Document:

Lease Amendment
                          (Airport Plaza Office Lease)

This Lease  Amendment,  dated as of January 12, 2000, is by and between Highline
Group  LLC  ("Landlord"),  as  receiver  for the  Airport  Plaza  Building  (the
"Building") and Frontier Airlines, Inc. ("Tenant").

                                    Recitals

A.       Landlord and Tenant  entered into the Lease  Agreement, dated March 15,
         1994, as amended from time to time  and  which  covers Spaces 100, 110,
         120,  121,  190, 200, 300, 350, 360, 400, 450, 470, 500, 605, 610, 615,
         and 620 in the Building (the "Lease").
B.       The date for the  expiration of the Lease  concerning  spaces 110, 120,
         200,  350,  360,  400,  605,  610, 615, and 620 is August 31, 2000 (the
         "2000 Expiration Spaces").
C.       The date for the  expiration of the Lease  concerning  spaces 100, 121,
         190, 300,  450, 500, and 470 is January 31, 2001 (the "2001  Expiration
         Spaces").
B.       Landlord and Tenant desire to modify the Lease as set forth below.

                                    Agreement

         Now, therefore,  for good and valuable  consideration,  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  parties  hereto  agree as
follows:

1.       The  term of the Lease for the 2000 Expiration Spaces shall be extended
         *.
2.       The  minimum  rent  payable  monthly  under  the  Lease  for  the  2000
         Expiration  Spaces shall be: $* ($* per square  foot) from  February 1,
         2000 to August 31, 2000,  and $* ($* per square foot) from September 1,
         2000 to January 31, 2001.  Tenant's  base year for the 2000  Expiration
         Spaces shall be the year 2000.
3.       All of the  terms  and  conditions  of the  Lease  concerning  the 2001
         Expiration  Spaces shall remain unchanged and the Tenant shall continue
         to pay rent and operating expense  reimbursements  equal to $*per month
         for the 2001 Expiration Spaces.
4.       Tenant  shall continue to pay for the remainder of the term of the 2000
         Expiration Spaces and the 2001  Expiration Spaces a monthly after hours
         reimbursement to Landlord in the amount of $*
5.       The expiration date for space 500 shall be extended to May 31, 2001 and
         Tenant shall pay Landlord monthly during such extended term (a) minimum
         rent and  operating  expense  reimbursements  equal to $*and  (b) after
         hours reimbursement equal to $*
6.       Tenant  shall  lease from  Landlord,  effective  the date of this Lease
         Amendment  through January 31, 2001 the following  additional spaces in
         the building:  Suite 122 at *square feet, Suite 440 at *square feet and
         Suite 600-A at *square  feet.  The minimum rent and  operating  expense
         reimbursements  payable  for such space  shall  equal $* ($* per square
         foot) per month from the date of this Lease  Amendment  to January  31,
         2001.  Tenant's base year for the suites  identified in this  paragraph
         shall be the year 2000.
7.       Tenant shall pay to Landlord a damage  deposit in the amount of $* that
         shall be returned to Tenant  within * days after the  expiration of the
         term of the  Lease  if  Tenant  has  satisfied  all of the  obligations
         contained in the Lease upon its  expiration.  Such damage deposit shall
         be placed in an interest  bearing  account and if the damage deposit is
         returned to Tenant as set forth above,  Tenant shall be entitled to the
         interest earned on such account.
8.       If Tenant and Landlord enter into a long term agreement  whereby Tenant
         leases from Landlord space for its reservation  center in the building,
         Landlord  will credit  Tenant for the amount of rent Tenant has paid to
         Landlord pursuant to paragraph 2 above that exceeds $* per square foot.

To the extent that any term of this Lease Amendment shall conflict with any term
in the Lease, or any amendment or term sheet related thereto,  the terms of this
Lease Amendment shall supercede such  conflicting  term and this Lease Amendment
shall control.  Except as modified  herein all of the other terms and conditions
of the Lease shall remain unchanged and in full force and effect.

Landlord
Highline Group, LLC
As receiver for Airport Plaza

By:______________________
     Name:_______________
    Title:_______________

Tenant
Frontier Airlines, Inc.

By:______________________
     Name:_______________
    Title:_______________Lease Amendment
                          (Airport Plaza Office Lease)

This Lease  Amendment,  dated as of April 1, 2000,  is by and  between  Highline
Group Rimfire 25, Inc. ("Landlord"),  as receiver for the Airport Plaza Building
(the "Building") and Frontier Airlines, Inc. ("Tenant").

                                    Recitals

A.       Landlord predecessor and Tenant entered into the Lease Agreement, dated
         March 15, 1994, as amended from time to time (the "Lease").
B.       Landlord and Tenant desire to modify the Lease as set forth below.

                                    Agreement

         Now, therefore,  for good and valuable  consideration,  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  parties  hereto  agree as
follows:

1.       Tenant hereby leases from Landlord Suites 600b (* square feet) and 600c
         (* square feet).
2.       The  minimum  rent  payable monthly under the Lease for Suites 600b and
         600c, collectively, shall be: $*.  Tenant's  base  year for Suites 600b
         and 600c shall be the year 2000.
3.       The  expiration of the term of the Lease for Suites 600b and 600c shall
         be *.

To the extent that any term of this Lease Amendment shall conflict with any term
in the Lease, or any amendment or term sheet related thereto,  the terms of this
Lease Amendment shall supercede such  conflicting  term and this Lease Amendment
shall control.  Except as modified  herein all of the other terms and conditions
of the Lease shall remain unchanged and in full force and effect.

Landlord
Rimfire 25, Inc.
By: Highline Group LLC, as agent

By:______________________
     Name:_______________
    Title:_______________

Tenant
Frontier Airlines, Inc.

By:______________________
     Name:_______________
    Title:_______________AIRCRAFT LEASE AGREEMENT

                                   Dated as of

                                 January 7, 2000

                                     between

                        AVIATION FINANCIAL SERVICES INC.

        a wholly owned subsidiary of General Electric Capital Corporation

                                       as

                                     Lessor

                                       and

                             FRONTIER AIRLINES, INC.

                                       as

                                     Lessee

                                  in respect of

Aircraft :                 Boeing 737-36E

Serial No:                 25256

U.S. Reg. No.:             N315FL

Note:    This Aircraft Lease Agreement has been executed in several counterparts
         of which this is  Counterpart  No.  ___.  See Clause  16.15  hereof for
         information concerning the distinction between various counterparts.

                                      INDEX

CLAUSE                                                                      PAGE
------                                                                      ----

1. Interpretation..............................................................1
         1.1 Definitions.......................................................1
         1.2 Construction.....................................................15
2. Representations and Warranties.............................................16
         2.1 Lessee's Representations and Warranties..........................16
         2.2 Lessee's Further Representations and Warranties..................17
         2.3 Repetition.......................................................19
         2.4 Lessor's Representations and Warranties..........................19
3. Conditions Precedent.......................................................20
         3.1 Conditions Precedent.............................................20
         3.2 Further conditions precedent.....................................23
         3.3 Waiver...........................................................23
4. Commencement...............................................................24
         4.1 Leasing..........................................................24
         4.2 Delivery.........................................................24
         4.3 Delayed Delivery.................................................24
         4.4 Licenses.........................................................25
         4.5 Inspection.......................................................25
         4.6 Indemnity........................................................25
5. Payments...................................................................25
         5.1 Deposit..........................................................25
         5.2 Rental Periods...................................................25
         5.3 Rent.............................................................26
         5.4 Maintenance Reserves.............................................26
         5.5 Payments.........................................................26
         5.6 Withholding......................................................27
         5.7 General Tax indemnity............................................27
         5.8 Sales and Use Taxes..............................................29
         5.9 Information......................................................30
         5.10 Indemnity Payments to be Made on an After-Tax Basis.............30
         5.11 Default Interest................................................30
         5.12 Contest.........................................................31
         5.13 Net Lease.......................................................32
         5.14 Security........................................................32
         5.14 Security........................................................33
6. Manufacturer's Warranties..................................................34
         6.1 Assignment.......................................................34
         6.2 Proceeds.........................................................34
         6.3 Parts............................................................34
         6.4 Agreement........................................................34
7. Lessor's Covenants.........................................................35
         7.1 Quiet Enjoyment..................................................35
         7.2 Release of Maintenance Reserves..................................35
         7.3 Lessor Obligations Following Expiry Date.........................36
8. Lessee's Covenants.........................................................36
         8.1 Duration.........................................................36
         8.2 Information......................................................36
         8.3 Lawful and Safe Operation........................................37
         8.4 Taxes and other Outgoings........................................39
         8.5 Sub-Leasing and Wet-Leasing......................................39
         8.6 Inspection.......................................................40
         8.7 Title............................................................40
         8.8 General..........................................................41
         8.9 Records..........................................................41
         8.10 Protection......................................................42
         8.11 Maintenance and Repair..........................................42
         8.12 Removal of Engines and Parts....................................43
         8.13 Installation of Engines and Parts...............................44
         8.14 Non-Installed Engines and Parts.................................44
         8.15 Pooling of Engines and Parts....................................45
         8.16 Equipment Changes...............................................45
         8.17 Title on an Equipment Change....................................46
         8.18 Third Party.....................................................46
9. Insurance..................................................................46
         9.1 Insurances.......................................................46
         9.2 Requirements.....................................................47
         9.3 Change...........................................................47
         9.4 Insurance Covenants..............................................47
         9.5 Failure to Insure................................................48
         9.6 Continuing Indemnity.............................................48
         9.7 Application of Insurance Proceeds................................48
         9.7 Application of Insurance Proceeds................................49
10. Indemnity.................................................................49
         10.1 General.........................................................49
         10.2 Duration........................................................50
11. Events of Loss............................................................50
         11.1 Events of Loss..................................................50
         11.2 Substitute Aircraft.............................................51
         11.3 Requisition.....................................................52
12. Return of Aircraft........................................................52
         12.1 Return..........................................................52
         12.2 Final Inspection................................................52
         12.3 Non-Compliance..................................................53
         12.4 Redelivery......................................................53
         12.5  Acknowledgment.................................................53
         12.6 Maintenance Program.............................................53
         12.7 Fuel............................................................53
         12.8 Automatic Extension of  Term....................................54
13. Default...................................................................54
         13.1 Events..........................................................54
         13.2 Rights..........................................................57
         13.3 Deregistration..................................................61
14. Assignment................................................................61
         14.1 Lessee's Assignment.............................................61
         14.2 Lessor's Assignment.............................................61
         14.3 Transfer........................................................61
15. Illegality................................................................61
16. Miscellaneous.............................................................62
         16.1 Waivers, Remedies Cumulative....................................62
         16.2 Delegation......................................................62
         16.3 Certificates....................................................62
         16.4 Appropriation...................................................62
         16.5 Currency........................................................62
         16.6 Set-off.........................................................62
         16.7 Severability....................................................63
         16.8 Remedy..........................................................63
         16.9 Expenses........................................................63
         16.10 Time of Essence................................................63
         16.11 Notices........................................................64
         16.12 Governing Law and Jurisdiction.................................64
         16.13 Sole and Entire Agreement......................................66
         16.14 Indemnities....................................................66
         16.15 Counterparts...................................................66
         16.16 Language.......................................................66
         16.17 No Brokers.....................................................66
17. Disclaimers and Waivers...................................................68
         17.1 Exclusion.......................................................68
         17.2 Waiver..........................................................68
         17.3 Disclaimer of Consequential Damages.............................69
         17.4 Confirmation....................................................69
18. Section 1110..............................................................69
19. Usury Laws................................................................69
20. Modification or Revision..................................................70
21. Witness...................................................................71
SCHEDULES.....................................................................72
SCHEDULE 1.   Description of Aircraft.........................................72
SCHEDULE 2.   Certificate of Technical Acceptance.............................78
SCHEDULE 3.   Operating Condition at Redelivery...............................84
SCHEDULE 4.   Insurances Requirements.........................................88
SCHEDULE 5.   Intentionally Omitted...........................................91
SCHEDULE 6.   Lease Supplement No.____........................................92
SCHEDULE 7.   Form of Lease Termination Certificate...........................95
SCHEDULE 8.    Form of Aircraft Usage Report..................................97

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

THIS AGREEMENT is made as of the 7th day of January, 2000 between:-

(1)       AVIATION  FINANCIAL  SERVICES INC., a company  incorporated  under the
          laws of Delaware and a wholly  owned  subsidiary  of General  Electric
          Capital  Corporation  whose  principal  place of business is at c/o GE
          Capital  Aviation  Services,  Inc.,  201 High  Ridge  Road,  Stamford,
          Connecticut, 06927 ("Lessor"); and

(2)       FRONTIER AIRLINES,  INC., a company incorporated under the laws of the
          State of Colorado whose  principal  place of business is at 12015 East
          46th  Avenue,  Denver,  Colorado,  80239,  United  States  of  America
          ("Lessee").

     WHEREAS:  Lessor  wishes to lease to Lessee  and Lessee is willing to lease
     from Lessor the  Aircraft on the terms of this  Agreement.  IT IS AGREED as
     follows:-

1.         INTERPRETATION

1.1        DEFINITIONS

           In this Agreement the following expressions have the meanings set out
           opposite:-

           After-Tax Basis
                         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)  (a "Required
                    Payment"),  the total amount that must be paid is the amount
                    such that,  after  deduction  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 (and  assuming  that
                    such Person is subject to (i) United States  Federal  income
                    tax  at the  highest  marginal  statutory  rate  imposed  on
                    corporations  for the relevant  period,  (ii) United  States
                    state and local income taxes at the composite of the highest
                    marginal  statutory  rates  imposed  on such  Person for the
                    relevant  period,  as such composite rate shall be certified
                    by a  financial  officer of such  Person,  and (iii)  income
                    taxes (if any)  imposed  by  countries  outside  the  United
                    States at the actual  rates  imposed on such Person) the net
                    amount received is the amount of the Required Payment.

           Agreed Value
                         the  amount   specified  for  Agreed  Value  in  Letter
                    Agreement No. 1.

           Air Authority
                         Federal Aviation Administration ("FAA").

           Aircraft
                         the aircraft  described in Part 1 of Schedule 1, (which
                    term includes where the context admits a separate  reference
                    to  all  Engines,  Parts  and  Aircraft  Documents)  or  any
                    aircraft  substituted  in place  thereof  pursuant to Clause
                    11.1 or 11.2.

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

           Airframe
                         the  Aircraft,   excluding  the  Engines  and  Aircraft
                    Documents.
           Appraisal Procedure
                         the  following  procedure  for  determining  the  "fair
                    market  rental  value" of the  Aircraft:  (a)  Lessor  shall
                    select an  independent  aircraft  appraiser 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
                         the auxiliary  power unit  installed on the Aircraft on
                    the Delivery Date and any  replacement  auxiliary power unit
                    installed in accordance with this Agreement.

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

           Business
                         Day a day (other  than a  Saturday  or Sunday) on which
                    business of the nature required by this Agreement is carried
                    out in the State of  Incorporation or where used in relation
                    to  payments  on which  banks are open for  business  in New
                    York.

           Certificated Air Carrier
                         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  United  States  Code) and
                    holding a Certificate  of Public  Convenience  and Necessity
                    issued under  Section 41102 of Title 49 of the United States
                    Code by the Department of  Transportation or any predecessor
                    or  successor   agency  thereto,   or,  in  the  event  such
                    certificates  shall no longer be issued,  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 United  States Code) 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 the United  States
                    Code with respect to the Aircraft.

           Cold Section Refurbishment
                         with  respect  to  any  Engine  the  completion  of the
                    following:  completely unstacking either high or low or both
                    compressor sections, if needed, and completing the following
                    for   the   appropriate   section(s):   visual   inspection;
                    de-blading    discs   as    necessary;    visual   and   NDT
                    (Non-Destructive  Testing)  inspections  as necessary of all
                    discs;  verification  that all snap  diameters  on discs are
                    within  limits;  inspection  of all blades for proper  chord
                    dimensions  and cracking;  repair or  replacement  of blades
                    below   minimums;   inspection  and  repair  of  stators  as
                    necessary; blade-up of discs using new lock plates; assembly
                    of rotors in the  compressor;  balance  of all  rotors;  and
                    installation of rotors in the engine.

           Cycle
                         one take-off and landing of the Aircraft.

           DGAC
                         means the Civil Aviation Authority of Spain.

           Damage Notification Threshold
                         the amount  specified  therefor in Letter Agreement No.
                    1.

           Default
                         any  Event of  Default  and any  event  which  with the
                    giving  of   notice,   lapse  of  time,   determination   of
                    materiality  or  fulfillment   of  other   condition   would
                    constitute an Event of Default.

           Delivery Condition Requirements
                         the requirements specified on Part 1 of Schedule 1.

           Delivery Date
                         the date on which the Aircraft is tendered for delivery
                    by Lessor in accordance with this Agreement.

           Delivery Location
                         Marana, Arizona.

           Deposit
                         all amounts  payable  pursuant to Clause 5.1 whether in
                    cash or by Letter of Credit.

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

           Engine
                         whether or not installed on the Aircraft:-

                         (a) each engine of the  manufacture and model specified
                    in Part 1 of Schedule 1 (each of which has 750 or more rated
                    takeoff  horsepower or the  equivalent  of such  horsepower)
                    which Lessor elects to tender to Lessee with the Aircraft on
                    the Delivery Date, such engines being described as to serial
                    numbers on the  certificate  of acceptance to be executed by
                    Lessee  upon  delivery  of the  Aircraft;  or
                         (b) any engine which has replaced that engine, title to
                    which has or  should  have,  passed to Lessor in  accordance
                    with this  Agreement;  and in each case includes all modules
                    and Parts from time to time  belonging  to or  installed  in
                    that engine but excludes any properly  replaced engine title
                    to which has, or should have,  passed to Lessee  pursuant to
                    this Agreement.

           Engine Event of Loss
                         the occurrence with respect to an Engine only,  whether
                    or not  installed  on the  Airframe,  of any of those events
                    described in provisions (a) through (d) of the definition of
                    Event of Loss.  Engine  Flight  Hour means each hour or part
                    thereof an Engine is operated, elapsing from the moment that
                    wheels of an  aircraft  on which  such  Engine is  installed
                    leave the  ground  until the  wheels of such  aircraft  next
                    touch the ground.

           Engine Refurbishment
                         a complete  disassembly,  inspection  and repair of the
                    modules  of  an  Engine   per  the   engine   manufacturer's
                    maintenance manual, so that such Engine shall have a minimum
                    expected on-wing life of * hours and * cycles.

           ERISA
                         the Employee Retirement Income Security Act of 1974, as
                    amended.

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

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

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

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

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

                         (d) the hi-jacking, theft, condemnation,  confiscation,
                    seizure or requisition for use or hire of the Aircraft which
                    deprives  any person  permitted  by this  Agreement  to have
                    possession  and/or  use of the  Aircraft  of its  possession
                    and/or use for more than * days (or, if earlier,  beyond the
                    Expiry Date).

           Excusable Delay
                         with  respect to  delivery  of the  Aircraft,  delay or
                    non-performance  due to or  arising  out of  acts  of God or
                    public enemy, civil war,  insurrection or riot, fire, flood,
                    explosion,   earthquake,   accident,  epidemic,   quarantine
                    restriction,  any act of government,  governmental priority,
                    allocation,   regulation  or  order  affecting  directly  or
                    indirectly,  the Aircraft,  any manufacturer,  Lessor or any
                    materials or  facilities,  strike or labor  dispute  causing
                    cessation, slowdown or interruption of work, inability after
                    due and  timely  diligence  to  procure  equipment,  data or
                    materials from manufacturers, suppliers, any existing owner,
                    seller or lessee in a timely manner, damage,  destruction or
                    loss,  or any other  cause to the extent  that such cause is
                    beyond the control of Lessor whether above  mentioned or not
                    and whether or not similar to the foregoing.

           Expiry Date
                         the day preceding the numerically  corresponding  day *
                    months  after the  Delivery  Date or if earlier  the date on
                    which:-

                         (a) the date  Lessor,  acting  in  accordance  with the
                    terms  of  this  Agreement  terminates  the  leasing  of the
                    Aircraft to Lessee under this Agreement; or

                         (b) Lessor  receives the Agreed Value together with any
                    other  amounts  then due and unpaid by Lessee  following  an
                    Event of Loss.

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

           FAR
                         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.

           Federal Aviation  Act
                         The  Transportation  Laws of the  United  States as set
                    forth  at 49  United  States  Code  et seq.  or any  similar
                    legislation  of the  United  States of  America  enacted  in
                    substitution or replacement thereof.

           Financing Statements
                         Uniform Commercial Code Financing Statements in respect
                    of the Aircraft and Engines leased  hereunder  prepared in a
                    form  acceptable for filing with the  applicable  Government
                    Entities in the Habitual  Base, the state in which the chief
                    executive  office  (as that term is  defined in Article 9 of
                    the  Uniform  Commercial  Code as in effect in the  Habitual
                    Base) and such other jurisdiction as Lessor shall reasonably
                    require.

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

           GAAP
                         generally accepted accounting  principles in the United
                    States.
           Governing Law
                         the laws of the State of New York.

           Government Entity
                         (a)  any  national  government,  political  subdivision
                    thereof, or local jurisdiction therein;
                         (b) any instrumentality,  board, commission,  court, or
                    agency of any thereof, however constituted; and

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

           Gross Negligence
                         means any intentional, conscious or voluntary action or
                    decision which is taken with wanton, reckless,  flagrant and
                    culpable  disregard for the  consequences  of such action or
                    decision.
           Guaranty
                         means  a   Guaranty   of   General   Electric   Capital
                    Corporation  to Lessee with respect to Lessor  substantially
                    in the form attached hereto as Exhibit A to Letter Agreement
                    No. 1.

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

           Hot Section Refurbishment
                         with  respect  to  any  Engine,   the  complete  visual
                    inspection and repair as necessary of the combustion section
                    of an Engine in an engine repair/overhaul  station including
                    without limitation  complete unstacking of the high pressure
                    or low pressure  turbine or both if needed;  complete visual
                    inspection  of  such  turbine(s);  de-blading  of  discs  as
                    required;  visual  and  NDT  inspections  of  all  discs  as
                    required;  verification that all snap diameters on discs are
                    within  limits;  inspection  of all blades for proper  chord
                    dimensions and cracking; repair or replacement of all blades
                    below   minimums;   inspection  and  repair  of  stators  as
                    necessary; blade-up of discs using new lock plates; assembly
                    of  rotors  in  the  turbine;  balance  of all  rotors;  and
                    installation of rotors in the engine.

           Indemnitee
                         each of GE Capital Aviation Services,  Inc. ("GECASI"),
                    GE Capital Aviation Services Limited ("GECASL"), Lessor, and
                    any   of   their   respective    successors   and   assigns,
                    shareholders,     subsidiaries,     affiliates,    partners,
                    contractors,   directors,  officers,  servants,  agents  and
                    employees and indemnitees;  provided,  however, that no such
                    Indemnitee  shall be entitled to an  indemnification  to the
                    extent such Indemnitee is manufacturer of the Aircraft,  any
                    Engines, or Parts in its capacity as such.

           Insurances
                         as defined in Clause 9.1 hereof.

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

           Law
                         shall  mean  and  include  (a)  any  statute,   decree,
                    constitution,  regulation, order judgment or other directive
                    of any Governmental Entity; (b) any treaty, pact, compact or
                    other  agreement  to  which  any  Governmental  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.

           Lease Supplement
                         a  Lease  Supplement,  substantially  in  the  form  of
                    Schedule 6 hereto, entered into between Lessor and Lessee.

           Lessee's Maintenance Program
                         the Maintenance  Program  specifically  approved by the
                    Air Authority for Lessee's maintenance of the Aircraft.

           Lessor Lien
                         (a) any Security Interest  whatsoever from time to time
                    created  by  or  through  Lessor  in  connection   with  the
                    financing of the Aircraft;

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

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

           Lessor Taxes
                         Taxes:-

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

                         (b)  imposed  on the net  income,  profits  or gains of
                    Lessor  by any  Government  Entity  in the  United  State of
                    America;  provided,  however,  that  Lessor  Taxes shall not
                    include  any  Tax  imposed  by  any   government  or  taxing
                    authority of any jurisdiction if and to the extent that such
                    Tax  results  from  (i)  the  use,  operation,  presence  or
                    registration  of the Aircraft,  the Airframe,  any Engine or
                    any Part in the  jurisdiction  imposing the Tax, or (ii) 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; or

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

                         provided  always,  that Lessor  Taxes shall not include
                    any income  taxes or other  amounts  payable  and subject to
                    indemnification in favor of Lessor pursuant to the Lease.

           Letter Agreement No. 1
                         that certain Letter  Agreement No. 1 between Lessor and
                    Lessee dated as of the date hereof.

           MACRS Deductions
                         means cost recovery  deductions  for *% of the Lessor's
                    cost of the  Aircraft  pursuant  to  Section  168(b)  of the
                    Internal Revenue Code of 1986, as amended, commencing in the
                    year 2000,  computed  (i) on the basis that the  Aircraft is
                    "7-year  property"  (within the meaning of Section 168(e) of
                    the Code),  (ii) by using the *%  declining  balance  method
                    over   a  7  year   recovery   period,   switching   to  the
                    straight-line  method  for  the  first  taxable  year of the
                    Lessor during the term for which such method yields a larger
                    allowance,  (iii) assuming salvage value is zero, (iv) using
                    a half-year convention and (v) assuming that the Aircraft is
                    sold at the end of the Term of * months.

           Letter of  Credit
                         means any letter of credit  issued in  relation  to the
                    Lease  pursuant  to  Section  5.15  and any  replacement  or
                    renewal of that letter of credit.

           Maintenance Performer
                         the Lessee, Tramco, USAir Inc., or such other Person as
                    is  approved  by  the  FAA  to  perform  maintenance  and/or
                    modification   services  on   commercial   aircraft   and/or
                    commercial aircraft engines, which Person shall be agreed by
                    Lessor  and   Lessee  to  have   recognized   standing   and
                    experience, suitable facilities for the level of maintenance
                    being  carried out and  suitable  equipment  to perform such
                    services on aircraft  and/or engines of the same or improved
                    model  as the  Aircraft  or,  in the  case of  engines,  the
                    Engines.

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

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

           Manufacturer
                         Boeing.

           Minimum Liability Coverage
                         the amount set forth therefore in Letter  Agreement No.
                    1.

           Mortgage Convention
                         shall  mean  the  Convention   for  the   International
                    Recognition of Rights in Aircraft, signed (ad referendum) at
                    Geneva, Switzerland, on June 19, 1948, and amended from time
                    to time, but excluding the terms of any adhesion  thereto or
                    ratification  thereof  containing  reservations to which the
                    United States of America does not accede.

           Operative Documents
                         shall  mean  this  Agreement,   all  Lease  Supplements
                    hereto, Letter Agreement No. 1, the Guaranty,  any schedules
                    or  documents  prepared  in  conformance  to  the  Schedules
                    hereto, any side-letters  related hereto and any amendments,
                    revisions, supplements or modifications hereto or thereto.

           Other Agreements
                         any agreement (other than this Agreement) made or to be
                    made between Lessor (or an associate or affiliate thereof or
                    a trustee-lessor acting for Lessor as beneficiary, including
                    without  limitation  Polaris Holding Company) or AerFi Group
                    plc (or an associate or affiliate thereof) and Lessee (or an
                    associate or affiliate thereof).

           Part
                         whether or not installed on the Aircraft:-

                         (a) any component,  furnishing or equipment (other than
                    a  complete  Engine)  furnished  with  the  Aircraft  on the
                    Delivery Date; and

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

                         but  excludes  any such items  title to which  has,  or
                    should have, passed to Lessee pursuant to this Agreement.

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

                         (b)  any  lien  of  a  repairer,   mechanic,   carrier,
                    hangarkeeper  or other  similar lien arising in the ordinary
                    course of  business  or by  operation  of Law in  respect of
                    obligations  which are not overdue or are being contested in
                    good faith by appropriate proceedings; and

                         (c) any Lessor Lien.

                         but  only if (in the  case of  both  (a) and  (b))  (i)
                    adequate  resources  have been  provided  by Lessee  for the
                    payment  of  the  Taxes  or   obligations;   and  (ii)  such
                    proceedings,  or the continued existence of the lien, do not
                    give rise to any likelihood of the sale, forfeiture or other
                    loss of the Aircraft or any interest  therein or of criminal
                    liability on Lessor.

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

           Redelivery Location
                         a  location  on  Lessee's  route  system in the  United
                    States  designated  by  Lessor,  or such other  location  as
                    Lessor and Lessee shall agree.

           Related Agreements
                         any agreement (other than this Agreement) made or to be
                    made  between or with Lessor (or an  associate  or affiliate
                    thereof   or  a   trustee-lessor   acting   for   Lessor  as
                    beneficiary,  including without  limitation  Polaris Holding
                    Company)  and  Lessee  (or  an  associate  or  affiliate  of
                    Lessee).

           Replacement Engine
                         an  engine  of the same  manufacturer  and  model,  and
                    having equivalent value, utility,  modification status, time
                    elapsed  since Hot Section  Refurbishment  and Cold  Section
                    Refurbishment and remaining warranty status as the Engine it
                    is intended to replace under Clause 11.1(c),  or at Lessee's
                    option,  an engine of the same  manufacturer  as such Engine
                    but of an improved  model,  and  otherwise of an  equivalent
                    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.

           Rent
                         all amounts payable pursuant to Clause 5.3.

           Rental Period
                         each period ascertained in accordance with Clause 5.2.

           Rent Date
                         the first day of each Rental Period.

           Required LC Expiry Date
                         means the date being * days after the Expiry Date.

           Return Occasion
                         the date on which the Aircraft is redelivered to Lessor
                    in accordance with Clause 12 hereof.

           Scheduled Delivery Month
                         *.

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

           State of Incorporation
                         State of Colorado.

           State of Registration
                         United States of America.

           Subsidiary
                         (a) in  relation  to any  reference  to  accounts,  any
                    company whose accounts are consolidated with the accounts of
                    Lessee in accordance with GAAP;

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

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

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

           Supplemental Rent
                         all amounts payable under Clause 5.4(a).

           Tax Indemnitee
                         means an  Indemnitee  and for any taxable year in which
                    the  Lessor  joins in the filing of a  consolidated  federal
                    income  tax  return,   shall  include  each  member  of  the
                    affiliated  group (within the meaning of Section 1504 of the
                    Internal Revenue Code of 1986, as amended,  or any successor
                    provision thereto) of which the Lessor is a member.

           Taxes
                         any  and  all   present  and  future   taxes,   duties,
                    withholdings,  levies, assessments,  imposts, fees and other
                    governmental   charges  of  all  kinds   together  with  any
                    penalties,  fines,  surcharges and interest  thereon and any
                    additions thereto.

           Term
                         the period  commencing  on the Delivery Date and ending
                    on the Expiry  Date,  except  that the Term may be  extended
                    beyond the Expiry Date if the Return  Occasion is delayed in
                    the circumstances  specified,  and subject to the limitation
                    described, in Clause 12.3.

           United States
                         the United States of America

           Viva
                         collectively  means (i) Viva Vuelos  Internacionales de
                    Vacaciones,  S.A. (ii) Hispamer  Servicos  Financieros EFC -
                    S.A. and (iii) Leasebanesto S.A

           Wet Lease
                         any  arrangement  whereby  Lessee agrees to furnish the
                    Aircraft to a third party pursuant to which the Aircraft (i)
                    shall be solely within the operational control of Lessee and
                    shall be  operated  solely by  regular  employees  of Lessee
                    possessing all current  certificates and licenses that would
                    be  required   under  the  Federal   Aviation  Act  for  the
                    performance  by such employees of similar  functions  within
                    the United  States of America,  (ii) shall be  maintained by
                    Lessee in accordance with Lessee's  Maintenance  Program and
                    (iii)  shall be and remain  subject and  subordinate  to all
                    other  terms and  conditions  of this  Agreement;  provided,
                    however,  that Lessee shall remain  primarily liable for the
                    performance   of  all  of  the   terms  of  this   Agreement
                    (including, without limitation, its obligations set forth in
                    Clause 9 of this  Agreement)  to the same  extent as if such
                    arrangement had not been entered into.

1.2        CONSTRUCTION

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

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

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

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

     (iv) a Clause or a Schedule is a reference  to a clause of or a schedule to
     this Agreement;

     (v) a reference to "Agreement",  "the Agreement" or "this Agreement" shall,
     unless expressly provided  otherwise,  mean and include this Aircraft Lease
     Agreement and each of the other Operative Documents; and

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

2.         REPRESENTATIONS AND WARRANTIES

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

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

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

(c)  Legal validity:  this Agreement has been duly entered into and delivered by
     Lessee, and this Agreement does, and the Operative Documents to which it is
     a party when executed and delivered by Lessee will, constitute legal, valid
     and binding  obligations of Lessee,  enforceable  in accordance  with their
     respective  terms,  except  as may be  limited  by  applicable  bankruptcy,
     insolvency, reorganization,  moratorium or other similar Laws affecting the
     enforcement of creditors' rights generally, and, to the extent that certain
     remedies require or may require  enforcement by a court of equity,  by such
     principles  of  equity  (regardless  of  whether  such   enforceability  is
     considered  in a  proceeding  in  equity  or  at  law)  as a  court  having
     jurisdiction  may impose and by Laws which may affect some of such remedies
     but which do not make the available remedies inadequate for the substantial
     realization of the benefits provided herein;

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

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

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

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

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

(f)  No Immunity:

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

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

(g)  Accounts:  the audited consolidated accounts of Lessee and its Subsidiaries
     most recently delivered to Lessor,  including balance sheets and statements
     of income and retained earnings:-

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

     (ii) fairly  represent the consolidated  financial  condition of Lessee and
     its Subsidiaries as at the date to which they were drawn up;

(h)  Restricted  Countries:  Lessee does not hold a contract or other obligation
     to operate the  Aircraft to or for any of the  countries  designated  under
     U.S. Code of Federal  Regulations 31 CFR Parts 500-599  including,  without
     limitation,   Cuba,  Iraq,  Iran,  Libya,   North  Korea,  the  Bosnia-Serb
     controlled  areas of the Republic of Bosnia and  Herzegovina  and the Unita
     Rebels of Angola.

(i)  Chief Executive's Office:  Lessee's Chief Executive Office (as that term is
     defined in  Article 9 of the  Uniform  Commercial  Code as in effect in the
     State of Colorado) is located at 12015 East 46th Avenue, Suite 200, Denver,
     Colorado, United States of America;

(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 United  States Code with  respect to the  Aircraft;
     and

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

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

(a)  No Default:

     (i) no Default has  occurred  and is  continuing  or might  result from the
     entry into or performance  of the Operative  Documents to which Lessee is a
     party; and

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

(b)  Registration:

     (i) except for the filing for  recordation  of this  Agreement  and a Lease
     Supplement  with  the  FAA,  and the  filing  of any  Financing  Statements
     required (and continuation  statements at periodic  intervals),  no further
     filing or recording of this Agreement or of any other  document  (including
     any financing statement under Article 9 of the Uniform Commercial Code) and
     no further  action,  is or will be  necessary  under the Laws of the United
     States,  the State of  Incorporation,  and the State of  Registration,  the
     Habitual Base or any other states in order to (A) fully establish,  perfect
     and protect  Lessor's title to, and interest in, the Aircraft or any Engine
     or Part as against  Lessee or any third party,  or (B) ensure the validity,
     effectiveness  and  enforceability of this Agreement or any other Operative
     Document to which the Lessee is a party; and

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

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

(d)  Pari Passu:  the  obligations  of Lessee under the  Operative  Documents to
     which it is a party rank at least pari  passu  with all other  present  and
     future  unsecured  and  unsubordinated  obligations  (including  contingent
     obligations)  of Lessee,  with the  exception  of such  obligations  as are
     mandatorily preferred by law and not by virtue of any contract;

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

(f)  Taxes:  Lessee has delivered all necessary  returns and payments due to the
     tax  authorities in the State of  Incorporation,  the State of Registration
     and the  Habitual  Base and is not required by Law to deduct any Taxes from
     any payments under this Agreement;

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

(h)  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.

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

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

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

(b)  Power and  authority:  Lessor  has the  corporate  power to enter  into and
     perform,  and has taken all  necessary  corporate  action to authorize  the
     entry into,  performance and delivery of, the Operative  Documents to which
     it is a party and the transactions  contemplated by the Operative Documents
     to which it is a party;

(c)  Legal validity:  the Operative  Documents to which it is a party constitute
     Lessor's legal, valid and binding obligation;

(d)  Non-conflict:  the  entry  into  and  performance  by  Lessor  of,  and the
     transactions  contemplated  by, the  Operative  Documents  to which it is a
     party do not and will not:-

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

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

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

(e)  Authorization:   so  far  as  concerns  the  obligations  of  Lessor,   all
     authorizations,  consents,  registrations and notifications  required under
     the laws of the  State  of New York in  connection  with  the  entry  into,
     performance,   validity  and   enforceability   of,  and  the  transactions
     contemplated  by, the Operative  Documents to which it is a party by Lessor
     have been (or will on or before the  Delivery  Date have been)  obtained or
     effected  (as  appropriate)  and are (or will on their  being  obtained  or
     effected be) in full force and effect; and

(f)  No Immunity:

     (i)  Lessor  is  subject  to  civil  commercial  law  with  respect  to its
     obligations under the Operative Documents to which it is a party; and

     (ii)  neither  Lessor  nor any of its  assets is  entitled  to any right of
     immunity and the entry into and  performance of the Operative  Documents to
     which it is a party by Lessor constitute private and commercial acts.

3.         CONDITIONS PRECEDENT

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

(a)  receipt by Lessor from  Lessee not later than * Business  Days prior to the
     Delivery  Date of the  following  satisfactory  in form  and  substance  to
     Lessor:-

     (i) Constitutional  Documents:  a copy of the  constitutional  documents of
     Lessee including without limitation articles of incorporation, bylaws and a
     current  certificate of good standing  issued by the secretary of the state
     for the State of Incorporation;

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

     (iii) Opinion:  evidence that opinions as reasonably  agreed by Lessor will
     be issued on the Delivery Date by legal counsel acceptable to Lessor;

     (iv) FAA  Opinion:  a draft of an opinion of Crowe & Dunlevy  P.C. or other
     counsel acceptable to Lessor who are recognized  specialists with regard to
     FAA registration  matters in form acceptable to Lessor as to the due filing
     for recordation of this  Agreement,  to be delivered in executed final form
     to Lessor and Lessee upon such filing and recordation;

     (v) Approvals:  evidence of the issue of each approval, license and consent
     which  may  be  required  in  relation  to,  or  in  connection  with,  the
     performance  by  Lessee  of any of its  obligations  hereunder  (including,
     without  limitation,  any  consent to the export of the  Aircraft  from the
     Habitual  Base and consent to the  deregistration  of the Aircraft upon the
     termination of the leasing of the Aircraft under this Agreement);

     (vi) Licenses: copies of Lessee's Certificate of Convenience and Necessity,
     Radio License, FAR Part 121 operator's certificates and all other licenses,
     certificates  and  permits  required  by  Lessee  in  relation  to,  or  in
     connection with, the operation of the Aircraft;

     (vii) Process Agent: a letter from the process agent appointed by Lessee in
     this Agreement accepting that appointment;

     (viii) Certificate: a certificate of a duly authorized officer of Lessee:-

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

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

          (c) certifying that Lessee's  representations and warranties contained
          in Clause 2.1 and 2.2 are true and correct on the Delivery  Date as if
          given on such date; and

          (d)  certifying  that there has been no  material  change in  Lessee's
          Constitutional  Documents  since  originally  delivered  by  Lessee to
          Lessor;

     (ix) Air  Traffic  Control:  a letter from Lessee  addressed  to  Transport
     Canada or other relevant air traffic  control  authority  pursuant to which
     Lessee  authorizes the addressee to issue to Lessor,  upon Lessor's request
     from time to time,  a statement of account of all sums due by Lessee to the
     authority in respect of all aircraft  (including,  without limitation,  the
     Aircraft) operated by Lessee;

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

     (xi) Certificate of Lease  Termination:  a certificate of lease termination
     executed by a duly authorized officer of Lessee,  substantially in the form
     of Schedule 7 hereto,  acknowledging  that this  Agreement  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 of the Term
     or  other  termination  of the  leasing  of  the  Aircraft  to  the  Lessee
     hereunder; and

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

(b)  the receipt by Lessor on or before the Delivery Date of:-

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

     (ii) Payments: all sums due to Lessor under this Agreement on or before the
     Delivery Date including, without limitation, the first payment of Rent;

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

     (iv) Lease Supplement No. 1: in the form of Schedule 6 hereto,  to be dated
     the Delivery Date,  fully completed and executed by Lessor and Lessee,  and
     filed for recording at the FAA;

     (v) Certificate of Technical Acceptance:  in the form of Schedule 2 hereto,
     to be dated  and  fully  completed,  and  executed  by  Lessor  and  Lessee
     certifying  that Lessee has  completed  its  inspection  of the Aircraft in
     accordance  with  Clause  4.5  hereof  and that  Aircraft  conforms  to the
     provisions  set forth therein and is in all respects  acceptable to Lessee,
     or if not so acceptable,  then setting forth  discrepancies  and corrective
     action to be taken;

     (vi)  Accounts:  the latest  available  accounts of Lessee as  described in
     Clause 8.2(b)(i) and (ii);

     (vii)  Documents:  a  confirmation  of  receipt of the  Aircraft  Documents
     delivered with the Aircraft on the Delivery Date;

     (viii)  UCC-1  Financing  Statements:  in form  acceptable  to Lessor,  and
     suitable  for filing in the States of  Colorado  and New York and signed by
     Lessee; and

     (ix) General: such other documents as Lessor may reasonably request.

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

(d)  evidence  that  on the  Delivery  Date  that  all  filings,  registrations,
     recordings and other actions have been or will be taken which are necessary
     or advisable to ensure the validity,  effectiveness  and  enforceability of
     this Agreement and the  Assignments  and to protect the property  rights of
     Lessor in the Aircraft or any Part.

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

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

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

3.3        Waiver:  The conditions  specified in Clauses 3.1 and 3.2 are for the
           sole  benefit of Lessor and may be waived or  deferred in whole or in
           part  and  with or  without  conditions  by  Lessor.  If any of those
           conditions  are not satisfied on the Delivery Date and Lessor (in its
           absolute  discretion)  nonetheless  agrees to deliver the Aircraft to
           Lessee, Lessee will ensure that those conditions are fulfilled within
           * days  after the  Delivery  Date and Lessor may treat as an Event of
           Default the failure of Lessee to do so.

<PAGE>

4.         COMMENCEMENT

4.1        Leasing:  Lessor  will lease the  Aircraft  to Lessee and Lessee will
           take the Aircraft on lease in accordance  with this Agreement for the
           duration of the Term.  Lessor will deliver and Lessee will accept the
           Aircraft  on the day in the  Scheduled  Delivery  Month  notified  by
           Lessor to Lessee at least * Business  Days in advance of such date or
           such other day as may be agreed. In the event (a) Lessee is unwilling
           or unable to accept  delivery of the Aircraft on the date notified by
           Lessor as the  Delivery  Date,  and (b) the Aircraft  meets  Delivery
           Condition Requirements then Lessee's obligation to pay Rent hereunder
           shall commence on such Delivery Date  notwithstanding that Lessee has
           not accepted possession of the Aircraft.  After delivery the Aircraft
           and every  Part will be in every  respect at the sole risk of Lessee,
           who will bear all risk of loss,  theft,  damage or destruction to the
           Aircraft from any cause whatsoever.

4.2        Delivery: The Aircraft will be delivered to and accepted by Lessee at
           the Delivery Location or such other location as may be agreed. Lessee
           will effect  acceptance  of the Aircraft by execution and delivery to
           Lessor of the duly  completed and executed  Certificate of Acceptance
           in the form of Schedule 2 and a duly  completed  and  executed  Lease
           Supplement  No. 1 in the form of Schedule 6 hereto and by authorizing
           the filing at the FAA of an  executed  copy of such Lease  Supplement
           with an executed copy of this Agreement attached thereto.

4.3        Delayed Delivery: If owing to:-

(a)  any seller, manufacturer or existing lessee of the Aircraft delaying in the
     delivery  of, or failing to deliver,  the Aircraft to Lessor for any reason
     (other  than  because of any  default of Lessor in the  performance  of its
     obligations  under an agreement  with that seller,  manufacturer  or lessee
     unless the default  arises  from any act or omission of Lessee)  whether or
     not in  circumstances  entitling  that  seller,  manufacturer  or lessee to
     terminate that agreement;

(b)  any purchase  agreement for the Aircraft  terminating  prior to delivery of
     the  Aircraft  (other  than  because  of  any  default  of  Lessor  in  the
     performance  of its  obligations  under that  agreement  unless the default
     arises from any act or omission of Lessee);

(c)  any Excusable Delay; or

(d)  notification of any defect or non-conformity pursuant to Clause 4.5;

Lessor delays in the delivery of, or fails to deliver,  the Aircraft  under this
Agreement:-

           (i)      Lessor will not be  responsible  for any  losses,  including
                    loss  of  profit,  costs  or  expenses  arising  from  or in
                    connection with the delay or failure suffered or incurred by
                    Lessee;

           (ii)     subject  to  Clause  4.5,  Lessee  will not be  entitled  to
                    terminate  this  Agreement  or to reject the  Aircraft  when
                    tendered for delivery by Lessor,  on the grounds of any such
                    delay;

           (iii)    in  the  case of termination of a purchase agreement, Lessor
                    may  at  any  time  after  the  termination  terminate  this
                    Agreement; and

           (iv)     upon any such termination or termination  pursuant to Clause
                    4.5  neither   Lessor  nor  Lessee  will  have  any  further
                    obligation to the other under this  Agreement  other than as
                    expressly set out in this Agreement, except that Lessor will
                    repay to Lessee  the  Deposit  if paid in cash or cancel and
                    return the Letter of Credit, as applicable.

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

4.5        Inspection:  Prior  to  the  Delivery Date, subject to any applicable
           purchase or lease agreement, Lessor will give Lessee an opportunity:-

(a)  to inspect the Aircraft at the Delivery Location; and

(b)  to  assign  up  to 2  representatives  to  participate  as  observers  in a
     demonstration flight to demonstrate the condition of the Aircraft.

           If Lessee  notifies Lessor promptly prior to the Delivery Date of any
           defect  or  non-conformity   with  Schedule  1  observed  during  the
           inspection or  demonstration  flight,  Lessor will correct or procure
           the  correction  of the  defect  or  non-conformity  as  promptly  as
           practicable  (except to the extent  otherwise agreed or to the extent
           in  the  opinion  of  Lessor  it is  impracticable  or  prohibitively
           expensive to do so).  Subject to Clause 4.3,  Lessor may postpone the
           Delivery Date in such a case to the date which Lessor notifies Lessee
           that the defect or non-conformity has been rectified.  Lessee will be
           entitled  to  terminate  this  Agreement  if Lessor  notifies it that
           Lessor does not intend to correct the defect or non-conformity.

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

5.         PAYMENTS

5.1        Deposit:  Lessee shall pay to Lessor a Deposit in cash or pursuant to
           a Letter of Credit in form and  substance  reasonably  acceptable  to
           Lessor in the  amounts  set forth in the  definition  of  Deposit  in
           Letter  Agreement No. 1 and in accordance with the schedule set forth
           therein.  So long as no  Default  or Event of  Default  then  exists,
           Lessor shall  refund to Lessee all Deposits  then held by Lessor upon
           return and final  acceptance  of the Aircraft by Lessor on the Expiry
           Date or promptly  after receipt of the Agreed Value after an Event of
           Loss.

5.2        Rental Periods: The Term will consist of consecutive whole or partial
           Rental Periods set forth in Letter  Agreement No. 1. 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 calendar day in the next month numerically
           corresponding to the Delivery Date, except that:

(a)  if there is no such  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:  Lessee will pay to Lessor or its order on each Rent Date, Rent
           in advance in the amount  specified as "Rent" in Letter Agreement No.
           1. Payment must be initiated  adequately  in advance of the Rent Date
           to ensure  that  Lessor  receives  credit for the payment on the Rent
           Date.  If a Rental  Period  begins on a  non-Business  Day,  the Rent
           payable  in  respect  of  that  Rental  Period  shall  be paid on the
           Business  Day  immediately  preceding  the date on which such  Rental
           Period commences.

5.4        Supplemental Rent:

(a)  Amount:  Lessee will further pay to Lessor Supplemental Rent in relation to
     each  calendar  month or portion  thereof  during the Term and for the last
     Rental  Period of the Term no later than the 10th day  following the end of
     such calendar month as follows:-

                    (i) in respect of the Airframe,  the product of the Airframe
                    Maintenance Reserve Rate specified in Letter Agreement No. 1
                    and the  number of Flight  Hours  operated  by the  Aircraft
                    during that calendar month ("Airframe  Supplemental  Rent");
                    and

                    (ii) in respect of the  life-limited  Parts ("LLP") for each
                    Engine,  the product of the Life-Limited  Parts Reserve Rate
                    specified in Letter Agreement No. 1 and the number of Engine
                    Flight  Hours (or fraction  thereof)  operated by the Engine
                    during  that  calendar  month  ("Engine  LLP   Refurbishment
                    Reserves"); and

                    (iii) in respect of Engine  Refurbishment  for each  Engine,
                    the  product  of  the  Engine  Refurbishment   Reserve  Rate
                    specified in Letter Agreement No. 1 and the number of Engine
                    Flight  Hours (or fraction  thereof)  operated by the Engine
                    during   that   calendar   month   ("Engine    Refurbishment
                    Reserves"); and

                    (iv) in  respect of the  Landing  Gear,  the  product of the
                    Landing Gear Reserve Rate specified in Letter  Agreement No.
                    1 and the number of Flight  Hours  operated  by the  Landing
                    Gear during that calendar month ("Landing Gear  Supplemental
                    Rent").

(b)  Adjustment:  Lessor may adjust  the amount of  Supplemental  Rent after the
     Delivery  Date upon  notice to Lessee  not more  frequently  than  annually
     utilizing the Escalation  Adjustment  set forth in Letter  Agreement No. 1.
     The Engine Reserve Rate may be further  adjusted not more  frequently  than
     annually as provided in Section III of Letter Agreement No. 1.

5.5        Payments:  All payments by Lessee to Lessor under this Agreement will
           be made for  value on the due date in  Dollars  and in same day funds
           settled  through  the New York  Clearing  House  System or such other
           funds as may for the time being be customary  for the  settlement  in
           New York City of  international  payments  in Dollars by  telegraphic
           transfer to Bankers  Trust  Company,  ABA number * for the account of
           GECC T&I Air  Depository  Account,  Account  No.  * or to such  other
           account as Lessor may advise Lessee in writing.

5.6        Withholding:  All  payments  by  Lessee  pursuant  to  the  Operative
           Documents to which it is a party shall be free of all withholdings of
           any nature whatsoever except to the extent otherwise required by Law,
           and if any such  withholding  is so required,  Lessee shall pay on an
           After-Tax Basis an additional amount such that after the deduction of
           all amounts required to be withheld, the net amount actually received
           by Lessor on an  After-Tax  Basis will equal the amount  that  Lessor
           would have received on an After-Tax Basis if such withholding had not
           been  required;  provided,  however,  that if  Lessee  pays  any such
           additional  amount to compensate  for the  withholding  of any Lessor
           Tax,  Lessor  shall  repay to Lessee  within * days after  receipt of
           Lessee's  written  request  therefor  (which  request shall include a
           description  in reasonable  detail of the Lessor Tax involved and the
           calculation of the additional amount to be repaid) the amount of such
           additional amount to the extent attributable to any Lessor Tax.

5.7        General Tax Indemnity:

(a)  General:

                    (i) Lessee will on demand pay and indemnify each  Indemnitee
                    against  all  Taxes  (other  than  Lessor  Taxes)  levied or
                    imposed  against or upon or payable  by such  Indemnitee  or
                    Lessee and arising  from,  with respect to or in  connection
                    with the transactions pursuant to the Operative Documents to
                    which it is a party including (but not limited to) all Taxes
                    relating or attributable to Lessee,  any Operative  Document
                    or the Aircraft  directly or indirectly  in connection  with
                    the  importation,   exportation,   registration,  ownership,
                    leasing, sub-leasing,  purchase, delivery,  possession, use,
                    operation,  repair, maintenance,  overhaul,  transportation,
                    landing,  storage, presence or redelivery of the Aircraft or
                    any part thereof or any rent, receipts,  insurance proceeds,
                    income or other amounts arising therefrom.

                    (ii) All Taxes indemnified pursuant to this Clause 5.7 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 an Indemnitee pursuant
                    to Clause 5.7 shall be paid within * days after receipt of a
                    written  demand   therefor  from  the  relevant   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 Clause
                    5.12  and  Lessee  shall  have  duly  performed  (and  shall
                    continue to perform) all its  obligations  under Clause 5.12
                    with respect to such contest,  then payment of the indemnity
                    with  respect  to such  Tax  under  Clause  5.12  shall , at
                    Lessee's  election,  be deferred  until the date the contest
                    has been completed.

(b)  MACRS Tax Indemnity

         Lessee will on demand pay and  indemnify  each Tax  Indemnitee  for any
         loss,  disallowance,  or deferral of, or delay in  claiming,  the MACRS
         Deductions  resulting  from (A)  Lessee's  using the Aircraft in such a
         manner as to cause the  Aircraft  to be treated as "used  predominantly
         outside the United  States" within the meaning of Section 168(g) of The
         Internal  Revenue  Code of 1986,  as  amended  (the  "Code") or (B) the
         Aircraft being treated as "tax-exempt use property"  within the meaning
         of  Section  168(h) of the Code  other  than as a result of the  Lessor
         being a "tax-exempt entity" under Section 168(h)(2) of the Code (either
         (A) or (B) hereinafter  referred to as a "MACRS Loss").  In determining
         the  indemnity  required  in  connection  with a MACRS  Loss to the Tax
         Indemnitee under this Clause,  the Tax Indemnitees  shall be assumed to
         be  subject  to a  combined  U. S. and state  income tax rate of (after
         giving effect to the deductibility of such state income taxes for U. S.
         income  tax  purposes)  *% in 2000  and in each  year  thereafter  (the
         "Assumed  Tax  Rate"),  and the Tax  Indemnitee  will  have  sufficient
         taxable  income  to be  taxed  at  the  Assumed  Tax  Rate  after  full
         utilization of the MACRS  Deductions.  The amount of the MACRS Loss for
         any taxable year or years shall be computed as the  difference  between
         (X) the present  value of the MACRS  Deductions  for such year or years
         and all  subsequent  years using a discount rate of * per cent (*%) per
         annum, and (Y) the present value of the actual cost recovery deductions
         attributable to the Aircraft realized by the Tax Indemnitee as a result
         of the MACRS Loss (but assuming that the Aircraft is sold by the Lessor
         at the end of the Term of * months using a discount  rate of * per cent
         (*%) per annum.  The amount payable under this  indemnity  shall be the
         amount that, after deduction by the Tax Indemnitee of the amount of all
         additional U.S., state,  local and foreign taxes required to be paid by
         the Tax Indemnitee in respect of the receipt or accrual of such amount,
         will equal the amount of the MACRS Loss as  computed  in the  preceding
         sentence,  plus  the  amount  of any  actual  interest,  penalties  and
         additions  to tax  payable by the Tax  Indemnitee  with  respect to the
         MACRS Loss.

(c)  Foreign Tax Credit Indemnity

         If, as a result of the use or  operation  or location  of the  Aircraft
         outside the United States by Lessee,  more than the *% (the  "Permitted
         Percentage") of any item of income,  deduction, or loss with respect to
         the transactions  contemplated by the Lease will be treated for Federal
         income tax purposes as derived from, or allocable to,  sources  outside
         the United States (an "Excess Foreign Allocation"),  and if as a result
         thereof the amount of the foreign tax credits available for utilization
         by the Lessor for any taxable year shall be less than the amount of the
         foreign tax credits that would have been  available for  utilization by
         the Lessor if the Lessee had not used the  Aircraft  outside the United
         States more than the Permitted Percentage (such event being referred to
         herein as a "Foreign  Tax Credit  Loss"),  then the Lessee shall pay to
         the Lessor as an  indemnity  an amount  which,  after  deduction of the
         amount  of all  additional  federal,  state,  local and  foreign  taxes
         actually required to be paid by the Lessor in respect of the receipt or
         accrual of such amount,  is equal to the actual increase in the Federal
         income  taxes  payable  by (or not  refundable  to) the Lessor for such
         taxable  year as a result of such  Foreign  Tax Credit  Loss,  plus the
         amount of any  interest,  penalties and additions to tax payable by the
         Lessor as a result of such Foreign Tax Credit Loss.

(d)  Payment

         Each payment by the Lessee  pursuant to Clauses 5.7(b) and (c) shall be
         made  within  *  days  after  receipt  of  a  written  demand  therefor
         accompanied by a written statement  describing in reasonable detail the
         MACRS  Loss or  Foreign  Tax  Credit  Loss in  question,  the amount of
         additional Federal income tax, interest, penalties and additions to tax
         and the  calculation  of the payment due in request  thereof (but in no
         event shall be required to be paid  earlier  than * (*)  Business  Days
         prior to the date  such  additional  Federal  income  taxes  are  due);
         provided  that,  if a contest of the MACRS  Loss or Foreign  Tax Credit
         Loss is being conducted pursuant to Clause 5.12 hereof,  payment (other
         than  payments  required  under Clause 5.12) shall not be required from
         the Lessee until * days after the final determination of such contest.

5.8.       Sales and Use Taxes:

(a)  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),  in addition  to the  amounts  specified  as "Rent" in
     Letter Agreement No. 1:

                    (i) all sales, use, 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  in which the
                    Aircraft is  habitually  based with  respect to the lease of
                    the Aircraft to Lessee  pursuant to the Operative  Documents
                    to which it is a party unless  Lessee  delivers to Lessor on
                    or prior to the Delivery Date such exemption  certificate or
                    other  document as may be  acceptable  to Lessor to evidence
                    Lessee's  entitlement  to  exemption  from all  Sales  Taxes
                    imposed by such  jurisdiction  with  respect to the lease of
                    the Aircraft  pursuant to the  Operative  Documents to which
                    Lessee is a party; and

                    (ii)  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  delivers 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 such  jurisdiction with respect to the
                    lease of the Aircraft pursuant to the Operative Documents to
                    which Lessee is a party.

(b)  Lessee will cooperate with Lessor 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 Operative
     Documents to which Lessee is a party.

(c)  The specific  obligations  with respect to sales and use taxes set forth in
     this Clause 5.8 are in addition  to, and are not in  substitution  for, the
     Lessee's obligation to indemnify for sales and use taxes pursuant to Clause
     5.7.

5.9        Information:

(a)  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 under the  Operative  Documents to
     which  Lessee is a party,  Lessee will  complete  the same and, on request,
     supply a copy of the report or return to Lessor.

(b)  If any report,  return or  statement  is required to be made by Lessor with
     respect to any Tax for which  there is an  indemnity  obligation  of Lessee
     under this Clause 5, Lessee will promptly  notify Lessor of the requirement
     and:

                    (i) 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 intends to prepare and file),  prepare such return in
                    such manner as will show 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

                    (ii) 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.

           Lessee will  provide  such  information  and  documents as Lessor may
           reasonably  request to enable  Lessor to comply  with its tax filing,
           audit and litigation obligations.

5.10       Indemnity  Payments to be Made on an After-Tax  Basis:  Lessee agrees
           that, with respect to any payment or indemnity pursuant to Clause 5.7
           (Tax  Indemnity),  Clause  5.8  (Sales  and Use  Taxes)  or Clause 10
           (Indemnity)  to or  for  the  benefit  of  any  Indemnitee,  Lessee's
           indemnity  obligations  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 Clause 5.10),
           determined based on the assumption that at the time each such payment
           or  indemnity  accrues to the  relevant  Indemnitee,  such payment or
           indemnity  will be subject to (i) United States Federal income tax at
           the highest  marginal  statutory tax rate applicable to corporations,
           (ii) United  States state and local income taxes at the  composite of
           the highest marginal statutory tax rates applicable to the Indemnitee
           and (iii)  income  taxes (if any)  imposed by  countries  outside the
           United States at the actual rates imposed on the relevant Indemnitee.

5.11       Default  Interest:  If Lessee fails to pay any amount  payable  under
           this  Agreement on the due date,  Lessee will pay on demand from time
           to time to Lessor  interest (both before and after  judgment) on that
           amount, from the due date to the date of payment in full by Lessee to
           Lessor,  at the Interest  Rate  specified in Letter  Agreement No. 1;
           provided,  however,  that in no event  shall  such  rate  exceed  the
           maximum  permitted  by Law.  All  such  interest  will be  compounded
           monthly  and  calculated  on the basis of the  actual  number of days
           elapsed in the month assuming a * day month and a * day year.

5.12       Contest:

(a)  If an  Indemnitee  receives  a written  claim for any Tax for which  Lessee
     would be required to pay an indemnity pursuant to Clause 5.7 or Clause 5.8,
     such Indemnitee  shall notify Lessee promptly of such claim,  provided that
     any  failure  to  provide  such  notice  will  not  relieve  Lessee  of any
     indemnification  obligation  pursuant  to  Clause  5.7 or  Clause  5.8.  If
     requested by Lessee in writing promptly after receipt of such  Indemnitee's
     notice, such Indemnitee shall, upon receipt of indemnity satisfactory to it
     and at the expense of Lessee  (including,  without  limitation,  all costs,
     expenses,  legal and accountants'  fees and  disbursements,  and penalties,
     interest and  additions to tax incurred in  contesting  such claim) in good
     faith contest or (if permitted by applicable Law in the case of Taxes other
     than those  payable  pursuant to Clauses  5.7(b) and (c)) permit  Lessee to
     contest such 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.  Such  Indemnitee  shall  determine  the method of any contest
     conducted by such Indemnitee and (in good faith  consultation  with Lessee)
     control the  conduct  thereof.  Lessee  shall  determine  the method of any
     contest  conducted  by Lessee  and (in good  faith  consultation  with such
     Indemnitee)  control  the  conduct  thereof.  Lessee  shall pay in full all
     payments  of Rent and  other  amounts  payable  pursuant  to the  Operative
     Documents to which Lessee is a party,  without  reduction for or on account
     of any Tax, while such contest is continuing.  Such Indemnitee shall not be
     required  to contest,  or to  continue to contest,  a claim for Taxes under
     this  Clause 5.12 if (w) in the case of Taxes  payable  pursuant to Clauses
     5.7(b) or (c),  the amount in dispute is less than $*, or (x) such  contest
     would result in a risk of criminal  penalties or of a sale,  forfeiture  or
     loss of, or the imposition of a Lien (other than a Permitted  Lien) on, the
     Aircraft,  or (y) Lessee shall not have furnished an opinion of independent
     tax counsel  selected by such  Indemnitee  and reasonably  satisfactory  to
     Lessee,  that a reasonable basis exists for such contest,  or (z) a Default
     or an Event of  Default  shall be  continuing  (unless  Lessee  shall  have
     provided  security  reasonably  satisfactory  to such  Indemnitee  securing
     Lessee's  performance  of its  obligations  under  this  Clause 5). If such
     Indemnitee  contests  any claim for Taxes by making a payment and seeking a
     refund  thereof,  then  Lessee  shall  advance  to such  Indemnitee,  on an
     interest-free  basis,  an  amount  equal  to the  Taxes  to be paid by such
     Indemnitee  in  connection  with  the  contest  and  shall  indemnify  such
     Indemnitee on an After-Tax  Basis for any adverse tax  consequences to such
     Indemnitee of such interest-free  advance.  Upon the final determination of
     any contest  pursuant to this Clause 5.12 in respect of any Taxes for which
     Lessee shall have made an advance to such 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 indemnity  obligation
     of Lessee to such  Indemnitee  under  this  Clause 5 and such  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.

(b)  If an Indemnitee obtains a refund of all or any part of any Taxes for which
     a full indemnity was paid by Lessee,  such Indemnitee  shall pay Lessee the
     amount of such refund,  reduced by any Taxes imposed on such  Indemnitee on
     receipt or accrual of such refund and  increased by any Taxes saved by such
     Indemnitee  by  reason  of  the  deductibility  of  such  payment  by  such
     Indemnitee.  If, in addition to such refund,  such  Indemnitee  receives an
     amount of interest on such refund,  such Indemnitee shall pay to Lessee the
     portion  of such  interest  which is fairly  attributable  to such  refund,
     reduced by any Taxes  imposed on such  Indemnitee  on receipt or accrual of
     such   interest  and  increased  by  any  Taxes  saved  by  reason  of  the
     deductibility of such payment by such Indemnitee. Such Indemnitee shall not
     be required to make any payment to Lessee  pursuant to this Clause 5.12 if,
     and for so long  as,  an  Event  of  Default  shall  have  occurred  and be
     continuing.

(c)  Any  Indemnitee in its sole  discretion  (by written  notice to Lessee) may
     waive its rights to indemnification  pursuant to Clause 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 such Indemnitee for the Taxes that are the subject of such claim.
     If an Indemnitee agrees to a settlement of any contest  conducted  pursuant
     to this Clause  5.11  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 Clause 5.7
     with respect to the Tax liability accepted in such settlement.

5.13       Net Lease: This Agreement is a net lease.  Lessee's obligations under
           this  Agreement  are  absolute  and unconditional irrespective of any
           contingency whatsoever including (but not limited to):-

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

(b)  any  unavailability  of the  Aircraft  for any reason,  including,  but not
     limited  to,  a  requisition   of  the  Aircraft  or  any   prohibition  or
     interruption of or interference with or other restriction  against Lessee's
     use, operation or possession of the Aircraft;

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

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

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

(f)  and Security Interests with respect to the Aircraft or Taxes; and/or

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

5.14       Security

(a)  To the fullest  extent  permitted by Law and by way of continuing  security
     Lessee as sole  beneficial  owner charges the Deposit and the  Supplemental
     Rent and all rights of Lessee to payment  thereof and the debt  represented
     thereby  (the  "Charged  Monies") to Lessor by way of first fixed charge as
     security for Lessee's  obligations and liabilities under this Agreement and
     the Related  Agreements  (the "Secured  Liabilities").  Except as expressly
     permitted under this  Agreement,  Lessee will not be entitled to payment of
     the Charged Monies.  Lessee will not assign,  transfer or otherwise dispose
     of all or part of its rights in the  Charged  Monies and it will enter into
     any  additional  documents  and  instruments   necessary  or  advisable  to
     evidence, create or perfect Lessor's rights to the Charged Monies;

(b)  If Lessee fails to comply with any provision of this Agreement or any Event
     of Default has  occurred and is  continuing,  in addition to all rights and
     remedies  accorded to Lessor elsewhere in this Agreement and under Law as a
     secured party in respect of the Charged  Monies,  Lessor may immediately or
     at any time thereafter, without prior notice to Lessee:-

                    (i)  set-off  all or any  part  of the  Secured  Liabilities
                    against the  liabilities of Lessor in respect of the Charged
                    Monies; or

                    (ii) apply or  appropriate  the Charged Monies in or towards
                    the payment or discharge of the Secured  Liabilities in such
                    order as Lessor sees fit; and

(c)  If Lessor has  exercised  the set-off  described in  sub-clause  (b) above,
     Lessee  shall,  following  a demand in writing  from  Lessor,  restore  the
     Charged Monies to the level at which they stood  immediately  prior to such
     set-off.

5.15       Letter of Credit

(a)  If Lessee 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 USBank or  another  bank  reasonably
     acceptable to Lessor in its reasonable discretion and in form and substance
     reasonably acceptable to Lessor, and, if not issued by USBank or by the New
     York  branch  of a  major  bank  reasonably  acceptable  to  Lessor  in its
     reasonable  discretion  from time to time, will be confirmed by and payable
     at the New York branch of a major bank  reasonably  acceptable to Lessor in
     its reasonable  discretion from time to time, and will be issued in lieu of
     a cash Deposit as security for all payment  obligations of Lessee under the
     Lease  and each  Other  Agreement  (including  any and all  obligations  to
     indemnify Lessor for Losses suffered or incurred by it), which shall remain
     in full force and effect and may be drawn down by Lessor upon demand at any
     time or times  following  the  occurrence  of an Event of Default until the
     Required LC Expiry Date.

(b)  With the prior written  consent of Lessor,  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,  in each case, be renewed and
     delivered  to Lessor not later than * days prior to its expiry;  and (ii) 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,  Lessor  reasonably  determines  in its
     reasonable  discretion  that the current issuing or confirming bank for the
     Letter of Credit is no longer an  acceptable  issuing  or  confirming  bank
     (whether by virtue of a material adverse change in its financial condition,
     a  decrease  in  any  credit  rating  of  its  long-term   unsecured   debt
     obligations,  or for any other reason) Lessee shall  promptly  procure that
     the Letter of Credit is  replaced  by a Letter of Credit  issued by another
     bank reasonably  acceptable to Lessor in its reasonable  discretion and (if
     reasonably  requested  by Lessor in its  reasonable  discretion)  that such
     replacement  Letter of Credit  is  confirmed  by  another  bank  reasonably
     acceptable to Lessor in its reasonable discretion.

(d)  If  Lessor  makes a drawing  under the  Letter  of  Credit,  Lessee  shall,
     following  a demand in  writing  by Lessor,  immediately  procure  that the
     maximum amount available for drawing under the Letter of Credit is promptly
     restored to the level at which it stood immediately prior to such drawing.

6.         MANUFACTURER'S WARRANTIES

6.1        Assignment:   Notwithstanding  this  Agreement,  Lessor  will  remain
           entitled to the benefit of each  warranty,  express or implied,  with
           respect to the  Aircraft,  any Engine or Part so far as concerns  any
           manufacturer, vendor, subcontractor or supplier. Except to the extent
           Lessor otherwise  directs,  Lessor hereby authorizes Lessee to pursue
           any claim  thereunder in relation to defects  affecting the Aircraft,
           any Engine or Part and Lessee  agrees  diligently  to pursue any such
           claim  which  arises  at its own  cost.  Lessee  will  notify  Lessor
           promptly upon becoming aware of any such claim.

6.2        Proceeds:   Except  to  the  extent  Lessor  otherwise  agrees  in  a
           particular case, all proceeds of any such claim will be paid directly
           to Lessor but if and to the extent that such claim relates:-

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

(b)  to  compensation  for loss of use of the  Aircraft,  an  Engine or any Part
     during the Term; and provided no Default has occurred and is continuing the
     proceeds will be paid to Lessee by Lessor but in the case of (a) above only
     on receipt of evidence satisfactory to Lessor that Lessee has rectified the
     relevant defect.

6.3        Parts:  Except to the extent Lessor  otherwise agrees in a particular
           case, Lessee will procure that all engines,  components,  furnishings
           or equipment provided by the manufacturer,  vendor,  subcontractor or
           supplier in replacement of a defective Engine or Part pursuant to the
           terms of any warranty  will be installed  promptly by Lessee and that
           title  thereto  free  of  Security  Interests  vests  in  Lessor.  On
           installation  each part will be deemed to be a Part. In the case of a
           Replacement  Engine,  Lessee will  satisfy  and  perform  each of the
           conditions  and  covenants  set  forth in  Clause  11.1(c),  and upon
           satisfaction  of such  conditions,  such  Replacement  Engine will be
           deemed an "Engine" for all purposes of this Agreement.

6.4        Agreement:  To the extent any warranties relating to the Aircraft are
           made  available  under an agreement between any manufacturer, vendor,
           subcontractor  or  supplier  and  Lessee, this Clause 6 is subject to
           that agreement.  However Lessee will:-

(a)  pay the proceeds of any claim  thereunder to Lessor to be applied  pursuant
     to Clause 6.2 and pending such payment will hold the claim and the proceeds
     on trust for Lessor; and

(b)  Lessee will take all such steps as are  necessary at the end of the Term to
     ensure the  benefit of any of those  warranties  which have not expired are
     vested in Lessor.

7.         LESSOR'S COVENANTS

7.1        Quiet  Enjoyment:  Lessor  will not  interfere  with the  quiet  use,
           possession  and  enjoyment of the Aircraft by Lessee but the exercise
           by Lessor of its rights under or in  connection  with this  Agreement
           will not  constitute  such an  interference.  Lessor will  procure at
           Lessee's request an undertaking of quiet enjoyment for the benefit of
           Lessee with respect to any prospective Lessor Lien.

7.2        Release of Supplemental Rent: Provided no Default has occurred and is
           continuing  Lessor will release funds to Lessee from the Supplemental
           Rent respecting  maintenance work performed upon submission by Lessee
           to Lessor within * months of the commencement of that maintenance and
           before * (*)  months  following  the Expiry  Date of an  invoice  and
           supporting    documentation   reasonably   satisfactory   to   Lessor
           evidencing:-

(a)  with respect to the  Airframe,  the  completion,  in  accordance  with this
     Agreement,  of those items of maintenance (excluding any repairs arising as
     the result of operational or maintenance mishandling)  characterized by the
     Manufacturer's  maintenance planning document and best industry practice as
     "D" Check and/or individual  structural  inspections  having an interval of
     not less than * Flight  Hours or * years  for the  Aircraft  or any  lesser
     interval for an equivalent major  structural  inspection if required by the
     Manufacturer's  maintenance  planning  document  subject to retroactive and
     prospective  adjustment  of the  Reserve  Rates as  deemed  appropriate  by
     Lessor,  the lesser of (i) the amount of that  invoice  and (ii) the amount
     equal to the aggregate amount of Airframe Supplemental Rent paid under this
     Agreement  at the  time  of  commencement  of  that  maintenance  less  the
     aggregate amount previously released by Lessor under this sub-clause;

(b)  with  respect to any  Engine,  the  performance,  in  accordance  with this
     Agreement,  of all shop visits requiring engine disassembly (other than (i)
     repairs  arising as a result of foreign  object  damage or  operational  or
     maintenance mishandling and/or (ii) removal, installation,  maintenance and
     repair of Quick Engine Change ("QEC")  kits),  the lesser of (i) the amount
     of that invoice and (ii) the amount equal to the aggregate amount of Engine
     Refurbishment  Reserves paid in respect of that Engine under this Agreement
     at the time of commencement of that  maintenance  less the aggregate amount
     previously paid in respect of that Engine by Lessor under this sub-clause;

(c)  with respect to life limited parts within any Engine,  the performance,  in
     accordance with this Agreement,  of any such parts replacement  (other than
     (i) replacement  arising as a result of accidents or incidents  (whether or
     not eligible for recovery under Lessee's insurance),  foreign object damage
     or   operational   or   maintenance   mishandling   and/or  (ii)   removal,
     installation, maintenance and repair of QEC kits) and/or (iii) any elective
     parts  replacement),  the lesser of (i) the amount of that invoice and (ii)
     the amount equal to the aggregate of Engine LLP Refurbishment Reserves paid
     in respect of that Engine under this Agreement at the time of  commencement
     of that maintenance less the aggregate amount previously paid in respect of
     that Engine by Lessor under this sub-clause; and

(d)  with respect to the Landing Gear, the  performance in accordance  with this
     Agreement,  of all work on the landing  gear in the nature of overhaul  and
     requiring removal and disassembly (other than repairs arising as the result
     of operational or maintenance mishandling), the lesser of (i) the amount of
     that invoice and (ii) the amount equal to the  aggregate  amount of Landing
     Gear   Supplemental   Rent  paid  under  this  Agreement  at  the  time  of
     commencement of that maintenance less the aggregate amount  previously paid
     by Lessor under this sub-clause.

7.3        Lessor Obligations Following Expiry Date: Within * Business Days of:-

(a)  redelivery  of  the  Aircraft  to  Lessor  in  accordance  with  and in the
     condition required by this Agreement; or

(b)  payment to Lessor of the Agreed Value  following an Event of Loss after the
     Delivery  Date;  or in each case such  later  time as Lessor is  reasonably
     satisfied  Lessee has irrevocably paid to Lessor all amounts which may then
     be outstanding or become payable under this Agreement,  the other Operative
     Documents to which Lessee is a party or the Related  Agreements and Lessee,
     Lessor will pay to Lessee:-

                    (i) the balance of the Deposit if paid in cash or cancel and
                    return the Letter of Credit, as applicable; and

                    (ii) 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
                    shall  return  to Lessee  the  warrant  certificate,  if not
                    previously exercised, representing the Warrant.

8.         LESSEE'S COVENANTS

8.1        Duration: The undertakings in this Clause and in Clause 12 will:-

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

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

8.2        Information: Lessee will:-

(a)  notify Lessor forthwith of the occurrence of any Default or any other event
     which  might  adversely  affect  Lessee's  ability  to  perform  any of its
     obligations under this Agreement;

(b)  furnish to Lessor:-

                    (i) upon request,  the consolidated  management  accounts of
                    Lessee  (comprising  a  balance  sheet and  profit  and loss
                    statement)  prepared for the most recent previous  financial
                    quarter;

                    (ii) as soon as available  but not in any event later than *
                    days  after the last day of each  financial  year of Lessee,
                    its audited  consolidated  balance  sheet as of such day and
                    its audited  consolidated  profit and loss statement for the
                    year ending on such day;

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

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

(c)  keep Lessor  informed as to current  serial  numbers of the Engines and any
     engine installed on the Aircraft;

(d)  promptly  furnish  to  Lessor  all  information  Lessor  from  time to time
     reasonably  requests  regarding the Aircraft,  any Engine or any Part,  its
     use,  location  and  condition  including,  without  limitation,  the hours
     available on the Aircraft  and any Engine until the next  scheduled  check,
     inspection, overhaul, refurbishment or shop visit, as the case may be;

(e)  on request,  within * days after the end of any Rental  Period,  furnish to
     Lessor  evidence  satisfactory to Lessor of payment of all Taxes due during
     that or any previous Rental Period;

(f)  on  request,  furnish to Lessor  evidence  satisfactory  to Lessor that all
     Taxes  and  charges  incurred  by  Lessee  with  respect  to the  Aircraft,
     including  without  limitation all payments due to the relevant air traffic
     control authorities, have been paid and discharged in full;

(g)  within * days after the end of each calendar month during the Term, provide
     Lessor with a monthly  report on the  Aircraft  and each Engine in the form
     set out in Schedule 8 hereto;

(h)  give  Lessor  not  less  than * days'  written  notice  as to the  time and
     location of all Major Checks; and

(i)  promptly notify Lessor of:-

                    (i) any loss, theft,  damage or destruction to the Aircraft,
                    any Engine or any Part, or any  modification to the Aircraft
                    if the  potential  cost may exceed  the Damage  Notification
                    Threshold; and

                    (ii) any claim or other occurrence  likely to give rise to a
                    claim under the  Insurances  (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.

8.3        Lawful and Safe Operation: Lessee will:-

(a)  comply  with  the law  for the  time  being  in  force  in any  country  or
     jurisdiction  which may for the time being be  applicable  to the  Aircraft
     (including without limitation Laws mandating insurance coverage) or, so far
     as concerns  the use and  operation of the Aircraft or an owner or operator
     thereof and take all  reasonable  steps to ensure that the  Aircraft is not
     used for any illegal purpose;

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

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

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

(e)  not use the Aircraft for the carriage of:-

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

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

                    (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
     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;

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

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

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

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

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

(i)  not operate the Aircraft,  or suffer or permit the Aircraft to operate,  to
     or for any  country or entity that is the  subject of  sanctions  under the
     U.S.  International  Economic Emergency Powers Act or U.N. Security Council
     directives  (presently Iraq, Iran, Libya, the Bosnia-Serb  controlled areas
     of the Republic of Bosnia and  Herzegovina and the Unita Rebels of Angola).
     Lessee also covenants and agrees (i) not to operate or locate, or suffer or
     permit to be operated or located,  the  Aircraft in any country  restricted
     under  the  U.S.   Trading   with  the  Enemy  Act  and  the  U.S.   Export
     Administration  Act except as may be permitted  by operating in  accordance
     with the conditions specified by the U.S. Export Administration Regulations
     (15  CFR  Parts  730-799),  General  License  GATS  (15  CFR  Part  771.19)
     (presently  Cuba, Iran,  North Korea,  Sudan,  and Syria),  and (ii) not to
     operate the Aircraft between Cuba and the United States; and

(j)  not use,  operate,  or locate the  Aircraft,  or cause suffer or permit the
     Aircraft to be used,  operated or located during the Term in any manner not
     covered by the  Insurances  or in any area  excluded  from  coverage by the
     Insurances  or in any manner  which would  prejudice  the  interests of the
     Indemnitees in the Insurances, the Aircraft, any Engine or any Part.

8.4        Taxes and other Outgoings: Lessee will promptly pay:-

(a)  all license and  registration  fees,  Taxes  (other than Lessor  Taxes) and
     other amounts of any nature imposed by any  Government  Entity with respect
     to the Aircraft,  including  without  limitation  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) and other amounts
     in  respect  of any  premises  where the  Aircraft  or any Part  thereof is
     located from time to time;

           except to the extent  that in the  reasonable  opinion of Lessor such
           payment is being contested in good faith by appropriate  proceedings,
           in respect of which  adequate  resources 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.

8.5        Sub-Leasing  and  Wet-Leasing:  LESSEE  WILL NOT,  WITHOUT  THE PRIOR
           WRITTEN  CONSENT  OF  LESSOR,  SUB-LEASE,  WET  LEASE  OR  PART  WITH
           POSSESSION  OF THE  AIRCRAFT,  THE  ENGINES OR ANY PART  EXCEPT  THAT
           LESSEE MAY PART WITH POSSESSION (A) WITH RESPECT TO THE AIRCRAFT, THE
           ENGINES  OR ANY PART TO THE  RELEVANT  MANUFACTURERS  FOR  TESTING OR
           SIMILAR PURPOSES OR TO THE MAINTENANCE PERFORMER FOR SERVICE, REPAIR,
           MAINTENANCE  OR  OVERHAUL  WORK,  OR  ALTERATION,   MODIFICATIONS  OR
           ADDITIONS TO THE EXTENT REQUIRED OR PERMITTED BY THIS AGREEMENT,  AND
           (B) WITH RESPECT TO AN ENGINE OR PART, AS EXPRESSLY PERMITTED BY THIS
           AGREEMENT.  LESSEE MAY ENTER INTO A WET LEASE FOR THE  AIRCRAFT,  THE
           ENGINES OR ANY PART FOR A TERM NOT TO  CONTINUE  BEYOND THE TERM,  ON
           TERMS  CUSTOMARY  IN THE  INDUSTRY  FOR WET LEASES OF SUCH  DURATION;
           PROVIDED,  HOWEVER, THAT LESSEE SHALL REMAIN PRIMARILY LIABLE FOR THE
           PERFORMANCE OF ALL OF THE TERMS OF THIS AGREEMENT  (INCLUDING WITHOUT
           LIMITATION, ITS OBLIGATIONS UNDER CLAUSES 8 AND 9) TO THE SAME EXTENT
           AS IF SUCH WET LEASE HAD NOT BEEN ENTERED INTO AND PROVIDED, FURTHER,
           THAT NO SUCH WET  LEASE  INVOLVES  OR  RELATES  TO A  CONTRACT  OR AN
           OPERATION PROHIBITED UNDER CLAUSE 2.1(H) HEREOF.

8.6        Inspection:

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

(b)  Lessee will pay to Lessor on an  After-Tax  Basis on demand all  reasonable
     out-of-pocket  expenses  incurred  by  Lessor in  connection  with any such
     visit, inspection or survey; and

(c)  Lessor will:-

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

                    (ii) so long as no Default has occurred  and is  continuing,
                    not exercise such right other than on reasonable  notice and
                    so as not to disrupt unreasonably the commercial  operations
                    of Lessee,  provided,  however, Lessee will take such action
                    as  may  be  reasonably   required  to  facilitate  Lessor's
                    inspection.

8.7        Title: Lessee will:-

(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 rights of Lessor as owner of the Aircraft;

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

(c)  not at any time (i)  represent  or hold out  Lessor,  GECASI  or  GACASL as
     carrying  goods  or  passengers  on the  Aircraft  or as  being  in any way
     connected or associated with any operation or carriage (whether for hire or
     reward or  gratuitously)  which may be  undertaken by Lessee or (ii) pledge
     the credit of Lessor;

(d)  ensure  that  there  is  always  affixed,  and  not  removed  or in any way
     obscured,  a fireproof plate (having dimensions of not less than 10 cm. x 7
     cm.) in a reasonably  prominent position in the cockpit of the Aircraft and
     on each Engine stating:-

"This Aircraft/Engine is owned by Aviation Financial Services Inc. and is leased
to Frontier  Airlines,  Inc. and may not be operated by any other person without
the prior written consent of Aviation Financial Services Inc.";

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

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

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

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

(i)  not  attempt,  or hold  itself out as having any power,  to sell,  lease or
     otherwise dispose of the Aircraft, any Engine or any Part; and

(j)  obtain a waiver of any  mechanic's  lien or right  thereto  from any vendor
     providing  maintenance services for Lessee prior to delivering the Aircraft
     or any Engine or Part to such vendor.

8.8        General: Lessee will:-

(a)  not make any  substantial  change in the nature of the business in which it
     is engaged, will preserve its corporate existence (other than in connection
     with a solvent  reconstruction  the terms of which  have been  approved  by
     Lessor,  such approval not to be unreasonably  withheld),  and will conduct
     its  business in an orderly and  efficient  and will  maintain  all rights,
     privileges,  licenses  and  franchises  material  thereto  or  material  to
     performing its obligations under this Agreement;

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

(c)  not without  giving  Lessor * days prior  notice (in  accordance  with this
     Agreement),  change its chief executive  office (as such term is defined in
     Article  9 of the  Uniform  Commercial  Code as in  effect  in the State of
     Colorado)  from 12015 East 46th Avenue,  Denver,  Colorado,  80239,  United
     States of America;

(d)  remain a Certified Air Carrier and maintain, without limitation, its status
     so as to fall within the preview of Section  1110 of Title 11 of the United
     States Code or any analogous Statute; and

(e)  remain a  "citizen  of the United  States"  as defined in Section  40102 of
     Title 49 of the United States Code.

8.9        Records: Lessee will:-

(a)  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; keep the_records in such manner as the Air Authority may from time to
     time require.  All records must be maintained in English.  The records will
     form part of the Aircraft Documents; and

(b)  maintain,  with appropriate  revisions in English,  all Aircraft Documents,
     records,  logs, and other  materials  required by applicable  Laws and best
     practice of major  international air transport  operators in respect of the
     Aircraft.

8.10       Protection: Lessee will:-

(a)  maintain the registration of the Aircraft with the Air Authority reflecting
     (so far as permitted by  applicable  Law) the interest of Lessor and not do
     or  suffer  to  be  done  anything  which  might   adversely   affect  that
     registration; and

(b)  do all acts and things (including, without limitation, making any filing or
     registration  with the Air Authority or any other  Government  Entity or as
     required to comply  with the  Mortgage  Convention  where  applicable)  and
     execute and deliver  all  documents  (including,  without  limitation,  any
     amendment of this Agreement) as may be required by Lessor:-

                    (i) following any change or proposed change in the ownership
                    or financing of the Aircraft; or

                    (ii) following any modification of the Aircraft,  any Engine
                    or any Part or the  permanent  replacement  of any Engine or
                    Part in accordance with this Agreement, so as to ensure that
                    the  rights of Lessor  under this  Agreement  apply with the
                    same effect as before; or

                    (iii) to establish,  maintain, preserve, perfect and protect
                    the rights of Lessor under this  Agreement  and the interest
                    of Lessor in the Aircraft.

8.11       Maintenance and Repair: Lessee will:-

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

(b)  not change the  Maintenance  Performer  without  providing  the Lessor with
     prior written notice;

(c)  not materially change the Lessee's  Maintenance  Program or the schedule of
     the  Lessee's  Maintenance  Program  without the prior  written  consent of
     Lessor;

(d)  maintain the  Aircraft in  accordance  with  Lessee's  Maintenance  Program
     through the Maintenance  Performer and perform (at the respective intervals
     provided in Lessee's Maintenance Program) all Major Checks;

(e)  maintain  the  Aircraft in  accordance  with the  standard  of  maintenance
     required by FAR Part 121,  Subpart L and any other rules and regulations of
     the FAA and in at least the same  manner  and with at least the same  care,
     including, without limitation, maintenance scheduling,  modification status
     and technical  condition,  as is the case with respect to similar  aircraft
     owned or  otherwise  operated by Lessee and as if Lessee were to retain and
     continue  operating  the  Aircraft  in its  fleet  after the  Expiry  Date,
     including,  without limitation, all maintenance to the Airframe, any Engine
     or any Part required to maintain all warranties,  performance guarantees or
     service  life  policies  in full force and  effect  except to the extent of
     conflict with the rules and regulations of the Air Authority;

(f)  subject to Letter Agreement No. 1, comply with all outstanding  (i.e. at or
     prior  to  the  Expiry  Date)   mandatory   inspection   and   modification
     requirements,  airworthiness directives and similar requirements applicable
     to the  Aircraft,  any Engine or Part having a  compliance  date during the
     Term or within * days after the Expiry  Date and which are  required by the
     Air Authority  and/or  mandated by any  manufacturer  of the Aircraft,  any
     Engine or Part (an "Airworthiness Directive);

(g)  comply with all  applicable  Laws and the  regulations of the Air Authority
     and  other  aviation  authorities  with  jurisdiction  over  Lessee  or the
     Aircraft,  any Engine or Part regardless of upon whom such requirements are
     imposed and which 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  certificate of  airworthiness  (in the
     appropriate  category for the nature of the operations of the Aircraft) for
     the  Aircraft  issued by the Air  Authority  except  where the  Aircraft is
     undergoing  maintenance,  modification  or repair  required or permitted by
     this  Agreement  and will  from  time to time  provide  to Lessor a copy on
     request;

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

(j)  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)  and in the case of any Engine  which  suffers an Engine
     Event of Loss,  shall procure that such engine complies with the provisions
     of Clause 11.1(c).

8.12       Removal  of  Engines  and Parts: Lessee will ensure that no Engine or
           Part  installed  on the  Aircraft  is  at  any  time removed from the
           Aircraft other than:-

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

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

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

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

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

                    and then in each case (A) with respect to a Part, only if it
                    is  reinstalled  or replaced by a part complying with Clause
                    8.13(a)  as soon as  practicable  and in any  event no later
                    than the  Expiry  Date,  and (B) with  respect to an Engine,
                    title to such Engine shall remain vested in Lessor.

8.13       Installation of Engines and Parts: Lessee will:-

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

                    (i) in the case of an  engine,  it is an  engine of the same
                    model as, or an improved  or advanced  version of the Engine
                    it  replaces,  which  is in the  same  or  better  operating
                    condition,  has substantially  similar hours available until
                    the next scheduled checks,  inspections,  overhauls and shop
                    visits and has the same or greater  value and utility as the
                    replaced Engine;

                    (ii)  in the  case of a  part,  it is in as  good  operating
                    condition,  has substantially  similar hours available until
                    the next scheduled checks,  inspections,  overhauls and shop
                    visits, is of the same or a more advanced make and model and
                    is of the same  interchangeable  modification  status as the
                    replaced Part;

                    (iii) in the case of a part,  it has become and  remains the
                    property  of  Owner  free  from  Security  Interests  and on
                    installation  on the Aircraft  will  without  further act be
                    subject to this Agreement; and

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

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

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

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

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

8.14       Non-Installed Engines and Parts: Lessee will:-

(a)  ensure that any Engine or Part which is not  installed  on the Aircraft (or
     any other aircraft as permitted by this  Agreement) is, except as expressly
     permitted by this Agreement, properly and safely stored, and kept free from
     Security Interests;

(b)  notify  Lessor  whenever any Engine is removed from the Aircraft  and, from
     time to time, on request  procure that any person to whom  possession of an
     Engine is given  acknowledges  in writing to Lessor,  in form and substance
     satisfactory to Lessor,  that it will respect the interest of Lessor in the
     Engine and will not seek to exercise any rights  whatsoever  in relation to
     it;

(c)  (notwithstanding   the  foregoing   provisions  of  this  sub-clause),   be
     permitted,  if no Default has  occurred and is  continuing,  to install any
     Engine or Part on an aircraft, or in the case of a Part on an engine:-

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

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

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

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

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

           (2)        the  lessor  under  such  lease,  the  seller  under  such
                      conditional  sale agreement or the holder of such Security
                      Interest,   as  the  case  may  be,  has   confirmed   and
                      acknowledged  in writing to Lessor,  in form and substance
                      satisfactory to Lessor,  that it will respect the interest
                      of Lessor in  respect  of that  Engine or Part and that it
                      will  not  seek  to  exercise  any  rights  whatsoever  in
                      relation thereto.

8.15      Pooling of Engines  and Parts:  Lessee  will not enter into nor permit
          any pooling  agreement or  arrangement in respect of an Engine or Part
          without the prior written consent of Lessor.

8.16       Equipment Changes:

(a)  Lessee will not make any  modification or addition to the Aircraft (each an
     "Equipment Change"), except for an Equipment Change which:-

                    (i) is expressly permitted by this Agreement, or

                    (ii) has the prior written approval of Lessor and which does
                    not diminish the value, utility, condition, or airworthiness
                    of the Aircraft;

(b)  So long as a Default has not occurred and is continuing,  Lessee may remove
     any  Equipment  Change  if it can be  removed  from  the  Aircraft  without
     diminishing or impairing the value, utility,  condition or airworthiness of
     the Aircraft; and

(c)  Lessee shall  indemnify  Lessor on an After-Tax Basis for any and all Taxes
     payable by Lessor as the case may be, as a result of an Equipment Change.

8.17       Title on an Equipment Change:

(a)  Title to all 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)) will on installation, without further act, vest
     in  Lessor  subject  to this  Agreement  free  and  clear  of all  Security
     Interests.  Lessee will at its own expense take all such steps and execute,
     and procure the  execution of, all such  instruments  as Lessor may require
     and which are necessary to ensure that title so passes to Lessor  according
     to all applicable  Laws. At any time when requested by Lessor,  Lessee will
     provide  evidence to Lessor's  satisfaction  (including the  provision,  if
     required, to Lessor of one or more legal opinions) that title has so passed
     to Lessor;

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

(c)  Except as  referred  to in Clause  8.17(b)  any  Engine or Part at any time
     removed  from the  Aircraft  will  remain  the  property  of Owner  until a
     replacement has been made in accordance with this Agreement and until title
     in that  replacement  has passed,  according to applicable  Laws, to Lessor
     subject to this Agreement and free of all Security Interests. Upon title to
     such  replacement  so passing to Lessor,  title to the  replaced  Engine or
     Part,  will,  provided no Default has occurred and is  continuing,  pass to
     Lessee.

8.18       Third Party:  Lessee will procure that no person  (other than Lessor)
           will act in any manner  inconsistent  with its obligations under this
           Agreement and that all persons will comply with those  obligations as
           if  references  to "Lessee"  included a separate  reference  to those
           persons.

9.         INSURANCE

9.1        Insurances:  Lessee will maintain in full force during the Term,  and
           thereafter  as expressly  required in this  Agreement,  insurances in
           respect of the Aircraft in form and substance  satisfactory to Lessor
           (the  "Insurances"  which expression  includes,  where the context so
           admits, any relevant  re-insurance(s))  through such brokers and with
           such insurers and having such  deductibles  and being subject to such
           exclusions  as may be  approved  by  Lessor  from  time to time.  The
           Insurances will be effected either:-

(a)  on a direct  basis  with  insurers  of  recognized  standing  who  normally
     participate in aviation insurances in the leading  international  insurance
     markets and led by reputable underwriter(s) approved by Lessor; or

(b)  with a single insurer or group of insurers  approved by Lessor who does not
     retain the risk but effects substantial  reinsurance with reinsurers in the
     leading  international  insurance  markets  and  through  brokers  each  of
     recognized standing and acceptable to Lessor for a percentage acceptable to
     Lessor of all risks insured (the "Reinsurances").

9.2        Requirements: Lessor's current requirements as to required Insurances
           are as  specified  in this  Clause and in Schedule 4. Lessor may from
           time to time stipulate other  requirements for the Insurances so that
           the scope and level of cover is maintained in line with best industry
           practice and the interests of Lessor protected.

9.3        Change:  If at any time Lessor  wishes to revoke its  approval of any
           insurer,  reinsurer,  insurance  or  reinsurance,  Lessor  and/or its
           brokers will  consult  with Lessee and  Lessee's  brokers (as for the
           time being approved by Lessor) regarding whether that approval should
           be revoked to protect  the  interests  of the  parties  insured.  If,
           following the  consultation,  Lessor considers that any change should
           be made,  Lessee  will then  arrange or procure  the  arrangement  of
           alternative cover satisfactory to Lessor.

9.4        Insurance Covenants: Lessee will:-

(a)  ensure that all legal  requirements  as to insurance of the  Aircraft,  any
     Engine or any Part  which may from time to time be  imposed  by the laws of
     the State of  Registration or any state to, from or over which the Aircraft
     may be flown,  in so far as they  affect or concern  the  operation  of the
     Aircraft, are complied with and in particular those requirements compliance
     with which is necessary to ensure that (i) the Aircraft is not in danger of
     detention or forfeiture, (ii) the Insurances remain valid and in full force
     and effect,  and (iii) the interests of the  Indemnitees  in the Insurances
     and the Aircraft or any Part are not thereby prejudiced;

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

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

                    (i) invalidates or may invalidate the Insurances; or

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

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

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

(e)  commence  renewal  procedures at least * days prior to expiry of any of the
     Insurances and provide to Lessor:-

                    (i) if  requested  by  Lessor,  a written  status  report of
                    renewal negotiation * days prior to each expiry date;

                    (ii) telexed telecopy  confirmation of completion of renewal
                    prior to each expiry date; and

                    (iii)  certificates  of  insurance  (and  where  appropriate
                    certificates   of   reinsurance),   and  broker's  (and  any
                    reinsurance  brokers')  letter  of  undertaking  in  a  form
                    acceptable to Lessor in English,  detailing the coverage and
                    confirming the insurers' (and any reinsurers')  agreement to
                    the  specified  insurance  requirements  of  this  Agreement
                    within * days after each renewal date;

(f)  on request,  provide to Lessor  copies of  documents  or other  information
     evidencing the Insurances;

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

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

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

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

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

(a)  to pay the premiums due or to effect and maintain  insurances  satisfactory
     to it or  otherwise  remedy  Lessee's  failure in such  manner  (including,
     without  limitation to effect and maintain an "owner's interest" policy) as
     it  considers  appropriate.   Any  sums  so  expended  by  it  will  become
     immediately  due and  payable  by Lessee to  Lessor on an  After-Tax  Basis
     together with interest  thereon at the rate specified in Clause 5.11,  from
     the date of  expenditure by it up to the date of  reimbursement  by Lessee;
     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 satisfaction.

9.6        Continuing  Indemnity:  Lessee shall  effect and  maintain  insurance
           after  the  Expiry  Date  with  respect  to its  liability  under the
           Indemnity in Clause 10 for * years which provides for each Indemnitee
           to be named as additional insured. Lessee's obligation in this Clause
           shall not be affected by Lessee  ceasing to be lessee of the Aircraft
           and/or any of the Indemnitees ceasing to have any interest in respect
           of the Aircraft.

9.7        Application of Insurance Proceeds:-

           As between Lessor and Lessee:-

(a)        all insurance  payments received as the result of an Event of Loss or
           Engine Event of Loss occurring during the Term will be paid to Lessor
           and  Lessor  will pay the  balance of those  amounts to Lessee  after
           deduction of all amounts which may be or become  payable by Lessee to
           Lessor under this Agreement (including under Clause 11.1(b));

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

(c)        all  insurance  proceeds  in respect of third party  liability  will,
           except to the  extent  paid by the  insurers  to the  relevant  third
           party,  be paid to Lessor to be paid directly in  satisfaction of the
           relevant  liability or to Lessee in  reimbursement  of any payment so
           made; and

(d)        notwithstanding  Clauses  9.7(a),  (b) or (c),  if at the time of the
           payment of any such insurance  proceeds a Default has occurred and is
           continuing,  all such  proceeds will be paid to or retained by Lessor
           to be applied  toward  payment of any amounts  which may be or become
           payable by Lessee in such  order as Lessor  sees fit or as Lessor may
           elect.

           To the extent insurance proceeds are paid to Lessee, Lessee agrees to
           comply  with the  foregoing  provisions  and  apply or pay over  such
           proceeds as so required.

9.8        Previous  Owner as  Additional  Insured:-  Lessee  shall  effect  and
           maintain  insurance  naming  Viva  as  an  additional  insured  under
           Lessee's public liability  policy,  to the extent of Viva's interest,
           for the  period  commencing  on the  Delivery  Date and ending on the
           earlier to occur of (i) the second  anniversary  of the Delivery Date
           or (ii) the date of  completion  of the next  scheduled  annual heavy
           maintenance visit.

10.        INDEMNITY

10.1       GENERAL:  LESSEE  AGREES TO DEFEND,  INDEMNIFY  AND HOLD HARMLESS THE
           INDEMNITEES  ON AN  AFTER-TAX  BASIS  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)  WHICH MAY AT ANY TIME BE SUFFERED OR INCURRED  DIRECTLY OR  INDIRECTLY AS A
     RESULT  OF  OR  CONNECTED  WITH  THE  POSSESSION,   DELIVERY,  PERFORMANCE,
     MANAGEMENT,  OWNERSHIP,  REGISTRATION,   CONTROL,  MAINTENANCE,  CONDITION,
     SERVICE,  REPAIR,  OVERHAUL,  LEASING,  USE, OPERATION,  DATE PROCESSING OR
     RETURN OF THE  AIRCRAFT,  ANY  ENGINE OR PART  (EITHER IN THE AIR OR ON THE
     GROUND)  WHETHER OR NOT THE CLAIM MAY BE  ATTRIBUTABLE TO ANY DEFECT IN THE
     AIRCRAFT,  ANY  ENGINE  OR ANY  PART OR TO ITS  DESIGN,  TESTING  OR USE OR
     OTHERWISE,  AND REGARDLESS OF WHEN THE SAME ARISES OR WHETHER IT ARISES OUT
     OF OR IS  ATTRIBUTABLE TO ANY ACT OR OMISSION,  NEGLIGENT OR OTHERWISE,  OF
     ANY INDEMNITEE;

(B)  WHICH ARISE OUT OF ANY ACT OR OMISSION  WHICH  INVALIDATES OR WHICH RENDERS
     VOIDABLE ANY OF THE INSURANCES; AND

(C)  WHICH MAY AT ANY TIME BE  SUFFERED  OR  INCURRED  AS A  CONSEQUENCE  OF ANY
     DESIGN,  ARTICLE OR MATERIAL IN THE AIRCRAFT, ANY ENGINE OR ANY PART OR ITS
     OPERATION  OR  USE  CONSTITUTING  AN  INFRINGEMENT  OF  PATENT,  COPYRIGHT,
     TRADEMARK,  DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH OF ANY OBLIGATION
     OF CONFIDENTIALITY OWED TO ANY PERSON;

           BUT EXCLUDING ANY CLAIM IN RELATION TO A PARTICULAR INDEMNITEE TO THE
           EXTENT  THAT THAT CLAIM IS  COVERED  PURSUANT  TO  ANOTHER  INDEMNITY
           PROVISION OF THIS  AGREEMENT  OR TO THE EXTENT IT ARISES  SOLELY AS A
           RESULT  OF  THE  GROSS  NEGLIGENCE  OR  WILLFUL  MISCONDUCT  OF  THAT
           INDEMNITEE, LESSOR TAXES OR A LESSOR LIEN.

10.2       Duration:  The indemnities  contained in this agreement will continue
           in full  force  following  the end of the  Term  notwithstanding  any
           breach or  repudiation  by Lessor or Lessee of this  Agreement or any
           termination of the lease of the Aircraft hereunder.

11.        EVENTS OF LOSS

11.1

(a)  Pre-delivery:  If an Event of Loss occurs prior to delivery of the Aircraft
     to Lessee, Lessor will have the option, exercisable by giving Lessee notice
     in writing, to substitute an alternative  aircraft of the same manufacture,
     model, value and utility as the Aircraft.  If Lessor exercises such option,
     Lessee shall be obliged to lease such substitute  aircraft  pursuant to the
     terms and conditions of this Agreement and such  substitute  aircraft shall
     constitute  the Aircraft for all purposes of this  Agreement.  Lessor shall
     provide  Lessee with details of the  substitute  aircraft as soon as may be
     practicable  after the  occurrence of the Event of Loss. If Lessor  advises
     Lessee that Lessor does not wish to exercise  such option,  this  Agreement
     will immediately terminate and except as expressly stated in this Agreement
     neither  party will have any further  obligation  or  liability  under this
     Agreement other than pursuant to Clause 16.9 except that Lessor will return
     the  Deposit if paid in cash or cancel and return the Letter of Credit,  as
     applicable, to Lessee; and

(b)  Post-delivery: If an Event of Loss occurs after delivery of the Aircraft to
     Lessee,  Lessee  will pay the  Agreed  Value to  Lessor  on or prior to the
     earlier of (i) * Business Days after the Event of Loss and (ii) the date of
     receipt of insurance  proceeds in respect of that Event of Loss. Subject to
     the rights of any  insurers  and  reinsurers  or other  third  party,  upon
     irrevocable  payment in full to Lessor of that amount and all other amounts
     which may be or become payable to Lessor under this Agreement,  Lessor will
     without  recourse  or warranty  (except as to  Lessor's  Liens) and without
     further act, be deemed to have transferred to Lessee all of Lessor's rights
     to any Engines and Parts not installed when the Event of Loss occurred, all
     on an as-is  where-is  basis,  and will at  Lessee's  expense,  execute and
     deliver such bills of sale and other  documents and  instruments  as Lessee
     may reasonably  request to evidence (on the public record or otherwise) the
     transfer  and the vesting of Lessor's  rights in such  Engines and Parts in
     Lessee, free and clear of all rights of Lessor and Lessor Liens.

(c)  Engine Event of Loss:  From the Delivery Date upon an Engine Event of Loss,
     Lessee shall give Lessor prompt written notice thereof and shall,  within *
     days after such occurrence, convey to Lessor, as replacement for the Engine
     suffering  such event,  title to a  Replacement  Engine.  Each  Replacement
     Engine shall be free of all Security  Interests  and shall be in as good an
     operating condition as the Engine being replaced, assuming the Engine being
     replaced  was in the  condition  and repair  required  by the terms  hereof
     immediately  prior to the Engine  Event of Loss.  Upon full  compliance  by
     Lessee  with the terms of this  Clause  11.1(c),  Lessor  will  transfer to
     Lessee title to the Engine which  suffered the Engine Event of Loss.  Prior
     to or at the time of any such conveyance,  Lessee, at its own expense, will
     promptly (i) furnish  Lessor with a full warranty bill of sale, in form and
     substance   reasonably   satisfactory  to  Lessor,  with  respect  to  such
     Replacement  Engine;  (ii) cause a lease  supplement (in form and substance
     satisfactory  to  Lessor)   subjecting  such  Replacement  Engine  to  this
     Agreement,  to be  duly  executed  by  Lessee,  and  recorded  pursuant  to
     applicable  Law;  (iii) furnish  Lessor with such evidence of title to such
     Replacement  Engine as Lessor may reasonably  request;  (iv) furnish Lessor
     with an  opinion  of  Lessee's  counsel  to the  effect  that title to such
     Replacement  Engine  has been  duly  conveyed  to  Lessor  subject  to this
     Agreement,  free  and  clear  of all  Security  Interests,  and  that  such
     Replacement  Engine is duly leased  hereunder;  (v)  furnish a  certificate
     signed  by a duly  authorized  financial  officer  or  executive  of Lessee
     certifying that, upon consummation of such replacement, no Event of Default
     will  have  occurred  or be  continuing;  (vi)  furnish  Lessor  with  such
     documents  as  Lessor  may  reasonably   request  in  connection  with  the
     consummation of the  transactions  contemplated by this Clause 11.1(c),  in
     each case in form and substance  satisfactory to Lessor;  and (vii) furnish
     such Financing  Statements  incorporating the Replacement  Engine as may be
     requested by Lessor. For all purposes hereof,  each such Replacement Engine
     shall be deemed part of the property leased  hereunder,  shall be deemed an
     "Engine" as defined herein and shall be deemed part of the same Aircraft as
     was the Engine  replaced  thereof.  No Engine Event of Loss covered by this
     Clause  11.1(c)  shall result in any  reduction in Rent or affect  Lessee's
     obligation to pay Engine Supplemental Rent or the amount thereof to be paid
     by Lessee.

Lessee shall indemnify each Indemnitee on an After-Tax Basis for any adverse tax
consequence  to  such  Indemnitee  of the  replacement  of one or  more  Engines
pursuant to this Clause 11.1.

11.2       Substitute Aircraft:

(a)  Without prejudice to the provisions of Clause 11.1 (b), if an Event of Loss
     occurs  after  delivery  of the  Aircraft  to Lessee,  Lessor will have the
     option,  exercisable  by giving Lessee notice in writing,  to substitute an
     alternative  aircraft (the  "Substitute  Aircraft") of the same manufacture
     and model as the Aircraft and having a value,  utility and condition  equal
     to or greater than the Aircraft as at the date of  occurrence  of the Event
     of Loss which  Substitute  Aircraft  will be leased by Lessor to Lessee for
     the  remainder  of the Term  pursuant to the terms and  conditions  of this
     Agreement.  If Lessor exercises such option,  the Substitute  Aircraft will
     constitute  the Aircraft  for all purposes of this  Agreement in respect of
     facts and  circumstances  arising  after the date of  delivery  thereof  to
     Lessee. Lessor shall provide Lessee with details of the Substitute Aircraft
     as soon as may be practicable after the occurrence of the Event of Loss;

(b)  Lessor will use all reasonable endeavors to deliver the Substitute Aircraft
     to Lessee as soon as may be practicable following the date of occurrence of
     the Event of Loss but not later than * months after such date; and

(c)  Lessee  agrees to enter into such  documentation  as Lessor may  require in
     order to  reflect  the  leasing of the  Substitute  Aircraft  as  aforesaid
     including, without limitation, documentation in respect of the Insurances.

Lessee shall indemnify each Indemnitee on an After-Tax Basis for any adverse tax
consequence  to such  Indemnitee of the  replacement of the Aircraft or Airframe
pursuant to this Clause 11.2.

11.3       Requisition:  During any requisition for use or hire of the Aircraft,
           any Engine or Part which does not constitute an Event of Loss:-

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

(b)  so long as no  Default  has  occurred  and is  continuing,  Lessee  will be
     entitled to any hire paid by the requisitioning authority in respect of the
     Term.  Lessee  will,  as  soon as  practicable  after  the end of any  such
     requisition,  cause the Aircraft to be put into the  condition  required by
     this Agreement.  Lessor will be entitled to all compensation payable by the
     requisitioning  authority in respect of any change in the structure,  state
     or condition of the Aircraft arising during the period of requisition,  and
     Lessor will apply such  compensation in reimbursing  Lessee for the cost of
     complying with its obligations  under this Agreement in respect of any such
     change, but so that, if any Default has occurred and is continuing,  Lessor
     may apply the compensation or hire in or towards  settlement of any amounts
     owing by Lessee under this Agreement.

12.        RETURN OF AIRCRAFT

12.1       Return:  On the Expiry Date or redelivery of the Aircraft pursuant to
           Clause 13.2 or  termination of the leasing of the Aircraft under this
           Agreement Lessee will,  unless an Event of Loss has occurred,  at its
           expense,  redeliver the Aircraft and Aircraft  Documents to Lessor at
           the  Redelivery  Location  or  such  other  airport  as  is  mutually
           acceptable to the parties  hereto,  in accordance with the procedures
           and in compliance  with the  conditions set forth in Schedule 3, free
           and clear of all Security  Interests and Permitted  Liens (other than
           Lessor   Liens)  and  in  a  condition   qualifying   for   immediate
           certification  of  airworthiness by the FAA or as otherwise agreed by
           Lessor and Lessee.

12.2       Final  Inspection:  Immediately  prior to redelivery of the Aircraft,
           Lessee  will  make  the  Aircraft  available to Lessor for inspection
           ("Final Inspection")  in  order  to  verify that the condition of the
           Aircraft complies with this  Agreement.  The  Final  Inspection  will
           permit, and be of sufficient duration for, Lessor to:-

(a)        inspect the Aircraft Documents;

(b)        inspect the Aircraft and uninstalled Parts;

(c)        inspect the Engines,  including  without  limitation  (i) a borescope
           inspection of (A) the low pressure and high pressure  compressors and
           (B) turbine and  combustion  areas,  (ii) engine  condition  runs and
           (iii)  review of  Engine  trend  monitoring  data and  technical  log
           reports covering the last * (*) days of operation; and

(d)        perform a complete borescope inspection of the APU; and

(e)        observe a * hour demonstration flight (with Lessor's  representatives
           as on-board observers).

12.3       Non-Compliance: To the extent that,  at the time of Final Inspection,
           the condition  of  the  Aircraft does not comply with this Agreement,
           Lessee will at Lessor's option:-

(a)        immediately   rectify  the  non-compliance  and  to  the  extent  the
           non-compliance  extends  beyond  the  Expiry  Date,  the Term will be
           automatically  extended and this Agreement will remain in force until
           the non-compliance has been rectified as provided in Clause 12.8; or

(b)        redeliver the Aircraft to Lessor and indemnify Lessor on an After-Tax
           Basis, and provide to Lessor's satisfaction cash as security for that
           indemnity,  against  the  cost  of  putting  the  Aircraft  into  the
           condition required by this Agreement.

12.4       Redelivery:  Upon  redelivery  Lessee  will  provide to Lessor,  upon
           Lessor's request, all documents necessary to export the Aircraft from
           the  Habitual  Base  (including,  without  limitation,  a  valid  and
           subsisting  export license for the Aircraft) and required in relation
           to the deregistration of the Aircraft with the Air Authority.

12.5       Acknowledgment:  Provided  Lessee has complied  with its  obligations
           under this Agreement,  following redelivery of the Aircraft by Lessee
           to Lessor at the Redelivery  Location,  Lessor will deliver to Lessee
           an acknowledgment confirming that Lessee has redelivered the Aircraft
           to Lessor in accordance with this Agreement.

12.6       Maintenance Program:

(a)        Prior to the  Expiry  Date and upon  Lessor's  request,  Lessee  will
           provide Lessor or its agent reasonable access to Lessee's Maintenance
           Program  and the  Aircraft  Documents  in  order  to  facilitate  the
           Aircraft's integration into any subsequent operator's fleet; and

(b)        Lessee  will,  if  requested  by Lessor to do so,  upon return of the
           Aircraft deliver to Lessor a certified true current and complete copy
           of  Lessee's  Maintenance  Program.  Lessor  agrees  that it will not
           disclose the contents of Lessee's  Maintenance  Program to any person
           or  entity  except  to  the  extent  necessary  to  monitor  Lessee's
           compliance  with this  Agreement  and/or to  bridge  the  maintenance
           program for the Aircraft from Lessee's Maintenance Program to another
           program after the Expiry Date.

12.7       Fuel: Upon  redelivery of the Aircraft to Lessor,  an adjustment will
           be made in  respect  of fuel on  board on the  Delivery  Date and the
           Expiry Date at the price then prevailing at the Redelivery Location.

12.8       Automatic Extension of Term: In the event of Lessee's failure to make
           the Aircraft  available to Lessor for timely  inspection  pursuant to
           Clauses 12.1 hereof,  non-compliance of the condition of the Aircraft
           under  Clause  12.3  hereof or any  other  failure  of  Lessee  which
           prevents  timely  Redelivery  of the Aircraft to Lessor,  the Term of
           this Agreement will be automatically extended and this Agreement will
           remain in force until such  non-compliance  has been rectified,  with
           Lessee being  obligated to pay Rent at a rate specified in Clause 5.3
           plus * percent on a per diem basis with respect to the period of such
           extension.

13.        DEFAULT

13.1       Events:  Each of the  following  events will  constitute  an Event of
           Default and a repudiation  (but not a termination)  of this Agreement
           by Lessee  (whether  any such  event or  condition  is  voluntary  or
           involuntary  or  occurs  by  operation  of law or  pursuant  to or in
           compliance  with any  judgment,  decree  or order of any court or any
           order,  rule  or  regulation  of  any  Government   Entity).   Lessee
           acknowledges  that  the  occurrence  of any  Event of  Default  would
           represent a material  default in the  performance of its  obligations
           under this Agreement:-

(a)        Non-payment: Lessee fails to make any payment under this Agreement on
           the due date; or

(b)        Insurance:  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 notice of cancellation is  given in respect
           of any such insurance; or

(c)        Breach:  Lessee  fails to  comply  with any other  provision  of this
           Agreement and, if such failure is in the reasonable opinion of Lessor
           capable of remedy, the failure continues for * 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  this Agreement or in any
           document or certificate or  statement  is  or  proves  to  have  been
           incorrect in any material respect when made or deemed to be repeated;
           or

(e)        Cross Default:

           (i)        a final  judgment  for the payment of money not covered by
                      insurance in excess of * Dollars ($*), or final  judgments
                      for the  payment  of money not  covered  by  insurance  in
                      excess  of *  Dollars  ($*)  in the  aggregate,  shall  be
                      rendered   against   Lessee  and  the  same  shall  remain
                      undischarged  for a  period  of * (*)  days  during  which
                      execution  thereof  shall  not be  effectively  stayed  by
                      agreement of the parties  involved,  stayed by court order
                      or adequately bonded; or

           (ii)       attachments or other Security Interests shall be issued or
                      entered  against  substantially  all  of the  property  of
                      Lessee and shall remain undischarged or unbonded for * (*)
                      days except for Security  Interests  created in connection
                      with monies borrowed or obligations agreed to by Lessee in
                      the ordinary course of its business; or

           (iii)      Lessee  shall  default  in the payment of any sum which by
                      itself is in excess  of  $* or any sums which in aggregate
                      exceed  $*  notwithstanding that any particular individual
                      sum  thereof  does  not  exceed  $*  of  any  one  or more
                      obligations for the payment of  borrowed  money,  for  the
                      deferred purchase price of property or for  the payment of
                      rent  or  hire  under  any lease of aircraft when the same
                      becomes due if such nonpayment results in or  would permit
                      an acceleration of  such  indebtedness,  or  Lessee  shall
                      default  in  the performance of any other term, agreement,
                      or  condition  contained  in  any  agreement or instrument
                      under  or   by  which  any  such  obligation  is  created,
                      evidenced  or secured, if the effect of such default is to
                      cause or permit such obligation to become due prior to its
                      stated maturity; or

           (iv)       any event  of  default  or  termination  event,  howsoever
                      described, occurs under the Other Agreements; or

(f)  Approvals: any consent, authorization,  license, certificate or approval of
     or registration  with or declaration to any Government Entity in connection
     with this Agreement (including, without limitation): -

           (i)        any  authorization  required  by  Lessee  to  obtain   and
                      transfer freely Dollars (or any other  relevant  currency)
                      out of any relevant country; or

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

           (iii)      the registration of the Aircraft; or

           (iv)       any airline  license or air transport  license  including,
                      without  limitation,  authority  to operate  the  Aircraft
                      under FAR Part 121 and a Certificate of Public Convenience
                      and  Necessity  issued under  Section 41102 of Title 49 of
                      the United States Code;

           is modified in a manner unacceptable to Lessor or is withheld,  or is
           revoked, suspended,  canceled, withdrawn,  terminated or not renewed,
           or otherwise ceases to be in full force; or

(g)        Bankruptcy, etc.:

           (i)        Lessee or any Subsidiary consents to the appointment of  a
                      custodian, receiver, trustee or liquidator  of  itself  or
                      all or any material part of  Lessee's property or Lessee's
                      consolidated property, or  Lessee or any Subsidiary admits
                      in writing its inability to, or is unable to, or does not,
                      pay  its  debts  generally  as  they  come due, or makes a
                      general assignment for the benefit of creditors, or Lessee
                      or any Subsidiary files a voluntary petition in bankruptcy
                      or  a  voluntary  petition  seeking  reorganization  in  a
                      proceeding under any bankruptcy or insolvency Laws (as now
                      or  hereafter  in  effect)  or  an  answer  admitting  the
                      material allegations of a petition filed against Lessee or
                      any  Subsidiary in  any  such proceeding, or Lessee or any
                      Subsidiary by voluntary petition,  answer or consent seeks
                      relief under  the  provisions  of  any  other  bankruptcy,
                      insolvency  or   other  similar  Law  providing  for   the
                      reorganization or winding-up of corporations, or  provides
                      for an agreement,  composition,  extension  or  adjustment
                      with its creditors,  or any  corporate  action (including,
                      without limitation, any board of directors or  shareholder
                      action)  is    taken   by  Lessee  or  any  Subsidiary  in
                      furtherance of any of  the  foregoing,  whether or not the
                      same is fully effected or accomplished; or

           (ii)       an  order,  judgment  or decree  is  entered  by any court
                      appointing,  without  the  consent of Lessee or any of its
                      Subsidiaries, a custodian, receiver, trustee or liquidator
                      of Lessee  or any  Subsidiary,  or of all or any  material
                      part  of  Lessee's   property  or  Lessee's   consolidated
                      property is sequestered,  and any such order,  judgment or
                      decree of appointment or sequestration  remains in effect,
                      undismissed,  unstayed or unvacated for a period of * 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  Subsidiary
                      in a proceeding under the United States Federal Bankruptcy
                      Laws or other insolvency Laws  (as  now  or  hereafter  in
                      effect) is filed and is not  withdrawn or dismissed within
                      * days  thereafter  or  at any time an order for relief is
                      granted in such proceeding, or if, under the provisions of
                      any  Law  providing  for  reorganization  or winding-up of
                      corporations which may apply to Lessee or any  Subsidiary,
                      any court of competent jurisdiction  assumes  jurisdiction
                      over, or custody or  control  of, Lessee or any Subsidiary
                      or  of  all  or any material part of Lessee's property, or
                      Lessee's  consolidated  property  and  such  jurisdiction,
                      custody  or control  remains  in  effect,  unrelinquished,
                      unstayed or unterminated for a period of 30 days or at any
                      time an order for relief is granted in such proceeding; or

(h)        Unlawful:  it  becomes  unlawful  for  Lessee  to  perform any of its
           obligations under this Agreement or this Agreement becomes wholly  or
           partly invalid or unenforceable; or

(i)        Suspension of Business: Lessee or any of its Subsidiaries suspends or
           ceases  or  threatens  to  suspend  or  cease  to  carry  on all or a
           substantial part of its business; or

(j)        Disposal:  Lessee or any of its  Subsidiaries  disposes,  conveys  or
           transfers  or  threatens  to dispose,  convey or transfer of all or a
           material part of its assets,  liquidates or dissolves or consolidates
           or  merges  with any  other  Person  whether  by one or a  series  of
           transactions,  related  or  not,  other  than  for the  purpose  of a
           reorganization  of the  terms of which  have  received  the  previous
           consent in writing of Lessor; or

(k)        Rights  and  Remedies:  the  existence,  validity,  enforceability or
           priority of the rights of Lessor as owner and the rights of Lessor as
           lessor in respect of the Aircraft are challenged  by  Lessee  or  any
           other person claiming by or through Lessee; or

(l)        Delivery:  Lessee  fails  to timely comply with its obligations under
           Clause 4 to accept delivery of the Aircraft; or

(m)        Ownership,  Security  Interests and Related Matters:  Lessee fails to
           timely comply with its obligations under Clause 8.7; or

(n)        Transfer:  Lessee makes or permits any assignment or transfer of this
           Agreement, or any interest herein, or of the right  to  possession of
           the Aircraft, the Airframe, or any Engine; or

(o)        Redelivery:  Lessee  fails  to  return  the Aircraft to Lessor on the
           Expiry Date in accordance with Clause 12.

(p)        Adverse Change:  any  event  or series of events occurs which, in the
           reasonable opinion of Lessor might have a material adverse effect  on
           the financial condition or operations of Lessee and its  Subsidiaries
           or on the ability of Lessee to comply with its obligations under this
           Agreement; or

(q)       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  (f)(i) above,
                           with respect to the  performance by the issuer of its
                           obligations  under any Letter of Credit, or paragraph
                           (g) above applies to such issuer (references in those
                           sub-paragraphs  to Lessee  being  deemed to be to the
                           issuer); or

                  (iv)     where applicable, any Letter of Credit is not renewed
                           within the time required by Section 5.15;

and each  reference  in this  paragraph  (q) to "the  issuer"  shall  include  a
reference to any confirming bank for the Letter of Credit.

13.2       Rights: If an Event of Default occurs,  Lessor may at its option (and
           without  prejudice to any of its other rights under this  Agreement),
           at any time  thereafter  (without notice to Lessee except as required
           under applicable Law):-

(a)        by notice to Lessee and with  immediate  effect on  dispatch  of such
           notice  terminate the letting of the Aircraft (but without  prejudice
           to the  continuing  obligations  of  Lessee  under  this  Agreement),
           whereupon  all rights of Lessee  under this  Agreement  shall  cease;
           and/or

(b)        proceed by appropriate court action or actions to enforce performance
           of this Agreement,  including, without limitation, the payment of all
           Rent and all  other  amounts  payable  to  Lessor  or any  Indemnitee
           pursuant to the terms hereof; and/or

(c)        proceed by appropriate court action or actions to recover damages for
           the breach of this Agreement which shall include, without limitation:
           -

           (i)        all  Rent  and  other  amounts which are or become due and
                      payable  hereunder  prior  to  the  date  Lessor  recovers
                      possession of the Aircraft;

           (ii)       at Lessor's election, either one of the amounts determined
                      pursuant to Clause  13.2(e) or Clause 13.2(f) below or any
                      lost  profits  suffered  by  Lessor  as a  consequence  of
                      Lessor's  inability  to place the  Aircraft  with  another
                      lessee on financial  terms that are as favorable to Lessor
                      as the terms of this Agreement;

           (iii)      all  costs  associated  with  Lessor's   exercise  of  its
                      remedies  hereunder,   including,   but  not  limited  to,
                      repossession  costs,  legal fees,  Aircraft storage costs,
                      Aircraft  re-lease  or sale  costs 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);

           (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;

           (v)        any  loss,  cost, expense or liability sustained by Lessor
                      due  to  Lessee's failure to redeliver the Aircraft in the
                      condition required by this Agreement; and

           (vi)       any  other  losses   (including  lost  profits),   damage,
                      expense,  cost or liability which Lessor suffers or incurs
                      as a result of the Event of Default and/or  termination of
                      this  Agreement,  including an amount  sufficient to fully
                      compensate  Lessor  for any loss of or damage  to  Lessors
                      residual  interest  in the  Aircraft  caused  by  Lessee's
                      default; 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  owner,  lessor
                      or secured party thereof) or cause it to be redelivered to
                      Lessor  at  a  location in the United States identified by
                      Lessor (or such other location as Lessor may require) (the
                      "Return Location"), by summary proceedings  or  otherwise,
                      all without liability  accruing to Lessor for or by reason
                      of  such  entry or  taking  of  possession whether for the
                      restoration of damage to property, or otherwise, caused by
                      such entry  or  taking,  except damages  caused  by  gross
                      negligence  or  willful  misconduct;  and Lessor is hereby
                      irrevocably, by way of security for  Lessee's  obligations
                      under  this  Agreement,  appointed  attorney for Lessee in
                      causing the redelivery  or  in  directing  the  pilots  of
                      Lessee or other pilots to fly the Aircraft to that airport
                      and will have all the powers and authorizations  necessary
                      for taking that action; or

           (ii)       by serving notice require Lessee to redeliver the Aircraft
                      to Lessor at a point within the  continental United States
                      designated by Lessor; 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)        whether  or  not  Lessor shall have exercised, or shall thereafter at
           any time exercise,  any  of its rights under paragraph (a), paragraph
           (b), paragraph (c),  paragraph (d),  or paragraph (e)  of this Clause
           13.2, Lessor, by * days written notice to Lessee specifying a payment
           date, may demand that Lessee pay to Lessor, and Lessee shall  pay  to
           Lessor, on the payment date specified in such notice,  as  liquidated
           damages for loss of bargain and not as a penalty (in lieu of the Rent
           due for the period commencing after the date specified for payment in
           such notice), any unpaid Rent for  the  Aircraft  and  other  amounts
           owing  under  this Agreement (prorated in the case of Rent on a daily
           basis) to  and  including  the payment date specified in such notice,
           plus  the  amount, if any,  by  which  the  aggregate  Rent  for  the
           remainder  of  the Term (determined without reference to any right of
           Lessor to terminate the leasing of the Aircraft,  whether or not such
           right is exercised), discounted periodically  (equal  to  installment
           frequency)  to  present  worth at the interest rate of * percent (*%)
           per annum, exceeds the fair market rental value  (determined pursuant
           to the Appraisal Procedure) of the Aircraft for the  remainder of the
           Term, after discounting such fair market  rental  value  periodically
           (equal  to  installment frequency) to present worth as of the payment
           date specified in such  notice at the interest rate of * percent (*%)
           per annum; and/or

(g)        In  the  event  that  Lessor, pursuant to Clause 13.2(e) above, shall
           have relet  the  Aircraft under a lease which extends at least to the
           date upon which the Term  for the Aircraft would have expired but for
           Lessee's default, Lessor, in lieu  of  exercising  its  rights  under
           Clause 13.2(f) above  with  respect to the Aircraft, may, if it shall
           so elect, demand that Lessee pay Lessor, and Lessee shall pay Lessor,
           as liquidated damages for loss  of  bargain  and not as a penalty (in
           lieu of the Rent for  the  Aircraft  due after the time of reletting)
           any unpaid Rent for the Aircraft due up  to the date of reletting and
           any  other  amounts  owing  under this Agreement, plus the amount, if
           any, by which  the aggregate  Rent  for  the  Aircraft,  which  would
           otherwise have become due  over the remainder of the Term (determined
           without reference to any right of Lessor to terminate  the leasing of
           the Aircraft, whether or not such  right  is  exercised),  discounted
           periodically  (equal to installment frequency) to present worth as of
           the date of  reletting  at  the  interest  rate of * percent (*%) per
           annum, exceeds the aggregate basic  rental  payments  to  become  due
           under the reletting from the date of such reletting to  the date upon
           which the Term for the Aircraft would  have  expired but for Lessee's
           default, discounted periodically (equal to installment frequency)  to
           present worth as of the date of the reletting at the interest rate of
           * percent (*%) per annum; and/or

(h)        in  lieu  of the remedies set forth in paragraphs (a), (c), (d), (e),
           (f), and (g) of this Clause 13.2,  by * days written notice to Lessee
           specifying a payment date, Lessor  may  demand  that  Lessee  pay  to
           Lessor, and Lessee shall pay to Lessor on the payment date  specified
           in such notice as liquidated damages for loss of bargain and not as a
           penalty (in lieu of the Rent due for the period commencing  after the
           date specified for payment in such notice), any unpaid Rent  for  the
           Aircraft and other  amounts payable under this Agreement (prorated in
           the case of Rent on a daily basis) to and including  the payment date
           specified in such notice, plus an amount equaling the aggregate  Rent
           for  the  remainder  of  the  Term, discounted periodically (equal to
           installment frequency) to present worth at the interest rate of * per
           cent (*%) per annum;

(i)         draw  upon the  Deposit  (including  the  Letter of  Credit)  or the
            Supplemental  Rent  furnished  under this  Agreement  or the Related
            Agreements (as those times are defined in such agreements) and apply
            such amounts to amounts owing to Lessor hereunder.

           Lessee, for itself and for its successors and assigns,  hereby agrees
           that,  to the extent now or hereafter  permitted by  applicable  Law,
           notwithstanding  any  provision  of the  Federal  Bankruptcy  Code as
           amended  from time to time,  the title of Lessor to the  Aircraft and
           any right of Lessor to take  possession of the Aircraft in compliance
           with  the  provisions  of this  Agreement,  in each  case,  upon  the
           occurrence  and  continuance  of an Event of  Default,  shall  not be
           affected by the provisions of the Federal Bankruptcy Code, as amended
           from time to time.

           In addition to the foregoing,  Lessee shall be liable for any and all
           unpaid Rent and other amounts payable under this Agreement  during or
           after the exercise of any of the  aforementioned  remedies,  together
           with  interest on such unpaid  amounts at the Interest Rate set forth
           in Letter Agreement No. 1, and until  satisfaction of all of Lessee's
           obligations to Lessor  hereunder and (on an After-Tax  Basis) for 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,
           including  all costs and  expenses  incurred in  connection  with the
           return  of the  Aircraft  in  accordance  with the terms of Clause 12
           hereof  or  in  placing  the  Aircraft  in  the  condition  and  with
           airworthiness certification as required by such Clause.

           In effecting any  repossession,  Lessor and its  representatives  and
           agents,  to the extent permitted by Law, shall: (i) have the right to
           enter upon any premises  where it  reasonably  believes the Aircraft,
           the Airframe, an Engine or Part to be located; (ii) not be liable, in
           conversion or otherwise,  for the taking of any personal  property of
           Lessee  which is in or attached to the  Aircraft,  the  Airframe,  an
           Engine or Part which is repossessed;  provided,  however, that Lessor
           shall  return  to  Lessee  all  personal  property  of  Lessee or its
           passengers  which was on the  Aircraft  at the time  Lessor  re-takes
           possession of the Aircraft;  (iii) not be liable or  responsible,  in
           any manner,  for any inadvertent  damage or injury to any of Lessee's
           property in repossessing and holding the Aircraft,  the Airframe,  an
           Engine  or Part,  except  for that  caused by or in  connection  with
           Lessor's  gross  negligence or willful  acts;  (iv) have the right to
           maintain possession of and dispose of the Aircraft,  the Airframe, an
           Engine or Part on any  premises  owned by  Lessee  or under  Lessee's
           control;  and (v) have the right to obtain a key to any  premises  at
           which the Aircraft,  the  Airframe,  an Engine or Part may be located
           from the landlord or owner thereof.

           If reasonably required by Lessor,  Lessee, at its sole expense, shall
           assemble  and make the  Aircraft,  the  Airframe,  an  Engine or Part
           available at a place  designated by Lessor in accordance  with Clause
           12 hereof.  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
           assigned to Lessee or otherwise held by Lessee shall without  further
           act,  notice or writing  be  assigned  or  reassigned  to Lessor,  if
           assignable.  Lessee shall be liable to Lessor on an  After-Tax  Basis
           for all reasonable expenses,  disbursements,  costs and fees incurred
           in (i)  repossessing,  storing,  preserving,  shipping,  maintaining,
           repairing and refurbishing the Aircraft,  the Airframe,  an Engine or
           Part to the condition required by Clause 12 hereof and (ii) 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, at its
           option,  to  make  reasonable  expenditures  which  Lessor  considers
           advisable to repair and restore the Aircraft, the Airframe, an Engine
           or Part  to the  condition  required  by  Clause  12  hereof,  all at
           Lessee's sole expense.

           At any public sale of the Aircraft,  the Airframe,  an Engine or Part
           pursuant  to this  Clause,  Lessor  may bid  for  and  purchase  such
           property and Lessee  agrees that the amounts paid  therefor  shall be
           used in the computation contemplated herein.

           With the exception  that the remedy in Clause  13.2(g) can be elected
           only if the remedy in Clause 13.2(f) is not elected and the remedy in
           Clause 13.2(h) can be elected only in lieu of all other remedies save
           the remedies in Clauses 13.2(b) and 13.2(i), no remedy referred to in
           this  Clause 13 is  intended  to be  exclusive,  but,  to the  extent
           permissible   hereunder  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  Clause 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.

13.3       Deregistration:  If an Event of  Default  occurs,  Lessor may sell or
           otherwise  deal with the Aircraft  free and clear of any leasehold or
           other interest of Lessee as if this Agreement had never been made and
           Lessee  will at the  request of Lessor  take all steps  necessary  to
           effect (if applicable)  deregistration of the Aircraft and its export
           from the country  where the  Aircraft is for the time being  situated
           and  any  other  steps   necessary  to  enable  the  Aircraft  to  be
           redelivered  to Lessor in accordance  with this  Agreement  including
           without  limitation  execution and filing of a  certificate  or other
           instrument of lease  termination  with the Air Authority and;  Lessee
           hereby  irrevocably and by way of security for its obligations  under
           this  Agreement  appoints  (which  appointment  is  coupled  with  an
           interest)   Lessor  as  its  attorney  to  execute  and  deliver  any
           documentation  and to do any act or thing required in connection with
           the foregoing.

14.        ASSIGNMENT

14.1       Lessee's Assignment: LESSEE WILL NOT ASSIGN, TRANSFER (VOLUNTARILY OR
           INVOLUNTARILY  BY OPERATION OF LAW OR  OTHERWISE) OR CREATE OR PERMIT
           TO EXIST ANY  SECURITY  INTEREST  OVER,  ANY OF ITS RIGHTS UNDER THIS
           AGREEMENT.

14.2       Lessor's Assignment:  Lessor may assign or transfer all or any of its
           rights under this  Agreement and in the  Aircraft.  In the case of an
           assignment  other than by way of  security,  Lessor  will be released
           from  and  will  have no  further  obligation  under  this  Agreement
           following the  assignment of all its rights under this  Agreement and
           the  assumption  by the  assignee  or  transferee  of all of Lessor's
           obligations   under   this   Agreement.   Notwithstanding   any  such
           assignment,  Lessor  will  remain  entitled  to the  benefit  of each
           indemnity and the liability insurances effected under this Agreement.
           Lessee  will  comply  with all  reasonable  requests  of Lessor,  its
           successors and assigns in respect of any such assignment. Lessor will
           promptly notify Lessee of any assignment.

14.3       Transfer:  If Lessor  desires to effect any assignment or transfer of
           its rights and  obligations  under this  Agreement,  Lessee agrees to
           cooperate and take all such steps as Lessor may reasonably request to
           give the  transferee the benefit of this Agreement and to acknowledge
           the release of Lessor from its  obligations  hereunder as of the time
           of such assignment or transfer.

15.        ILLEGALITY

           If it is or becomes  unlawful in any  jurisdiction for Lessor to give
           effect to any of its obligations as contemplated by this Agreement or
           to continue this Agreement, Lessor may by notice in writing to Lessee
           terminate the leasing of the Aircraft under this Agreement and Lessee
           will  forthwith  redeliver the Aircraft to Lessor in accordance  with
           Clause 12. Without  prejudice to the foregoing Lessor will consult in
           good  faith  with  Lessee  as to any  steps  which  may be  taken  to
           restructure  the transaction to avoid that  unlawfulness  but will be
           under no obligation to take any such steps.

16.        MISCELLANEOUS

16.1       Waivers,  Remedies  Cumulative:  The  rights  of  Lessor  under  this
           Agreement:-

           (i)        may be exercised as often as necessary;

           (ii)       are  cumulative  and not exclusive of its rights under any
                      Law; and

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

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

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

16.3       Certificates:  Save where expressly  provided in this Agreement,  any
           certificate or  determination by Lessor as to any rate of interest or
           as to any other amount  payable  under this  Agreement  will,  in the
           absence of manifest error, be conclusive and binding on Lessee.

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

16.5       Currency:  Lessee  acknowledges  that the specification of Dollars in
           this  Agreement  is of the  essence  and  that  Dollars  shall be the
           currency of account in any and all events. Lessee waives any right it
           may have in any  jurisdiction  to pay any amount under this Agreement
           in a currency other than Dollars.

16.6       Set-off:  Lessor may set off any  matured  obligation  owed by Lessee
           under  this  Agreement,  the  Related  Agreements  or under any other
           agreement  between Lessor (or any affiliate or associate of Lessor or
           a trustee-lessor acting for Lessor as beneficiary) and Lessee against
           any  obligation  (whether or not  matured)  owed by Lessor to Lessee,
           regardless  of the place of payment or currency.  If the  obligations
           are in different currencies,  Lessor may convert either obligation at
           the market  rate of exchange  available  in New York or at its option
           London  for  the  purpose  of  the  set-off.   If  an  obligation  is
           unascertained or unliquidated, Lessor may in good faith estimate that
           obligation  and set off in  respect of the  estimate,  subject to the
           relevant  party  accounting  to the  other  when  the  obligation  is
           ascertained  or  liquidated.  Lessor  will not be  obliged to pay any
           amounts to Lessee under this  Agreement so long as any sums which are
           then due from Lessee under this Agreement,  the Related Agreements or
           under  any  other  agreement  between  Lessor  (or any  affiliate  or
           associate  of  Lessor  or  a  trustee-lessor  acting  for  Lessor  as
           beneficiary)  and Lessee  remain  unpaid and any such  amounts  which
           would otherwise be due will fall due only if and when Lessee has paid
           all such sums except to the extent  Lessor  otherwise  agrees or sets
           off such amounts against such payment pursuant to the foregoing.

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

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

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

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

16.9       Expenses: Whether or not the Aircraft is delivered to Lessee pursuant
           to this Agreement, Lessee is to  pay  to Lessor on an After-Tax Basis
           on demand:-

           (a)        all costs  associated with  perfecting  Lessor's rights in
                      the  Aircraft  and/or  this  Agreement  in  the  State  of
                      Registration, the Habitual Base of the Aircraft (and other
                      states  as   appropriate   given  the   operation  of  the
                      Aircraft), including (but not limited to) the provision of
                      legal opinions, tax advice, stamp duties, translations and
                      registrations, whether required by Lessor or Lessee.

           (b)        all   expenses   (including   legal,   professional,   and
                      out-of-pocket  expenses)  incurred  or  payable  by Lessor
                      related  to any  amendment  to or  extension  of or  other
                      documentation  in connection  with, or the granting of any
                      waiver or consent under this Agreement requested by Lessee
                      or the  monitoring  of  compliance  by  Lessee  with  this
                      Agreement; and

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

           All expenses payable pursuant to this Clause 16.9 will be paid in the
           currency in which they are incurred by Lessor.

16.10      Time of  Essence:  The  time  stipulated  in this  Agreement  for all
           payments  payable by Lessee to Lessor and the  prompt,  punctual  and
           performance of Lessee's other obligations under this Agreement are of
           the essence of this Agreement.

16.11      Notices:  All  notices  under,  or in connection with, this Agreement
           will,  unless  otherwise  stated,  be  given  in  writing  by letter,
           facsimile or SITA.  Any such notice is deemed effectively to be given
           as follows:-

           (i)        if by letter, on the earlier of the date when delivered or
                      the *th day after dispatch;

           (ii)       if  by  facsimile  or  SITA,  when  transmitted  and  full
                      transmission has been separately  notified by telephone by
                      the transmitting party.

           The address,  telex numbers, SITA, facsimile and telephone numbers of
           Lessee, Lessor and Owner are as follows:-

           Lessee:    Address:        12015 East 46th Avenue, Suite 200
                                      Denver, Colorado 80239
                                      United States of America
                      Attn:           General Counsel
                      SITA:           DENGAF9
                      Facsimile:      (303) 371-7007
                      Telephone:       (303) 371-7400

           Lessor:    Address:        Aviation Financial Services, Inc.
                                      c/o GE Capital Aviation Services, Inc.
                                      201 High Ridge Road
                                      Stamford, CT  06927-4900
                      Attn:           Contracts - Leader North America
                      Facsimile:      (203) 961-5965
                      Telephone:      (203) 357-4585

16.12      Governing Law and Jurisdiction:

(a)        THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY AND CONSTRUED  IN
           ACCORDANCE  WITH  THE GOVERNING LAW (WITHOUT REFERENCE TO CONFLICT OF
           LAWS PRINCIPLES);

(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 City of New York, New York are to
           have nonexclusive  jurisdiction to settle any disputes arising out of
           or relating to this  Agreement and each party submits  itself and its
           property to the  nonexclusive  jurisdiction  of the foregoing  courts
           with respect to such disputes;

(c)        Without prejudice to any other mode of service,

           (i)        (A) Lessee  appoints Corporation Service Company, 80 State
                      Street,  6th  Floor,  Albany,  New York  12207-2543 as its
                      agent for service of process relating to  any  proceedings
                      before  the  New  York  courts  in  connection  with  this
                      Agreement and agrees to maintain the process agent in  New
                      York notified to Lessor and (B)  Lessor  appoints  General
                      Electric Capital Corporation, a New York corporation,  260
                      High Ridge Road, Stamford, Connecticut 06927 as  its agent
                      for service  of process relating to any proceedings before
                      the New York courts in  connection with this Agreement and
                      agrees to maintain the process agent in New York  notified
                      to Lessee;

           (ii)       Each of Lessor and Lessee agrees that failure by a process
                      agent to notify the other party of the  process  shall not
                      invalidate the proceedings concerned;

           (iii)      Each of Lessor  and  Lessee  consents  to the  service  of
                      process  relating  to  any  such  proceedings  by  prepaid
                      mailing  of a copy of the  process  to the  other  party's
                      agent at the address identified in paragraph (i)(A) or (i)
                      (B),  respectively,  or by  prepaid  mailing  by air mail,
                      certified or  registered  mail of a copy of the process to
                      Lessee or Lessor,  respectively,  at the address set forth
                      in Clause 16.11;

(d)        Lessee: -

           (i)        waives  to  the  fullest  extent   permitted  by  Law  any
                      objection  which lessee may now or  hereafter  have to the
                      COURTS  REFERRED TO IN CLAUSE 16.12(b) ABOVE on grounds of
                      inconvenient forum or otherwise as regards  proceedings in
                      connection with this Agreement;

           (ii)       waives  to  the  fullest  extent   permitted  by  Law  any
                      objection  which lessee may now or  hereafter  have to the
                      laying of venue of any suit, action or proceeding  arising
                      out of or relating to this agreement brought in the courts
                      REFERRED TO IN CLAUSE 16.12(b);

           (iii)      agrees that a judgment  or order of any court  REFERRED TO
                      IN CLAUSE  16.12(b) in connection  with this  Agreement is
                      conclusive  and binding on it and may be enforced  against
                      it in the courts of any other jurisdiction;

(e)        Nothing  in this  Clause  16.12  limits  the right of Lessor to bring
           proceedings against Lessee in connection with this Agreement: -

           (i)        in any other court of competent jurisdiction; or

           (ii)       concurrently in more than one jurisdiction;

(f)        Lessee irrevocably and unconditionally: -

           (i)        agrees that if Lessor brings legal proceedings  against it
                      or its assets in  relation to this  Agreement  no immunity
                      from  such  legal  proceedings  (which  will be  deemed to
                      include  without  limitation,  suit,  attachment  prior to
                      judgment,  other  attachment,  the  obtaining of judgment,
                      execution or other  enforcement)  will be claimed by or on
                      behalf of itself or with respect to its assets;

           (ii)       waives any such right of immunity which it or  its  assets
                      now has or may in the future acquire;

           (iii)      consents  generally in respect of any such  proceedings to
                      the  giving of any  relief or the issue of any  process in
                      connection  with  such  proceedings   including,   without
                      limitation,  the making,  enforcement or execution against
                      any  property  whatsoever  (irrespective  of  its  use  or
                      intended  use) of any order or judgment  which may be made
                      or given in such proceedings.

16.13      Sole and Entire  Agreement:  This  Agreement and the other  Operative
           Documents to which each is a party are the sole and entire  agreement
           between Lessor and Lessee in relation to the leasing of the Aircraft,
           and supersede all previous agreements in relation to that leasing.

16.14      Indemnitees:  All rights  expressed to be granted to each  Indemnitee
           under  this  Agreement  (other  than  Lessor)  are given to Lessor on
           behalf of that Indemnitee.

16.15      Counterparts:   This  Agreement  may  be  executed  in  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 this  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 Agreement
           may be created  through the transfer or possession of any counterpart
           other than the counterpart  that has been marked  "Counterpart No. 1"
           on the cover page thereof.

16.16      Language:  All  notices to be given under this  Agreement  will be in
           English. All documents delivered to Lessor pursuant to this Agreement
           will be in English,  or if not in English,  will be  accompanied by a
           certified English translation.  If there is any inconsistency between
           the English  version of this  Agreement  and any version in any other
           language, the English version will prevail.

16.17      No Brokers:  Lessee  hereby  represents  and warrants 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 this  Agreement,  to any employee of
           Lessor or to any  person or  entity in the State of  Registration  or
           elsewhere,  except to Excluded  Persons,  as herein  defined.  Lessor
           hereby represents and warrants 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 this
           Agreement,  to any  employee  of Lessee or to any person or entity in
           the State of Registration or elsewhere,  except to Excluded  Persons,
           as  herein  defined.  For the  purposes  hereof,  the term  "Excluded
           Persons"  shall mean (x) in the case of Lessor,  any of its officers,
           directors,  employees,  attorneys  or  other  professional  advisors,
           whether located in the State of Registration or elsewhere, and (y) in
           the  case  of  Lessee,  any of its  officers,  directors,  employees,
           attorneys  or other  professional  advisors,  whether  located in the
           State of  Registration  or elsewhere.  Each party agrees to indemnify
           and hold the other  harmless  from and  against  any and all  claims,
           suits,  damages,  costs and expenses  (including,  but not limited to
           reasonable  attorneys'  fees) asserted by any agent,  broker or other
           third  party  for  any  commission  or  compensation  of  any  nature
           whatsoever  based upon this  Agreement or the Operative  Documents to
           which  Lessor and Lessee are a party or the  Aircraft,  if such claim
           damage, cost or expense arises out of any action or alleged action by
           the indemnifying party, its employees or agents.

<PAGE>

17.        DISCLAIMERS AND WAIVERS

17.1       Exclusion:  THE AIRCRAFT IS TO BE LEASED AND DELIVERED  HEREUNDER "AS
           IS,  WHERE IS" AND  LESSEE  AGREES  AND  ACKNOWLEDGES  THAT,  SAVE AS
           EXPRESSLY STATED IN THIS AGREEMENT,  LESSOR WILL HAVE NO LIABILITY IN
           RELATION  TO,  AND LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE
           OR GIVEN  (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  THIS  AGREEMENT  OR   OTHERWISE),   ANY  WARRANTIES  OR
           REPRESENTATIONS,  EXPRESS OR IMPLIED,  WITH RESPECT TO, THE AIRCRAFT,
           INCLUDING BUT NOT LIMITED TO: -

(a)        THE    TITLE,    DESCRIPTION,    AIRWORTHINESS,    COMPLIANCE    WITH
           SPECIFICATIONS,  OPERATION,  MERCHANTABILITY,  FREEDOM FROM CLAIMS OF
           INFRINGEMENT OR THE LIKE,  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
           REPRESENTATION OR WARRANTY 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

(b)        ANY OBLIGATION,  LIABILITY,  RIGHT, CLAIM OR REMEDY IN CONTRACT OR IN
           TORT  OUT  OF  ANY  NEGLIGENCE  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
                      DEFECT THEREIN OR BY ANY OTHER  CIRCUMSTANCE IN CONNECTION
                      THEREWITH;

           (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 CONSEQUENTIAL DAMAGES;

           (iv)       THE DELIVERY,  OPERATION,  SERVICING, MAINTENANCE, REPAIR,
                      IMPROVEMENT OR REPLACEMENT OF THE  AIRCRAFT, ANY ENGINE OR
                      ANY PART; OR

           (v)        ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

17.2       Waiver:  LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR,  ALL
           ITS RIGHTS IN RESPECT OF ANY WARRANTY OR  REPRESENTATION,  EXPRESS OR
           IMPLIED,  ON THE  PART  OF  LESSOR  AND  ALL  CLAIMS  AGAINST  LESSOR
           HOWSOEVER  AND  WHENEVER  ARISING AT ANY TIME IN RESPECT OF OR OUT OF
           THE POSSESSION,  OPERATION OR PERFORMANCE OF THE AIRCRAFT, ANY ENGINE
           OR ANY PART OR THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS EXCEPT
           TO THE EXTENT ARISING UNDER CLAUSE 2.4.

17.3       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,  CONSEQUENTIAL  DAMAGES AS A
           RESULT  OF ANY  BREACH  OR  ALLEGED  BREACH  BY  LESSOR OF ANY OF THE
           AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR CONTAINED IN THIS
           AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS.

17.4       Confirmation:   LESSEE  CONFIRMS  THAT  IT  IS  FULLY  AWARE  OF  THE
           PROVISIONS  OF THIS  CLAUSE  AND  ACKNOWLEDGES  THAT  RENT AND  OTHER
           AMOUNTS HAVE BEEN CALCULATED BASED ON ITS PROVISIONS.

18.        SECTION 1110

           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  U.S.C.  Lessee  covenants  and  agrees  with
           Lessor  that to better  ensure  the  availability  of such  benefits,
           Lessee shall  support any motion,  petition or  application  filed by
           Lessor with any  bankruptcy  court  having  jurisdiction  over Lessee
           whereby  Lessor seeks  recovery of possession  of the Aircraft  under
           said  Section  1110 and shall not in any way  oppose  such  action by
           Lessor unless Lessee shall have  complied  with the  requirements  of
           said  Section  1110 to be  fulfilled  in order to  entitle  Lessee to
           continued use and possession of the Aircraft hereunder.  In the event
           said  Section  1110 is  amended,  or if it is  repealed  and  another
           statute is enacted in lieu thereof,  Lessor and Lessee agree to amend
           the Lease and take such other action not inconsistent  with the Lease
           as Lessor  reasonably  deems  necessary so as to afford to Lessor the
           rights and benefits as such amended or  substituted  statute  confers
           upon owners and lessors of aircraft similarly situated to Lessor.

19.         USURY LAWS:  The parties intend to  contract  in  strict  compliance
            with the usury Laws of the States of New York and Colorado  and,  to
            the extent applicable, the United States of America. Notwithstanding
            anything to the contrary in the Operative Documents, Lessee will not
            be  obligated   to   pay  any  interest  in excess  of  the  maximum
            non-usurious interest rate, as in effect from time  to  time,  which
            may by applicable Law be charged, contracted for, reserved, received
            or collected by Lessor in connection with the  Operative  Documents.
            During  any  period  of  time  in  which the then-applicable highest
            lawful rate is lower than the rate  specified  in  Clauses  5.11  or
            13.2, interest will accrue and be payable  at  such  highest  lawful
            rate; however, if at later times such highest lawful rate is greater
            than the rate specified in Clauses  5.11 or 13.2,  then  Lessee will
            pay interest at the highest lawful rate until the  aggregate  amount
            of interest paid by Lessee equals the amount of interest that  would
            have been payable in accordance with the interest rate specified  in
            Clauses 5.11 or 13.2.

20.         MODIFICATION OR REVISION:

            Neither  this  Agreement  nor  any  term of  this  Agreement  may be
            modified, rescinded, changed waived, discharged or terminated except
            by a writing  signed by the party to be  charged.  Lessor and Lessee
            acknowledge  their  agreement to the  provision of this Clause 20 by
            their initials below: -

           LESSOR: __________               LESSEE: ____________

<PAGE>

21.        IN WITNESS whereof the parties hereto have executed this Agreement on
           the date shown at the beginning of this Agreement.

           WITNESS                  SIGNED on behalf of
                                    AVIATION FINANCIAL SERVICES INC.

                                    By:              ___________________________

                                    Name:            ___________________________

                                    Title:           ___________________________

           WITNESS                  SIGNED on behalf of FRONTIER AIRLINES, INC.

                                    By:              ___________________________

                                    Name:            ___________________________

                                    Title:           ___________________________

<PAGE>

                                   SCHEDULE 1

                                     PART 1

                             DESCRIPTION OF AIRCRAFT

           AIRCRAFT

           MANUFACTURER:                    Boeing

           MODEL:                           737-36E

           SERIAL NUMBER:                   25256

           ENGINES

           ENGINE TYPE:                     CFM-56-3B2

           SERIAL NOS:                      SN 727254 and
                                            SN 724977

                         Part A Description of Aircraft

On the Delivery Date each Aircraft shall comply with the following conditions:

1.      The  Aircraft  will  have  accomplished  all  outstanding  airworthiness
        directives by  terminating  action,  if required,  and mandatory  orders
        affecting  that model of Aircraft  issued by the Air  Authority  and the
        DGAC  which,  if the  Aircraft  was  registered  with either of such air
        authorities,  would  have to be  complied  with  within * days after the
        Delivery Date.

2.      The  Aircraft  will have in  existence  a valid  Export  Certificate  of
        Airworthiness  with respect to the Aircraft issued by the DGAC and shall
        have all systems  operational  and shall be eligible for 14 C.F.R.  Part
        121 operations.

3.      The Aircraft shall be in 148Y (tourist/load class seats).

4.      The Aircraft shall be fully serviceable with no carried forward  defects
        and shall be clean by airline standards.

5.      Airframe:          Ex a block MPD 'C7-SI' check  in accordance  with the
                           Manufactures maintenance planning document, including
                           100%  compliance  with  the  CPCP  program  and aging
                           aircraft program.

        Engines:           Minimum  expected  life  of *  hours  and  *  cycles,
                           verified  by power  assurance  runs.  Plus  Boroscope
                           inspections  to establish  the internal  condition of
                           the engine.  The engines will be able to achieve full
                           take off power at  22,000  thrust  rating of  minimum
                           OATL of 34 degrees Celsius.

        Components:        Minimum  of * hours,  * cycles on hard  time  limited
                           items  and * months or full life if Full life is less
                           than * months on calendar  limited items and shall be
                           supported by appropriate certification  documentation
                           such as JAR form 1 or FAA form 8130-1,  where the FAA
                           approval  agency is a JAA  listed  company:  for this
                           purpose  "Hard Time  Component"  means any  component
                           which has a limited  on-wing life in accordance  with
                           Manufactures  Maintenance Planning Document and which
                           can have  life  fully  restored  through  appropriate
                           maintenance.

                           The  installed  components  as a group  will  have an
                           average  of total  flight  time since new of not more
                           than that of the Airframe; and

        APU:               Serviceable and  capable of operating under full load
                           without limitation

        Livery Painting:   Freshly painted white.

        Demonstration

        Flight:            At  delivery  Lessor  will  provide  a  demonstration
                           flight not exceeding two hours in duration.

        Detail             Specification:   Aircraft   shall   comply  with  the
                           aircraft detail  specification No D6-76300-87  except
                           for systems  which have been  modified to comply with
                           JAR ops requirements and shall have TCAS and VHF 8.33
                           spacing installed.

        MTOW:              138,000 LBS

6.      FUSELAGE, WINDOWS AND DOORS

         The aircraft will be ex a D Check as specified in 5 above.The  fuselage
         will be free of major  dents  and  abrasions,  and  loose or  pulled or
         missing rivets. All repairs will be permanent Class 1 repairs and where
         possible  flush as  defined  by the  Manufacturer's  structural  repair
         manual or have specific Manufacturer approval accepted by the FAA.

7.      WINGS AND EMPENNAGE

        (a)      Leading edges will be free from damage.

        (b)      Unpainted surfaces will be polished during the D Check;

        (c)      Control  surfaces  will be cleaned and  polished  or painted as
                 per Previous operator's policy during the "D" Check; and

        (d)      Wings will be free of fuel leaks.

8.      INTERIOR

        (a)      Ceilings, sidewalls and bulkhead panels will be serviceable.

        (b)      Carpets  and  seat  covers  will be in good condition, and meet
                 JAR/FAR fire resistance regulations;

        (c)      Seats  will  be  serviceable,  in  good  condition  having been
                 removed, inspected and repaired.

        (d)      Emergency equipment having a calendar life will  have a minimum
                 of * year or *% of its total  approved life, whichever is less,
                 remaining; and

        (e)      All signs and decals shall be clean, secure and legible.

9.      COCKPIT

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

        (b)      Floor coverings will be clean;

        (c)      Seat covers will be in serviceable , clean and free of stains.

        (d)      Seats  will  be  serviceable,  in  good  condition  and will be
                 repainted as necessary; and

        (e)      All signs and decals shall be clean, secure and legible.

10.     CARGO COMPARTMENTS

        (a)      Panels will be serviceable; and

        (b)      Nets will be in servicable.

<PAGE>

                                     PART 2

                               AIRCRAFT DOCUMENTS

Part A

A.       Certificates

A001     Certificate of Airworthiness
A002     Current Aircraft Registration
A003     C of A for Export (if applicable)
A004     Noise Limitation Certificate (AFM page)
A005     Radio Station License
A007     Aircraft deregistration confirmation
A008     Burn Certificates - Cabin Interiors - as follows:

Certification  of compliance with the fire blocking  requirements as outlined in
JAR/FAR  Part 25  including:
- Seat  cushions*
- Back rest  cushions*
- Dress covers*
- Carpets
- Curtains
- Interior  Surfaces (if  refurbished)
* Including "in combination" burn certification

B.       Aircraft Maintenance Status Summaries

B001     Certified  current  Time  in  Service (Hours & Cycles) and  maintenance
         status
B002     Certified  status  of  Airworthiness  Directives  including  method  of
         compliance
B003     Certified status of Service Bulletin Status
B004     Certified status of SSI
B005     Certified status of CPCP (if applicable)
B006     Certified inventory of Hard Time Components (Fitted listing)
B007     Certified inventory of OC/CM Components (Fitted listing)
B008     Certified status of all non-SB and Major  Modifications/STC's including
         acceptable State of Manufacture Certification
B009     Certified status of Check/Inspection History & Current Status of Checks
B010     List of  Deferred  Maintenance  Items B011 List of Out of Phase Checks,
         Special Requirements,  Time Limited Repairs (if any).
B012     Aircraft Accident & Incident Report.
B013     Structural repairs and damage (including Dent & Buckle Chart).

C.       Aircraft Maintenance Records

C001     Technical Logs (Minimum of 2 years or as required by the FAA)
C002     A Checks
         Last complete  cycle of A Checks (or  equivalent)
C003     C Checks
         Last Complete cycle of C Checks  (or  equivalent)
C004     All Major  Checks
C005     CPCP Tasks (if applicable)
C006     Periodic  Tasks
C007     Dirty Finger Print  Certification  - AD's
C008     Dirty Finger Print Certification - SB's
C009     Dirty Finger Print Certification - All other modification
C010     Last Weight Report including Schedule
C011     Last Test Flight Report
C012     Certified ETOPS compliance report (if applicable)
C013     Dirty  Finger  Print  certification - All Structural repairs/structural
         damage
C014     Details  of  State  of  Manufacture  certification  basis -  A  non-SRM
         Structural repairs
C015     Aircraft Log Book(s) if applicable

D.       Configuration Status

D001     Approved and certified LOPA
D002     Galley Drawings/Component OHM
D003     Emergency Equipment Drawing/Listing
D004     Loose Equipment Inventory
D005     Inventory Listing of Avonic installed Units.

E.       Aircraft Historical Records

E001     C of A (Export) from State of Manufacture
E002     Manufacturer's AD Report
E003     Manufacturer's Inspection Report, Initial Equipment list
E004     Manufacturer's repair/alteration report
E005     Manufacturer's SB Report
E006     Service Difficulty Reports (if any)
E007     Aircraft Historical Log
E008     Last Flight Data Recorder Read-Out & Corrections
E009     Weighing report

F.       Engine Records

F001     Certified Statement of Status of Each Engine
F002     AD Compliance Report and Compliance Documents
F003     Manufacturer's Modifications & SB Status
F004     In-house Modifications (if applicable)
F005     Certified LLP Listing
F006     Certified listing of installed units
F007     Manufacturer Delivery Document
F008     Complete copies of all historical engine/module Shop Visit Reports
F009     State of Manufacture LLP Traceability
F010     Conditioning Monitoring Report
F011     Engine Log Book/Master Records of Installation/Removals
F012     Last Borescope Report, including video if available
F013     Test Cell Run Report
F014     Last On-Wing Ground Run
F015     Certified Statement that Engines are not involved in an Accident
F016     Approved Release to Service Certification for installed rotables
F017     Approved ETOPS compliance report (if applicable)

G.       APU

G001     Certified Statement on Status of APU (if applicable)
G002     Certified SB Compliance Report/AD Status Report
G003     Approved Release to Service Certification for installed units
G004     APU Log Book/Master Record of Installation/Removals
G005     Complete copies of all APU Shop Visit Reports & Reason for Removal
G006     Statement of APU Hours to Aircraft Flying Hours
G007     LLP Status and Full Traceability to birth
G008     APU Borescope Report
G009     Last On-Wing/Health Check Data sheets (if applicable)
G010     Last Test Cell Run
G011     Approved ETOPS compliance report

H.       Component Records

H001     Approved Release to Service Certification for Hard Time Components
H002     Approved Release to Service Certification for OC/CM Components

I.       Landing Gears

I001     Approved Release to Service Certification for major  assemblies on each
         Gear
I002     Approved LLP Listings for each Gear (with FULL Traceability to Birth)
I003     Last Shop Visit Report (OH)

J.       Manuals

All  Manufacturer's  Manuals  delivered with the Aircraft  updated to the latest
revision standard as may be reasonably requested by Purchaser

Microfilm:
J006     WDM
J007     IPC
J008     Maintenance Manual
J009     Schematics
J010     Hook Up Listing

K.       Miscellaneous

K006     Maintenance Programme Specifications (Operator's)
K007     Reference   Material   for  Interpretation  of  Status   Summaries,  or
         cross-reference for Part Numbers

<PAGE>

                                   SCHEDULE 2

                       CERTIFICATE OF TECHNICAL ACCEPTANCE

This Certificate of Technical Acceptance is delivered, on the date set out below
by Frontier  Airlines,  Inc.  ("Lessee"),  to AVIATION  FINANCIAL  SERVICES INC.
("Lessor"),  pursuant to the  Aircraft  Lease  Agreement  dated as of the 7th of
January, 2000 between Lessor and Lessee (the "Agreement"). The capitalized terms
used in this  Certificate  shall  have the  meaning  given to such  terms in the
Agreement.

1.         DETAILS OF ACCEPTANCE

           Lessee  hereby  confirms  to Lessor that Lessee has at [ ] o'clock on
           this  [ ] day  of [ ],  2000,  at [ ],  accepted  the  following,  in
           accordance with the provisions of the Agreement:

(a)        Boeing Model 737-36E airframe, Manufacturer's Serial No. 25256;

(b)         CFM-56-3B2 Engines: -

           Engine Manufacturer's Serial Nos.

           1)  [______]

           2)  [______]

           (Each of which shall have more than 750 rated  takeoff  horsepower or
           the equivalent of such horsepower);

(c)        Fuel on Board Status:     [               ] (lbs.) (gals.)

(d)        Loose Equipment  Check  List: as per list signed by Lessor and Lessee
           and attached hereto; and

(e)        Aircraft  Documents:  as  per  list  signed  by Lessor and Lessee and
           attached hereto.

<PAGE>

2.         HOURS AND CYCLES DATA (as of Delivery Date)

(a)        Airframe:

           Number of Hours since last block "D" Check (Heaviest Check):
           ______ hours

           "C" Check (or Equivalent):

                  Interval:   ________________________

                  Time Since:  _______________________

(b)        Landing Gear Overhaul:
           ---------------------

           Number of Cycles Since Last Overhaul:

                  Left Gear __________________________ cycles

                  Right Gear _________________________ cycles

                  Nose Gear _________________________ cycles

                  Center Gear ________________________ cycles

           Interval: Left Gear _________________________

                  Right Gear _________________________

                  Nose Gear _________________________

                  Center Gear ________________________

(c)        Engines:
           -------

           Number of Hours Since Last Heavy Shop Visit:

                  S/N            :______ hours
                      -----------

                  S/N            :______ hours
                      -----------

           Number of Hours Since Last Hot Section Refurbishment:

                  S/N            :______ hours
                      -----------

                  S/N            :______ hours
                      -----------

<PAGE>

           Number of Hours Since Last Cold Section Refurbishment:

                  S/N            :______ hours
                      -----------

                  S/N            :______ hours
                      -----------

           Hot Section Inspection:

                  Interval:  ___________________________

                  Time Since (S/N               ):  __________________________
                                  --------------

                  Time Since (S/N               ):  __________________________
                                  --------------

           Time Remaining to First Restriction:

           Engine S/N:                       _
                           ------------------

                  Hours:   __________       Restriction:      __________

                  Cycles:  __________       Restriction:      __________

           Engine S/N:                       _
                           ------------------

                  Hours:   __________       Restriction:      __________

                  Cycles:  __________       Restriction:      __________

           Average Cycles in Life Limited Parts (see attached Schedule):________

(d)        Auxiliary Power Unit:
           --------------------

           Number of APU Hours Since Last Heavy Shop Visit:

                  __________ hours  Date accomplished __________

           Hot Section Inspection:

                  Interval:         ________________________

                  Time Since:       ________________________

(e)        Time Controlled Components:
           --------------------------

 (f)       Interior Equipment:
           ------------------

           Number of Passenger Seats and Configuration:_______________ _________

           Number of Galleys and Location:  _________         __________

           Number of Lavatories and Location: _________  __________

           LOPA - Attached                  __________        __________

           List of Loose Equipment on Board:

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

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

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

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

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

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

(g)        Avionics:       Description                 Model          Part No.
           --------        -----------                 -----          --------

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

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

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

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

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

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

<PAGE>

3.         ACCEPTANCE:

           The undersigned hereby confirms that the Aircraft, Engines, Parts and
           Aircraft  Documents are acceptable to it, satisfy all of the Delivery
           Condition  Requirements  relating to the  technical  condition of the
           Aircraft and are in the condition  for delivery to and  acceptance by
           Lessee as required  under the  Agreement,  except as described on the
           EXCEPTIONS LIST attached hereto.  LESSEE'S  EXECUTION AND DELIVERY OF
           THIS  CERTIFICATE   SIGNIFIES   LESSEE'S   ABSOLUTE  AND  IRREVOCABLE
           TECHNICAL  ACCEPTANCE OF THE AIRCRAFT FOR ALL PURPOSES  HEREOF AND OF
           THE AGREEMENT.

           IN   WITNESS   WHEREOF,   Lessee   has,   by  its   duly   authorized
           representative,  executed this Certificate on the date in paragraph 1
           above.

           LESSEE: FRONTIER AIRLINES, INC.

           By:    _________________________

           Title: _________________________

<PAGE>

                                                                      ATTACHMENT

                                 EXCEPTIONS LIST

         The items set forth below  represent  non-conformities  to the Delivery
Condition  Requirements  as of the  Delivery  Date,  the  corrective  action (or
payment to Lessee in lieu  thereof),  if any, to be taken by Lessor and the date
of accomplishment. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR'S UNDERTAKINGS SET
FORTH HEREIN ARE IN FURTHERANCE  OF AND SUBJECT TO THE AIRCRAFT LEASE  AGREEMENT
DATED AS OF JANUARY 7, 2000 BETWEEN LESSOR AND LESSEE (THE "LEASE"), THAT LESSOR
MAKES  NO  REPRESENTATIONS  OR  WARRANTIES  OF ANY  KIND,  EXPRESS  OR  IMPLIED,
HEREUNDER AND THAT LESSORS UNDERTAKINGS ARE SUBJECT TO EACH AND EVERY DISCLAIMER
OF LESSOR SET FORTH IN THE LEASE INCLUDING,  WITHOUT LIMITATION, THOSE SET FORTH
IN CLAUSE 17 THEREOF.

LESSOR                                               LESSEE

By:      _________________________          By:___________________________

Title:   _________________________          Title:__________________________

         --------------------------------------
1.       ______________________________________

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

2.       ______________________________________

         ======================================
         --------------------------------------  -------------      ----------

3.       ______________________________________

         ======================================
         --------------------------------------  -------------      ----------

                                   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 in the same configuration as on the Delivery Date or as reasonably
           requested by Lessor;

(b)        be clean by commercial airline standards;

(c)        have  installed the full  complement of engines and other  equipment,
           parts,  furnishings and  accessories as is normally  installed in the
           Aircraft and the loose  equipment as was installed in the Aircraft at
           the time of Delivery,  and be in a condition  suitable for  immediate
           operation in commercial service;

(d)        have  in  existence  a  valid  certificate  of  airworthiness  (or if
           required by Lessor, a valid export certificate of airworthiness) with
           respect  to the  Aircraft  issued  by  the  Air  Authority  and be in
           compliance without waiver with all current FAR Part 121 requirements;

(e)        comply with the manufacturer's original specifications or as modified
           by Lessee with the  approval  of Lessor,  and as required to meet the
           regulations of the Air Authority at the Expiry Date;

(f)        have undergone, immediately prior to redelivery, a block `C' Check so
           that all  inspections  falling due within the next following * Flight
           Hours,  * Cycles  or the next  following  * months  of  operation  in
           accordance with Lessee's Maintenance Program, have been accomplished;

(g)        have had accomplished all outstanding (i.e. at or prior to the Expiry
           Date)   mandatory    inspection   and   modification    requirements,
           airworthiness  directives and similar requirements  applicable to the
           Aircraft, any Engine or Part having a compliance date during the Term
           or within * days after the Expiry Date and which are  required by the
           Air Authority,  and/or mandated by any  manufacturer of the Aircraft,
           any  Engine  or  Part,  for  this  purpose,  compliance  shall  be by
           terminating   action   if:  the  latest   date   permitted   by  such
           Airworthiness  Directive for compliance by  terminating  action falls
           within * days after the Expiry Date;

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

(i)        have its  fuselage,  engine  cowlings,  and  vertical  fin and rudder
           freshly painted in an all white livery and the paint on the wings and
           the  horizontal  stabilizer  surfaces  shall  be  clean  and in  good
           condition,  free from  cracks,  peeling,  blistering  and erosion and
           shall be uniform in color and free from areas of local touch up;

(j)        have all signs and decals clean, secure and legible;

(k)        shall  have  no open, deferred, continued, carryover or placarded log
           book items; and

(l)        meet  the  requirements  of  FAR  Part 36, Appendix C,  Stage 3 noise
           compliance as then in effect without waiver or restriction.

2.         COMPONENTS

(a)        Each Flight  Hour and Cycle  limited  component  (other than the APU)
           shall have not less than * Flight  Hours and * Cycles  (whichever  is
           the more  stringent  test)  of life  remaining  to the next  expected
           removal, in accordance with Lessee's Maintenance Program and shall be
           supported by  documentation  indicating  Time Since New, Cycles Since
           New,  Time Since  Overhaul  and Cycles  Since  Overhaul  and shall be
           accompanied by appropriate certification  documentation acceptable to
           the Air Authority from the last overhaul or zero time shop visit such
           as JAR form 1 or FAA form 8130-1;

(b)        Each calendar-limited  component including safety equipment will have
           not less than * months life remaining to the next  scheduled  removal
           in  accordance  with  Lessee's   Maintenance  Program  and  shall  be
           supported by  documentation  indicating  Time Since New, Cycles Since
           New,  Time  Since  Overhaul,  Cycles  Since  Overhaul  and  shall  be
           accompanied by appropriate certification  documentation acceptable to
           the Air Authority from the last overhaul or zero time shop visit such
           as JAR form 1 or FAA form 8130-1;

(c)        Each  life-limited  component  will  be  supported  by  certification
           documentation necessary to demonstrate  traceability  of  utilization
           since new (i.e. back-to-birth traceability);

(d)        Each  "on-condition"  and  "condition monitored"  component  will  be
           serviceable;

(e)        The APU will be serviceable and capable of operating under full  load
           without limitation; and

(f)        The  installed  components  as a group  will have an average of total
           flight time since new of not more than that of the Airframe.

<PAGE>

3.         ENGINES

           Each Engine will be  installed on the Aircraft and if not the engines
           installed  on  the  Delivery   Date  will  be   accompanied   by  all
           documentation  Lessor may require to evidence  that title  thereto is
           properly vested in Owner and will:-

(a)        have not less than * Engine  Flight Hours or * Cycles  (whichever  is
           the more restrictive factor) remaining to next scheduled life limited
           part replacement and have an expected  on-wing  remaining life of not
           less than * Engine  Flight Hours or * Cycles  (whichever  is the more
           restrictive  factor).  The expected life remaining will be determined
           by the  inspection  and checks  accomplished  by Lessor in accordance
           with this Agreement;

(b)        not be "on watch".  (For  purposes of the  Agreement "on watch" shall
           mean any  maintenance  condition that would require an Engine removal
           and/or  reinspection  or  airworthiness  directive  action that would
           require an Engine  removal  within * flight hours and * Cycles of the
           Expiry Date); and

(c)        be  in  a condition which can operate at maximum rated take off power
           at sea level at a temperature of 34oC.

4.         FUSELAGE, WINDOWS AND DOORS

(a)        The fuselage will be free of major dents and abrasions, and any dents
           and abrasions that require a repetitive  inspection or future repair,
           temporary  repairs,  and loose or pulled or  missing  rivets  and all
           structural repairs shall be in accordance with the manufacturer's and
           Air Authority's approved data for permanent repair;

(b)        Windows will be free of delamination, blemishes,  crazing and will be
           properly sealed; and

(c)        Doors will  be  free  moving,  correctly  rigged  and  be fitted with
           serviceable seals.

5.         WINGS AND EMPENNAGE

(a)        Leading edges will be free from damage;

(b)        Unpainted control surfaces will be waxed and polished;

(c)        Unpainted cowlings and fairings will be polished; and

(d)        Wings will be free of fuel leaks.

6.         INTERIOR

(a)        Ceilings, sidewalls  and  bulkhead  panels  will be clean and free of
           cracks and stains;

(b)        Carpets and seat covers will be in good condition, clean and free  of
           stains and meet FAR fire resistance regulations;

(c)        Seats  will  be  serviceable,  in  good  condition  and  repainted as
           necessary; and

(d)        Emergency  equipment  having a calendar life will have a minimum of *
           year or *% of its total approved life, whichever is less, remaining.

7.         COCKPIT

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

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

(c)        Seat covers  will be in good  condition, clean and free of stains and
           will conform to FAR fire resistance regulation; and

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

8.         CARGO COMPARTMENTS

(a)        Panels will be in good condition; and

(b)        Nets will be in good condition.

9.         LANDING GEAR

           The  landing  gear and wheel  wells will be clean,  free of leaks and
           repaired  as  necessary.  Wheels and  brakes  shall be in a half life
           condition or better.

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

(b)        Each  wheel  and  brake assembly shall be in a half life condition or
           better.

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 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  and an  approved  corrosion  prevention
           program will be in operation; and

(c)        Fuel  tanks  will be free from contamination and corrosion and a tank
           treatment program will be in operation.

<PAGE>

                                   SCHEDULE 4

                             INSURANCE REQUIREMENTS

           The Insurances required to be maintained are as follows:-

(a)        HULL ALL RISKS of Loss or Damage whilst flying and on the ground with
           respect to the  Aircraft  on an "agreed  value  basis" for the Agreed
           Value and with a deductible not exceeding the  Deductible  Amount set
           forth in Letter  Agreement  No.  1, or such  other  amount  agreed by
           Lessor from time to time;

(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   including   confiscation   and
           requisition  by the  State  of  Registration  for the  Agreed  Value,
           however,  when the Aircraft is being  operated  solely in or over the
           United States of America  and/or  Canada,  coverage may be limited to
           such  perils  as are  customarily  insured  by  comparable  airlines,
           operating similar equipment in similar circumstances;

(c)        ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the ground or
           in transit other than by air)  property  insurance on all Engines and
           Parts when not  installed on the Aircraft on an "agreed  value" basis
           for their  full  replacement  value  and  including  engine  test and
           running risks;

(d)        AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER,  BAGGAGE, CARGO AND
           MAIL AND AIRLINE  GENERAL  THIRD  PARTY  (INCLUDING  PRODUCTS)  LEGAL
           LIABILITY for a Combined Single Limit (Bodily Injury/Property Damage)
           of an amount not less than the  Minimum  Liability  Coverage  for the
           time  being  any one  occurrence  (but in  respect  of  products  and
           personal  injury  liability this limit may be an aggregate  limit for
           any and all losses occurring during the currency of the policy).  War
           and Allied Risks are also to be covered under the Policy in line with
           prudent market practice for comparable  airlines,  operating  similar
           equipment in similar circumstances;

(e)        All  required  hull and spares insurance (as specified above), so far
           as it relates to the Aircraft will: -

           (i)        name Lessor and its  respective  successors and assigns as
                      additional   assureds  for  their  respective  rights  and
                      interests,   warranted,   each  as  to  itself  only,   no
                      operational interest;

           (ii)       provide that any loss will be settled  jointly with Lessor
                      and Lessee and will be payable in Dollars to Lessor except
                      where the loss does not  exceed  the  Damage  Notification
                      Threshold, and Lessor has not notified the insurers to the
                      contrary,  in which case the loss will be settled with and
                      paid to Lessee;

           (iii)      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 market language);

           (iv)       confirm  that the insurers are not entitled to replace the
                      Aircraft in the event of an insured Event of Loss;

           (v)        confirm  that  the  insurers  will  not  obtain  a   valid
                      discharge of  the  obligations  under  the  Insurances  by
                      payment  to the broker, notwithstanding market practice to
                      the contrary;

(f)        All required liability insurances (specified above) will:-

           (i)        include Lessor, GECASI, GECASL, Viva, and their respective
                      successors and assigns and their respective  shareholders,
                      subsidiaries,  directors,  officers, agents, employees and
                      indemnitees  as additional  insureds for their  respective
                      rights and interests,  warranted,  each as to itself only,
                      no  operational  interest;  provided,  however,  that Viva
                      shall be named as an  additional  assured  solely  for the
                      period  commencing  on the Delivery Date and ending on the
                      earlier  to occur of (i) * years  following  the  Delivery
                      Date and (ii) the completion of the next heavy maintenance
                      visit;

           (ii)       include a Severability  of Interest  Clause which provides
                      that the  insurance,  except  for the limit of  liability,
                      will operate to give each assured the same  protection  as
                      if there was a separate policy issued to each assured;

           (iii)      contain a provision  confirming that the policy is primary
                      without  right of  contribution  and the  liability of the
                      insurers  will not be affected by any other  insurance  of
                      which  Lessor or Lessee  have the  benefit so as to reduce
                      the amount payable to the  additional  insureds under such
                      policies;

(g)        All Insurances will:-

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

           (ii)       provide  cover  denominated  in  Dollars  and  any   other
                      currencies which Lessor may reasonably require in relation
                      to liability insurance;

           (iii)      operate  on  a worldwide basis subject to such limitations
                      and exclusions as Lessor may agree;

           (iv)       acknowledge the insurer is aware  (and has seen a copy) of
                      this Agreement and that the Aircraft is owned by Lessor;

           (v)        provide  that, in relation to the interests of each of the
                      additional assureds the Insurances will not be invalidated
                      by any act or  omission  by  Lessee,  or any other  person
                      other  than  the  respective  additional  assured  seeking
                      protection  and shall insure the  interests of each of the
                      additional  assureds regardless of any breach or violation
                      by Lessee,  or any other person other than the  respective
                      additional  assured  seeking  protection  of any warranty,
                      declaration or condition, contained in such Insurances;

           (vi)       provide that the insurers will hold harmless and waive any
                      rights  of  recourse   and/or   subrogation   against  the
                      additional assureds,  including GECASI and GECASL or to be
                      subrogated to any rights of Lessor against Lessee;

           (vii)      provide  that  the   additional   assureds  will  have  no
                      obligation  or  responsibility  for  the  payment  of  any
                      premiums due (but reserve the right to pay the same should
                      any of them elect so to do) and that the insurers will not
                      exercise any right of set-off or  counter-claim in respect
                      of any premium due against the respective interests of the
                      additional   assureds  other  than  outstanding   premiums
                      relating to the  Aircraft,  any Engine or Part the subject
                      of the relevant claim;

           (viii)     provide that the  Insurances  will continue  unaltered for
                      the benefit of the additional assureds for at least * 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 to Lessor, except in the
                      case of war risks for which * days (or such lesser  period
                      as is or may be  customarily  available  in respect of war
                      risks or allied  perils) will be given,  or in the case of
                      war between the 5 great powers or nuclear  peril for which
                      termination is automatic;

           (ix)       if  reinsurance  is  a  requirement of this Agreement such
                      reinsurance will (i) be  on the same terms as the original
                      insurances   and  will  include  the  provisions  of  this
                      Schedule, (ii) provide that notwithstanding any bankruptcy
                      insolvency,   liquidation,    dissolution    or    similar
                      proceedings  of   or  affecting  the  reinsured  that  the
                      reinsurers' liability  will  be  to  make such payments as
                      would  have  fallen  due  under  the  relevant  policy  of
                      reinsurance if the  reinsured had (immediately before such
                      bankruptcy,  insolvency,   liquidation,   dissolution   or
                      similar proceedings) discharged its  obligations  in  full
                      under the original insurance  policies in respect of which
                      the then relevant policy of reinsurance has been effected;
                      and  (iii) contain a "cut-through" clause in the following
                      form    (or   otherwise,  satisfactory  to  Lessor):  "The
                      Reinsurers and the Reinsured hereby mutually agree that in
                      the event of any  claim arising under the  reinsurances in
                      respect of a total loss or other claim where  as  provided
                      by the Aircraft Lease Agreement  dated  March 25, 1997 and
                      made between Lessor and Lessee such claim is to be paid to
                      the  person  named  as  sole  loss payee under the primary
                      insurances, the Reinsurers will in lieu of payment to  the
                      Reinsured, its successors in interest and  assigns  pay to
                      the person named  as  sole  loss  payee  under the primary
                      insurances effected by the Reinsured that portion  of  any
                      loss due for  which  the  Reinsurers  would  otherwise  be
                      liable to pay the Reinsured (subject to proof of loss), it
                      being understood and agreed that any such payment  by  the
                      Reinsurers will (to the  extent  of  such  payment)  fully
                      discharge  and  release  the  Reinsurers  from any and all
                      further liability  in connection  therewith";  subject  to
                      such  provisions  not contravening any law of the State of
                      Incorporation;

           (x)        contain  a provision entitling Lessor or any insured party
                      to initiate a claim  under any policy in the event of the
                      refusal or failure of Lessee to do so; and

           (xi)       accept  and  insure  the  indemnity  provisions  of   this
                      Agreement to the  extent  of  the  risks  covered  by  the
                      policies.

<PAGE>

                                   SCHEDULE 5

                             [Intentionally Omitted]

<PAGE>

                                   SCHEDULE 6

                             LEASE SUPPLEMENT NO. __

         LEASE SUPPLEMENT NO. ___, dated                , 2000, between Aviation
 Financial Services Inc., a corporation organized under the laws of Delaware and
a wholly owned subsidiary of General Electric Capital Corporation (Lessor"), and
Frontier  Airlines,  Inc. a corporation organized under the laws of the State of
Colorado (Lessee").

         Lessor and Lessee have  previously  entered into that certain  Aircraft
Lease  Agreement  dated  as of  January  7,  2000  (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. 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 the Agreement and
           Lessee hereby accepts,  acknowledges receipt of possession and leases
           from Lessor under the  Agreement,  that certain  Boeing Model 737-300
           commercial   jet  Aircraft,   and  the  two  (2)  CFM   International
           CFM-56-3-B2  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 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.

4.         The amount of Rent for the Delivered Aircraft is set forth in  Letter
           Agreement No. 1 to the Agreement.

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 Clause 8.7(d) of the Agreement, (ii) the Aircraft is insured
           as required by the Agreement,(iii) the representations and warranties
           of Lessee referred  to  in  Clause 2  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, except as noted
           in the Exceptions List  attached  to  the  Certificate  of  Technical
           Acceptance,  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. __ to be duly executed as of the day and year first above written.

LESSOR,                                              LESSEE,

AVIATION FINANCIAL SERVICES INC.    FRONTIER AIRLINES, INC.

By:_____________________________            By:_________________________

Name:__________________________             Name:______________________

Title:____________________________          Title:________________________

<PAGE>

                                   SCHEDULE 1

                                       TO

                              LEASE SUPPLEMENT NO.

                                       One

                                 Boeing 737-300

                                    Airframe

                                Registration Mark

                                     N_____

   Manufacturer's

           Serial No.               Total Time*               Total Cycles*
           ----------               ----------                ------------

           25256                     _________                 _________

                        Installed CFM International, Inc.

                                     Engines

Model No.         Serial No.         Total Time*       Total Cycles*
---------         ----------         ----------        ------------

CFM-56-3-B2        [______]         ____________       ____________

CFM-56-3-B2        [______]         _____________      ____________

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

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

<PAGE>

                                   SCHEDULE 7

                                     FORM OF

                          LEASE TERMINATION CERTIFICATE

The  undersigned  hereby certify that the Aircraft Lease  Agreement  dated as of
January 7, 2000 between the undersigned  Lessor and undersigned  Lessee,  and as
further  described in the  Appendix  attached  hereto,  has  terminated  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

AVIATION FINANCIAL SERVICES INC.            FRONTIER AIRLINES, INC.

By:________________________________         By:___________________________

Title:_______________________________       Title:_________________________

<PAGE>

                                    APPENDIX

FAA Recording Date                                            FAA Conveyance No.

<PAGE>

                                   SCHEDULE 8

                          FORM OF AIRCRAFT USAGE REPORT

                  FOR PERIOD BEGINNING ON __________, 2000____
                       AND ENDING ON ___________, 2000____

The undersigned  Officer of Frontier Airlines,  Inc. ("Lessee") hereby certifies
as follows:

1. This report is submitted to Aviation Financial Services Inc. ("Lessor") under
that  certain  Aircraft  Lease  Agreement  dated as of January 7, 2000,  between
Lessor and Lessee (the "Lease"),  and  capitalized  terms used and not otherwise
defined herein have the meanings ascribed to them in the Lease.

2.       The Aircraft covered by this report is:

                           Aircraft:                          Boeing 737-36E
                           Serial No:                         25256
                           U.S. Reg. No.:                     N_____

3. During the period  covered by this report,  the Airframe which is the subject
of the Lease was operated for the following number of Flight Hours and Cycles as
such terms are defined in the Lease:

                  _________ Flight Hours             __________ Cycles

4. During the period  covered by this  report,  the  CFM-56-B2  Engines  Bearing
respective serial numbers  __________ and ____________  which are the subject of
the Lease,  where each operated for the following  number of Engine Flight Hours
and Cycles, as defined in the Lease:

                                  Engine Flight Hours              Cycles

         SN ________                _______________           _________________
         SN ________                _______________           _________________

This Aircraft Usage Report is dated __________________, 200_,

                                        FRONTIER AIRLINES, INC.

                                        By:________________________________

                                        Title:_____________________________

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