Document:

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                                                                   Exhibit 10.65

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                                 LEASE AGREEMENT

                          dated as of February 4, 2000

                                     between
                        WILLIS LEASE FINANCE CORPORATION,

                                     Lessor

                                       and
                              ALOHA ISLANDAIR, INC.

                                     Lessee

                          Covering One (1) de Havilland
                               Dash 8-102 Aircraft
                        Manufacturer's Serial Number 023
                         U.S. Registration No. N811 PH,
                             Two (2) Pratt & Whitney
                              Model PW 120 Engines
                              Manufacturer's Serial
                            Numbers 120077 and 120096
                                       and
                            Two (2) Hamilton Standard
                               14 SF-7 Propellers,
                              Manufacturer's Serial
                            Numbers 850910 and 850911
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THIS LEASE AGREEMENT HAS BEEN EXECUTED IN COUNTERPARTS. TO THE EXTENT THAT
THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART
CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LESSOR ON THE SIGNATURE PAGE
THEREOF.

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                                TABLE OF CONTENTS

                                                                           Page
LEASE AGREEMENT .............................................................1

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

     SECTION 2. AGREEMENT TO LEASE: TERM ....................................7
           2.01 Leasing of Aircraft .........................................7
           2.02 Acceptance ..................................................7
           2.03 Delivery of Aircraft ........................................8
           2.04 Term ........................................................8

     SECTION 3. CONDITIONS PRECEDENT ........................................8
           3.01 Conditions Precedent to Lessor's Obligations ................8
           3.02 Conditions Precedent to Lessee's Obligations ...............10

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

     SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES ....................13
           5.01 Due Organization, Standing etc. ............................14
           5.02 Operative Documents ........................................14

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

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                                                                           Page

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

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

     SECTION 9. USE OPERATION AND MAINTENANCE...............................19
           9.01 General ....................................................19
           9.02 Operation and Use ..........................................19
           9.03 Maintenance in General .....................................20
           9.04 Specific Items of Maintenance ..............................21
           9.05 Parts ......................................................22
           9.06 Airworthiness Directives ...................................23
           9.07 Service Bulletins: Nondiscrimination .......................23
           9.08 Corrosion Control ..........................................24
           9.09 Modifications ..............................................24
           9.10 Possession; Subleasing; Equipment Substitution .............24
           9.11 Repairs ....................................................26
           9.12 Aircraft Records ...........................................26
           9.13 Warranties .................................................26
           9.14 Airport Charges ............................................27
           9.15 Right to Inspect ...........................................27
           9.16 Reporting ..................................................27

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

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                                                                           Page

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

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

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

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

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

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

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                                                                           Page

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

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

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

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

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

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

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

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                                 LEASE AGREEMENT

     THIS LEASE AGREEMENT, dated as of February 4, 2000 ("Lease"), is between
WILLIS LEASE FINANCE CORPORATION ("Lessor"), a Delaware corporation having its
principal place of business at 2320 Marinship Way, Sausalito, CA 94965 and ALOHA
ISLANDAIR, INC. ("Lessee"), a Delaware corporation having its principal place of
business at 99 Kapalulu Place, Honolulu, Hawaii 96819.

                                   WITNESSETH:

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

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

     SECTION 1. DEFINITIONS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     "MODIFICATIONS" means Optional Modifications and Required Modifications.

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

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

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

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

     "OTHER AIRCRAFT" means that certain de Havilland Dash 8-102 aircraft,
manufacturer's serial number 026, as further identified in the Other Lease.

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

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

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

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

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

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

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

     "RENT" means Basic Rent and Supplemental Rent.

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

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

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

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

     "REQUIRED MODIFICATION" has the meaning given in Section 9-09(a) hereof.

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

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

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

     "Stipulated Loss Value" has the meaning given in Exhibit B hereto.

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

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

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

     SECTION 2. AGREEMENT TO LEASE: TERM.

     2.01 LEASING OF AIRCRAFT.

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

     2.02 ACCEPTANCE.

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

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

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

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

     2.03 DELIVERY OF AIRCRAFT.

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

     2.04 TERM.

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

     SECTION 3. CONDITIONS PRECEDENT.

     3.01 CONDITIONS PRECEDENT TO LESSORS OBLIGATIONS.

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

     (a) RESERVED.

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

     (c) Lessor shall have received the following:

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

                                      - 8 -
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

     (xiii) an opinion of McAfee & Taft, special FAA counsel,

                                      - 9 -
<PAGE>

addressed to Lessor and covering such matters incident to the transactions
hereto as Lessor may reasonably request;

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

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

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

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

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

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

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

     3.02 Conditions Precedent to Lessee's Obligations.

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

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

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

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

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

                                     - 10 -
<PAGE>

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

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

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

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

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

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

     SECTION 4. LESSEE'S REPRESENTATIONS AND WARRANTIES.

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

     4.01 DUE ORGANIZATION, STANDING ETC.

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

     4.02 OPERATIVE DOCUMENTS.

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

     4.03 NO CONFLICT, CONSENT.

                                     - 11 -
<PAGE>

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

     4.04 GOVERNMENTAL CONSENTS.

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

     4.05 NO ADVERSE AGREEMENTS.

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

     4.06 NO DEFAULTS OR VIOLATIONS.

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

     4.07 LITIGATION.

     Except as the Lessee has otherwise disclosed to the Lessor in writing on or
before the date hereof there are no pending or threatened actions, proceedings
or investigations (or any basis therefore known to Lessee) that would either
individually or

                                     - 12 -
<PAGE>

in the aggregate materially and adversely affect the financial condition,
business or operations of Lessee or Guarantor or the ability of Lessee or
Guarantor to perform its obligations under any of the Operative Documents to
which it is a party.

     4.08 NO EVENT OF DEFAULT.

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

     4.09 FINANCIAL STATEMENTS.

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

     4.10 CHIEF EXECUTIVE OFFICE.

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

     4.11 FILINGS MADE.

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

     4.12 CERTIFICATE.

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

     SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES.

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

                                     - 13 -
<PAGE>

     5.01 DUE ORGANIZATION, STANDING ETC.

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

     5.02 OPERATIVE DOCUMENTS.

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

     SECTION 6. COVENANTS OF LESSEE.

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

     6.01 AIR OPERATOR'S CERTIFICATE.

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

     6.02 FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED.

     Furnish to Lessor:

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

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

                                     - 14 -
<PAGE>

in accordance with generally accepted accounting principles and practices,
together with detailed information regarding any Event of Default as may have
occurred in the relevant period and the action taken or proposed to be taken
with respect thereto;

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

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

     6.03 EXISTENCE.

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

     6.04 INSPECTION RIGHTS; RECORDS.

     (a) Permit any duly authorized representative or designee of Lessor (which
may be a manufacturer's representative, an outside consultant or representative
of Lessor or of a lender secured by the Aircraft) to inspect the Aircraft, to
examine Lessee's technical books and Aircraft records, to take memoranda and
extracts therefrom and to make copies thereof, and to discuss the affairs,
finances and accounts of Lessee. Such inspections shall be at Lessor's expense
unless an Event of Default exists, in which case inspections shall be at
Lessee's expense. Unless an Event of Default exists, such inspections may only
take place at any reasonable time. Lessee shall notify Lessor in writing when
"C" and "D" Checks, if Lessee shall no longer be utilizing the de Havilland
Equalized Maintenance Program, are scheduled to take place

                                     - 15 -
<PAGE>

and if Lessee shall be utilizing the de Havilland Equalized Maintenance
Program, when structural inspections required by the Maintenance Program and not
included in the de Havilland Equalized Maintenance Program are scheduled to take
place and if Lessor advises Lessee in writing that it or its designee will be
inspecting during such check, the parties will use reasonable efforts to
coordinate regarding the exact time and place thereof. Lessee shall also provide
Lessor, quarterly, with scheduling information regarding the performance of the
various segments of the de Havilland Equalized Maintenance Program required to
be performed or performed during each such quarter and if Lessor advises Lessee
in writing that it or its designee will be inspecting during such segments, the
parties will use reasonable efforts to coordinate regarding the exact time and
place thereof.

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

     6.05 PAYMENT OF TAXES AND CLAIMS.

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

     6.06 NOTICE OF LITIGATION.

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

     6.07 MERGER

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

                                     - 16 -
<PAGE>

     6.08 CHIEF EXECUTIVE OFFICE.

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

     6.09 CERTIFICATE.

     Lessee shall maintain the certificate described in Section 4.12.

     SECTION 7. PAYMENTS.

     7.01 RENT.

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

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

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

     7.02 NET LEASE; NO SET-OFF OR DEDUCTIONS.

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

                                     - 17 -
<PAGE>

contrary notwithstanding. Lessee hereby waives, to the extent permitted by
Applicable Law, any and all rights which it may now or hereafter have, by
statute or otherwise, to terminate, cancel, quit or surrender the Lease and the
leasing thereunder of the Aircraft, it being the express intention of Lessor and
Lessee that all Rent payable by Lessee hereunder shall be, and continue to be,
payable in all events unless the obligation to pay the same shall be terminated
pursuant to the express provisions of this Lease. Notwithstanding the foregoing,
Lessee shall retain separate rights of action with respect to any present or
future claims against Lessor under this Lease.

     7.03 IMMEDIATELY AVAILABLE FUNDS.

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

     7.04 SUPPLEMENTAL RENT; OVERDUE RENT.

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

     7.05 RESERVED.

     7.06 GROSS UP.

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

     SECTION 8. LIMITATION OF, LESSOR'S LIABILITY.

     LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS","WHERE-IS" AND LESSOR HAS NOT
MADE, AND SHALL NOT BE DEEMED TO HAVE MADE

                                     - 18 -
<PAGE>

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

     SECTION 9. USE OPERATION AND MAINTENANCE.

     9.01 GENERAL.

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

     9.02 OPERATION AND USE.

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

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

                                     - 19 -
<PAGE>

any manufacturers operating manuals or instructions.

     9.03 MAINTENANCE IN GENERAL.

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

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

     (i)  reimburse Lessee for the cost of the first major refurbishment
          following the Delivery Date of Engines serial numbers 120077 and
          120096. Such costs, payable within 30 days after invoices,
          satisfactory to the Lessor, are received, shall be for the
          refurbishment of the Engines only. All other costs, including but not
          limited to, removal and installation of the Engines, transportation
          and/or substitute engine(s) are for the account of the Lessee.
          Notwithstanding the foregoing, if the refurbishment is performed due
          to foreign object damage ("FOD") or FOD is discovered during
          performance of the refurbishment under this subsection 9.03(i), (A)
          Lessee will use commercially reasonable best efforts to recover the
          maximum damage amount recoverable from any and all insurance providers
          with respect to the Aircraft and (B) Lessee shall contribute an amount
          up to the full amount of any applicable insurance deductible and the
          full amount of any recovery from any insurance provider with respect
          to such damage toward the cost of the refurbishment. For purposes of
          this subpart (i), refurbishment shall include the replacement of all
          Life Limited Parts having fewer than 10,000 cycles remaining.

     (ii) either provide Lessee serviceable replacement flaps and necessary,
          modified to eliminate the repeat inspection requirements of DHC-8
          Maintenance Program task numbers 5750/09A and 5750/10A

                                     - 20 -
<PAGE>

          through the term or reimburse Lessee for the cost of replacing such
          flaps and carriages. Not less than 180 days prior to the estimated
          date the flaps will accumulate 60,000 total Cycles, Lessor and Lessee
          will commence cooperation with each other in locating such replacement
          flaps and carriages. In the event Lessor replaces such flaps and
          carriages, as necessary, Lessor shall furnish such flaps and carriages
          to Lessee between 90 and 180 days prior to the estimated date the
          flaps will accumulate 60,000 total cycles. In the event Lessee
          replaces such flaps and carriages, as necessary, and Lessor is to
          reimburse Lessee for the cost of replacing such flaps and carriages,
          such cost, payable within 30 days after invoices satisfactory to the
          Lessor are received, shall be for the Lessee's reasonable net cost of
          such flaps and carriages only. Notification in writing, from the
          Lessee to the Lessor, shall be given no later than 12 months prior to
          the date the Lessee estimates the flaps will have accumulated 60,000
          total Cycles.

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

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

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

     9.04 SPECIFIC ITEMS OF MAINTENANCE.

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

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

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

                                     - 21 -
<PAGE>

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

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

     9.05 PARTS.

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

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

     (c) Title to all parts incorporated or installed in or attached or added to
the Airframe or any Engine or Propeller as the result of any alteration,
modification or

                                     - 22 -
<PAGE>

addition effected by Lessee shall, without further act, vest in Lessor and
become subject to this Lease and such part shall be deemed to be a Part for all
purposes hereof.

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

     9.06 AIRWORTHINESS DIRECTIVES.

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

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

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

     9.07 SERVICE BULLETINS: NONDISCRIMINATION.

     Lessee agrees, at its sole cost and expense to incorporate. Service
Bulletins into the Aircraft which Lessee has accomplished on 30% of it's
Aircraft fleet during the Term of this Lease. It is not the intent of the
parties that the Aircraft shall be discriminated from the rest of the Lessee's
Aircraft fleet in Service Bulletin compliance

                                     - 23 -

<PAGE>

or other maintenance, provided, however, the foregoing shall not be
interpreted to, expand Lessee's obligations beyond the express requirements of
Section 10 and Exhibit "F".

     9.08 CORROSION CONTROL.

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

     9.09 MODIFICATIONS.

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

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

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

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

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

     9.10 POSSESSION; SUBLEASING; EQUIPMENT SUBSTITUTION

     Lessee shall not sublease the Aircraft or otherwise in any manner deliver,

                                     - 24 -
<PAGE>

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

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

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

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

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

PROVIDED that the rights of a transferee who receives possession by reason
of a transfer permitted by this Section 9.10 shall be subject and subordinate to
all the terms of this Lease and the rights of the Lessor hereunder to repossess
such property and any such

                                     - 25 -
<PAGE>

arrangement shall expressly state it is so subordinate or contain a
provision substantially to the effect of clause (e) of this Section 9.10, and
Lessee shall remain primarily liable hereunder for the performance of all of
the terms of this Lease to the same extent as if such transfer had not occurred.

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

     9.11 REPAIRS.

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

     9.12 AIRCRAFT RECORDS.

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

     9.13 WARRANTIES.

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

                                     - 26 -
<PAGE>

     9.14 AIRPORT CHARGES.

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

     9.15 RIGHT TO INSPECT.

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

     9.16 REPORTING.

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

     SECTION 1O. RETURN OF AIRCRAFT.

     10.01 RETURN.

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

     10.02 CONDITION OF AIRCRAFT.

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

                                     - 27 -
<PAGE>

     10.03 BOROSCOPE INSPECTION.

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

     10.04 HISTORICAL RECORDS: TREND MONITORING DATA.

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

     10.05 INSPECTION.

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

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

     10.06 OPERATIONAL GROUND CHECK.

     Promptly after completion of any corrections required under Section

                                     - 28 -
<PAGE>

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

     10.07 OPERATIONAL CHECK FLIGHT.

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

     10.08 ACCEPTANCE.

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

     10.09 DEFERRED DISCREPANCY CORRECTION.

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

                                     - 29 -
<PAGE>

     10.10 FLIGHT COST

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

     10.11 INDEMNIFICATION.

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

     10.12 INSURANCE.

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

     10.13 MANUALS AND TECHNICAL RECORDS.

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

                                     - 30 -
<PAGE>

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

     10.14 SERVICE BULLETIN KITS.

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

     10.15 LESSEE'S SPECIAL EXTERIOR MARKINGS.

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

     10.16 OWNERSHIP.

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

     10.17 STORAGE UPON RETURN.

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

     SECTION 11. TITLE; REGISTRATION; LIENS.

     11.01 TITLE.

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

                                     - 31 -
<PAGE>

     11.02 REGISTRATION; FILINGS; REGISTRATION.

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

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

     11.03 LIENS.

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

     11.04 NOTICE OF OWNERSHIP.

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

                       "WILLIS LEASE FINANCE CORPORATION,

                                Owner and Lessor,

                     Leased to ALOHA ISLANDAIR,INC., Lessee

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

                                     - 32 -
<PAGE>

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

     SECTION 12. INSURANCE.

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

     12.01 ALL-RISK INSURANCE.

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

     12.02 WAR RISK INSURANCE.

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

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

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

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

     (d) any malicious act or act of sabotage;

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

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

                                     - 33 -
<PAGE>

     12.03 LIABILITY INSURANCE.

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

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

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

     12.04 ELECTRONIC DATE RECOGNITION INSURANCE.

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

     12.05 DEDUCTIBLES AND SELF INSURANCE.

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

     12.06 ADDITIONAL REQUIREMENTS; LOSS PAYMENT.

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

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

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

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

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

                                     - 34 -
<PAGE>

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

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

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

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

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

     12.07 NO SET-OFF.

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

     12.08 NOTICE OF MATERIAL ALTERATION OR CANCELLATION.

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

     12.09 APPLICATION OF CERTAIN INSURANCE PROCEEDS.

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

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

                                     - 35 -
<PAGE>

under this Lease pursuant to Section 13-02 hereof to the reasonable
satisfaction of Lessor and, where appropriate, Lessor shall issue any necessary
payment orders with respect to such payments;

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

     12.10 INSURANCE FOR OWN ACCOUNT.

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

     12.11 CERTIFICATES AND REPORTS.

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

     SECTION 13. LOSS, DAMAGE OR REQUISITION.

     13.01 AN EVENT OF LOSS OF AIRFRAME.

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

                                     - 36 -
<PAGE>

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

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

     13.02 ENGINE OR PROPELLER LOSS.

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

                                     - 37 -
<PAGE>

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

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

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

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

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

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

     13.04 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.

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

                                     - 38 -
<PAGE>

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

     SECTION 14. EVENT OF DEFAULT

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

     14.01 FAILURE TO MAKE PAYMENTS.

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

     14.02 FAILURE TO OBTAIN OR MAINTAIN INSURANCE.

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

     14.03 FAILURE TO PERFORM OTHER OBLIGATIONS.

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

     14.04 REPRESENTATIONS AND WARRANTIES UNTRUE.

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

     14.05 INSOLVENCY OR BANKRUPT

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

                                     - 39 -
<PAGE>

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

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

     14.06 LOSS OF REGISTRATION OR PROTECTION.

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

     14.07 LOSS OF LICENSE.

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

     14.08 OTHER LEASE.

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

     14.09 FINAL JUDGEMENT.

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

     14.10 OTHER DEFAULT.

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

     14.11 CONTEST.

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

     14.12 FAILURE TO MAINTAIN LETTER OF CREDIT.

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

                                     - 40 -
<PAGE>

     14.13 FAILURE TO MAINTAIN THE GUARANTY.

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

     SECTION 15. REMEDIES.

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

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

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

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

                                     - 41 -
<PAGE>

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

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

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

                                     - 42 -
<PAGE>

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

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

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

     SECTION 16. INDEMNITIES AND EXPENSES.

     16.01 GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.

                                     - 43 -
<PAGE>

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

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

     16.02 GENERAL TAX INDEMNITY.

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

                                     - 44 -
<PAGE>

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

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

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

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

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

                                     - 45 -
<PAGE>

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

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

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

          (viii) any Canadian federal goods and services tax, and any penalties
     and interest thereon, which is imposed as the result of the delivery of the
     Aircraft by Lessor to Lessee pursuant to Section 2.03 of this Lease while
     the Aircraft is located in Canada and which would not have been imposed but
     for Lessor's carrying on business in Canada.

     (b) Reports. In case of any report or return to be made with respect to
any Imposition or possible Imposition, Lessee will either make such report or
return in

                                     - 46 -
<PAGE>

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

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

                                     - 47 -
<PAGE>

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

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

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

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

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

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

                                     - 48 -
<PAGE>

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

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

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

     16.03 AFTER-TAX BASIS: SURVIVAL.

     It is understood and agreed that all payments for which Lessee is obligated
hereunder are to be made on an "after tax basis" so that the amount the Lessee
shall be required to pay with respect to any Claim or Imposition indemnified
against hereunder shall be an amount sufficient to restore the Indemnitee(s) to
the same position such Indemnitee(s) would have been in had such Claim not been
asserted or such Imposition not been incurred taking into account, INTER ALIA,

                                     - 49 -
<PAGE>

Impositions, fees and other charges, however imposed, required to be paid
on the receipt of an indemnity under this Section 16 and further taking into
account any tax benefits realized by such Indemnitee(s) that is attributable to
such indemnifiable Imposition. The Lessee's obligations hereunder shall survive
the expiration or earlier termination of this Lease and return of the Aircraft
to Lessor.

     16.04 EXPENSES.

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

     SECTION 17. QUIET ENJOYMENT.

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

     SECTION 18. ASSIGNMENT.

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

                                     - 50 -
<PAGE>

the Lessor shall be released from all such obligations and such assignee
shall be the "Lessor" hereunder for all purposes of this Lease. Lessor will pay
the reasonable out-of-pocket expenses of the Lessee in connection with an
assignment by the Lessor hereunder. No assignment by Lessor hereunder shall
result in an increase in Lessee's obligations under this Lease.

     SECTION 19. NOTICES.

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

     If to Lessor:

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

     If to Lessee:

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

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

     SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE

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

                                     - 51 -
<PAGE>

     SECTION 21. LEASE; SECTION 1110.

     21.01 LEASE.

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

     21.02 SECTION 1110.

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

     SECTION 22. MISCELLANEOUS.

     22.01 WAIVERS, HEADINGS.

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

     22.02 COUNTERPARTS.

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

     22.03 GOVERNINGH LAW

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

                                     - 52 -
<PAGE>

SHALL BE EFFECTIVE FOR ALL PURPOSES AS OF THE DATE FIRST ABOVE WRITTEN.

     22.04 BENEFIT AND BINDING EFFECT

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

     22.05 FURTHER ASSURANCES.

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

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

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

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

     22.07 USURY LAWS.

     The parties intend to contract in strict compliance with the usury laws of

                                     - 53 -
<PAGE>

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

     22.08 ENTIRE AGREEMENT.

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

                                     - 54 -
<PAGE>

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

LESSOR                                 WILLIS LEASE FINANCE CORPORATION

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

LESSEE                                 ALOHA ISLANDAIR, INC.

                                       By: __________________________
                                           Name:
                                           Title:

                                       By:  __________________________
                                           Name:
                                           Title:

Lease of de Havilland Dash 8-102 Aircraft
MSN 023

                                     - 55 -
<PAGE>

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

LESSOR                                 WILLIS LEASE FINANCE CORPORATION

                                       By: __________________________
                                           Name:
                                           Title:

LESSEE                                 ALOHA ISLANDAIR, INC.

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

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

Lease of de Havilland Dash 8-102 Aircraft
MSN 023

                                     - 56 -
<PAGE>

                                    EXHIBIT A

                             DESCRIPTION OF AIRCRAFT

<TABLE>
<CAPTION>
Mfr./N#             Model                 Manufacturer's               Number and Type
                Configuration             Serial Number                of Engines*
<S>                     <C>                  <C>                           <C>
DeHavilland       Dash- 102                  023                       Two (2) Pratt &
   N811PH         Aircraft                                             Whitney Model
                  (described in the                                    PW 120, MSN 120077
                  FAA records as a                                     and MSN 120096
                  Model DHC-8-102)
                                                                       Number and Type
                                                                       OF PROPELLERS**

                                                                       Two (2) Hamilton
                                                                       Standard. 14 SF-7
                                                                       Propellers
                                                                       MSN 850910
                                                                       MSN 850911
</TABLE>

The Aircraft is to be delivered and redelivered without APU.

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

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

                                       A-1
<PAGE>

                                    EXHIBIT B

                        RENT AND OTHER FINANCIAL MATTERS

     1.   STIPULATED LOSS VALUE

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

     2.   PAYMENT ACCOUNT

          All payments of Rent shall be paid to Lessors bank account at:

               Union Bank of California
               ABA#:  122 000 496
               Acct#: 2380002084
               Name:  Willis Lease Finance Corporation

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

     3.   TERM.

          The Term shall commence on the Delivery Date and expire sixty (60)
     months and twenty-five (25) days thereafter on the thirtieth (30th) day
     following the sixtieth Rent Payment Date unless earlier terminated in
     accordance with the terms of the Lease.

     4.   BASIC RENT

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

                                       B-1
<PAGE>

    then the Rent Payment Date shall be the last date of such month

    5.    PUBLIC LIABILITY INSURANCE.

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

     6.   LETTER OF CREDIT.

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

     7.   EXTENSION OF TERM.

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

     8.   OVERDUE RATE.

          As used in the Lease, "Overdue Rate" means the prime rate announced
     from time to time by Citibank N.A. (or its successor) plus three (3%)
     percent.

     9.   CONTRIBUTION AMOUNT

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

                                       B-2
<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

                                LETTER OF CREDIT

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

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

Notwithstanding the foregoing, in the event that:

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

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

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

                                       B-3
<PAGE>

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

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

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

                                       B-4
<PAGE>

                                    EXHIBIT C

                             ACCEPTANCE CERTIFICATE

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

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

     A.   One (1) de Havilland Model Dash 8-102 Aircraft (described in the FAA
          records as a Model DHC-8-102), bearing Manufacturers Serial Number
          023, U.S. Registration No. N811PH, together with two (2) Pratt &
          Whitney PW 120 Engines, Manufacturers Serial Numbers 120077 and
          120096, two (2) Hamilton Standard 14 SF-7 Propellers, Manufacturer's
          Serial Numbers 850910 and 850911 and all appliances, instruments,
          accessories, equipment (not including an APU) and parts attached
          thereto and thereon, in an airworthy condition;

     B.   Fuel on board the Aircraft, _ pounds;

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

     D.   the items listed on Schedule 1 hereto.

     2. All of the foregoing were delivered and accepted to Lessee's full
satisfaction and pursuant to the terms and provisions of the Aircraft Lease
Agreement between Lessor and Lessee, dated as of February 4, 2000 (the
"Lease"), except as set forth on Schedule 2 hereto. For purposes of the Lease,
Lessor and Lessee agree that the installed hard time components have, as of the
Delivery Date, the time, Flight Hours and Cycles operating time remaining as set
forth on Schedule 3 hereto.

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

                                       C-1
<PAGE>

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

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

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

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

                                       ALOHA ISLANDAIR, INC. (LESSEE)

                                       By: ____________________
                                           Name:
                                           Title:

                                       By: ____________________
                                           Name:
                                           Title:

Lease Acceptance Certificate
Lease of de Havilland Dash 8-102
MSN

                                       C-2
<PAGE>

                                   SCHEDULE 1

                            AIRCRAFT LOOSE EQUIPMENT

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

                                       C-3
<PAGE>

                                   SCHEDULE 2

                                  DESCREPANCIES

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

                                       C-5
<PAGE>

                                   SCHEDULE 3

             TIME CONTROLLED / LIFE LIMITED PARTS STATUS AT DELIVERY

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

                                       C-6
<PAGE>

                                    EXHIBIT D

                     SCHEDULE OF MANUALS/MAINTENANCE RECORDS

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

                                       D-1
<PAGE>

                                    EXHIBIT E

                          RETURN ACCEPTANCE CERTIFICATE

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

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

     A.   One (1) de Havilland Model Dash 8-102 Aircraft, bearing
          Manufacturer's Serial Number 023 together with two (2) Pratt &
          Whitney__ Engines, Manufacturers Serial Numbers _____ and _______,
          two (2) Hamilton Standard ______ propellers, Manufacturers Serial
          Numbers _______ and _______ and all appliances, instruments,
          accessories, equipment (not including an APU) and parts attached
          thereto and thereon, in an airworthy condition;

     B.   Fuel on board the Aircraft, ____________________;and

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

     2. All of the foregoing were delivered and accepted to Lessors full
satisfaction and pursuant to the terms and provisions of the Lease Agreement
between Lessor and Lessee dated as of February 4, 2000 (the "Lease") except as
set forth on Schedule 2 hereto.

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

                                       E-1
<PAGE>

     Dated this _______ day of _______, 200_

                                       WILLIS LEASE FINANCE CORPORATION

                                                                       (LESSOR)

                                       By: ________________________

                                       Name: ______________________

                                       Title: _____________________

Lease Return Acceptance Certificate
Lease of de Havilland Dash 8-102
MSN_____

                                       E-2
<PAGE>

                                    EXHIBIT F

                    GENERAL RETURN CONDITIONS OF THE AIRCRAFT

1.   GENERAL RETURN CONDITIONS OF THE AIRCRAFT.

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

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

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

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

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

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

                                       F-1
<PAGE>

severe or exfoliated corrosion in accordance with the Maintenance Program.

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

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

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

II.  CONDITION OF AIRFRAME AND ENGINES.

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

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

                                       F-2
<PAGE>

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

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

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

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

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

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

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

                                       F-3
<PAGE>

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

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

Ill. ADJUSTMENTS.

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

                                       F-4
<PAGE>

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

                                       F-5
<PAGE>

                              ALOHA AIRGROUP, INC.

                                                    Dated as of February 4, 2000

    TO:   Willis Lease Finance Corporation
          2320 Marinship Way
          Suite 300
          Sausalito, CA 94965

          Re:    One (1) de Havilland Dash 8-102 Aircraft
                 Manufacturer's Serial No. 023
                 U.S. Registration No. N811PH

Ladies and Gentlemen:

     Reference is hereby made to the Lease Agreement dated as of the date hereof
(as amended, modified or supplemented from time to time, the "Lease Agreement"),
between Willis Lease Finance Corporation ("Lessor"), a Delaware corporation, as
lessor, and Aloha IslandAir, Inc. ("Lessee"), a Delaware corporation, as lessee,
covering the Aircraft. Capitalized terms used herein without definition which
are defined in the Lease Agreement are used herein with the respective meanings
given such terms in the Lease Agreement.

     In order to induce you to enter into the Lease Agreement and the
transactions contemplated thereby with the Lessee, Aloha Airgroup, Inc., a
Hawaii corporation (together with any successor, the "Guarantor") hereby
represents, warrants and covenants to you as follows:

     1.  REPRESENTATIONS AND WARRANTIES.

     (a) All of the representations and warranties with respect to the Guarantor
contained in the Lease Agreement are true, complete and correct and are
incorporated herein by reference for the benefit of the Lessor with the same
force and effect as if set forth herein in full.

     (b) The Guarantor acknowledges receipt of executed counterparts or copies
of the Operative Documents and consents to all the terms and conditions thereof,
such consent not to be construed as requiring the consent of the Guarantor to
any amendments thereof.

     (c) The Guarantor has requested that the Lessee enter into the transactions
contemplated by the Operative Documents for valid business purposes of the
Guarantor, and acknowledges receipt of good and sufficient consideration for the
guaranties given herein.

     (d) The obligations of the Guarantor under this Guaranty shall rank at
least PARI PASSU with all other unsecured indebtedness of the Guarantor now or
hereafter existing.

                                        1
<PAGE>

     (e) It shall not be necessary for the Lessor to inquire into the capacity,
power or authority of the officers, directors, or agents acting or purporting to
act on behalf of the Lessee, and any obligations incurred or created in reliance
upon the professed exercise of such powers shall be guarantied hereunder.

     2. GUARANTY.

     (a) The Guarantor does hereby unconditionally and irrevocably guarantee to
the Lessor, as a primary obligor and not merely as surety, (i) the due,
punctual, and full payment (when due, by acceleration or otherwise) of each
amount which the Lessee is or may become obligated to pay under the Operative
Documents, (ii) the due and punctual performance and observance by Lessee of
each term, provision, condition, agreement and covenant for which it is liable
contained in each Operative Document to which it is a party, and (iii) the
accuracy of each of the representations and warranties of the Lessee set forth
in the Operative Documents.

     (b) This is a continuing guaranty of payment and performance, not of
collection. The Guarantor hereby expressly waives notice, promptness,
presentment and diligence as to the obligations guarantied hereby and acceptance
of this guaranty or any requirement that the Lessor proceed against Lessee or
any security for or any other guarantor of any of the obligations guarantied
hereunder (and without having to join any other Person in any such action). The
Guarantor agrees that it shall not be required to consent to, or receive any
notice of, any amendment or modification of, or waiver, consent or extension
with respect to, any Operative Document to which it is not a party that may be
made or given as provided therein. Guarantor hereby waives any and all benefits
and defenses under California Civil Code Section 2810 and hereby agrees that by
doing so Guarantor is liable hereunder even if Lessee had no liability at the
time of execution of any of the Operative Documents, or thereafter ceases to be
liable. Guarantor hereby waives any and all benefits and defenses under
California Civil Code Section 2809 and agrees that by doing so Guarantor's
liability may be larger in amount and more burdensome than that of Lessee.

     (c) The obligations of the Guarantor hereunder are absolute, unconditional,
and irrevocable irrespective of the legality, validity or binding effect of any
of the Operative Documents and, without limiting the foregoing, will not be
discharged or otherwise affected by: (i) any extension, increase or renewal with
respect to any obligation of the Lessee under any Operative Document; (ii) any
modification of, or amendment or supplement to, any Operative Document or any
other agreement or instrument referred to therein; (iii) any furnishings or
acceptance of additional security for any obligation of the Lessee or any
release of any such security; (iv) any waiver, consent or other action or
inaction or any exercise or non-exercise of any right, remedy or power with
respect to the Lessee; (v) any change in the structure or organization of the
Lessee or the Guarantor or any determination that the Lessee or the Guarantor
lacks capacity or authority to contract; (vi) any insolvency, bankruptcy,
reorganization, arrangement, composition, liquidation, dissolution, or similar
proceedings with respect to the Lessee or the Guarantor; (vii) any legal
prohibition against the exercise of any remedies against the Lessee or the
Guarantor under any of the Operative Documents which in either case might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor; (viii) the unenforceability of any terms of the Operative Documents,
including without limitation any of the remedies for an Event of Default set

                                      2
<PAGE>

forth in Section 15 of the Lease, the Guarantor hereby expressly acknowledging
that it participated in the negotiation of such remedies, that it is fully
familiar with the terms of such remedies, that it consents to such terms, and
that for the Lessor such remedies are essential to the transactions contemplated
by the Operative Documents; (ix) any limitation, discharge, or cessation which
may now or hereafter be imposed by any statute, regulation or rule of law, of
the liability or obligations of the Lessee or the Guarantor or any other Person
under the terms of the Operative Documents or any discharge, termination,
cancellation, frustration, irregularity, or impossibility of performance, in
whole or in part, of the Operative Documents or any term thereof; (x) any defect
in the title, condition, design, operation or fitness for use of, or damage to
or loss or destruction of or interruption of use of the Aircraft or any part
thereof for any reason whatsoever regardless of the duration thereof, whether or
not resulting from accident and whether or not without fault of the Lessee, the
Guarantor, or any other Person; (xi) any defense, setoff, counterclaim, or claim
of recoupment, discharge or exoneration, that the Lessee or the Guarantor may
have or assert; (xii) any failure, omission or delay on the part of the Lessee
to conform or comply with any term of the Operative Documents; and (xiii) any
other occurrence or circumstance whatsoever which might otherwise constitute a
legal or equitable discharge or defense of a surety or guaranty, except (A)
payment in full of all amounts payable by the Lessee under the Operative
Documents and performance in full of all obligations of the Lessee, in each case
in accordance with the terms and conditions of the Operative Documents and (B)
payment and performance in full of the obligations of the Guarantor hereunder.
Without limiting the generality of the foregoing, Guarantor hereby waives the
rights and benefits under California Civil Code Section 2819, and agrees that by
doing so Guarantor's liability shall continue even if Lessor alters any
obligations guaranteed hereunder in any respect or if Lessor's remedies or
rights against Lessee are in any way impaired or suspended without Guarantor's
consent.

     3. RELATED PROVISIONS.

     (a) The obligations of the Guarantor hereunder shall continue to be
effective, or shall be reinstated, if any payment by the Lessee under any
Operative Document is rescinded or must otherwise be restored for any reason,
all as though such payment had not been made.

     (b) Any and all payments to be made by the Guarantor hereunder shall be
made in full in U.S. dollars without setoff or counterclaim and free and clear
of and without deduction for or on account of any present or future taxes,
levies, imposts, duties, stamp tax, turnover tax, charges, currency surcharges,
fees, assessments, restrictions, conditions, deductions or withholdings of any
nature (collectively, together with any interest and/or penalties thereon,
hereinafter called "taxes") unless Guarantor is compelled by law to make payment
subject to any of such taxes in which event the Guarantor shall pay to the
Lessor or its assignee such additional amounts as may be necessary to ensure
that the Lessee or such assignee receives an amount in U.S. dollars equal to the
full amount that the Lessee or such assignee would have received if payment had
not been made subject to any of such taxes.

     (c) The Guarantor shall not be subrogated to any rights against the Lessee
as a result of any payment hereunder until all amounts and performance owing by
the Lessee under the Operative Documents are paid and performed in full.

                                       3
<PAGE>

     (d) The obligations of the Guarantor shall continue unimpaired, even if the
beneficial interest of the Lessee is no longer wholly owned by the Guarantor.

     (e) This Guaranty shall be binding upon the successors and permitted
assigns of the Guarantor and be enforceable by the Lessor and its successors and
assigns. The Guarantor shall have no right to assign or transfer its obligations
hereunder except with the prior written consent of the Lessor. This Guaranty
shall be governed, construed, applied and enforced in accordance with the laws
of the State of California.

     (f) The Guarantor agrees to pay all reasonable costs, expenses, and damages
(including reasonable legal fees and expenses) incurred in connection with any
action or appeal to enforce the obligations of the Lessee under the Operative
Documents to the extent that such costs, expenses and damages are not paid by
the Lessee pursuant to the terms of the Operative Documents or otherwise and in
connection with the Lessor enforcing this Guaranty.

     (g) The Guarantor shall not voluntarily take (A) any action to subject the
Lessee, as debtor to the provisions of any applicable bankruptcy or insolvency
law (as now or hereafter in effect), or (B) any other action not permitted by
the terms of the Operative Documents to threaten the existence or integrity of
the Lessee.

     4. SUBORDINATION. Any right of the Guarantor to reimbursement from the
Lessee of any amount paid hereunder or to receive payment for any debt,
obligation or liability of the Lessee to the Guarantor shall be subordinate in
right and time of payment to the full payment or performance of the obligations
guarantied hereby and the Guarantor will hold in trust and immediately pay to
the Lessor any payment in respect of such reimbursement, debt, obligation or
liability of the Lessee to the Guarantor received from the Lessee without
affecting, reducing or impairing in any manner from the liability (determined
after application of such payment) of the Guarantor under the other provisions
of this Guaranty. Except with the prior written consent of the Lessor, the
Guarantor will not commence, prosecute or take a position in any bankruptcy or
insolvency proceeding or any administrative, legal or equitable action involving
the Lessee that might adversely affect the Lessor or their interests or that is
inconsistent with the provisions of this Guaranty. In the event any case is
commenced by or against the Lessee under any bankruptcy act or code, the Lessor
may, in its sole discretion, enforce this subordination paragraph by receiving
any distribution that would otherwise go to the Guarantor in or pursuant to such
case and by filing any claim that the Lessee would be entitled to file in their
own name. Unless and until all obligations guarantied hereby have been
discharged by payment or performance in full, the Guarantor shall not assign or
otherwise transfer any claim against the Lessee to any other Person unless the
assignee or transferee of such claim accepts such assignment or transfer subject
to the provisions of this Guaranty.

     5. INDEPENDENT OBLIGATIONS. The obligations of the Guarantor hereunder are
independent of the obligations of the Lessee and a separate action may be
brought against the Guarantor regardless of whether the Lessee is joined in such
action or a separate action is brought against Lessee.

                                      4
<PAGE>

     6. SPECIAL CALIFORNIA LAW WAIVERS. Guarantor understands and acknowledges
that if Lessor exercises remedies judicially or nonjudicially against the
Aircraft or other property described in the Lease, such exercises of remedies
could impair or destroy any ability that Guarantor may have to seek
reimbursement, contribution or indemnification from Lessee or others based on
any right Guarantor may have of subrogation, reimbursement, contribution or
indemnification for any amounts paid by Guarantor under this Guaranty. In
addition to all the other waivers agreed to and made by Guarantor as set forth
in this Guaranty, by executing this Guaranty, Guarantor freely, irrevocably and
unconditionally:

        (i) waives and relinquishes any defense to liability under this Guaranty
and agrees that Guarantor will be fully liable under this Guaranty even though
Lessor may exercise remedies judicially or nonjudicially against the Aircraft or
other property described in the Lease Agreement;

        (ii) agrees that Guarantor will not assert any defense in any action or
proceeding which Lessor may commence to enforce this Guaranty, other than the
indefeasible payment in full of the obligations guaranteed hereby;

        (iii) acknowledges and agrees that the rights and defenses waived by
Guarantor in this Guaranty include any right or defense that Guarantor may have
or be entitled to assert based upon or arising out of Section 2848 of the
California Civil Code;

        (iv) waives any defenses resulting from any provisions of the Lease
which contractually limit or negate Lessor's right to obtain a deficiency
judgment or other recourse against Lessee;

        (v) waives presentment, demand, protest, notice of protest, notice of
dishonor and notice of non-payment and notice of acceptance of this Guaranty;

        (vi) waives the right, if any, to the benefit of, or to direct the
application of, any security held by Lessor; and, until all the obligations,
payment and performance of which are hereby guaranteed have been paid and
performed in full, any right to enforce any remedy which Lessor now has or
hereafter may have against Lessee, and any right to participate in any security
now or hereafter held by Lessor;

        (vii) waives the right to require Lessor to proceed against Lessee, to
proceed against or exhaust any property held as security for the obligations, or
to proceed against or exhaust any other security now or hereafter held by Lessor
or to pursue any other remedy in Lessor's power;

        (viii) waives any other defenses arising out of the absence, impairment
or loss of any right of reimbursement, contribution, indemnification or
subrogation or other right or remedy of Guarantor against Lessee or against any
security resulting from the exercise or election of any remedy or remedies by
Lessor, and any defense arising by reason of any disability or other defense of
Lessee or by reason of the cessation, from any cause, of the liability of
Lessee;

                                       5
<PAGE>

        (ix) waives the benefit of or right to assert any statute of limitations
affecting the liability of Guarantor hereunder or the enforcement hereof to the
extent permitted by law; any part payment by Lessee or other circumstances which
operates to toll any statute of limitations as to Lessee shall also operate to
toll the statute of limitations as to Guarantor;

        (x) waives the suretyship and other rights, benefits and defenses, if
any, otherwise available to Guarantor pursuant to California law, including,
without limitation, the rights, benefits or defenses set forth in California
Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2849, 2850, 2855, 2899 or 3433
and any rights, benefits or defenses resulting from alteration, impairment or
suspension in any respect or by any means of any of Lessee's obligations under
the Operative Documents or any of Lessor's rights or remedies under the Lease
without Guarantor's prior consent;

        (xi) acknowledges and agrees that Lessor is relying on the above waivers
in leasing the Aircraft and other property under the Lease, and that these
waivers are a material part of the consideration which Lessor is receiving for
entering into the Lease; and

        (xii) pursuant to the provisions of California Civil Code Section 2856,
"waives all rights and defenses arising out of an election of remedies by the
creditor, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise."

     7. FULL KNOWLEDGE. Guarantor agrees that each waiver set forth in this
Guaranty is made with full knowledge of its significance and consequences and
is, under the circumstances reasonable and not contrary to public policy or law.
If a court of competent jurisdiction shall determine that any such waiver is in
any respect contrary to public policy or applicable law, such waiver shall
nevertheless remain effective to the extent not so contrary.

     8. JURISDICTION, SERVICE OF PROCESS AND WAIVER OF IMMUNITY WITH RESPECT TO
THE GUARANTOR. The provisions of Section 22.06 of the Lease Agreement are
incorporated herein by reference as though fully set out herein.

     9. WAIVER OF JURY TRIAL. GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL
OR WRITTEN), OR ACTION OF GUARANTOR OR LESSEE. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LESSOR ENTERING INTO THE LEASE.

     10. NOTICES. All notices, demands, requests, consents, approvals and other
communications required under the terms and provisions hereof shall be given as
provided in Section 19 of the Lease Agreement with respect to the Lessee.

                                       6
<PAGE>

     11. CUMULATIVE REMEDIES; NO WAIVER, ETC. The rights, powers and remedies of
Lessor hereunder are cumulative and not exclusive of any other right, power or
remedy. No failure on the part of the Lessor to exercise, no delay in
exercising, and no course of dealing with respect to, any right or remedy
hereunder will operate as a waiver thereof; nor will any single or partial
exercise of any right or remedy hereunder preclude any exercise of any other
right or remedy. This Guaranty may not be amended or modified except by written
agreement of the Guarantor and each of the Lessor.

     12. ASSIGNMENT. The Guarantor acknowledges that the Lessor may assign its
right, title and interest in and to this Guaranty and all moneys due or to
become due hereunder as contemplated by Section 18 of the Lease Agreement, and
the Guarantor consents to any such assignment and agrees to make all payments
hereunder in the same manner as would be required of the Lessee under the
Operative Documents. The Guarantor hereby waives the right to assert against any
lender, as assignee of the Lessor, any claim, defense, counterclaim or setoff
that it could assert against the Lessor in an action brought by the Lessor upon
this Guaranty. Unless any Lender shall otherwise direct in writing, the
Guarantor hereby agrees that it will make payment of all moneys due or to become
due to the Lessor hereunder to such Lender for application pursuant to any
applicable loan agreement or other facility.

     13. PARTIAL UNENFORCEABILITY. If any term of this Guaranty and any other
application thereof shall be invalid or unenforceable, the remainder of this
Guaranty and any other application of such terms shall not be affected thereby.

                                               Very truly yours,

                                               ALOHA AIRGROUP, INC.

                                               By: /s/ G. R. Zander
                                                   ---------------------------
                                               Name:
                                                     -------------------------
                                               Title:
                                                      ------------------------

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

Guaranty
MSN 023

                                       7<PAGE>

                                                                   Exhibit 10.66

                                 LEASE AGREEMENT

                                     BETWEEN

                            WILMINGTON TRUST COMPANY,

                                AS OWNER TRUSTEE,

                                     LESSOR

                                       AND

                              ALOHA AIRLINES, INC.,

                             A DELAWARE CORPORATION,

                                     LESSEE

                                   DATED AS OF

                                 AUGUST 4, 1999

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

                        ONE BOEING MODEL 737-73A AIRCRAFT

                       MANUFACTURER'S SERIAL NUMBER 28500

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                            PAGE
ARTICLE 1.   DEFINITIONS.....................................................1-1

ARTICLE 2.   ACCEPTANCE UNDER LEASE..........................................2-1
       (a)   Conditions Precedent............................................2-1
       (b)   Time of Delivery................................................2-3
       (c)   Place of Delivery...............................................2-3
       (d)   Test Flight; Customer Walk-Around...............................2-3
       (e)   Change Orders...................................................2-3
       (f)   Development Changes.............................................2-4
       (g)   Use of Aircraft by Manufacturer.................................2-4
       (h)   Lessor Aircraft Modifications...................................2-4

ARTICLE 3.   TERM AND RENT...................................................3-1
       (a)   Term............................................................3-1
       (b)   Basic Rent......................................................3-1
       (c)   Security Deposit................................................3-1
       (d)   Supplemental Rent...............................................3-2
       (e)   Payments on Business Days.......................................3-2
       (f)   Place of Payment................................................3-2
       (g)   Prohibition Against Setoff, Counterclaim, Etc...................3-2

ARTICLE 4.   REPRESENTATIONS AND WARRANTIES..................................4-1
       (a)   Lessor's Representations and Warranties.........................4-1
       (b)   Lessee's Representations and Warranties.........................4-2

ARTICLE 5.   POSSESSION AND USE..............................................5-1
       (a)   Possession......................................................5-1
       (b)   Lawful Operations; Use..........................................5-1
       (c)   Maintenance.....................................................5-2
       (d)   Registration and Insignia.......................................5-3

ARTICLE 6.   REPLACEMENT AND POOLING OF PARTS;
             ALTERATIONS, MODIFICATIONS AND ADDITIONS........................6-1

                                     - i -
<PAGE>

       (a)   Replacement of Parts............................................6-1
       (b)   Pooling of Parts................................................6-2
       (c)   Alterations, Modifications and Additions........................6-2
       (d)   Transfer of Engines Within Lessee's Fleet.......................6-3

ARTICLE 7.   INSPECTION; FINANCIAL INFORMATION; RECORDS......................7-1
       (a)   Information and Inspection......................................7-1
       (b)   Financial and Other Information.................................7-1
       (c)   Reports of Aircraft Use.........................................7-2

ARTICLE 8.   INDEMNIFICATION BY LESSEE.......................................8-1
       (a)   General Indemnity...............................................8-1
       (b)   General Tax Indemnity...........................................8-2
       (c)   After-Tax Nature of Indemnity...................................8-4
       (d)   Survival of Indemnities.........................................8-5
       (e)   Performance by Indemnitees......................................8-5

ARTICLE 9.   DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION..................9-1
       (a)   Event of Loss with Respect to Aircraft..........................9-1
       (b)   Event of Loss with Respect to an Engine.........................9-1
       (c)   Application of Payments from Governmental
             Authorities in Respect of Event of Loss.........................9-2
       (d)   Application of Payments During Existence of Event or
             Event of Default................................................9-2

ARTICLE 10.  INSURANCE......................................................10-1
       (a)   Liability and Property Damage Insurance........................10-1
       (b)   Insurance Against Loss or Damage to Aircraft...................10-1
       (c)   Requirements in Insurance Policies.............................10-2
       (d)   Uninsured Operations...........................................10-3
       (e)   Application of Insurance Proceeds for Event of Loss............10-3
       (f)   Application of Insurance Proceeds for Other than
             Event of Loss..................................................10-4
       (g)   Application in Default.........................................10-4
       (h)   Reports, Certificates, etc.....................................10-4
       (i)   Insurance - General............................................10-5

                                     - ii -
<PAGE>

       (j)   Insurance of Lessee's Interest.................................10-5

ARTICLE 11.  MORTGAGES, LIENS, ETC..........................................11-1

ARTICLE 12.  RECORDATION AND FURTHER ASSURANCES.............................12-1

ARTICLE 13.  RETURN OF AIRCRAFT AND RECORDS.................................13-1
       (a)   Return.........................................................13-1
       (b)   Inspection; Test Flight........................................13-1
       (c)   Flight Hours/Cycles/Time Requirements..........................13-2
       (d)   General Return Requirements...................................13-11
       (e)   Records.......................................................13-12
       (f)   Technical Acceptance; Ferry Flight............................13-12
       (g)   Aid in Disposition............................................13-13

ARTICLE 14.  EVENTS OF DEFAULT..............................................14-1

ARTICLE 15. REMEDIES........................................................15-1

ARTICLE 16. EXCUSABLE DELAY.................................................16-1
       (a)  General.........................................................16-1
       (b)  Four (4) Months' Excusable Delay................................16-1
       (c)  Consequence of Termination......................................16-1
       (d)  Failure to Terminate............................................16-2
       (e)  Damage to or Destruction of Aircraft - Delivery Delay...........16-2
       (f)  Termination Rights Exclusive....................................16-2

ARTICLE 17. MISCELLANEOUS...................................................17-1
       (a)  Construction and Applicable Law.................................17-1
       (b)  Notices.........................................................17-1
       (c)  Lessor's Right to Perform for Lessee............................17-2
       (d)  Corporate Existence; Merger.....................................17-2
       (e)  Training and Customer Support...................................17-3
       (f)  Subject and Subordinate.........................................17-3
       (g)  Assignment......................................................17-4
       (h)  Expenses........................................................17-4
       (i)  Survival........................................................17-4
       (j)  Integration.....................................................17-5
       (k)  Federal Bankruptcy Code.........................................17-5

                                     - iii -
<PAGE>

       (l)  Counterparts....................................................17-5
       (m)  Execution by Telecopy...........................................17-5

Schedule "1".................................................................S-1

Exhibit "A"..................................................................A-1

                                     - iv -
<PAGE>

                                 LEASE AGREEMENT

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

                                    RECITALS

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

                              TERMS AND CONDITIONS

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

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

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

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

                                     - 1-1 -
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                     - 1-2 -
<PAGE>

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

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

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

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

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

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

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

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

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

                                     - 1-3 -
<PAGE>

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

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

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

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

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

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

     "Maintenance Program," as of any date of determination, means Lessee's
program of overhaul and maintenance for the Equipment, approved by the FAA and
which: (i) at all times complies in all material respects with the then latest
revision of the Manufacturer's Maintenance Planning Document and, if Lessee's
program of overhaul and maintenance is a block maintenance program, the then
latest revision of Appendix C Document No. D626AO01 (or any restatement thereof)
applicable to the Aircraft as the result of the Flight Hours/Cycles ratio that
the Aircraft has been operated during the Term, (ii) incorporates the then
latest revision of the Manufacturer's Corrosion Prevention and Control Program
for aircraft of similar type as the Aircraft, and (iii) at all times complies in
all material respects with the then latest revision of the Engine manufacturer's
Engine Management Program.

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

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

                                     - 1-4 -
<PAGE>

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

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

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

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

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

     "Rent" means Basic Rent and Supplemental Rent.

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

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

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

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

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

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

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

                                     - 1-5 -
<PAGE>

     ARTICLE 2. ACCEPTANCE UNDER LEASE.

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

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

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

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

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

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

             (1) Lessor shall have received the following:

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

                                     - 2-1 -
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                     - 2-2 -
<PAGE>

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

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

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

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

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

                                     - 2-3 -
<PAGE>

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

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

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

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

                                     - 2-4 -
<PAGE>

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

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

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

                                     - 2-5 -
<PAGE>

     ARTICLE 3. TERM AND RENT.

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

     (b) BASIC RENT. Lessee shall pay Lessor Basic Rent for the Aircraft
throughout the Term in 120 consecutive monthly in advance payments, due and
payable commencing on the Delivery Date for the Aircraft and on the like date in
each calendar month thereafter to and including the 120th calendar month, or if
such month has no such date, on the last Business Day of such month. The amount
of each monthly Basic Rent payment payable for the Aircraft throughout the Term
shall be as specified in paragraph 2 of Schedule "1" hereto.

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

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

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

                                     - 3-1 -
<PAGE>

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

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

     (f) PLACE OF PAYMENT. All Rent shall be payable in Dollars, in immediately
available funds, not later than 11:00 a.m., New York City time, on the due date
thereof, at the office of Citibank, N.A., 21st Floor, Zone 1, 111 Wall Street,
New York, New York, 10043, ABA No. 021000089 (CHIPS ID 0008), for credit to the
account of Ansett Worldwide Aviation, U.S.A., Account No. 36953153, or at such
other location or account as Lessor shall from time to time designate in
writing. Rent payments payable hereunder shall be deemed to have been paid only
at the time actually credited to Lessor's account referred to above. All
interest and other payments payable hereunder that are pro-rated on an
annualized or other periodic basis shall be calculated on the basis of a year
consisting of 360 days and twelve 30-day months.

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

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

                                     - 3-2 -
<PAGE>

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

                                     - 3-3 -
<PAGE>

     ARTICLE 4. REPRESENTATIONS AND WARRANTIES.

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

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

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

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

                                     - 4-1 -
<PAGE>

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

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

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

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

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

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

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

                                     - 4-2 -
<PAGE>

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

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

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

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

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

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

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

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

                                     - 4-3 -
<PAGE>

     ARTICLE 5. POSSESSION AND USE.

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

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

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

                                     - 5-1 -
<PAGE>

     Lessee further agrees that it will not use or permit the use of the
Aircraft for the carriage of: (i) whole animals, living or dead, except in the
cargo compartments according to I.A.T.A. regulations, and except domestic pet
animals carried in a suitable container to prevent the escape of any liquid and
to ensure the welfare of the animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, nuclear wastes, or any nuclear
assemblies or components, except as permitted for cargo under the "Restriction
of Goods" schedule issued by I.A.T.A. from time to time and provided that all
the requirements for packaging or otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could reasonably be
expected to cause damage to the Aircraft and which would not be adequately
covered by the insurances maintained in accordance with Article 10 hereof; or
(iv) any illegal item or substance.

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

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

                                     - 5-2 -
<PAGE>

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

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

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

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

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

                                     - 5-3 -
<PAGE>

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

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

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

                                     - 6-1 -
<PAGE>

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

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

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

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

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

                                     - 6-2 -
<PAGE>

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

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

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

                                     - 6-3 -
<PAGE>

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

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

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

                                     - 6-4 -
<PAGE>

     ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORDS.

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

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

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

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

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

                                     - 7-1 -
<PAGE>

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

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

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

                                     - 7-2 -
<PAGE>

     ARTICLE 8. INDEMNIFICATION BY LESSEE.

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

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

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

                                     - 8-1 -
<PAGE>

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

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

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

                                     - 8-2 -
<PAGE>

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

                                     - 8-3 -
<PAGE>

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

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

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

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

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

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

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

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

                                     - 8-4 -
<PAGE>

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

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

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

                                     - 8-5 -
<PAGE>

     ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION.

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

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

                                     - 9-1 -
<PAGE>

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

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

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

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

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

                                     - 9-2 -
<PAGE>

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

                                     LESSOR:

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

WITNESS:                             By:____________________________________

                                     Title:_________________________________

________________________________

                                     LESSEE:

                                     ALOHA AIRLINES.INC.

WITNESS:                             By:____________________________________

                                     Title:_________________________________

________________________________

WITNESS:                             By:____________________________________

                                     Title:_________________________________

________________________________

                                     - A-3 -
<PAGE>

     ARTICLE 10. INSURANCE.

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

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

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

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

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

         (iv) any malicious act or act of sabotage;

                                    - 10-1 -
<PAGE>

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

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

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

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

                                    - 10-2 -
<PAGE>

nonpayment of premium, such cancellation, termination, change or lapse shall not
be effective as to such Additional Insured for thirty (30) days (seven (7) days,
or such lesser period as is customarily available in accordance with industry
practice, in the case of any war risk and allied perils coverage) after receipt
by such Additional Insured of written notice by such insurers of such
cancellation, termination, change or lapse, (vi) in the event Lessee maintains
separate policies to cover all risk aircraft hull and war risk and related
perils insurances, all such policies shall include a 50/50 provisional claims
settlement arrangement in the event of dispute over which policy covers the
loss, (vii) be primary without right of contribution from any other insurance
carried by any Additional Insured or Indemnitee with respect to its interest as
such in the Aircraft, (viii) be in an amount sufficient to prevent Lessee and
any Additional Insured from becoming a co-insurer, (ix) provide for worldwide
geographical coverage, except for exclusions of geographical areas reasonably
acceptable to Lessor, (x) provide satisfactory coverage against the risks
associated with electronic date recognition problems, in the form of AVN2000,
AVN2001 and AVN2002, or equivalent, substitute or replacement in respect thereof
in accordance with then current market practice (and Lessee shall make and
comply with the warranties, representations, and undertakings required to be
given in connection with obtaining/maintaining such clauses in accordance with
then current market practice, and (xi) comply to the extent necessary with the
insurance requirements set forth in the Manufacturer's product support and
customer training agreements. Each liability insurance policy carried in
accordance with section (a) of this Article shall contain a cross-liability
endorsement so that each insured, Additional Insured and Indemnitee shall be
protected from claims by each other insured, Additional Insured or Indemnitee,
and a severability of interest provision which shall expressly provide that all
of the provisions thereof shall operate in the same manner as if there were a
separate policy covering each insured, Additional Insured and Indemnitee;
provided, however, such policies shall not operate to increase the insurers'
limit of liability. Lessee shall cause its insurers to agree that the indemnity
and hold harmless provisions of Article 8(a) are insured as a contractual
assumption of liability by Lessee's insurers, but only to the extent of the
risks, covered by the policy of insurance.

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

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

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

                                    - 10-3 -
<PAGE>

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

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

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

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

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

                                    - 10-4 -
<PAGE>

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

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

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

                                    - 10-5 -
<PAGE>

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

                                    - 11-1 -
<PAGE>

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

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

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

                                    - 12-1 -
<PAGE>

     ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS.

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

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

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

                                    - 13-1 -
<PAGE>

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

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

         (i) The Airframe shall be fresh out of its next sequential block
"6C" systems, zonal and structural check (all as described in the latest
revision of the Boeing Maintenance Planning Document and the latest revision
of Appendix C No. D626AOOI (or restatement thereof) applicable to the
Aircraft as the result of the hour/cycle ratio that the Aircraft has been
operated during the Term) or equivalent block-type maintenance check,
including all corresponding lower level checks (i.e., "A" and lower "C"
checks), and corrosion prevention and control and aging aircraft inspections,
if any, and all other known inspections and routine and non-routine tasks due
at such time, all with full fault rectification and interior refurbishment
and all without taking into account any sampling programs (collectively
referred to hereafter as the "6C Maintenance"). If Lessee's Maintenance
Program permits such 6C Maintenance to be performed in phases, Lessee shall
perform all phases of such 6C Maintenance immediately prior to return of the
Aircraft to Lessor in order to align such maintenance of the Aircraft with
the Boeing Maintenance Planning Document and the latest revision of Appendix
C No. D626AO01 (or restatement thereof) to the same extent as if Lessee's
Maintenance Program did not permit such maintenance to be performed in
phases. During such 6C Maintenance, Lessee shall also perform any other work
reasonably requested by Lessor and not otherwise required hereunder (provided
such other work does not increase the ground time required for Lessee to
prepare the Aircraft for return to Lessor as required hereby, or, if it does
increase the downtime, Lessor and Lessee shall have agreed to a Basic Rent
abatement for such additional ground time), and Lessor will reimburse Lessee
for the cost of such work (including labor and materials), billed at Lessee's
most preferred customer's rates. Lessee shall give Lessor at least thirty
(30) days prior notice of the date on which such 6C Maintenance is to be
performed.

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

                                    - 13-2 -
<PAGE>

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

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

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

                                    - 13-3 -
<PAGE>

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

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

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

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

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

                                    - 13-4 -
<PAGE>

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

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

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

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

                                    - 13-5 -
<PAGE>

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

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

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

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

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

                                    - 13-6 -
<PAGE>

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

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

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

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

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

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

                                    - 13-7 -
<PAGE>

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

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

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

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

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

                                    - 13-8 -
<PAGE>

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

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

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

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

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

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

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

                                    - 13-9 -
<PAGE>

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

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

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

                                    - 13-10 -
<PAGE>

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

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

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

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

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

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

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

                                    - 13-11 -
<PAGE>

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

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

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

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

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

                                    - 13-12 -
<PAGE>

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

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

                                    - 13-13 -
<PAGE>

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

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

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

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

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

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

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

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

                                    - 14-1 -
<PAGE>

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

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

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

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

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

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

                                    - 14-2 -
<PAGE>

     ARTICLE 15. REMEDIES. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default and Lessor may, in addition to any
other remedies provided herein or by applicable law, exercise one or more of the
following remedies with respect to the Aircraft, or any part thereof, as Lessor
in its sole discretion shall elect:

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

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

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

                                    - 15-1 -
<PAGE>

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

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

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

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

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

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

                                    - 15-2 -
<PAGE>

Aircraft in the condition and airworthiness as required by such Article, and
for the cost of storage, insurance, and re-leasing or sale of the Aircraft.

     Except as otherwise expressly provided above, no remedy referred to in this
Article is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and the exercise or beginning of exercise by Lessor of any
one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies. No express or implied
waiver by Lessor of any Event or Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Event or Event of Default.
To the extent permitted by applicable law, Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft or any Engine in mitigation of Lessor's
damages as set forth in this Article or which may otherwise limit or modify any
of Lessor's rights or remedies hereunder.

                                    - 15-3 -
<PAGE>

     ARTICLE 16. EXCUSABLE DELAY.

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

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

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

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

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

                                    - 16-1 -
<PAGE>

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

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

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

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

                                    - 16-2 -
<PAGE>

     ARTICLE 17. MISCELLANEOUS.

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

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

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

                                    - 17-1 -
<PAGE>

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

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

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

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

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

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

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

                                    - 17-2 -
<PAGE>

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

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

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

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

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

                                    - 17-3 -
<PAGE>

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

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

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

                                     - 17-4 -
<PAGE>

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

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

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

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

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

                                     - 17-5 -
<PAGE>

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

                                     LESSOR:

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

WITNESS:                             By:     /s/ [Illegible]
                                         ___________________________________

/s/ Mary Kay Cupillo                 Title:      AVP
______________________________              ________________________________

                                 LESSEE:

                                 ALOHA AIRLINES, INC.

WITNESS:                         By:        /s/ G. R. Zander
                                       ______________________________________
________________________________

                                 Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                       ______________________________________

WITNESS:                         By:        /s/ James M. King
                                       ______________________________________

________________________________

                                 Title: VICE PRESIDENT PLANNING & DEVELOPMENT
                                       ______________________________________

                                    - 17-6 -
<PAGE>

                                  SCHEDULE "1"

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

<PAGE>

                                  Exhibit "A"

                                LEASE SUPPLEMENT

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

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

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

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

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

         (i) Airframe: Identification Number_____; Manufacturer's Serial
No._____; and

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

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

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

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

                                     - A-1 -
<PAGE>

     (5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
________.

     (6) Lessee hereby confirms to Lessor that the Airframe and Engines
described above have been duly marked as showing Lessor's title thereto and
Mortgagee's mortgage interest therein in accordance with the terms of the Lease
Agreement and that Lessee has accepted the Delivered Equipment for all purposes
of the Lease Agreement, including its being airworthy, in accordance with
specifications, in good working order and repair and without defect or inherent
vice in title, condition, design, operation or fitness for use, whether or not
discoverable by Lessee as of the date hereof, and free and clear of all Liens;
provided, however, that nothing contained herein or in the Lease Agreement shall
in any way diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other person,
whether under the Purchase Agreement or otherwise.

     (7) All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference into the Lease Agreement to the same extent as if
fully set forth therein.

     (8) This Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of California including all
matters of construction, validity and performance.

                                     - A-2 -
<PAGE>

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

                                     LESSOR:

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

WITNESS:                             By: _____________________________________

                                     Title: __________________________________

______________________________

                                   LESSEE:

                                   ALOHA AIRLINES, INC.

WITNESS:                           By: _____________________________________

                                   Title: __________________________________

______________________________

WITNESS:                           By: _____________________________________

                                   Title: __________________________________

______________________________

                                     - A-3 -

<PAGE>

                                LEASE SUPPLEMENT
                                ----------------

     THIS LEASE SUPPLEMENT, dated November 12, 1999, between Wilmington Trust
Company, a Delaware banking corporation, acting not in its individual
capacity but solely as Owner Trustee (herein called "Lessor"), and Aloha
Airlines, Inc. (the "Lessee").

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

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

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

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

         (i) Airframe: U.S. Registration Number N739AL; Manufacturer's Serial
No. 28500; and

         (ii) Engines: Two CFM International Model CFM56-7B24 engines bearing,
respectively, manufacturer's serial numbers 875976 and 875977 (each of which
engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).

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

     (3) The Term for the Delivered Equipment shall commence on the Delivery
Date therefor and shall end on November 11, 2009.

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

<PAGE>

     (5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
1,695 gallons.

     (6) The Lease Agreement is amended and supplemented in the following
respects:

          (i) The "Mortgage" referred to in Article 1 is more specifically
              defined as the Mortgage Agreement dated October 1999 between
              Lessor and Mortgagee;

         (ii) The "Mortgagee" referred to in Article 1 is more specifically
              defined as Citibank International Plc, and its successors,
              transferees and assigns; and

        (iii) Citibank International Plc and Citibank, N.A. are lenders in
              connection with the Mortgage and are therefore included in the
              definition of "Participants" in Article 1.

     (7) Lessee hereby confirms to Lessor that the Airframe and Engines
described above have been duly marked as showing Lessor's title thereto and
Mortgagee's mortgage interest therein in accordance with the terms of the Lease
Agreement and that Lessee has accepted the Delivered Equipment for all purposes
of the Lease Agreement, including its being airworthy, in accordance with
specifications, in good working order and repair and without defect or inherent
vice in title, condition, design, operation or fitness for use, whether or not
discoverable by Lessee as of the date hereof, and free and clear of all Liens;
provided, however, that nothing contained herein or in the Lease Agreement shall
in any way diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other person,
whether under the Purchase Agreement or otherwise.

     (8) All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference into the Lease Agreement to the same extent as if
fully set forth therein.

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

    (10) This Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of California including all
matters of construction, validity and performance.

                                      - 2 -
<PAGE>

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

                                       LESSOR:

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

 WITNESS:                              By: /s/ Patricia A. Evans
                                               ----------------------------
 /s/ [ILLEGIBLE]                                 PATRICIA A. EVANS
     ------------------------
                                       Title:  Financial Services Officer
                                               ----------------------------

                                       LESSEE:

                                       ALOHA AIRLINES.INC.

 WITNESS:                              By:
                                               ----------------------------

     -----------------------           Title:
                                               ----------------------------

WITNESS:                               By:
                                               ----------------------------

     -----------------------           Title:
                                               ----------------------------

                                      - 3 -
<PAGE>

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

                                       LESSOR:

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

 WITNESS:                              By:
                                               ----------------------------

     ------------------------          Title:
                                               ----------------------------

                                       LESSEE:

                                       ALOHA AIRLINES.INC.

 WITNESS:                              By: /s/ Brenda F. Cutwright
                                               ----------------------------
                                                BRENDA F. CUTWRIGHT

                                       Title:  SR. VICE PRESIDENT FINANCE &
 /s/ [ILLEGIBLE]                               PLANNING AND CFO
     -----------------------                   ----------------------------

WITNESS:                               By: /s/ James M. King
                                               ----------------------------
                                                JAMES M. KING

                                       Title:  VICE PRESIDENT PLANNING &
 /s/ [ILLEGIBLE]                               DEVELOPMENT
     -----------------------                   ----------------------------

                                      - 3 -

<PAGE>
                                              (CERTIFIED COPY TO BE RETURNED)
                                                         RECORDED
                                             Federal Aviation Administration

                                            Date   1-24-02      Time   am 9:0
                                                 --------------      ----------
                                             Conveyance Number     QQ024260
                                                              -----------------
                                            By     /s/ L. Kelley
                                               ---------------------

                                 AMENDMENT NO. 1
                               TO LEASE AGREEMENT

     This Amendment No. 1 to Lease Agreement ("Amendment No. 1"), dated as of
November 29, 2001, is entered into by and between Wilmington Trust Company not
in its individual capacity but solely as Owner Trustee (herein called "Lessor"),
and Aloha Airlines, Inc., a Delaware corporation (herein called "Lessee").

                                    RECITALS

     A. Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999,* as supplemented to the date hereof (collectively referred
to as the "Lease"), pursuant to which Lessor has leased to Lessee one Boeing
Model 737-73A aircraft bearing manufacturer's serial number 28500 and United
States Registration Marks N739AL, equipped with two CFM 56-7B24 engines bearing,
respectively, manufacturer's serial numbers 875976 and 875977.

     B. Lessor and Lessee wish to amend certain terms of the Lease and to extend
the Term of the Lease all on the terms and conditions set forth below.

     C. Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Lease and reference to "Articles"
herein shall be construed to refer to Articles of the Lease.

                              TERMS AND CONDITIONS

     Therefore, in consideration of the premises, and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Article 3(a) of the Lease is hereby amended and restated in its entirety
as follows:

     "(a) TERM. Except as otherwise provided herein, the Aircraft shall be
     leased to Lessee hereunder for a Term that commences on the Delivery Date
     and ends on November 11, 2010."

     2. Schedule 1 to the Lease Agreement shall be amended in accordance with
the Amendment to Schedule 1 attached hereto.

* as more particularly described in Annex I attached hereto (the "Lease"),

<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof", or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.

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

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

                                 ALOHA AIRLINES, INC.

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

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

                                        2

<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof", or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.

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

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

                                 ALOHA AIRLINES, INC.

                                 By:    /s/ Brenda F. Cutwright
                                        ----------------------------------------
                                 Title: EXECUTIVE VICE PRESIDENT & CFO
                                        ----------------------------------------

                                 By:    /s/ James M. King
                                        ----------------------------------------
                                 Title: SENIOR VICE PRESIDENT PLANNING
                                        AND BUSINESS DEVELOPMENT
                                        ----------------------------------------

<PAGE>

                           AMENDMENTS TO SCHEDULE "1"

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

<PAGE>

                                                                         Annex I
                                           to Amendment No. 1 to Lease Agreement

                              DESCRIPTION OF LEASE

     Lease Agreement dated as of August 4, 1999 between Wilmington Trust
Company, as owner trustee under Trust Agreement No. 2 dated November 12, 1999,
as lessor, and Aloha Airlines, Inc., as lessee, which was recorded by the
Federal Aviation Administration on December 9,1999 and assigned Conveyance No.
I64454, as supplemented by the following described instrument:

<Table>
<Caption>
                              Date of              FAA                 FAA
        Instrument           Instrument       Recording Date      Conveyance No.
        ----------           ----------       --------------      --------------
<S>                          <C>              <C>                 <C>
Lease Supplement              11/12/99           12/09/99             I64454
</Table>

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