HAS FULLY INSPECTED THE AIRCRAFT AND EVERY PART THEREOF AND THAT
         THE AIRCRAFT, THE ENGINES, THE PARTS AND THE AIRCRAFT DOCUMENTS AND
         RECORDS ARE TECHNICALLY ACCEPTABLE TO LESSEE AND SATISFY THE DELIVERY
         CONDITION REQUIREMENTS AND ARE IN SUITABLE CONDITION FOR DELIVERY TO
         AND ACCEPTANCE BY LESSEE.

 16.1     Exclusion

         THE AIRCRAFT IS LEASED AND DELIVERED UNDER THE LEASE "AS IS, WHERE IS,"
         AND LESSEE AGREES AND ACKNOWLEDGES THAT:

         (a)      LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS
                  NOT AND WILL NOT BE DEEMED TO HAVE ACCEPTED, MADE OR GIVEN
                  (WHETHER BY VIRTUE OF HAVING DONE OR FAILED TO DO ANY ACT, OR
                  HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN
                  RELATION TO THE LEASE OR OTHERWISE), ANY GUARANTEES,
                  COVENANTS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
                  WITH RESPECT TO, THE AIRCRAFT OR ANY ENGINE OR PART OR ANY
                  SERVICES PROVIDED BY LESSOR UNDER THE LEASE, INCLUDING (BUT
                  NOT LIMITED TO) THE TITLE (EXCEPT AS AND TO THE EXTENT
                  EXPRESSLY PROVIDED IN SECTION 7.1), DESCRIPTION,
                  AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS, OPERATION,
                  MERCHANTABILITY, QUALITY, FREEDOM FROM INFRINGEMENT OF PATENT,
                  COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY RIGHTS, FITNESS FOR
                  ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY, DATE
                  PROCESSING, CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE
                  MATERIAL OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER
                  DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER
                  MATTER WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED
                  WARRANTY ARISING FROM A COURSE OF PERFORMANCE OR DEALING OR
                  USAGE OF TRADE) WITH RESPECT TO THE AIRCRAFT, ANY ENGINE OR
                  ANY PART OR ANY SERVICES PROVIDED BY LESSOR UNDER THE LEASE;
                  AND

         (b)      LESSOR SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER
                  TO LESSEE (WHETHER ARISING IN CONTRACT OR IN TORT, AND WHETHER
                  ARISING BY REFERENCE TO NEGLIGENCE, MISREPRESENTATION OR
                  STRICT LIABILITY OF LESSOR OR OTHERWISE) FOR:

                  (i)     ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE
                          CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY
                          ENGINE OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR

                                             -59-

<PAGE>

                           DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN
                           CONNECTION THEREWITH (EXCEPT FOR DIRECT DAMAGES DUE
                           TO LESSOR'S BREACH AS AND TO THE EXTENT EXPRESSLY
                           PROVIDED IN SECTION 4.4 OR 7.1 HEREOF);

                  (ii)     THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR
                           ANY RISKS RELATING THERETO;

                  (iii)    ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR
                           ANTICIPATED PROFITS OR ANY OTHER DIRECT (EXCEPT FOR
                           DIRECT DAMAGES DUE TO LESSOR'S BREACH AS PROVIDED IN
                           SECTION 4 4 or 7.1), INDIRECT OR CONSEQUENTIAL LOSS
                           OR DAMAGE; OR

                  (iv)     THE DELIVERY, OPERATION, SERVICING, MAINTENANCE,
                           REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT,
                           ANY ENGINE OR ANY PART.

 16.2   Waiver

        LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL ITS RIGHTS IN
        RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR
        IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER
        AND WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF ANY OF THE
        MATTERS REFERRED TO IN SECTION 16.1.

 16.3   Disclaimer Of Consequential Damages

        LESSEE AGREES THAT IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY
        DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER,
        FOR INTERRUPTION OF SERVICE, LOSS OF BUSINESS, LOST PROFITS OR REVENUES
        OR CONSEQUENTIAL DAMAGES (AS DEFINED IN SECTION 2A-520 OF THE UCC OR
        OTHERWISE) AS A RESULT OF ANY BREACH OR ALLEGED BREACH BY LESSOR OF ANY
        OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR CONTAINED IN
        THE LEASE (INCLUDING A BREACH BY LESSOR UNDER SECTION 4.4 OR 7.1).

 16.4   Confirmation

        LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF THIS SECTION
        16 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS PAYABLE UNDER THE LEASE
        HAVE BEEN CALCULATED BASED ON ITS PROVISIONS.

                                         -60-

<PAGE>

 16.5   Limitation

        LESSOR HEREBY EXPRESSLY AGREES AND ACKNOWLEDGES THAT NOTHING IN THIS
        SECTION 16 SHALL DEROGATE FROM LESSOR'S OBLIGATIONS UNDER, OR OTHERWISE
        LIMIT LESSOR'S LIABILITY IN RESPECT OF, SECTIONS 2.2, 4.4(c), 7.1,
        7.2, 14.2 or 14.3 HEREOF OR SECTION 2(c) OF SCHEDULE 4 HERETO.

 1.7.   BROKERS AND OTHER THIRD PARTIES

 17.1   No Brokers

        Each of the parties hereby represents and warrants to the other that it
        has not paid, agreed to pay or caused to be paid directly or indirectly
        in any form, any commission, percentage, contingent fee, brokerage or
        other similar payments of any kind, in connection with the
        establishment or operation of the Lease, to any Person (other than fees
        payable to legal advisers or portfolio services).

 17.2   Indemnity

        Each party agrees to indemnify and hold the other harmless from and
        against any and all claims, suits, damages, costs and expenses
        (including, reasonable legal fees and expenses) asserted by any agent,
        broker or other third party for any commission or compensation of any
        nature whatsoever based upon the Lease or the Aircraft, if such claim,
        suit, damage, cost or expense arises out of any breach by the
        indemnifying party, its employees or agents of Section 17.1.

                      REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                                THE SIGNATURE PAGE FOLLOWS.

                                          -61-

<PAGE>

 IN WITNESS WHEREOF the parties hereto have executed the Common Terms Agreement
 on the date shown at the beginning of the document.

 GENERAL ELECTRIC CAPITAL CORPORATION

 By:    /s/  Norm Liu
    -----------------------------------
 Name:    Norm Liu
      ---------------------------------
 Title:       Vice President
       --------------------------------

 ALOHA AIRLINES, INC.

 By: __________________________________
 Name:_________________________________
 Title:________________________________

 By: __________________________________
 Name:_________________________________
 Title:________________________________

<PAGE>

  IN WITNESS WHEREOF the parties hereto have executed the Common Terms Agreement
  on the date shown at the beginning of the document.

  GENERAL ELECTRIC CAPITAL CORPORATION

 By: __________________________________
 Name:_________________________________
 Title:________________________________

  ALOHA AIRLINES, INC.

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

 By:   /s/ James M. King
     ----------------------------------
 Name:  James M. King
      ---------------------------------
 Title:  VP Planning & Development
       --------------------------------

<PAGE>

                                  SCHEDULE 1
                                  DEFINITIONS

  The following words and expressions have the respective meanings set forth
  below:

  Act means the Federal Aviation Act of 1958, as amended, and as recodified in
  Title 49 U.S.C. pursuant to Public Law 103-272, or any similar legislation of
  the United States enacted in substitution or replacement thereof.

  AFFILIATE means as to any Person, any other Person that, directly or
  indirectly, is in control of, is controlled by, or is under common control
  with, such Person. For purposes of this definition, "control" of a Person
  means the power, directly or indirectly, either to (a) vote 50% or more of the
  securities having ordinary voting power for the election of directors (or
  persons performing similar functions) of such Person or (b) direct or cause
  the direction of the management and policies of such Person, whether by
  contract or otherwise.

  AFTER-TAX BASIS means in the case of any amount payable on an "After-Tax
  Basis" to or for the benefit of any Person (including any amount payable
  pursuant to this definition) that he total amount paid shall be such that the
  Person actually realizes the amount payable, after deduction from the total
  amount paid of the net amount of all Taxes required to be paid by such Person
  with respect to the receipt or accrual by it of such amount.

  AGREED VALUE has the meaning given in the Aircraft Lease Agreement.

  AIR AUTHORITY means the FAA.

  AIRCRAFT has the meaning given in the Aircraft Lease Agreement.

  AIRCRAFT DOCUMENTS AND RECORDS means the documents, data and records
  identified in the list attached to the Certificate of Technical Acceptance,
  and any other documents and records Lessee is required to maintain under
  Section 8.8, and all additions, renewals, revisions and replacements from time
  to time made to any of the foregoing in accordance with the Lease.

  AIRCRAFT LEASE AGREEMENT means the specific aircraft lease agreement for the
  Aircraft entered or to be entered into between the parties hereto or
  Affiliates thereof.

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

  AIRFRAME STRUCTURAL CHECK has the meaning given in the Aircraft Lease
  Agreement.

  AIRFRAME SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
  Agreement.

                                     1-1

<PAGE>

 AIRWORTHINESS DIRECTIVE means an airworthiness directive issued by the State of
 Design or the State of Registry.

 ANNUAL SUPPLEMENTAL RENT ADJUSTMENT has the meaning given in the Aircraft
 Lease Agreement.

 APPRAISAL PROCEDURE means the following procedure for determining the "fair
 market rental value" of the Aircraft pursuant to Sections 13.2 and 13.4 of the
 CTA: (a) Lessor shall select an independent aircraft appraiser in its sole and
 absolute discretion who shall make a determination of "fair market rental
 value" of the Aircraft; and (b) the fees and expenses of the appraiser shall be
 paid by Lessee. "Fair market rental value" shall mean the value determined by
 an appraisal completed on an "as-is" and "where-is" basis.

 APU means the auxiliary power unit installed on the Aircraft on the Delivery
 Date and any replacement auxiliary power unit installed on the Aircraft and
 title to which is transferred to Owner in accordance with the Lease.

 APU SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

 ASSUMED UTILIZATION has the meaning given in the Aircraft Lease Agreement.

 ASSUMED RATIO has the meaning given in the Aircraft Lease Agreement.

 BUSINESS DAY means any day other than a Saturday, Sunday or other day on which
 banking institutions in New York, New York or Honolulu, Hawaii are authorized
 or required by Law to be closed.

 "C" CHECK means a block "C" check in accordance with Lessee's Maintenance
 Program or, if the Lessee's Maintenance Program is not based on the
 Manufacturer's Maintenance Planning Document on a block basis, in accordance
 with the Manufacturer's Maintenance Planning Document.

 CERTIFICATE OF TECHNICAL ACCEPTANCE means a certificate of technical acceptance
 in the form of Part I or Part 2, as applicable, of Schedule 5.

 CERTIFICATED AIR CARRIER means any Person (except the United States Government)
 that is a "citizen of the United States of America" (as defined in Section
 40102 of Title 49 of the U.S.C.) and holding a Certificate of Public
 Convenience and Necessity issued under Section 41102 of Title 49 of U.S.C. by
 the Department of Transportation or any predecessor or successor agency
 thereto, and an air carrier operating certificate issued pursuant to Chapter
 447 of Title 49 of U.S.C. or, in the event such certificates shall no longer be
 applicable, any Person (except the United States Government) that is a citizen
 of the United States (as defined in Section 40102 of Title 49 of the U.S.C.)
 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 capable of
 carrying ten or more individuals or 6,000 pounds or more of cargo, which also
 is certificated so as to entitle Lessor, as a lessor, to the benefits of
 Section 1110 of Title 11 of U.S.C. with respect to the Aircraft.

                                     1-2

<PAGE>

   CONDITIONS PRECEDENT means Lessee Conditions Precedent and Lessor's
   Conditions Precedent, collectively, or any of them, as the context may
   require.

   CYCLE means one take-off and landing of the Aircraft.

   DAMAGE NOTIFICATION THRESHOLD has the meaning given in the Aircraft Lease
   Agreement.

   DEDUCTIBLE AMOUNT has the meaning given in the Aircraft Lease Agreement.

   DEFAULT means any Event of Default or any event or circumstance which, with
   the giving of notice and/or lapse of time and/or determination of materiality
   and/or fulfillment of any other condition, would constitute an Event of
   Default.

   DEFECT means any defect or non-conformity with the Delivery Condition
   Requirements notified by Lessee to Lessor during the Pre-Delivery Procedure.

   DELIVERY means delivery of the Aircraft by Lessor to Lessee under the Lease.

   DELIVERY CONDITION REQUIREMENTS has the meaning given in the Aircraft Lease
   Agreement.

   DELIVERY DATE means the date on which Delivery occurs.

   DELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

   DEPOSIT has the meaning given in the Aircraft Lease Agreement.

   DISCOUNT RATE has the meaning given in the Aircraft Lease Agreement.

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

   ENGINE means, whether or not installed on the Aircraft:

           (a)      each engine of the manufacture and model specified in the
                    Aircraft Lease Agreement for the Aircraft which Lessor
                    offers to Lessee for delivery with the Airframe on the
                    Delivery Date, such engines being described as to serial
                    numbers on the Certificate of Technical Acceptance; and

           (b)      any Replacement Engine, with effect from the. time when
                    title thereto has passed to Owner in accordance with the
                    Lease;

   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 passed to Lessee pursuant to the Lease.

   ENGINE CYCLE means operation of an engine on an aircraft from and including a
   take-off to and including the landing of that aircraft.

                                     1-3

<PAGE>

 ENGINE EVENT OF LOSS means the occurrence, with respect to the Engine only,
 whether or not installed on the Airframe, of any of those events described in
 the definition of Event of Loss.

  ENGINE FLIGHT HOUR means each hour or part thereof an Engine is operated,
  elapsing from the moment the wheels of an aircraft on which such Engine is
  installed leave the ground until the wheels of such aircraft next touch the
  ground.

  ENGINE LLP REPLACEMENT has the meaning given in Section 7.2(ii);

  ENGINE LLP SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
  Agreement.

  ENGINE REFURBISHMENT means all scheduled and unscheduled off the wing Engine
  maintenance and repair accomplished for each module in accordance with the
  performance restoration or full overhaul sections of the Manufacturer's
  workscope planning guide.

 ENGINE SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

 EQUIPMENT CHANGE has the meaning given in Section 8.12.

 ERISA means the Employee Retirement Income Security Act of 1974, as amended.

 EVENT OF DEFAULT means any event or condition specified in Schedule 9.

 EVENT OF LOSS means with respect to the Aircraft (including for the purposes of
 this definition the Airframe):

          (a)       the actual or constructive, compromised, arranged or
                    agreed total loss of the Aircraft; or

          (b)       the Aircraft being destroyed, damaged beyond reasonable
                    economic repair as determined by Lessor or permanently
                    rendered unfit for normal use for any reason whatsoever,
                    or

          (c)       the Aircraft being condemned, confiscated or
                    requisitioned for title, or title to the Aircraft
                    being otherwise compulsorily acquired by the government
                    of the State of Registry or any other Government Entity;
                    or

          (d)       the Aircraft being hijacked, stolen, confiscated,
                    detained, seized, condemned or requisitioned for use or
                    hire for the lesser of (i) a period of more than 30 days
                    (or 60 days in the case of requisition for use or hire by
                    the government of the State of Registry) or (ii) a period
                    equal to or exceeding the remaining balance of the Tenn;
                    or

          (e)       as a result of any rule, regulation, order or other
                    action by the FAA the use of the Aircraft by Lessee or
                    any Permitted Sub Lessee shall have been prohibited for a
                    period of twelve (12) consecutive months.

                                     1-4

<PAGE>

 EXPIRY DATE means the Scheduled Expiry Date or, if earlier (i) the date when
 Lessor acting in accordance with the provisions of the Lease, terminates the
 leasing of the Aircraft to Lessee under the Lease, or (ii) subject to the
 provisions of Section 11.1 and 11.2, the date when Lessor receives the Agreed
 Value together with any other amounts then due and unpaid under the Lease and
 the Other Agreements following an Event of Loss; provided, that if the Term is
 extended pursuant to Section 12.2, the Expiry Date shall be extended to the
 date to which the Term is extended pursuant to Section 12.2.

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

 FAR means the Federal  Aviation  Regulations set forth in Title 14 of the
 United States Code of Federal  Regulations,  as amended and  modified from
 time to time.

 FINAL DELIVERY DATE has the meaning given in the Aircraft Lease Agreement.

 FINAL INSPECTION has the meaning given in Section 1.1 of Part III of Schedule A
 to the Aircraft Lease Agreement.

 FINANCIAL INDEBTEDNESS means 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
                  (exclusive of trade payables); or

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

 FINANCIAL INFORMATION means:

         (a)     as soon as available but not in any event later than 60 days
                 after the last day of each fiscal quarter of Lessee, the
                 consolidated financial statements of Aloha Airgroup, Inc.
                 (consisting of a balance sheet and statements of operations
                 and of retained earnings and cash flows) prepared for the
                 most recent previous fiscal quarter certified by a qualified
                 financial officer of Aloha Airgroup, Inc. as being true and
                 correct and fairly presenting its financial condition and
                 results of operation in accordance with GAAP (subject to
                 year end adjustments); and

          (b)    as soon as available but not in any event later than 120
                 days after the last day of each fiscal year of Lessee, the
                 audited combined financial statements of Aloha Airgroup,
                 Inc. (consisting of a balance sheet and statements of
                 operations and of retained earnings and cash flows),
                 prepared for the fiscal year then most recently ended
                 certified by the independent auditors of Aloha Airgroup,
                 Inc. without qualification.

                                     1-5

<PAGE>

 FINANCING DOCUMENTS (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 FINANCING DOCUMENTS CONTEST RIGHTS (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING DOCUMENTS INDEMNITY AMOUNTS (if applicable) has the meaning given in
 the Aircraft Lease Agreement.

 FINANCING DOCUMENTS TAX AMOUNTS (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING PARTIES (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 FINANCING PARTIES' REPRESENTATIVE (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING STATEMENTS means Uniform Commercial Code Financing Statements in
 respect of the Lease and the Aircraft and Engines leased thereunder prepared in
 a form acceptable for filing with the applicable Government Entities in the
 state in which Lessee's chief executive office is located (as the term "chief
 executive office" is defined in Article 9 of the Uniform Commercial Code as in
 effect in such state) and such other jurisdictions as Lessor shall reasonably
 require.

 FLIGHT HOUR means each hour or part thereof 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.

 GAAP means generally accepted accounting principles in the United States.

 GE CAPITAL means General Electric Capital Corporation.

 GECAS means either or both of GE Capital Aviation Services, Limited and GE
 Capital Aviation Services, Inc.

 GOVERNMENT ENTITY means:

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

          (b)    any instrumentality, board, commission, court, or agency of
                 any of the above, 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.

                                     1-6

<Page>

  GUARANTEE means, if applicable, a guarantee by the Guarantor in form and
  substance reasonably acceptable to Lessor and references to the Guarantee
  include reference to any replacement or re-issued guarantee.

  GUARANTOR (if applicable) has the meaning given in the Aircraft Lease
  Agreement.

  HABITUAL BASE means the jurisdiction in which the Aircraft's primary aircraft
  operations center is located.

  INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

  INTEREST RATE has the meaning given in the Aircraft Lease Agreement.

  INSURANCE means the insurance in respect of the Aircraft in form and
  substance satisfactory to Lessor, and includes any insurance and reinsurance
  required by Section 9 and Schedule 7.

  LANDING GEAR means the landing gear assembly of the Aircraft excluding any
  rotable components.

  LANDING GEAR SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
  Agreement.

  LAW means and includes (a) any statute, decree, constitution, regulation,
  order, judgement or other directive of any Government Entity; (b) any treaty,
  pact, compact or other agreement to which any Government Entity is a signatory
  or party; (c) any judicial or administrative interpretation or application of
  any Law described in (a) or (b) above; and (d) any amendment or revision of
  any Law described in (a), (b) or (c) above.

  LC AMOUNT has the meaning given in the Aircraft Lease Agreement.

  LEASE means the Aircraft Lease Agreement for the Aircraft (of which this CTA
  forms a part), any schedules or documents executed pursuant to the Schedules
  hereto or pursuant to the Aircraft Lease Agreement, any Lease Supplement to
  the Lease (including Lease Supplement No. 1), and any side letters related to
  the Lease.

  LEASE SUPPLEMENT means any Lease Supplement executed and delivered with
  respect to the Lease.

  LEASE SUPPLEMENT NO. 1 means a Lease Supplement No. 1 substantially in the
  form of Schedule 12.

  LEASE TERMINATION CERTIFICATE means a Lease Termination Certificate
  substantially in the form of Schedule 11 in respect of the Lease.

  LESSEE means the Person named as Lessee in the Aircraft Lease Agreement.

  LESSEE AFFILIATE means any Subsidiary or other Affiliate for the time being of
  Lessee.

  LESSEE CONDITIONS PRECEDENT means the conditions specified in Part B of
  Schedule 3.

                                     1-7

<PAGE>

 LESSEE'S MAINTENANCE PROGRAM means the Maintenance Program specifically
 approved by the Air Authority for maintenance of the Aircraft by Lessee, or at
 any time that a Permitted Sub-Lease approved by Lessor and meeting the
 requirements of Section 8.4(b) is in effect, by the Permitted Sub-Lessee under
 such Permiitted Sub-Lease.

 LESSOR means the Person named as Lessor in the Aircraft Lease Agreement.

 LESSOR CONDITIONS PRECEDENT means the conditions specified in Part A of
 Schedule 3.

 LESSOR LIEN means (i) any Security Interest whatsoever from time to time
 created by Lessor or Owner in connection with the financing of the Aircraft,
 including the Financing Documents, and (ii) any other Security Interest in the
 Aircraft which (a) results from acts of or claims against Lessor or Owner or
 any affiliate of Lessor or Owner that do not relate to the transactions
 contemplated by the Lease or by any other contract or agreement between Lessee
 or any affiliate of Lessee and Lessor or Owner or any affiliate of Lessor or
 Owner and (b) is not attributable to Lessee or Lessee's use or possession of
 the Aircraft.

 LESSOR/OWNER TAX JURISDICTION has the meaning given in the Aircraft Lease
 Agreement.

 LESSOR TAXES means Taxes for which Lessee is not obligated to indemnify Lessor
 and/or Owner and/or a Financing Party as provided in Section 5.7(c).

 LETTER OF CREDIT means any letter of credit issued in relation to the Lease
 pursuant to Section 5.14 and any  replacement  or renewal  of that letter of
 credit.

 LOSSES means any and all cost, expense (including any and all reasonable legal
 fees and expenses and the fees and expenses of other professional advisers),
 claims, proceedings, losses, liabilities, obligations, damages (whether direct,
 indirect, special, incidental or consequential), suits, judgements, fees,
 penalties or fines (whether criminal or civil) of any kind or nature
 whatsoever, including any of the foregoing arising or imposed with or without
 any Indemnitee's fault or negligence, whether passive or active or under the
 doctrine of strict liability.

 MAINTENANCE CONTRIBUTIONS means, as and if applicable, all amounts payable by
 Lessor pursuant to Section 7.2.

 MAINTENANCE PERFORMER means (i) any of the Persons identified on Schedule 14
 hereto (until such time as Lessor delivers written notice to Lessee of the
 removal of any such Person from the list of Maintenance Performers), or (ii)
 such other mutually acceptable Persons as may be added to Schedule 14 hereto
 from time to time (Lessee shall advise- Lessor in writing of any request to add
 a Person to Schedule 14 and Lessor shall respond in writing).

 MAINTENANCE PROGRAM means an Air Authority approved maintenance program for the
 Aircraft and encompassing scheduled maintenance, condition-monitored
 maintenance, and/or on-condition

                                     1-8

<PAGE>

  maintenance of Airframe, Engines and Parts, including servicing, testing,
  preventive maintenance, repairs, structural inspections, system checks,
  overhauls, approved modifications, engineering orders, airworthiness
  directives, corrosion control, inspections and treatments.

  MAJOR CHECKS means any C-check, multiple C-check or heavier check (including
  structural inspections and CPCP) suggested for commercial aircraft of the same
  model as the Aircraft by its manufacturer (however denominated) as set out in
  the Lessee's Maintenance Program.

  MANUFACTURER has the meaning given in the Aircraft Lease Agreement.

  MANUFACTURER'S MAINTENANCE PLANNING DOCUMENT means the recommended maintenance
  program for the Aircraft issued by the Manufacturer as in effect at the time
  of any applicable determination.

  MINIMUM AIRFRAME LIFE LIMITED COMPONENT CYCLES has the meaning given in the
  Aircraft Lease Agreement.

  MINIMUM AIRFRAME LIFE LIMITED COMPONENT FLIGHT HOURS has the meaning given in
  the Aircraft Lease Agreement.

  MINIMUM APU LIMIT has the meaning given in the Aircraft Lease Agreement.

  MINIMUM APU LLP LIMIT has the meaning given in the Aircraft Lease Agreement.

  MINIMUM COMPONENT CALENDAR LIFE has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM COMPONENT CYCLES has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM COMPONENT FLIGHT HOURS has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM ENGINE CYCLES has the meaning given in the Aircraft Lease Agreement.

  MINIMUM ENGINE FLIGHT HOURS has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LANDING GEAR CALENDAR TIME has the meaning given in the Aircraft
  Lease Agreement.

  MINIMUM LANDING GEAR CYCLES has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LANDING GEAR FLIGHT HOURS has the meaning given in the Aircraft
  Lease Agreement.

  MINIMUM LIABILITY COVERAGE has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM MEASURABLE FUEL REQUIREMENT has the meaning given in the Aircraft
  Lease Agreement.

  NAMEPLATE INSCRIPTION means the inscription to be included on the
  Nameplates as reasonably requested by Lessor from time to time.

                                     1-9

<PAGE>

  NAMEPLATES means the fireproof plates to be installed on the Aircraft in
  accordance with Section 8.6(a).

  OTHER AGREEMENTS means any aircraft, engine or spare parts related lease
  or financing agreement   (including an aircraft, engine or spare parts
  related loan, hire purchase,   conditional sale, credit sale or security
  agreement) from time to time entered   into between Lessor (or any
  Subsidiary or Affiliate of Lessor), on the one   hand, and Lessee (or any
  Subsidiary or Affiliate of Lessee), on the other   hand.

   OWNER has the meaning given in the Aircraft Lease Agreement.

   PART means, whether or not installed on the Aircraft:

           (a)      any component, furnishing or equipment (other than a
                    complete Engine or engine) incorporated or installed in
                    or attached to or furnished with the Aircraft on the
                    Delivery Date or thereafter if paid for or otherwise
                    provided by or on behalf of Lessor; and

           (b)      any other component, furnishing or equipment (other than
                    a complete Engine or engine), with effect from the time
                    when title thereto has passed to Owner pursuant to the
                    Lease;

           (c)      but excludes any such items title to which has passed to
                    Lessee pursuant to the Lease.

   PART 36 OR FAR PART 36 means Part 36 of the FAR, as amended or modified from
   time to time.

   PART 121 OR FAR PART 121 means Part  121 of the FAR, as amended or modified
   from time to time.

   PERMITTED LIEN means:

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

           (b)      any lien of a repairer, mechanic, hangar-keeper or other
                    similar lien arising in the ordinary course of business
                    by operation of Law in respect of obligations which are
                    not overdue or are being diligently contested in good
                    faith by appropriate proceedings;

           (c)      any Lessor Lien; and

           (d)      rights of others under any sub-lease or other arrangements
                    to the extent expressly permitted under Section 8.4;

  but only if (in the case of both (a) and (b)) (i) adequate reserves have been
  provided by Lessee for the payment of such Taxes or obligations; and (ii) such
  proceedings, or the continued existence of the lien, do not give rise to any
  risk of the sale, forfeiture or other loss of the Aircraft or any interest
  therein or of criminal liability on the part of Lessor or Owner.

                                     1-10

<PAGE>

  PERMITTED SUB-LEASE means any sub-lease of the Aircraft to a Permitted
  Sub-Lessee to which Lessor has consented as provided for in Section 8.4(a).

  PERMITTED SUB-LESSEE means any sub-lessee of the Aircraft to which Lessor has
  consented as provided in Section 8.4(a).

  PERSON means any individual person, any form of corporate or business
  association, trust, Government Entity, or organization or association of which
  any of the above is a member or a participant.

  PRE-APPROVED BANK has the meaning given in the Aircraft Lease Agreement.

  PRE-DELIVERY PROCEDURE means the procedure leading to Delivery as specified in
  Schedule 4.

  REDELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

  REGULATIONS means any Law or regulation, official directive or recommendation,
  mandatory requirement, or contractual undertaking, or airworthiness
  requirements or limitations, which applies to Lessee or the Aircraft and any
  Law or regulation, official directive or recommendation or mandatory
  requirement which applies to Lessor, Owner, Financing Parties' Representative
  or GECAS.

  RENT means the basic monthly "Rent", as defined in Schedule B of the Aircraft
  Lease Agreement, and payable pursuant to Section 5.3.

  RENT COMMENCEMENT DATE has the meaning given in the Aircraft Lease Agreement.

  RENTAL PERIOD means each period ascertained in accordance with Section 5.2.

  RENT DATE means the first day of each Rental Period.

  REPLACEMENT APU means an "APU" that has duly replaced the APU in accordance
  with the requirements of Section 8.11(b).

  REPLACEMENT ENGINE means an "Engine" that has duly replaced an "Engine" in
  accordance with the requirements of Section 8.11(b).

  REQUIRED LC EXPIRY DATE means the date being 91 days after the Expiry Date.

  RETURN OCCASION means the date on which the Aircraft is redelivered to Lessor
  in accordance with Section 12.

  SCHEDULED DELIVERY DATE has the meaning given in the Aircraft Lease
  Agreement.

  SCHEDULED DELIVERY MONTH has the meaning given in the Aircraft Lease
  Agreement.

  SCHEDULED DELIVERY WEEK has the meaning given in the Aircraft Lease
  Agreement.

                                     1-11

<PAGE>

  SCHEDULED EXPIRY DATE has the meaning given in the Aircraft Lease Agreement.

  SECURITY INTEREST means any mortgage, chattel mortgage, security interest,
  charge, pledge, lien, conditional sale agreement, title retention agreement,
  equipment trust agreement, encumbrance, assignment, hypothecation, right of
  detention, right of set-off or any other agreement or arrangement having the
  effect of conferring security.

  STATE OF DESIGN has the meaning specified in the Aircraft Lease Agreement.

  STATE OF INCORPORATION means the United States and the state of
  organization of the applicable Person as identified in the heading of the
  Aircraft Lease Agreement.

  STATE OF REGISTRY means the United States.

  SUBSIDIARY means:

           (a)     in relation to any reference to financial statements, any
                   Person whose financial statements are consolidated with the
                   accounts of Lessee in accordance with GAAP; and

           (b)     for any other purpose, an entity from time to time of
                   which another has direct or indirect control or owns
                   directly or indirectly more than 50 percent of the voting
                   share capital or similar equity interests.

  SUPPLEMENTAL RENT means, as and if applicable, all amounts payable under the
  Lease in respect of each of Airframe Supplemental Rent, Engine Supplemental
  Rent, Engine LLP Supplemental Rent, APU Supplemental Rent and Landing Gear
  Supplemental Rent.

  TAXES means any and all present and future taxes, duties, withholdings,
  levies, assessments, imposts, fees and other governmental charges of all kinds
  (including any value added or similar tax and any stamp, documentary, license,
  registration or similar fees or tax) imposed by a Government Entity, together
  with any penalties, fines, surcharges and interest thereon and any additions
  thereto.

  TAX INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

  TECHNICAL REPORT means a monthly report of the Flight Hours, Cycles, Engine
  Flight Hours and Engine Cycles operated by the Airframe and Engines in respect
  of each calendar month substantially in the form attached as Schedule 15.

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

  UCC means the Uniform Commercial Code as in effect in the State of New York.

  UNFORESEEN EVENT means:

                                     1-12

<PAGE>

          (a)      civil disturbance or act of any Government Entity;

          (b)      natural disaster or any other act of God;

          (c)      Law of, or any allocation or other action by, a Government
                   Entity or any unexpected shortage of labor, materials or
                   facilities affecting the Aircraft;

          (d)      any damage or Defect;

          (e)      labor disputes;

          (f)      breach of contract by any Person (other than Lessor), or
                   other failure to deliver or redeliver the Aircraft by any
                   Person (whether or not a breach) with possession or control
                   of the Aircraft (other than by Lessor, if it has possession
                   and control of the Aircraft), including any failure to
                   deliver or delay in-delivery by any prior lessee, any seller
                   of the Aircraft or any Person performing modifications or
                   maintenance to the Aircraft and any breach by any prior
                   lessee, seller or modification or maintenance performer or
                   failure to cooperate by any prior lessee, seller or
                   modification or maintenance performer, or any "excusable" or
                   "inexcusable" delay under any previous lease, purchase or
                   modification or maintenance agreement for the Aircraft, or
                   any purchase or modification or maintenance agreement for the
                   Aircraft terminating prior to Delivery (including due to
                   Lessor or an Affiliate of Lessor voluntarily terminating such
                   agreement);

          (g)      delays in obtaining the Aircraft or any equipment or
                   services for the Aircraft;

          (h)      any delay due to Air Authority certifications; or

          (i)      any other cause beyond the control of Lessor or not
                   occasioned by Lessor's gross negligence or willful
                   misconduct.

  UNITED STATES means the United States of America.

  U.S.C. means the United States Code.

                                     1-13

<PAGE>

                                   SCHEDULE 2
                         REPRESENTATIONS AND WARRANTIES

 1.1     LESSEE'S REPRESENTATIONS AND WARRANTIES

 Lessee's representations and warranties to Lessor as of the date of execution
 of the Lease and the Delivery Date are as follows:

         (a)      STATUS: It is duly organized, validly existing and in good
                  standing in its State of Incorporation.

         (b)      NON-CONFLICT:  Execution,  delivery  and  performance  of
                  the  Lease do not  contravene  or  breach  any  Regulation
                  applicable to Lessee.

         (c)      POWER AND AUTHORITY: It has all corporate and other power and
                  authority to execute, deliver and perform the Lease, and the
                  Lease has been duly authorized, executed and delivered by
                  Lessee.

         (d)      LEGAL  VALIDITY:  The Lease is its legal,  valid and
                  binding  obligation,  enforceable  against Lessee in
                  accordance with its terms.

         (e)      NO EVENT OF DEFAULT: No Event of Default has occurred and is
                  continuing or would occur because of Delivery.

         (f)      LITIGATION: It is not involved in any litigation or other
                  dispute which could materially and adversely affect its
                  financial condition or its ability to perform its obligations
                  under the Lease.

         (g)      FINANCIAL INFORMATION: Its audited financial statements most
                  recently delivered to Lessor:

                   (i)     have been prepared in accordance with GAAP; and

                   (ii)    are true and correct and present fairly the financial
                           condition and results of operations of Lessee as at
                           the date thereof and for the period then ending.

          (h)      FULL DISCLOSURE: Neither the audited financial statements
                   referred to in paragraph (g) nor any other financial,
                   operational or credit related information provided to
                   Lessor by Lessee for the purposes of the Lease contains as
                   of the date thereof any untrue statement of a material
                   fact or omits to state any material fact necessary in
                   order to make the statements therein not misleading in the
                   light of the circumstances under which they were made.

                                     2-1

<PAGE>

         (i)       LOCATION: Lessee's chief executive office (as that term is
                   defined in Article 9 of the UCC) is located at the address
                   set forth in the heading of the Aircraft Lease Agreement;
                   and the records of the Lessee concerning the Aircraft are
                   maintained at such chief executive office or at the
                   Habitual Base of the Aircraft.

         (j)       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 U.S.C. with respect to the Aircraft.

         (k)       CITIZEN OF THE UNITED STATES: Lessee is a "citizen of the
                   United States" as defined in Section 40102 of Title 49
                   of the U.S.C.

         (1)       ERISA: Lessee is not engaged in any transaction in
                   connection with which it could be subjected to either a
                   civil penalty assessed pursuant to Section 502 of ERISA or
                   any tax imposed by Section 4975 of the Internal Revenue
                   Code; no material liability to the Pension Benefit
                   Guaranty Corporation has been or is expected by Lessee to
                   be incurred with respect to any employee pension benefit
                   plan (as defined in Section 3 of ERISA) maintained by
                   Lessee or. by any trade or business (whether or not
                   incorporated) which together with Lessee would be treated
                   as a single employer under Section 4001 of ERISA and
                   Section 414 of the Internal Revenue Code; there has been
                   no reportable event (as defined in Section 4043(b) of
                   ERISA) with respect to any such employee pension benefit
                   plan; no notice of intent to terminate any such employee
                   pension benefit plan has been filed or is expected to be
                   filed, nor has any such employee pension benefit been
                   terminated; no circumstance exists or is anticipated that
                   constitutes or would constitute grounds under Section 4042
                   of ERISA for the Pension Benefit Guaranty Corporation to
                   institute proceedings to terminate, or to appoint a
                   trustee to manage the administration of, such an employee
                   pension benefit plan; and no accumulated funding
                   deficiency (as defined in Section 302 of ERISA or Section
                   412 of the Internal Revenue Code), whether or not waived,
                   exists with respect to any such employee pension benefit
                   plan.

         (m)       MATERIAL ADVERSE CHANGE: there has been no material adverse
                   change in the financial condition or operations of Lessee
                   and Lessee Affiliates or in the ability of Lessee to
                   comply with its obligations under the Lease since the date
                   of the financial statements most recently provided to
                   Lessor on or prior to the date of the Aircraft Lease
                   Agreement.

 1.2     LESSOR'S REPRESENTATIONS AND WARRANTIES

 Lessor's representations and warranties to Lessee as of the date of execution
 of the Lease and the Delivery Date are as follows:

         (a) STATUS: It is duly organized, validly existing and in good standing
             in its State of Incorporation.

                                     2-2

<PAGE>

         (b)      NON-CONFLICT:  Execution,  delivery and performance of the
                  Lease do not contravene or breach any Regulation
                  applicable to Lessor.

         (c)      POWER AND AUTHORITY: It has all corporate and other power and
                  authority to execute, deliver and perform the Lease, and the
                  Lease has been duly authorized, executed and delivered by
                  Lessor.

         (d)      LEGAL  VALIDITY:  The Lease is its  legal,  valid and
                  binding  obligation,  enforceable  against Lessor in
                  accordance with its terms.

         (e)      CITIZEN OF THE UNITED  STATES:  Lessor is a "citizen of the
                  United  States" as defined in Section 40102 of Title 49 of
                  the U.S.C. and the FAR.

                                     2-3

<PAGE>

                                   SCHEDULE 3
                              CONDITIONS PRECEDENT

  PART A - LESSOR CONDITIONS PRECEDENT

  The conditions precedent to Lessor's obligation to deliver and to commence the
  leasing of the Aircraft are as follows. All documents delivered to Lessor
  pursuant to this Schedule 3 will be in English:

  1.1     PRELIMINARY CONDITIONS

 Lessor will receive from Lessee, not later than two Business Days prior to the
 Scheduled Delivery Date, each of the following, satisfactory in form and
 substance to Lessor:

          (a)      OPINIONS(S): forms of the opinion(s) substantially in the
                   form of Schedule 8 that will be issued on the Delivery
                   Date by legal counsel(s) reasonably acceptable to Lessor
                   with respect to the laws of the State of New York, the
                   state of the location of Lessee's chief executive offices
                   and the general corporate laws of the State of
                   Incorporation;

          (b)      APPROVALS: evidence of the issue of each approval, license
                   and consent, if any, which is required in relation to, or
                   in connection with the performance by Lessee of any of its
                   obligations under the Lease;

          (c)      IMPORT: evidence that any required 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 Taxes;

          (d)      PROCESS AGENT: a letter from the process agent appointed by
                   Lessee in the Lease accepting that appointment;

          (e)      LICENSES: copies of Lessee's air transport license, air
                   carrier operating certificate, air operator's
                   certificates, including authority to operate the Aircraft
                   under FAR Part 121, and a Certificate of Public
                   Convenience and Necessity issued under Section 40102 of
                   Title 49 of U.S.C.;

          (f)      UCC: Financing Statements with respect to the Lease and
                   the Aircraft in a form reasonably acceptable to Lessor
                   shall have been executed and delivered by Lessee to Lessor
                   and duly filed in each jurisdiction reasonably requested
                   by Lessor;

          (g)      Letter of Credit (if applicable): the form of the Letter of
                   Credit;

          (h)      General: such other documents as Lessor may reasonably
                   request.

                                     3-1

<PAGE>

 1.2      FINAL CONDITIONS

          (a)     Final Documents: Lessor shall receive on or before the
                  Delivery Date each of the following:

                  (i)      CERTIFICATE OF TECHNICAL ACCEPTANCE AND LEASE
                           SUPPLEMENT NO. 1: each of the Certificate of
                           Technical Acceptance and Lease Supplement No. 1,
                           dated and fully completed, and executed by Lessee,
                           and, in the case of Lease Supplement No. 1, filed
                           for recording at the FAA (together with the CTA);

                  (ii)     OPINIONS: a signed original (or facsimile
                           transmission thereof) of each of the opinions
                           referred to in Section 1.1(a) of this Schedule,
                           dated the Delivery Date;

                  (iii)    PAYMENTS: all sums due to Lessor under the Lease on
                           or before the Delivery Date, including the first
                           payment of Rent and, if applicable, the balance of
                           the Deposit;

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

                  (v)      FINANCIAL INFORMATION: the latest Financial
                           Information of Lessee requested by Lessor;

                  (vi)     LETTER OF CREDIT (if applicable): the Letter of
                           Credit;

                  (vii)    GUARANTEE (if applicable): the Guarantee, duly
                           executed and delivered by the Guarantor, and an
                           opinion of legal counsel acceptable to Lessor in
                           respect of the Guarantee in form and substance
                           acceptable to Lessor and its legal counsel;

                  (viii)   LESSEE'S MAINTENANCE PROGRAM: such information and
                           documents relating to the Lessee's Maintenance
                           Program as Lessor may reasonably require;

                  (ix)     FILINGS: evidence that on the Delivery Date 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 the Lease and to protect the
                           interests of Owner and, if applicable, the Financing
                           Parties in the Aircraft, any Engine or any Part and
                           in the Lease;

                  (x)      FAA OPINION: evidence that there will be issued an
                           opinion of or other counsel reasonably acceptable
                           to Lessor who are recognized specialists with
                           regard to FAA registration matters in a form
                           reasonably acceptable to Lessor as

                                     3-2

<PAGE>

                           to the due filing for recordation of the Lease
                           and, if applicable,  the Financing  Documents,
                           (the costs for which shall be paid by Lessee);

                   (xi)    CERTIFICATE OF LEASE TERMINATION: a certificate of
                           lease termination executed by .a duly authorized
                           officer of Lessee substantially in the form of
                           Schedule 11 acknowledging that the Lease is no
                           longer in effect with respect to the Aircraft and
                           Engines, which certificate Lessor will hold in
                           escrow to be filed at the FAA upon the expiration
                           or other termination of the Lease;

                    (xii)   ACKNOWLEDGEMENT AND AGREEMENT RE ASSIGNMENT (if
                            applicable): an acknowledgement of and certain
                            agreements with respect to the assignment by Lessor
                            of this Lease to Owner and Financing Parties'
                            Representative in the form previously provided to
                            Lessee or as Owner or Financing Parties'
                            Representative may otherwise reasonably request; and

                   (xiii)   GENERAL: such other documents as Lessor may
                            reasonably request;

          (c)      REPRESENTATIONS/WARRANTIES: the representations and
                   warranties of Lessee in Schedule 2 shall be true and
                   correct in all material respects, and would be true and
                   correct in all material respects if repeated on Delivery;
                   and

           (d)     NO DEFAULT: no Default shall have occurred and be
                   continuing on Delivery or could reasonably be expected to
                   result from the leasing of the Aircraft to Lessee under
                   the Lease.

  PART B - LESSEE CONDITIONS PRECEDENT

  The conditions precedent to Lessee's obligation to accept and to commence the
  leasing of the Aircraft are as follows. All documents delivered to Lessee
  pursuant to this Schedule 3 will be in English.

          (a)      FINAL DOCUMENTS: Lessee shall receive on or before the
                   Delivery Date for the  Aircraft each of the following:

                   (i)      LEASE SUPPLEMENT NO. 1: Lease Supplement No. 1,
                            dated and executed by Lessor and filed for
                            recording at the FAA (together with the CTA); and

                   (ii)     ACKNOWLEDGEMENT RE QUIET ENJOYMENT: if Lessee is
                            required to deliver an acknowledgement of or
                            agreement with respect to the assignment by
                            Lessor of the Lease to Owner or Financing
                            Parties' Representative, an agreement by each
                            such Person (Owner, Financing Parties'
                            Representative or both, as the case may be) as to
                            itself to the effect set forth in Section 7.1;

                                     3-3

<PAGE>

                  (iii)    REPRESENTATIONS/WARRANTIES: the representations and
                           warranties of Lessor in Schedule 2 shall be true and
                           correct in all material respects, and would be true
                           and correct in all material respects if repeated on
                           Delivery; and

                  (iv)     DELIVERY CONDITION REQUIREMENTS: tender by Lessor
                           of delivery of the Aircraft in compliance with the
                           Delivery Condition Requirements.

                                     3-4

<PAGE>

                                   SCHEDULE 4

                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 1 (NEW AIRCRAFT)

  1.      LICENSES

          (a)      It is the responsibility of Lessee to obtain all licenses,
                   permits or approvals necessary to export or transport the
                   Aircraft from the Delivery Location.

          (b)      Lessor will provide Lessee with any required data and
                   information for the purposes of obtaining any such licenses,
                   permits or approvals.

  2.      INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)      Subject to any applicable purchase agreement, Lessee may
                   inspect the Aircraft (including such rights as Lessor has
                   to be present and inspect, on an ongoing basis, the
                   manufacture of the Aircraft and including a demonstration
                   flight at no expense to Lessee with up to two (2)
                   representatives of Lessee on the Aircraft as observers) to
                   ensure that the Aircraft fulfils the Delivery Condition
                   Requirements.

          (b)      If Lessee's inspection of the Aircraft shows that the
                   Aircraft does not fulfil the Delivery Condition
                   Requirements, Lessor will correct any defects and make the
                   Aircraft available for re-inspection by Lessee provided
                   that, in Lessor's reasonable opinion, it is not
                   impracticable or prohibitively expensive to correct the
                   defect.

          (c)      If Lessor notifies Lessee that it does not intend to
                   correct the defect, either party may terminate the Lease,
                   and upon such termination neither party shall have any
                   further liability to any party under this Lease, except
                   that Lessor shall promptly return to Lessee the Deposit
                   and/or the Letter of Credit, if any, to Lessor.

 3.       INDEMNITY

          Lessee is responsible for and will indemnify each Indemnitee against
          all Losses arising from death or injury to any observer or any
          employee of Lessee in connection with the inspection of the Aircraft.

                                      4-1

<PAGE>

                                   SCHEDULE 4

                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 2 (USED AIRCRAFT)

  1.      LICENSES

          (a)      It is the responsibility of Lessee to obtain all licenses,
                   permits or approvals necessary to export or transport the
                   Aircraft from the Delivery Location.

          (b)      Lessor will provide Lessee with my required data and
                   information for the purposes of obtaining any such
                   licenses, permits or approvals.

  2.      INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)      Subject to any applicable purchase agreement or prior
                   lease, Lessee may inspect the Aircraft (including a
                   demonstration flight at no expense to Lessee with up to
                   two (2) representatives of Lessee on the Aircraft as
                   observers) to ensure that the Aircraft fulfils the
                   Delivery Condition Requirements.

          (b)      If Lessee's inspection of the Aircraft shows that the
                   Aircraft does not fulfil the Delivery Condition
                   Requirements, Lessor will correct any defects and make the
                   Aircraft available for re-inspection by Lessee provided
                   that, in Lessor's reasonable opinion, it is not
                   impracticable or prohibitively expensive to correct the
                   defect.

          (c)      If Lessor notifies Lessee that it does not intend to
                   correct the defect, either party may terminate the Lease,
                   and upon such termination neither party shall have any
                   further liability to any party under this Lease, except
                   that Lessor shall promptly return to Lessee the Deposit
                   and/or the Letter of Credit, if any, to Lessor.

 3.       INDEMNITY

          Lessee is responsible for and will indemnify each Indemnitee against
          all Losses arising from death or injury to any observer or any
          employee of Lessee in connection with the inspection of the Aircraft.

                                      4-2

<PAGE>

                                   SCHEDULE 5

            CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 1 (NEW AIRCRAFT)

This Certificate of Technical Acceptance is delivered, on the date set out
below by _____________ ("Lessee") to ______________ ("Lessor") pursuant to the
Aircraft Lease Agreement dated ______________ between Lessor and Lessee (the
"Lease"). The capitalized terms used in this Certificate shall have the
meaning given to such terms in the Lease.

DETAILS OF ACCEPTANCE

Lessee hereby confirm to Lessor that Lessee has at [ ] o'clock on this
____ day of ____________, at technically accepted the following, in accordance
with the provisions of the Lease:

_________ Aircraft, Manufacturer's Serial Number _________;

_________ Engines:

Engine Number    Manufacturer's Serial Number _________

[To be completed at Delivery]

(each of which has 750 or more rated take off horsepower or the equivalent of
such horsepower)

Fuel Status:    Kilos/lbs _________; and

Loose Equipment Check List: in accordance with the list signed by Lessor and
Lessee and attached hereto.

Aircraft Documents and Records: in accordance with the list signed by Lessor
and Lessee and attached hereto.

LOPA drawing attached.

HOURS AND CYCLES DATA (AS OF DELIVERY DATE)

Airframe:

Time Since New: _________          Cycles Since New: _________

Landing Gear (Main and Nose)

Time Since New: [, Center]         Cycles Since New: _________

Engines

Position:                          Time Since New: ___________

                                   Cycles Since New: _________

________________________

Auxiliary Power Unit:

Number of Flight Hours/APU Hours

(as applicable) since New: _________

                                     5-1

<PAGE>

ACCEPTANCE:

Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
Documents and Records are technically acceptable to it, satisfy all of the
Delivery Condition Requirements and are in the condition for delivery and
acceptance as required under the Lease.

IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Technical Acceptance on the date
in paragraph 1 above.

LESSEE:___________________________

By:_______________________________

Title:____________________________

LESSOR:___________________________

By:_______________________________

Title:____________________________

                                     5-2

<PAGE>

                                   SCHEDULE 5

            CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 2 (USED AIRCRAFT)

This Certificate of Technical Acceptance is delivered, on the date set out
below by _____________ ("Lessee") to ______________ ("Lessor") pursuant to the
Aircraft Lease Agreement dated ______________ between Lessor and Lessee (the
"Lease"). The capitalized terms used in this Certificate shall have the
meaning given to such terms in the Lease.

DETAILS OF ACCEPTANCE

Lessee hereby confirm to Lessor that Lessee has at [ ] o'clock on this ____
day of ____________, at ____________ technically accepted the following, in
accordance with the provisions of the Lease:

_________ Aircraft, Manufacturer's Serial Number _________;

_________ Engines:

Engine Number    Manufacturer's Serial Number _________

[To be completed at Delivery]

(each of which has 750 or more rated take off horsepower or the equivalent of
such horsepower)

Fuel Status:    Kilos/lbs _________; and

Loose Equipment Check List: in accordance with the list signed by Lessor and
Lessee and attached hereto.

Aircraft Documents and Records: in accordance with the list signed by Lessor
and Lessee and attached hereto.

HOURS AND CYCLES DATA (as of Delivery Date)

Airframe:

Number of Hours since last Airframe Structural Check: ______ hours

"C" Check (or Equivalent)

Interval:_________________________

Time Since:_______________________

Landing Gear Overhaul:

Number of Cycles Since Last Overhaul:

                                      5-3

<PAGE>

[____] Gear __________ cycles

Interval:______________________________

Engines:

Number of Hours Since Last Engine Refurbishment:

S/N__________:__________ hours

Hot Section Inspection:

Interval:______________________________

Time Since (S/N__________):____________

Time Remaining to First Restriction:

Engine SIN:

Hours:___________     Restrictions:__________

Cycles:__________     Restrictions:__________

Average Cycles in Life Limited Parts (see attached Schedule):__________

Auxiliary Power Unit:

Number of APU Hours since Last Heavy Shop Visit:

__________ hours    Date accomplished____________________

Hot Section Inspection:

Interval:______________________________

Time Since:____________________________

Interior Equipment:

LOPA - attached________________________

Emergency drawing - attached____________________

Galley Equipment_______________________

                                      5-4

<PAGE>

ACCEPTANCE:

Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
Documents and Records are technically acceptable to it, satisfy all of the
Delivery Condition Requirements and are in the condition for delivery and
acceptance as required under the Lease.

IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Technical Acceptance on the date
in paragraph 1 above.

LESSEE:

By:_______________________________

Title:____________________________

LESSOR:

By:_______________________________

Title:____________________________

By:_______________________________

Title:____________________________

                                      5-5

<PAGE>

                                     SCHEDULE 6

                                   [NOT APPLICABLE]

                                        6-1

<PAGE>

                                   SCHEDULE 7

                           INSURANCE REQUIREMENTS

1.1      TYPES OF INSURANCE

The Insurances required to be maintained are as follows:

         (a)     HULL ALL RISKS of loss or damage while flying, taxiing and
                 on the ground with respect to the Aircraft on an agreed
                 value basis for not less than the Agreed Value and not more
                 than 110% of the Agreed Value and with a deductible not
                 exceeding the Deductible Amount;

         (b)     HULL WAR AND ALLIED PERILS, being such risks excluded from
                 the Hull All Risks Policy, to the fullest extent available
                 from the leading international insurance markets for the
                 Agreed Value; provided that, when the Aircraft is being
                 operated in or over the United States or Canada, coverage
                 may be limited to such coverage as is usual and customary
                 for comparable airlines, operating similar equipment in
                 similar circumstances, namely subject to the North American
                 buy-back;

         (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
                 for like kind and quality value and including engine test
                 and running risks; and

         (d)     COMPREHENSIVE 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 for 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 in line with prudent market practice for
                 comparable airlines, operating rating similar equipment in
                 similar circumstances.

1.2      TERMS OF HULL AND SPARES INSURANCE

All required hull and spares insurance, so far as it relates to the Aircraft,
will:

         (a)     LOSS PAYEE: name Lessor, as loss payee (without imposing on
                 Lessor any obligation imposed on the insured, including the
                 liability to pay any calls, commissions or premiums);

         (b)     PAYMENT OF LOSSES: Losses will be payable in Dollars to
                 Lessor for all amounts up to the Agreed Value and to Lessee
                 for any excess above the Agreed Value (which excess shall
                 not exceed 10% of the Agreed Value), except where the
                 insurance payment does not

                                      7-1

<PAGE>

                 exceed the Damage Notification Threshold, and no Default is
                 in existence, in which case the loss will be settled with
                 and paid to Lessee;

         (c)     50/50 PROVISION: if separate Hull "all risks" and "war
                 risks" insurances are arranged, include a 50/50 provision
                 in accordance with market practice (AVS. 103 is the
                 current London market language); and

        (d)      NO OPTION TO REPLACE: confirm that the insurers are not
                 entitled to replace the Aircraft in the event of an insured
                 Event of Loss and are not entitled to replace any Engine in
                 the event of an Engine Event of Loss with respect to such
                 Engine.

1.3      TERMS OF LIABILITY INSURANCE

All required liability insurances will:

        (a)      ADDITIONAL INSUREDS: include each Indemnitee, as additional
                 insureds for its respective rights and interests, warranted,
                 each as to itself only, no operational interest (without
                 imposing on any such Person any obligation imposed on the
                 insured, including the liability to pay any calls,
                 commissions or premiums);

         (b)     SEVERABILITY: include a Severability of interests clause
                 which provides that the insurance, except for the limit of
                 liability, will operate to give each insured the same
                 protection as if there were a separate policy issued to each
                 insured; and

         (c)     PRIMARY POLICY: 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, any Indemnitee or Lessee has the
                 benefit so as to reduce the amount payable to the additional
                 insureds under such policies.

1.4      TERMS OF ALL INSURANCES

All Insurances will:

        (a)      INDUSTRY PRACTICE: be in accordance with standard industry
                 practice for airlines operating similar aircraft in similar
                 circumstances;

         (b)     DOLLARS: provide cover denominated in Dollars;

         (c)     WORLDWIDE: operate on a worldwide basis subject to such
                 limitations and exclusions as are in line with industry
                 practice obtained by prudent United States-based
                 international air carriers;

         (d)     BREACH OF WARRANTY: 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

                                      7-2

<PAGE>

                 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;

          (e)    SUBROGATION: provide that the insurers will hold harmless
                 and waive any rights of recourse or subrogation against the
                 additional insureds to tile extent Lessee has waived its
                 rights against the additional insureds in the Lease;

          (f)    PREMIUMS: provide that the additional insureds 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 set-off, counter claim or other deduction, by
                 attachment or otherwise, in respect of any premium due
                 against the respective interests of the additional insureds
                 other than outstanding premiums relating to the Aircraft,
                 any Engine or Part the subject of the relevant claim;

          (g)    CANCELLATION/CHANGE: provide that the Insurances will
                 continue unaltered for the benefit of the additional insured
                 for at least 30 days after written notice by registered mail
                 or telex of any cancellation, change, event of non-payment
                 of premium or installment thereof has been sent by
                 insurer(s) to Lessor, or where an insurance broker is
                 appointed to the insurance broker who shall promptly send on
                 such notice to Lessor, 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; and

          (h)    [NOT APPLICABLE]

          (i)    [INTENTIONALLY OMITTED.]

          (j)    INDEMNITIES:  accept and insure the  indemnity  provisions
                 of the Lease to the extent of the risks  covered by the
                 policies.

1.5      DEDUCTIBLES

Lessee shall be responsible for any and all deductibles under the Insurances.

1.6      APPLICATION OF INSURANCE PROCEEDS

The Insurances will be endorsed to provide for payment of proceeds as follows:

         (a)     EVENT OF LOSS: all insurance payments up to the Agreed Value
                 received as the result of an Event of Loss occurring during
                 the Term will be paid to Lessor as loss payee and any amount
                 in excess of the Agreed Value (which excess shall not exceed
                 10% of the Agreed Value) shall be paid to Lessee;

                                      7-3

<PAGE>

         (b)     EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance
                 proceeds of any 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 the appropriate repair facility,
                 and applied in payment (or paid to Lessee and/or Lessor as
                 reimbursement) for repairs or replacement property upon
                 Lessor being satisfied that the repairs or replacement have
                 been effected in accordance with the Lease.

         (c)     BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in
                 amounts below the Damage Notification Threshold shall be
                 paid by the insurer directly to Lessee;

         (d)     LIABILITY PROCEEDS: all insurance proceeds in respect of
                 third party liability will be paid by the insurers to the
                 relevant third party in satisfaction of the relevant
                 liability or to Owner, Lessor, Financing Partners'
                 Representative or Lessee, as the case may be, in
                 reimbursement of any payment so made;

         (e)     DEFAULT: notwithstanding any of the foregoing paragraphs, 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 Lessor, Owner or Financing Parties'
                 Representative, as the case may be, or retained to be
                 applied toward payment of any amounts which may be or become
                 payable by Lessee in such order as Lessor or Owner, as the
                 case may be, may elect until such time as no Default is
                 continuing and then applied as described above; and to. the
                 extent that insurance proceeds are paid to Lessee, Lessee
                 agrees to hold such proceeds in trust and comply with the
                 foregoing provisions and apply or pay over such proceeds as
                 so required.

1.7      UNITED STATES GOVERNMENTAL INDEMNITY

Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
Sub-Lease to, or a requisition of use by, the United States or any
Governmental Entity whose obligations have the full faith and credit of the
federal Government of the United States, Lessor agrees to accept in lieu of
insurance required hereunder indemnification or insurance from the United
States or such a Governmental Entity in a form reasonably acceptable to
Lessor and Owner and against such risks and in such amounts and on such terms
such that when added to the Insurance maintained by Lessee, Lessee is in full
compliance with the requirements of Section 9 and this Schedule.

                                      7-4

<PAGE>

                                   SCHEDULE 8

                 FORM OF LESSEE'S AND GUARANTOR'S LEGAL OPINION

[Lessor]

[Owner]

[Financing Parties' Representative]

Ladies and Gentlemen:

1.   You have asked us to render an opinion in connection with the
     transaction governed by or subject to, inter alia, the following
     documents.

     (a)  the Lease as defined below;

     (b)  the [Articles/Certificate of Incorporation and By-laws]* of Lessee;
          and

          [*Counsel should amend this reference as necessary to describe the
          actual constitutional documents of Lessee].

     (c)  all other documents, approvals and consents of whatever nature and
          wherever kept which, it was, in our judgement and to our knowledge,
          necessary or appropriate to examine to enable us to give the
          opinion expressed below.

     Words and expressions used and not otherwise defined herein will bear
     the same meanings as defined in an Aircraft Lease Agreement dated
     __________, _____ between __________ ("Lessor") and __________
     ("Lessee") in respect of one __________ aircraft with manufacturer's
     serial number __________ together with the __________ installed
     __________ engines (the "Aircraft"). As used herein the term "Lease"
     means and includes the Aircraft Lease Agreement which incorporates the
     Common Terms Agreement (as defined therein) and Lease Supplement
     No.__________. Also, for the purposes of this opinion, the term
     "Lease" includes the Acknowledgment and Agreement dated as of the
     date hereof executed by Lessee in favor of Owner and Financing Parties'
     Representative.

2.   Having considered the documents listed in paragraph 1 above, and having
     regard to the relevant laws of __________ we are pleased to advise that
     in our opinion:

     (a)  Lessee is a company duly incorporated and in good standing under
          the laws of ____________ and is qualified to do business as a foreign
          corporation in each jurisdiction where failure to so qualify would
          have a materially adverse effect on Lessee's business or its
          ability to perform its obligations under the Lease;

     (b)  Lessee has the corporate power to enter into and perform, and has
          taken all necessary corporate action to authorize the entry into,
          and the execution, delivery and performance by it of, the Lease and
          the transactions contemplated by the Lease;

                                      8-1

<PAGE>

     (c)  the entry into and performance by Lessee of, and the transactions
          contemplated by, the Lease do not and will not (x) conflict with
          any laws binding on Lessee, (y) conflict with the
          [Articles/Certificate of Incorporation or By-laws] of Lessee; or
          (z) conflict with or result in default under any agreement or
          instrument which is binding upon Lessee or any of its assets or
          result in the creation of any Security Interest on any of its
          assets;

     (d)  no authorizations, consents, licenses, approvals and registrations
          (other than those which have been obtained and of which copies are
          attached hereto) are necessary or desirable to be obtained from any
          governmental or other regulatory authorities in the United States
          or any other jurisdiction having jurisdiction over Lessee, its
          operations or its properties to enable Lessee (x) to enter into and
          perform the transactions contemplated by the Lease, (y) to operate
          the Aircraft in the United States and on international flights for
          the transport of fare-paying passengers, or (z) to make the
          payments provided for in the Lease;

     (e)  except for the filing and recordation of [a bill of sale in favor of
          the Owner,] the Financing Documents and the Lease with the FAA
          (which filing has been duly made on or before this date) and the
          filing of Financing Statements in it is not necessary or desirable,
          to ensure the priority, validity and enforceability of all the
          obligations of Lessee under the Lease, as against Lessee and all
          third parties, or to perfect the interests of Lessor, Owner or
          Financing Parties' Representative in and to the Aircraft or the
          Lease, that the Lease be filed, registered, recorded or notarized
          in any public office or elsewhere or that any other instrument be
          signed, delivered, filed, registered or recorded, that any tax or
          duty be paid or that any other action whatsoever be taken;

     (f)  the Lease has been duly executed and delivered on behalf of
          Lessee and  constitutes  the legal,  valid and binding obligation
          of Lessee, enforceable against Lessee in accordance with its terms;

     (g)  [NOT APPLICABLE];

     (h)  there is no applicable usury or interest limitation law in
          ________________ applicable to payments in accordance with the
          Lease;

     (i)  there are no registration, stamp or other taxes or duties of any
          kind payable in ________________ connection with the execution,
          performance or enforcement by legal proceedings of the Lease or the
          Guaranty;

     (j)  the choice of New York law to govern the Lease will be upheld as a
          valid choice of law in any action in the courts of ______________;

     (k)  the consent to the jurisdiction by Lessee contained in the Lease is
          valid and binding on Lessee;

                                 8-2

<PAGE>

     (l)  Lessee is a Certificated Air Carrier;

     (m)  Lessee is a "citizen of the United States" as defined in 49 U.S.C.
          Section 40102(a)(15);

     (n)  Lessee's "chief executive office" (as referenced in the Uniform
          Commercial Code adopted in the State of _________________) is
          _______________________;

     (o)  Lessor will not violate any law or regulation of the States of
          _______________ or New York or any federal laws or regulations of
          the United States of America and Lessor will not become liable to
          income tax in the State of solely by reason of Lessor entering into
          the Lease with Lessee or performing its obligations thereunder or
          enforcement of its rights thereunder;

     (p)  It is not necessary for Lessor to establish a place of business or
          be licensed or qualified to do business in the State of
          ___________________ or New York in order for Lessor to enforce any
          provisions of the Lease; and

     (q)  Lessor is entitled to the benefits of Section 1110 of Title 11 of
          the U.S.C. with respect to the Aircraft and the Lease.

                                                   Very truly yours,

[If there is a Guarantor/Guarantee the opinion must also include paragraphs
(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (o) and (p) revised to
be applicable to the Guarantor/Guarantee]

                                      8-3

<PAGE>

                                   SCHEDULE 9

                                EVENTS OF DEFAULT

Each of the following events or conditions constitutes an Event of Default:

     (a)  NON-PAYMENT: Lessee fails to make any payment of Rent, Supplemental
          Rent or any other amount payable under the Lease on the due date
          and such failure continues for three (3) Business Days or more; or

     (b)  INSURANCE: Lessee fails to comply with any provision of Section 9
          (other than the requirement to provide Lessor with evidence of
          renewal of any policy on or before the renewal date where the
          policy has actually been renewed on or prior to such date) or
          Schedule 7, or any insurance required to be maintained under the
          Lease is cancelled or terminated, or a notice of cancellation is
          given in respect of any such insurance; or

     (c)  BREACH: (i) Lessee fails to provide Lessor with evidence of renewal
          of any insurance policy on or before the renewal date for that
          policy where the policy has actually been renewed on or prior to
          such date and such failure continues for 24 hours after notice from
          Lessor to Lessee of such failure to comply; or (ii) Lessee fails to
          comply with any other provision of the Lease not referenced in this
          Schedule 9 and, if such failure is in the opinion of Lessor capable
          of remedy, such failure continues for 30 days after notice from
          Lessor to Lessee; or

     (d)  REPRESENTATION: any representation or warranty made (or deemed to
          be repeated) by Lessee in or pursuant to the Lease or in any
          document executed by Lessee in connection with or pursuant to the
          Lease or in any document or in any certificate is or proves to have
          been incorrect in any material respect when made or deemed to be
          repeated; or

     (e)  CROSS-DEFAULT:

          (i)   any amount in respect of Financial Indebtedness of Lessee or
                any Lessee Affiliate having a principal amount in excess of
                Five Hundred Thousand Dollars ($500,000) is not paid when due;

          (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 becomes due as a result of an event of
                default or termination event, howsoever described, on the
                part of Lessee or any other Person prior to the date when it
                would otherwise have become due; or

          (iii) the security for any such Financial Indebtedness becomes
                enforceable; or

                                      9-1

<PAGE>

          (iv)  any event of default or termination event, howsoever
                described, occurs under any Other Agreement, or any other
                lease, hire purchase, conditional sale or credit sale
                agreement of Lessee or any Lessee Affiliate; or

     (f)  APPROVALS: any consent, authorization, license, certificate or
          approval of or registration with or declaration to any Government
          Entity required to be obtained or maintained by Lessee in
          connection with the Lease and/or the operation of the Aircraft
          (including any airline license or air transport license including
          authority to operate the Aircraft under Part 121 of the FARs, a
          Certificate of Convenience and Necessity issued under the Act and
          any air carrier operating certificate issued under the Act) is
          modified in a materially prejudicial manner oris 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 Lessee Affiliate consents to the appointment of
                a custodian, receiver, trustee or liquidator of itself or all
                or a material part of its property or its consolidated
                property, or Lessee or any Lessee Affiliate 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 Lessee Affiliate
                files a voluntary, petition in bankruptcy or voluntary
                petition seeking reorganization in a proceeding under any
                bankruptcy or insolvency laws (as now or hereafter in
                effect), or an answer admitting the material allegations of a
                petition filed against Lessee in any such proceeding, or
                Lessee or any Lessee Affiliate 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 debtors, or provides for an
                agreement, composition, extension or adjustment with its
                creditors, or any board of directors or shareholder action is
                taken by Lessee or any Lessee Affiliate in furtherance of any
                of the foregoing, whether or not the same is fully-effected
                or accomplished; or

          (ii)  An order, judgement or decree is entered by any court
                appointing, without the consent of Lessee or any Lessee
                Affiliate,' a custodian, receiver, trustee or liquidator of
                or sequestering any of Lessee's or any Lessee Affiliate's
                property, and any such order, judgement 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

          (iii) An involuntary petition against Lessee or any Lessee
                Affiliate or other 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

                                      9-2

<PAGE>

                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 debtors
                which may apply to Lessee or any Lessee Affiliate, any court
                of competent jurisdiction assumes jurisdiction over, or
                custody or control of, Lessee or any Lessee Affiliate or of
                all or any material part of Lessee's or Lessee Affiliates'
                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)  SUSPENSION OF BUSINESS: Lessee suspends or ceases or takes
          substantive steps to suspend or cease to carry on all or a material
          part of its business as a Certificated Air Carrier (other than as a
          result of a labor dispute with Lessee's employees); or

     (i)  RIGHTS AND REMEDIES: Lessee or any other Person claiming by or
          through Lessee challenges the existence, validity, enforceability
          or priority of the Lease or the rights of Lessor as lessor or of
          Owner as owner in respect of the Aircraft or Financing Parties'
          Representative as holder of a first priority Security Interest in
          the Aircraft and the Lease; or

     (j)  CHANGE OF  CONTROL:  any single  person or group of persons
          acquire  control of Lessee or  Guarantor  without the previous
          consent in writing of Lessor; or

     (k)  DELIVERY: Lessee fails to comply with its obligation under Section
          4 to accept delivery of the Aircraft or Lessee fails to comply with
          its obligations under Section 2 of Part III of Schedule A to the
          Aircraft Lease Agreement; or

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

     (m)  Letter of Credit:

          (i)   the  issuer of the Letter of Credit (if any) fails to make
                any  payment  under that  Letter of Credit  when due; or

          (ii)  any such Letter of Credit is not in full force or, for any
                reason ceases to constitute the legal; valid and binding
                obligation of the issuer; or

          (iii) any of the events listed in paragraph (g) above applies to
                such issuer (references in those sub-paragraphs to Lessee
                being deemed to be to the issuer); or

                                   9-3

<PAGE>

          (iv)  where applicable, any Letter of Credit is not renewed,
                extended or reissued within the time, or replaced when,
                required by Section 5.14; or

          (v)   any consent, authorization, license, certificate or approval
                of or registration with or declaration to any Governmental
                Entity required to be obtained or maintained by the issuer of
                the Letter of Credit in connection with the Letter of Credit
                is modified in a materially prejudicial manner or is
                withheld, revoked, suspended, cancelled, withdrawn,
                terminated or not renewed, or otherwise ceases to be in full
                force; or

          (vi)  and each reference in this paragraph (in) to "the issuer"
                shall include a reference to any confirming bank for the
                Letter of Credit

     (n)  REDELIVERY: Lessee fails to return the Aircraft to Lessor on the
          Expiry Date in accordance with Section 12; or

     (o)  LITIGATION: a judgement for the payment of money not covered by
          insurance in excess of Six Hundred Fifty Thousand Dollars
          ($650,000) (or the equivalent thereof in other currencies) shall be
          rendered against Lessee or any Lessee Affiliate and the same shall
          remain undischarged for a period of 30 days, unless during such
          period, execution of such judgement shall have been effectively
          stayed by agreement of the parties involved or by court order or
          such judgement shall have been adequately bonded; or

     (p)  GUARANTEE:

          (i)   any representation or warranty made by Guarantor is or proves
                to have been incorrect in any material respect when made or
                deemed to be repeated or Guarantor fails to make any payment
                or comply with any other obligation under the Guarantee when
                due; or

          (ii)  the Guarantor repudiates, revokes or claims that it has no
                further obligations under the Guarantee or the Guarantee
                ceases to be in full force or, for any reason, ceases to be
                the legal, valid and binding obligation of Guarantor; or

          (iii) any of the events listed in paragraph (f)(i) or (g) above
                occurs in respect of Guarantor (and for purposes of this
                paragraph(s), references in those paragraphs to Lessee shall
                be deemed to be references to Guarantor); or

     (q)  UNLAWFUL: it becomes unlawful for Lessee to perform any of its
          obligations under the Lease or the Lease becomes wholly or partly
          invalid or unenforceable; or

     (r)  TRANSFER/LESSEE REQUIREMENTS: Lessee makes or permits any
          assignment or transfer of the Lease, or any interest herein, or of
          the right to possession of the Aircraft, the

                                      9-4

<PAGE>

          Airframe, or any Engine, or any obligations under the Lease, or
          Lessee subleases the Aircraft, in any case except as expressly
          permitted in the Lease; or Lessee breaches any provision of Section
          8.7; or

     (s)  ENGINE LOSS: Lessee fails to timely comply with its obligations
          under Sections 8.11 (a) and 8.11 (b) with respect to an Engine
          Event of Loss.

     (t)  OTHER: Such other events, if any, as may be specified in the
          Aircraft Lease Agreement.

                                    9-5

<PAGE>

                                 SCHEDULE 10

                               [NOT APPLICABLE]

                                    10-1

<PAGE>

                                 SCHEDULE 11

                   FORM OF LEASE TERMINATION CERTIFICATE

The undersigned hereby certify that the Aircraft Lease Agreement dated as
of__________, ______ between the undersigned Lessor and undersigned Lessee,
and as further described  in the Appendix attached hereto, has terminated
(except as described in Section  15.1 of the Common Terms Agreement
incorporated therein) and the aircraft and  aircraft engines covered thereby
are no longer subject to the terms thereof.  This certificate may be executed
in one or more counterparts each of which when  taken together shall
constitute one and the same instrument.

          DATED this___________ day of___________________, ________

LESSOR                                        LESSEE

[INSERT LESSOR'S NAME]                        [INSERT LESSEE'S NAME]
 --------------------                          --------------------

By:_______________________                    By:_______________________

Title:____________________                    Title:____________________

                                    11-1

<PAGE>

                                 SCHEDULE 12

                       FORM OF LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated__________, ______
between_________________,
[a corporation organized under the laws of________________________]
[,not in its individual capacity, but solely as owner trustee] ("Lessor"),
and a ________________, corporation organized under the laws of the
___________________ ("Lessee").

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

     The Agreement and this Lease Supplement relate to the Aircraft, Engines
and Parts as more precisely described below and in the Certificate of
Technical Acceptance. A counterpart of the Agreement is attached hereto and
this Lease Supplement and the Agreement shall form one document.

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

1. Lessor hereby delivers and leases to Lessee under and pursuant to the
Agreement and Lessee hereby accepts, acknowledges receipt of possession and
leases from Lessor under and pursuant to the Agreement, that
certain__________ aircraft, and the____________ (___) ____________ Engines
(each of which Engines has 750 or more rated takeoff  horsepower or the
equivalent of such horsepower) described in Schedule 1 hereto, together with
the Aircraft. Documents and Records described in the Agreement (the
"Delivered Aircraft").

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

3. The Term for the Delivered Aircraft shall commence on the Delivery Date
and shall end on the Expiry Date, with respect to which the Scheduled Expiry
Date shall be [insert date].

4. The amount of Rent for the Delivered Aircraft is set forth in Schedule B
to the Agreement.

                                    12-1

<PAGE>

5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and each
delivered Engine have been duly marked in accordance with the terms of
Section 8.6(a) of the Agreement, (ii) the Aircraft is insured as required by
the Agreement, (iii) the representations and warranties of Lessee referred to
in Section 2.1 of the Agreement are hereby repeated with effect as of the
date first above written, (iv) having inspected the Delivered Aircraft,
Lessee acknowledges that the Delivered Aircraft satisfies all conditions
required for Lessee's acceptance of delivery as set forth in the Agreement,
and (v) the execution and delivery of this Lease Supplement signifies
absolute and irrevocable acceptance by Lessee of the Delivered Aircraft for
all purposes hereof and of the Agreement.

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

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

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

LESSOR,                                       LESSEE,

[INSERT LESSOR'S NAME]                        [INSERT LESSEE'S NAME]
 --------------------                          --------------------

By:_______________________                    By:_______________________

Name:_____________________                    Name:_____________________

Title:____________________                    Title:____________________

                                    12-2

<PAGE>

                                  SCHEDULE 13

                           FORM OF LETTER OF CREDIT

                    IRREVOCABLE STANDBY LETTER OF CREDIT

BENEFICIARY:
Aviation Financial Services, Inc.
Attention:___________________
201 High Ridge Road
Stamford, CT 06927

Gentlemen:

     We hereby establish our irrevocable Standby Letter of Credit
No. S/B_________ dated February___, 2000 (this "Letter of Credit"), in your
favor in connection with the leasing of one Boeing 737-700 aircraft by
Aviation Financial Services Inc. ("Beneficiary') to Aloha Airlines, Inc.
("Customer"). All bank charges relating to this Letter of Credit are for the
account of Customer.

     At the request of Customer for account of same, we hereby establish this
Irrevocable Standby Letter of Credit No. S/B_________ (this "Letter of
Credit") to authorise you to draw on First Hawaiian Bank, Honolulu, Hawaii an
amount or amounts not exceeding in aggregate US$_________ (_________ United
States Dollars) upon receipt by us of the following demand certificate from
Beneficiary, accompanied by a copy of this Letter of Crediot (which
certificate and copy may be presented to us by telecopy at telecopy
no._________):

     "The undersigned are two authorised signatories of Aviation Financial
     Services Inc ("Beneficiary"). Beneficiary hereby draws upon the
     Irrevocable Standby Letter of Credit No. S/B_________ of first Hawaiian
     Bank, Honolulu, Hawaii dated________________. Beneficiary hereby instructs
     you to transfer US$___________ (_______United States Dollars) to Bankers
     Trust Company, New York, ABA 021 001 033, For the account of: Aviation
     Financial Services Inc., Account Number: 50-259-862, immediately, with
     telex confirmation to us of such payment."

     We hereby agree with you that drawings drawn under and in compliance
with the terms of this Letter of Credit received on or prior to the first
anniversary of the date of this Letter of Credit (as the same may be extended
pursuant to the terms hereof, the "Expiration Date") will be duly honoured
upon receipt by us of such a demand certificate. Partial drawings are
permitted. This Letter of Credit shall be automatically renewed for
successive one year periods until at least unless at least thirty (30)________,
business days prior to the then current Expiration Date, we notify you in
writing by certified mail, return receipt requested, at the address set forth
above or such other address as Beneficiary may have notified to us in
writing, of our election not to renew this Letter of Credit beyond the then
current Expiration Date. In the event of such non-

                                    13-1

<PAGE>

renewal, the full amount of this Letter of Credit may be drawn down upon
presentation of a demand certificate as provided above.

     If a drawing by you hereunder does not, in any instance, conform to the
provisions of this Letter of Credit, we shall give you prompt notice that the
purported drawing was not effected in accordance with such provisions, stating
the reasons therefor, and that we are holding any documents presented in
connection therewith at your disposal or are returning the same to you, as we
may elect.

     This Letter of Credit is transferable and constitutes an obligation to
make payment against documents. Except to the extent the express provisions
hereof conflict, this Letter of Credit is issued subject to the uniform
Customs and Practice for Documentary Credits (1993 Revision) international
Chamber of Commerce Publication No. 500 ("Uniform Customs").

                                                  Sincerely,

                                                  FIRST HAWAIIAN BANK

-------------------------                         -------------------------
Authorised Signature                              Authorised Signature

                                    13-2

<PAGE>

                                  SCHEDULE 14

                            MAINTENANCE PERFORMERS

Air New Zealand Limited
Repair Station #ANZZ188C
Christchurch

Aviation Management Systems
Repair Station #ZM7R567Y
Sky Harbor Int'l Airport

Aviation Management Systems
Repair Station #D8LR566Y
Goodyear, AZ

BFGoodrich Aerospace MR0
Repair Station #HN6R593N
Everett, WA

Conair Aviation Ltd.
Repair Station #AMO 10-75
Abbotsford, B.C.

Spar Aerospace Limited
Repair Station #AMO 03-57
Canada

                                    14-1

<PAGE>

                                  SCHEDULE 15

                            FORM OF TECHNICAL REPORT

                            AIRCRAFT SPECIFICATIONS
                                   WORKSHEET

GENERAL                                           WEIGHTS

Registration:                                     Max. Taxi Weight:
Manufacturer:                                     Max. Take Off Weight:
Aircraft Type:                                    Max. Landing Weight:
Serial Number:                                    Max. Zero Fuel Weight:
Line Number:                                      Operating Empty Weight:
Date of Manufacture:                              Fuel Capacity:
Aircraft IT:
Aircraft TC:                                      UTILIZATION
Data as of:                                        Hours:
                                                  Cycles:

INSPECTIONS

----------------------------------------------------------------------------
 TYPE OF CHECK        LAST ACCOMPLISHED                               TIME
                   DATE     TIME     CYCLE          INTERVAL       REMAINING
----------------------------------------------------------------------------
      C
----------------------------------------------------------------------------

_____Any major checks coming due in the next 3 months.

                                          --------------
ENGINES                                   MFG:
                                          --------------

                                          --------------
                                          TYPE:
                                          --------------

---------------------------------------------------
POSITION      S/N      TT      TC      TSO      TCO
---------------------------------------------------

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

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

                                    15-1

<PAGE>

                           AIRCRAFT SPECIFICATIONS
                                  WORKSHEET

REGISTRATION:___________________

AUXILIARY POWER UNIT

                             --------------
                         MFG:
                             --------------

                             --------------
                         TYPE:
                             --------------

---------------------------------------------------------------
     S/N                TT                TC                TSO
---------------------------------------------------------------

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

LANDING GEAR

        OVERHAUL INTERVAL

                      --------------
                 MAIN:
                      --------------

                      --------------
                 NOSE:
                      --------------

      ------------------------------------------------------------------------
       S/N        TT        TC        TSO        CSO        TIME        CYCLES
                                                          REMAINING   REMAINING
                                                            TO O/H     TO LIFE
      ------------------------------------------------------------------------
NLG
      ------------------------------------------------------------------------
LMG
      ------------------------------------------------------------------------
RMG
      ------------------------------------------------------------------------

INTERIOR EQUIPMENT

                       QTY                LOCATION & TYPE
                 -------------------------------------------
Galleys:
                 -------------------------------------------
Lavatories:
                 -------------------------------------------
Air Stairs:
                 -------------------------------------------
Psgr. Seats:
                 -------------------------------------------

                                     15-2

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