Document:

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                                                                    EXHIBIT 10.1
                                                               Execution Version

LOAN AGREEMENT [ENGINES]

                          DATED AS OF SEPTEMBER 3, 2004

                                      AMONG

                          AMERICA WEST AIRLINES, INC.,

                      GENERAL ELECTRIC CAPITAL CORPORATION,

                             AS ADMINISTRATIVE AGENT

                      GENERAL ELECTRIC CAPITAL CORPORATION,

                          AS ORIGINAL SERIES A LENDER,

                      GENERAL ELECTRIC CAPITAL CORPORATION

                           AS ORIGINAL SERIES B LENDER

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
                               AS SECURITY TRUSTEE

                                       AND

                                   THE LENDERS
                         FROM TIME TO TIME PARTY HERETO

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                                TABLE OF CONTENTS

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                                                                                                            PAGE
<S>                                                                                                         <C>
ARTICLE I  THE LOAN ......................................................................................    1

     Section 1.1.  The Loan...............................................................................    1
     Section 1.2.  Making the Loan........................................................................    3
     Section 1.3.  Fees...................................................................................    4
     Section 1.4.  Commitment Termination.................................................................    4
     Section 1.5.  [Intentionally omitted.]...............................................................    4
     Section 1.6.  Substitute Lenders.....................................................................    5
     Section 1.7.  Special Provisions Governing the Loan..................................................    5
     Section 1.8.  Payments and Computations..............................................................    7
     Section 1.9.  Sharing of Payments, Etc...............................................................    8
     Section 1.10.  Obligation of Lenders to Mitigate.....................................................    8
     Section 1.11.  Replacement Notes.....................................................................    9

ARTICLE II  INTEREST .....................................................................................    9

     Section 2.1.  Rate of Interest.......................................................................    9
     Section 2.2.  Interest Periods.......................................................................    9
                (a)  Interest Periods.....................................................................    9
                (b)  Expiration of Interest Periods.......................................................    9
     Section 2.3.  Interest Payments......................................................................    9
     Section 2.4.  Default Rate...........................................................................    9
     Section 2.5.  Computation of Interest................................................................   10
     Section 2.6.  Maximum Rate...........................................................................   10

ARTICLE III  REPRESENTATIONS AND WARRANTIES...............................................................   10

     Section 3.1.  Representations and Warranties.........................................................   10
                (a)  Organization; Powers.................................................................   10
                (b)  Authorization; Enforceability........................................................   10
                (c)  No Violation.........................................................................   11
                (d)  Governmental Approvals...............................................................   11
                (e)  Litigation...........................................................................   11
                (f)  Financial Condition..................................................................   11
                (g)  No Default...........................................................................   12
                (h)  Investment and Holding Company Status................................................   12
                (i)  Use of Proceeds......................................................................   12
                (j)  Licenses, Permits, etc...............................................................   12
                (k)  Compliance with Laws.................................................................   12
                (l)  Tax Returns..........................................................................   12
                (m)  Information..........................................................................   12
     Section 3.2.  The Engines............................................................................   13
                (a)  Good Title...........................................................................   13
                (b)  Filings..............................................................................   13
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                                TABLE OF CONTENTS
                                  (CONTINUED)

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<S>                                                                                                          <C>
                (c)    No Event of Loss..................................................................    13
                (d)    Section 1110......................................................................    13
                (e)    Conditions........................................................................    13
     Section 3.3.  Representations and Warranties of the Security Trustee................................    13
                (a)    Powers and Authorizations.........................................................    13
                (b)    Litigation........................................................................    14
                (c)    No Legal Bar......................................................................    14
     Section 3.4.  Representations and Warranties of the Lenders.........................................    14
                (a)    Accredited Investor...............................................................    14
                (b)    Investment Intent.................................................................    14
                (c)    ERISA.............................................................................    14
                (d)    No Offering.......................................................................    14

ARTICLE IV  COVENANTS ...................................................................................    15

     Section 4.1.      Covenants of the Borrower.........................................................    15
                (a)    Financial Statements and Other Information........................................    15
                (b)    Existence; Conduct of Business....................................................    16
                (c)    Mergers and Consolidations........................................................    17
                (d)    Delivery of Post-Recording FAA Opinion............................................    18
                (e)    Engine Reports....................................................................    18
                (f)    Compliance with Mortgage..........................................................    18

ARTICLE V  INCREASED COSTS; GENERAL INDEMNITY............................................................    18

     Section 5.1.  Increased Costs.......................................................................    18
     Section 5.2.  Capital Adequacy......................................................................    19
     Section 5.3.  Withholding of Taxes..................................................................    20
                (a)  Payments to Be Free and Clear.......................................................    20
                (b)  Grossing-up of Payments.............................................................    20
                (c)  Evidence of Exemption from U.S. Withholding Tax.....................................    21
     Section 5.4.      (a)  Other Taxes..................................................................    24
                       (b)  Contest of Tax Claims........................................................    24
                       (c)  Non-Parties..................................................................    25
     Section 5.5.  Indemnity.............................................................................    25

ARTICLE VI  CONDITIONS PRECEDENT.........................................................................    27

     Section 6.1.  General Conditions....................................................................    27
     Section 6.2.  Additional Conditions.................................................................    28

ARTICLE VII  EVENTS OF DEFAULT...........................................................................    31

     Section 7.1.  Events of Default.....................................................................    31
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                                TABLE OF CONTENTS
                                  (CONTINUED)

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<S>                                                                                                         <C>
ARTICLE VIII  THE TRANSACTION AGENTS.....................................................................   33

     Section 8.1.  Appointment and Authorization.........................................................   33
     Section 8.2.  Delegation of Duties..................................................................   33
     Section 8.3.  Exculpatory Provisions................................................................   33
     Section 8.4.  Reliance by Transaction Agents........................................................   34
     Section 8.5.  Notice of Events of Default...........................................................   34
     Section 8.6.      Non-Reliance on Transaction Agents and Other Lenders; Lender
                       Representations...................................................................   34
     Section 8.7.  Transaction Agents and Affiliates.....................................................   34
     Section 8.8.  Indemnification.......................................................................   35
     Section 8.9.  Successor Transaction Agents..........................................................   35
     Section 8.10.  Qualifications of Successor Security Trustee.........................................   35

ARTICLE IX  MISCELLANEOUS................................................................................   35

     Section 9.1.  Amendments............................................................................   35
     Section 9.2.  Notices...............................................................................   36
     Section 9.3.  Costs and Expenses....................................................................   36
     Section 9.4.  Certain Agreements....................................................................   36
     Section 9.5.  Entire Agreement......................................................................   36
     Section 9.6.  Cumulative Rights and Severability....................................................   37
     Section 9.7.  Waivers...............................................................................   37
     Section 9.8.  Successors and Assigns; Participations; Assignments...................................   37
                (a)  Successors and Assigns..............................................................   37
                (b)  Participations......................................................................   37
                (c)  Assignments.........................................................................   37
                (d)  Register............................................................................   38
     Section 9.9.  Confidentiality.......................................................................   38
     Section 9.10.  Counterparts.........................................................................   39
     Section 9.11.  Governing Law; Submission to Jurisdiction; Venue.....................................   39
     Section 9.12.  Waiver of Trial by Jury..............................................................   40
     Section 9.13.  Effective Date.......................................................................   40

Schedule 1        Definitions

Schedule 2        Engine Descriptions, Stipulated Loss Values and Termination Values
Schedule 3        Principal Payments for the Notes
Schedule 4        Certain Information

EXHIBIT A-1  Form of Mortgage
EXHIBIT A-2  Form of Subordinated Mortgage
EXHIBIT B    Form of Promissory Note
EXHIBIT C    Form of Notice of Borrowing
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                               TABLE OF CONTENTS
                                  (CONTINUED)

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EXHIBIT D                  Form of Opinion of Special Counsel to the Borrower for Closing
EXHIBIT E                  Form of Opinion of Borrower's Legal Department for Closing
EXHIBIT F                  Form of Transfer Supplement
EXHIBIT G                  Form of Certificate of Non-Bank Status
EXHIBIT H                  Form of FAA Counsel's Opinion
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                            LOAN AGREEMENT [ENGINES]

      THIS LOAN AGREEMENT [ENGINES], dated as of September 3, 2004 (this
"Agreement"), is among AMERICA WEST AIRLINES, INC., a Delaware corporation (the
"Borrower"), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as
Administrative Agent for the Lenders (the "Administrative Agent"), WELLS FARGO
BANK NORTHWEST, National Association, as the Security Trustee (the "Security
Trustee"), GENERAL ELECTRIC CAPITAL CORPORATION (herein called the "Original
Series A Lender"), and GENERAL ELECTRIC CAPITAL CORPORATION (herein called the
"Original Series B Lender") and such other lenders as may from time to time be
party hereto (together with the Original Series A Lender and the Original Series
B Lender, the "Lenders"). Certain capitalized terms used herein are defined, and
certain rules of construction are specified, in Schedule 1.

                                   BACKGROUND

      l.    The Lenders have agreed to make loans to the Borrower to be secured
by a Lien on certain engines owned by the Borrower.

      2.    connection with such loans, the parties hereto wish to enter into
certain related understandings, as set forth herein.

      The parties hereto agree as follows:

                                    ARTICLE I
                                    THE LOAN

      Section 1.1. The Loan.

      (a)   Commitments. Subject to the terms and conditions of this Loan
Agreement, on the Funding Date the Original Series A Lender shall make a loan to
the Borrower in the principal amount equal to the Series A Commitment, and the
Original Series B Lender shall make a loan to the Borrower in the principal
amount equal to the Series B Commitment. As evidence of the loan advanced by the
Original Series A Lender, on the Funding Date the Borrower shall issue and
deliver to the Original Series A Lender, as provided hereunder, a Series A Note
payable to the Original Series A Lender in an original principal amount equal to
the amount of its Series A Commitment. As evidence of the loan advanced by the
Original Series B Lender, on the Funding Date the Borrower shall issue and
deliver to the Original Series B Lender, as provided hereunder, a Series B Note
payable to the Original Series B Lender in an original principal amount equal to
the amount of the Series B Commitment. The Notes and the Security Trustee's form
of certificate of authentication to appear on the Notes shall each be
substantially in the form set forth in Exhibit B.

      (b)   The Notes: Amortization. Each Series of Notes shall have the stated
maturity set forth on Schedule 3 with respect to such Series (or in the case of
a Replacement Note, as set forth in such Replacement Note), and the principal of
each Note shall be payable in installments on the Payment Dates, each such
installment to be in an amount computed by multiplying the original

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principal amount of such Note by the ratio set forth in Annex A to such Note
opposite the Payment Date on which such installment is due; provided that, in
the event that the Notes shall have been prepaid in part pursuant hereto
(regardless of whether such prepayment is made pursuant to subparagraphs (c) or
(d) of this Section 1.1 or pursuant to Section 1.7), from and after the relevant
Prepayment Date or at any time pursuant to Section 1.7 or on an Engine Payment
Date (as the case may be), the amounts of such installments shall be reduced, in
inverse order of maturity, by the amount of such partial prepayment. Annex A to
each Note of any Series shall be completed based on the "Percentage of Original
Principal Amount to be Paid" for such Series as set forth in Schedule 3. In the
case of each Note, each payment of the principal amount, LIBOR Breakage Costs,
if any, and interest or other amounts due thereon shall be applied, first, to
the payment of any amounts due in respect of the Loan (other than principal and
accrued interest on the Loan and LIBOR Breakage Costs) to the date of such
payment (including any interest on overdue principal amount, LIBOR Breakage
Costs, if any, and to the extent permitted by law, interest and other amounts
thereunder), second, to the payment of accrued interest on the Loan to the date
of such payment, third, to the payment of LIBOR Breakage Costs, if any, due
hereunder in respect of the Loan, and fourth, the balance, if any, remaining
thereafter, to the payment of the principal amount of the Loan remaining unpaid
(provided that the Loan shall not be subject to prepayment, except as provided
in Sections 1.1(c), 1.1(d) and 1.7 hereof).

      (c)   Optional Prepayment.

            (i)   In General. The Borrower may not, except as otherwise
expressly provided in this Agreement, prepay the Loan (or any portion thereof)
prior to the Designated Date. On or after the Designated Date, on any Business
Day (a "Prepayment Date"), on not less than three Business Days' prior
irrevocable written notice from the Borrower to the Administrative Agent, the
Borrower may prepay all, or any portion of the outstanding principal amount of
the Loan; provided, however, that no partial prepayment of the Loan shall be for
less than $5,000,000 original principal amount. If the Borrower elects to prepay
the Loan, the Borrower shall pay on the Prepayment Date to the Administrative
Agent the outstanding principal amount of the Loan subject to prepayment
together with all accrued and unpaid interest thereon, any LIBOR Breakage Costs,
the Prepayment Fee (if applicable), and all other amounts then due and payable
under the Transaction Documents.

            (ii)  Limited Optional Prepayment. Notwithstanding anything to the
contrary in Section 1.1(c)(i) above and without limiting the Borrower's
obligations under Sections 5.1, 5.2 and 5.3, in the event that the Borrower
receives notice from any Lender of any costs that the Borrower is required to
pay to such Lender pursuant to any of Sections 5.1, 5.2 or 5.3, the Borrower and
such Lender shall negotiate in good faith in order to arrive at a mutually
acceptable alternative means of structuring the Loan Amount held by such Lender
in order to mitigate, minimize or eliminate such costs in the future. In the
event that the Borrower and such Lender are not able to agree, within thirty
(30) days following the date of the notice to the Borrower of amounts due under
any of Section 5.1, 5.2 or 5.3, as the case may be, on an alternative means of
structuring the Loan Amount held by such Lender, then the Borrower shall have
the right, exercisable upon not less than ten Business Days' prior notice to the
applicable Lender (with a copy to the Administrative Agent), to prepay in full
the Loan Amount held by such Lender, together with accrued interest thereon, any
LIBOR Breakage Costs and any amounts due to such Lender pursuant to Sections
5.1, 5.2 and 5.3, as applicable. Any

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prepayment by the Borrower pursuant to this Section 1.1(c)(ii) shall be made by
the Borrower directly to the applicable Lender, and no prepayment by the
Borrower pursuant to this Section 1.1(c)(ii) shall have any effect on the
Borrower's obligations with respect to the remaining outstanding balance of the
Loan to any of the other Lenders hereunder. For the avoidance of doubt such
prepayment would not be subject to any Prepayment Fee, may be made prior to the
Designated Date and may be in an amount less than $5,000,000.

      (d)   Mandatory Prepayment. If an Event of Loss occurs with respect to any
Engine and the Borrower elects not to substitute another engine for such Engine
in accordance with the Mortgage (or if the Borrower so elects, but does not
substitute another engine for such Engine in accordance with the Mortgage) or if
a Permitted Disposition occurs with respect to any Engine, the Borrower shall,
on the date specified for payment with respect to such Event of Loss in Section
3.04(a)(i) of the Mortgage or such Permitted Disposition in Section 3.04(h) of
the Mortgage (in either case, the "Engine Payment Date"), prepay the Loan in a
principal amount equal to the amount determined pursuant to the immediately
following sentence, together with accrued interest thereon to the date of such
prepayment plus any LIBOR Breakage Costs. The amount of principal to be prepaid
pursuant to this Section 1.1(d) with respect to any Engine will be equal to the
amount set forth opposite such Engine (or the Engine which such Engine has
replaced) under the appropriate heading on Schedule 2 as follows: "Stipulated
Loss Value-A" (with respect to an Event of Loss that occurs prior to the
Designated Dated), "Stipulated Loss Value-B" (with respect to an Event of Loss
that occurs on or after the Designated Date), or "Termination Value" (if Section
3.04(h)(3)(ii) of the Mortgage is applicable). For the avoidance of doubt such
prepayment would not be subject to any Prepayment Fee, may be made prior to the
Designated Date and may be in an amount less than $5,000,000.

      (e)   Pro Rata Treatment. Except to the extent otherwise provided herein
(including, but not limited to, as otherwise specified in Section 1.1(c)(ii)
above and Section 1.6 below): (a) the borrowing of the Loan from the Lenders
under Section 1.2 shall be made from the Lenders pro rata according to the
amounts of their respective Commitments; (b) each payment or prepayment of
principal of the Loan shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amounts of the Loan held by them
(as evidenced by the Notes, regardless of Series, held by them); and (c) each
payment of interest on the Loan shall be made for account of the Lenders pro
rata in accordance with the amounts of interest on the Loan then due and payable
to the Lenders, but must in all respects comply with the terms of the Mortgage.

      Section 1.2. Making the Loan.

            (a)   The Loan shall be requested by the delivery of a Notice of
Borrowing by the Borrower to the Administrative Agent not later than 4:00 p.m.
(New York City time) on the third Business Day prior to the Funding Date
specified in such notice. The Administrative Agent shall give to each Lender
prompt notice thereof. The Notice of Borrowing shall be irrevocable and binding
on the Borrower. The Notice of Borrowing shall be in writing specifying therein
the (i) the aggregate amount of the Loan to be funded, and (ii) the proposed
Funding Date. The Original Series A Lender and the Original Series B Lender
shall, before 10:00 a.m. (New York City time) on the scheduled Funding Date,
make available for the account of its Lending Office to the Administrative
Agent's Account, in immediately available funds, the Series A

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Commitment and the Series B Commitment respectively. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article VI as confirmed during a closing conference call pursuant
to which the Administrative Agent or its counsel shall indicate such
fulfillment, the Administrative Agent shall transfer such funds to the Borrower
at its account at Bank One Arizona, N.A. (ABA No. 122-100-024), Account Number
23124479.

      (b)   If for any reason a Closing is not consummated on the Funding Date
set forth in the Notice of Borrowing, the Borrower may, by written notice to the
Administrative Agent given by 5:00 p.m., New York City time on the scheduled
Funding Date, designate a delayed Funding Date for such Closing, in which case
the Administrative Agent shall hold the funds provided by the Lenders until such
delayed Funding Date and use reasonable efforts to invest such funds in
Permitted Investments, as directed by the Borrower, provided, that if such
Closing does not occur by the third Business Day after such initial scheduled
Funding Date, such funds shall be returned to the Lenders. The Administrative
Agent shall pay to the Borrower upon its request any earnings from such
investments, and the Borrower shall pay to the Administrative Agent upon its
request any losses from such investments. If the Closing fails to occur on a
scheduled or delayed Funding Date and the Borrower does not give notice of a
delayed Funding Date pursuant to this Section, the Administrative Agent shall
promptly return to the Lenders the amounts funded by them and the Borrower shall
pay to the Lenders upon demand LIBOR Breakage Costs with respect to amounts
funded plus, in the case of failure to close on a delayed Funding Date, interest
from and including the initial scheduled Funding Date to but excluding the date
on which such funds are returned by 1:00 p.m. (New York City time) (or, if
returned after such time on such date, to but excluding the next Business Day),
at a rate per annum equal to the relevant LIBOR Rate plus the Applicable Margin
that would have been applicable thereto had the Closing occurred on the initial
scheduled Funding Date. If the Borrower has designated a delayed Funding Date
pursuant to this Section and the Closing occurs on such delayed Funding Date,
the Loan shall begin to accrue interest at the relevant LIBOR Rate plus the
Applicable Margin on the date that funds were originally provided by the Lenders
to the Administrative Agent to make the Loan (which shall be deemed to be the
commencement date of the initial Interest Period for the Loan); provided,
however, if all conditions precedent specified in Article VI are satisfied in
full on or before the initial scheduled Funding Date and the Closing does not
occur on the initial scheduled Funding Date solely due to the failure of the
Lenders to fund the Loan pursuant to their respective Commitments hereunder (but
the Closing does occur later pursuant to this Section 1.2(b)), then the Loan
shall begin to accrue interest only on the date that the Closing actually occurs
(rather than from the initial scheduled Funding Date).

      Section 1.3. Fees. The Borrower shall pay to the Administrative Agent on
the Funding Date an upfront fee in the amount agreed to separately with the
Administrative Agent in writing.

      Section 1.4. Commitment Termination. The Aggregate Commitment and the
Commitment of each Lender shall terminate on the earlier of (i) the making of
the Loan pursuant to Section 1.2(a) above, or (ii) at 5:00 p.m. (New York time)
on the Commitment Termination Date.

      Section 1.5. [Intentionally omitted.].

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      Section 1.6. Substitute Lenders. In the event the Borrower is required
under the provisions of Section 5.1, 5.2 or 5.3 to make payments to any Lender,
a notice has been given to the Borrower under Section 1.7(g) and the Borrower
and a Lender are unable to agree on a Substitute Basis or an Affected Lender has
given notice to the Borrower under Section 1.7(c) and the Borrower and the
Affected Lender are unable to agree on a Substitute Basis, the Borrower may, so
long as no Potential Default under clause (a), (e) or (f) of Section 7.1 or
Event of Default shall have occurred and be continuing, elect to terminate such
Lender (or Affected Lender) as a party to this Agreement; provided that
concurrently with such termination, (i) the Borrower shall pay or cause to be
paid to that Lender (or Affected Lender) all principal, interest, LIBOR Breakage
Costs and fees and other Obligations (including, without limitation, amounts, if
any, owed under Sections 5.1, 5.2 and 5.3) due to such Lender (or Affected
Lender) through such date of termination, (ii) another financial institution
reasonably satisfactory to the Borrower and the Administrative Agent shall
agree, as of such date, to become a Lender for all purposes under this Agreement
(whether by assignment or amendment) and to assume all obligations of the Lender
(or Affected Lender) to be terminated as of such date, and (iii) all documents
and supporting materials necessary, in the reasonable judgment of the
Administrative Agent, to evidence the substitution of such Lender shall have
been received and approved by the Administrative Agent as of such date.

      Section 1.7. Special Provisions Governing the Loan. Notwithstanding any
other provision of this Agreement to the contrary, the following provisions
shall govern with respect to the Loans as to the matters covered:

      (a)   As soon as practicable after 11:00 a.m. (London time) on each
Interest Rate Determination Date, the Administrative Agent shall determine the
interest rate that shall apply to each Series of Notes for the applicable
Interest Period (which determination shall be prima facie evidence of such rate)
and shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Borrower, the Security Trustee and each Lender; provided that
the Administrative Agent's failure to so give notice shall not relieve the
Borrower of its obligation to pay interest on the Notes hereunder.

      (b)   [Intentionally omitted].

      (c)   In the event that on any date the making, maintaining or
continuation by any Lender of its Percentage Share of the Loan as evidenced by
its Notes has become unlawful as a result of compliance by such Lender in good
faith with any change that becomes effective after the date hereof in any law,
treaty, governmental rule, regulation, guideline or order (whether or not having
the force of law), then, and in any such event, such Lender shall be an
"Affected Lender" and it shall promptly so notify (by facsimile or by telephone
confirmed in writing) the Borrower and the Security Trustee (which notice the
Security Trustee shall promptly transmit to each other Lender). Thereafter (i)
the obligation of the Affected Lender to make its Percentage Share of the Loan
as evidenced by its Notes (if not yet funded) shall be suspended until such
notice shall be withdrawn by the Affected Lender, (ii) the Affected Lender's
obligation to maintain its outstanding Loan Amount as evidenced by its Notes
(the "Affected Loan Amount") shall be suspended with respect to the Affected
Loan Amount until such notice shall be withdrawn by the Affected Lender, and
(iii) the parties shall follow the procedures set forth in Section 1.7(f) with
respect to the Affected Loan Amount so long as, if following such

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procedures, the maintaining continuation of such Affected Loan Amount or the
balance of the Loan is not unlawful. The Borrower may elect to terminate such
Affected Lender as a party to this Agreement in compliance with Section 1.6.
Except as provided in the immediately preceding sentence, nothing in this
Section 1.7(c) shall affect the obligation of any Lender other than an Affected
Lender to make its Percentage Share of the Loan or maintain its Loan Amount as
evidenced by its Notes in accordance with the terms of this Agreement.

      (d)   The Borrower shall compensate each Lender, within ten (10) Business
Days after written request by that Lender (which request shall set forth in
reasonable detail the basis for requesting such amounts), for all reasonable
losses, costs, expenses and liabilities (including any interest paid by that
Lender to lenders of funds borrowed by it to make or carry its Loan Amount as
evidenced by its Notes and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds)
(collectively, "LIBOR Breakage Costs") which that Lender may sustain: (i) except
as provided in Section 1.2(b), if for any reason (other than a default by that
Lender) a borrowing of the Loan does not occur on a date specified therefor in a
Notice of Borrowing, (ii) as a consequence of any prepayment or other principal
payment of the Loan or any portion thereof that occurs on a date other than the
last day of an Interest Period, (iii) to the extent that any prepayment of the
Loan or any portion thereof is not made on any date specified in a notice of
prepayment given by the Borrower (including, without limitation, any notice of
prepayment revoked by the Borrower), (iv) as a consequence of the replacement of
such Lender pursuant to Section 1.6 or (v) as a consequence of any default by
the Borrower in the repayment of the Loan when required by the terms of this
Agreement.

      (e)   In the case of any Lender, LIBOR Breakage Costs shall not exceed the
excess, if any, of (A) the amount of interest which would have accrued on the
principal amount of such Lender's Loan Amount (or in the case of an event
described in subclause (i) of Section 1.7(c) above, such Lender's Percentage
Share) had such event not occurred, at the LIBOR Rate that would have been
applicable to the Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, for the period that would have been the Interest Period for the Loan)
(the "BREAK PERIOD"), over (B) the interest that would have accrued on such
amount during the Break Period at an interest rate equal to the LIBOR Rate
(determined two Business Days prior to the first day of the Break Period) with a
maturity comparable to the Break Period (or, if no such rate exists for such
period, the rate determined from the applicable Bloomberg screen using standard
interpolation methodologies by reference to the next higher and next lower
available maturities (as determined by the Administrative Agent). A certificate
of any Lender setting forth any amount or amounts that such Lender is entitled
to receive pursuant to this Section shall be delivered to the Borrower and shall
be prima facie evidence of amounts owed under this Section. The Borrower shall
pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.

      (f)   During the 30 days following the date of any notice given to the
Borrower pursuant to Section 1.7(c) or 1.7(g), each Affected Lender (or, in the
case of Section 1.7(g), each Lender) and the Borrower shall negotiate in good
faith in order to arrive at a mutually acceptable alternative basis for
determining the interest rate from time to time applicable to the Affected Loan
Amount (or, in the case of Section 1.7(g), the Loan) (the "Substitute Basis");
such interest rate to be based on an agreed cost-of-funds benchmark plus the
Applicable Margin. If within the 30 days following the date of any such notice
to the Borrower, any Affected Lender (or, in the

                                      -6-
<PAGE>

case of Section 1.7(g), any Lender) and the Borrower shall agree upon a
Substitute Basis, such Substitute Basis shall be retroactive to and effective
from the first day of the applicable Interest Periods until and including the
last day of such Interest Periods. If after 30 days from the date of such
notice, any Affected Lender (or, in the case of Section 1.7(g), any Lender) and
the Borrower shall have failed to agree upon a Substitute Basis, then each such
Affected Lender (or, in the case of Section 1.7(g), each such Lender) shall
certify in writing to the Borrower through the Security Trustee (such
certification to be conclusive and binding on all of the parties hereto absent
manifest error) the interest rate at which such Affected Lender (or, in the case
of Section 1.7(g), such Lender) is prepared to make or maintain the Affected
Loan Amount (or, in the case of Section 1.7(g), its Loan Amount) for such
Interest Periods, such interest rate to be retroactive to and effective from the
first day of such Interest Period. If no Substitute Basis is established, upon
receipt of notice of the interest rates at which an Affected Lender (or, in the
case of Section 1.7(g), a Lender) is prepared to make or maintain its affected
Loans, the Borrower shall have the right (i) exercisable upon ten Business Days'
prior notice to such Affected Lender (or such Lender) through the Security
Trustee (A) to continue to borrow the relevant Loan Amount at the interest rates
so advised by such Affected Lender (or such Lender) (as such rates may be
modified, from time to time, at the outset of each subsequent Interest Period)
or (B) to prepay in full the affected Loan Amount of any such Affected Lender
(or any such Lender), together with accrued interest thereon at the interest
rate certified in writing by such Affected Lender (or such Lender) as provided
above and any LIBOR Breakage Costs (provided that LIBOR Breakage Costs shall not
include amounts attributable to an Affected Lender's (or in the case of Section
1.7(g), a Lender's) funding commitment of greater than three months), whereupon
such affected Loan Amount shall become due and payable on the date specified by
the Borrower in such notice or (ii) to substitute any such Affected Lender (or
such Lender) pursuant to the provisions of, and subject to the conditions
contained in, Section 1.6.

      (g)   In the event that on any Interest Rate Determination Date, by reason
of circumstances affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the interest rate applicable to the Loan on
the basis provided for in the definition of LIBOR Rate, the Administrative Agent
shall on such date give notice (by facsimile or by telephone confirmed in
writing) to the Borrower and each Lender of such circumstance, whereupon the
relevant provisions of Section 1.7(f) shall be applicable.

      Section 1.8. Payments and Computations.

      (a)   The Borrower shall make each payment hereunder and under the Notes
not later than 12:30 p.m. (New York City time) on the day when due in Dollars to
the Administrative Agent's Account in immediately available funds, without
set-off or counterclaim (except for any required withholding taxes not subject
to indemnification hereunder). Any amounts received after such time may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for the purpose of calculating interest thereon.
The Administrative Agent will promptly thereafter but in no event later than
2:00 p.m. (New York City time) on the date such funds are received by the
Administrative Agent from the Borrower cause to be distributed like funds to the
Lenders for the account of their respective Lending Offices, in each case to be
applied in accordance with the terms of this Agreement. If the payment by the
Borrower is received by the Administrative Agent after 12:30 p.m., New York
time, at the place of payment, the Administrative Agent shall make payment
promptly, but

                                      -7-
<PAGE>

not later than 2:00 p.m. New York time on the next succeeding Business Day. Upon
its acceptance of any Transfer Supplement and recording of the information
contained therein in the Register pursuant to Section 9.8(d), from and after the
effective date specified in such Transfer Supplement, the Administrative Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender assignee thereunder.

      (b)   Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or other amounts as the case
may be; provided, however, that, if such extension would cause payment of
interest on or principal of a Loan to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day, and such
reduction of time shall be given effect in the computation of the payment of
interest hereunder.

      Section 1.9. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loan owing to it in excess of its
proportionate share of payments on account of the Obligations, such Lender shall
forthwith purchase from the other Lenders such participation in the applicable
Obligations as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's proportionate share (according to
the proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 1.9 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.

      Section 1.10. Obligation of Lenders to Mitigate. If an event or the
existence of a condition occurs that would cause any Lender to become an
Affected Lender or that would entitle such Lender to receive payments under
Section 5.1, 5.2 or 5.3, then, upon the request of the Borrower, such Lender
will to the extent not inconsistent with any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, fund or maintain the
Commitment of such Lender or the Loan Amount of such Lender through another
lending office of such Lender or (ii) take such other reasonable measures, if as
a result thereof the circumstances which would cause such Lender to be an
Affected Lender would cease to exist or the additional amounts which would
otherwise be required to be paid to such Lender pursuant to Sections 5.1, 5.2
and 5.3 would be reduced and if the making, funding or maintaining of such
Commitment or Loan Amount through such other lending office or in accordance
with such other measures, as the case may be, would not otherwise materially
adversely affect such Commitment or Loan Amount or the interests of such Lender;
provided that such Lender will not be obligated to utilize such other lending
office pursuant to this Section 1.10 unless the Borrower agrees to pay all
incremental expenses, if any, incurred by such Lender as a result of utilizing
such other lending office as described in clause (i) above; provided, further,
that such Lender shall have no obligation to

                                      -8-
<PAGE>

designate another lending office that does not maintain loans comparable to the
Loan. A certificate as to the amount of any such expenses (setting forth in
reasonable detail the basis for requesting such amount and the calculation
thereof) submitted by such Lender to the Borrower (with a copy to the Security
Trustee) shall be prima facie evidence of such expenses.

      Section 1.11. Replacement Notes So long as General Electric Capital
Corporation and its Affiliates are the only Lenders, Replacement Notes may be
issued in accordance with the terms and conditions set forth in the Restructure
Letter.

                                   ARTICLE II
                                    INTEREST

      Section 2.1. Rate of Interest. Subject to Section 1.7 hereof, each Note
shall bear interest on the unpaid principal amount thereof for each Interest
Period from the date made through maturity (whether by acceleration or
otherwise) at a rate equal to the sum of the LIBOR Rate for such Interest Period
plus the Applicable Margin. The applicable Interest Period for determining the
rate of interest with respect to each Note or portion thereof shall be
established in accordance with Section 2.2.

      Section 2.2. Interest Periods.

      (a)   Interest Periods. The first Interest Period shall be the period
commencing on the Funding Date (provided, that in the case of a delayed Funding
Date, the date the funds for such Note are made available to the Administrative
Agent shall be the commencement date of such Interest Period pursuant to Section
1.2(b)), and shall end on, but shall exclude, the next Interest Payment Date,
and thereafter each successive Interest Period shall commence on (and shall
include) the last day of the next preceding Interest Period and shall end on
(but shall exclude) the next succeeding Interest Payment Date, provided however
that notwithstanding anything in this Agreement to the contrary, the final
Interest Period shall end on the Maturity Date.

      (b)   Expiration of Interest Periods. If an Interest Period would
otherwise expire on a day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; provided that, if any Interest
Period would otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day.

      Section 2.3. Interest Payments. Accrued interest on each Note shall be
payable in arrears on the last day of each Interest Period; provided, that (i)
interest accrued pursuant to Section 2.4 shall be payable on demand and (ii) in
the event of any repayment or prepayment of any Note (or any portion thereof),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment.

      Section 2.4. Default Rate. Notwithstanding Section 2.1, the Borrower shall
pay the Security Trustee for the account of the Lenders and the Transaction
Agents on demand interest on any principal, interest, fee or other amount not
paid hereunder, under any Note or under any other Transaction Document when due
at a rate per annum that is 2% per annum in excess of the LIBOR Rate for the
relevant Interest Period plus the Applicable Margin (the "Default Rate").

                                      -9-
<PAGE>

      Section 2.5. Computation of Interest. Interest on the Notes shall be
computed on the basis of a 360-day year for the actual number of days elapsed in
the period during which such amount accrues. In computing such amounts, the
first day of the applicable period shall be included, and the last day of the
applicable period shall be excluded; provided that if a Note (or any portion
thereof) is repaid on the same day on which it is made, one day's interest shall
be paid on that Note or the relevant portion thereof.

      Section 2.6. Maximum Rate. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Note, together with
all fees, charges and other amounts which are treated as interest on such Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by the Lender holding the Loan or the relevant portion
thereof in accordance with applicable law, the rate of interest payable in
respect of such Note or the relevant portion thereof hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable
in respect of such Note or the relevant portion thereof but were not payable as
a result of the operation of this Section shall be cumulated and the interest
and Charges payable to such Lender in respect of other periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the LIBOR Rate to the date of repayment, shall
have been received by such Lender.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

      Section 3.1. Representations and Warranties. The Borrower represents and
warrants to the Transaction Agents and each Lender as of the date of this
Agreement that:

      (a)   Organization; Powers. The Borrower is duly incorporated, validly
existing and in good standing under the laws of Delaware, has all requisite
corporate power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, would not
result in a Material Adverse Change, is qualified to do business in, and is in
good standing in, every jurisdiction where such qualification is required.

      (b)   Authorization; Enforceability. The execution and delivery of the
Transaction Documents by the Borrower and the performance by the Borrower of its
obligations thereunder are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action of Borrower and do not require
any stockholder approval, or approval or consent of any trustee or holder of
indebtedness or obligations of the Borrower except such as have been duly
obtained. This Agreement has been duly executed and delivered by the Borrower
and the other Transaction Documents will be duly executed and delivered by the
Borrower when required by this Agreement. This Agreement constitutes, and each
of the other Transaction Documents when executed and delivered by the Borrower
will constitute, a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

                                      -10-
<PAGE>

      (c)   No Violation. The execution and delivery by the Borrower of the
Transaction Documents and the performance by the Borrower of its obligations
thereunder do not and will not (a) violate any provision of the Certificate of
Incorporation or By-Laws of the Borrower, (b) violate any law applicable to or
binding on the Borrower or (c) violate or constitute any default under (other
than any violation or default that would not result in a Material Adverse
Change), or result in the creation of any Lien (other than as permitted under
the Mortgage) upon any Engine under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, lease, loan or other material
agreement, instrument or document to which the Borrower is party or by which the
Borrower or any of its properties is bound.

      (d)   Governmental Approvals. The execution and delivery by the Borrower
of the Transaction Documents and the performance by the Borrower of its
obligations thereunder do not and will not require the consent or approval of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, any
Governmental Authority, other than (i) the consents of the ATSB and the four
counterguarantors under the ATSB loan documents to the Transaction Documents and
the Additional Documents, which have been obtained, (ii) the filings,
recordings, notices and other ministerial actions pursuant to any routine
recording, and contractual or regulatory requirements applicable to it, each of
which has been effected or obtained, and (iii) the filings described in Section
3.2(b).

      (e)   Litigation. Except as set forth in the Borrower's Annual Report on
Form 10-K for 2003 (as amended through the Funding Date), or in any Quarterly
Report on Form 10-Q or Current Report on Form 8-K filed by the Borrower with the
SEC subsequent to such Form 10-K (in each case as amended through the Funding
Date) (a list of which filings has been provided by Borrower to the
Administrative Agent on the Funding Date), no action, claim or proceeding is now
pending or, to the Actual Knowledge of the Borrower, threatened against the
Borrower before any court, governmental body, arbitration board, tribunal or
administrative agency, which is reasonably likely to be determined adversely to
the Borrower and if determined adversely to the Borrower would result in a
Material Adverse Change.

      (f)   Financial Condition. The audited consolidated balance sheet of the
Borrower with respect to its most recent fiscal year included in its Annual
Report on Form 10-K for 2003 (as amended through the Funding Date) filed by the
Borrower with the SEC, and the related consolidated statements of operations and
cash flows for the year then ended have been prepared in accordance with GAAP
and fairly present in all material respects the financial condition of the
Borrower and its consolidated subsidiaries as of such date and the results of
its operations and cash flows for such period, and since the date of such
balance sheet there has been no Material Adverse Change in such financial
condition or operations of the Borrower, except for matters disclosed in (a) the
financial statements referred to above or (b) any subsequent Quarterly Report on
Form 10-Q or Current Report on Form 8-K filed by the Borrower with the SEC (in
each case as amended through the Funding Date) (a list of which filings has been
provided by Borrower in writing to the Administrative Agent on the Funding
Date). The consolidated balance sheet of the Borrower as of June 30, 2004
included in its Quarterly Report on Form 10-Q for the period ended June 30,
2004, and the related consolidated statement of operations and cash flows for
the three months then ended have been prepared in accordance with GAAP (subject
to normal year-end adjustments and the absence of footnotes) and fairly present
in all material respects the

                                      -11-
<PAGE>

financial condition of the Borrower and its consolidated subsidiaries as of such
date and the results of its operations and cash flows for such period.

      (g)   No Default. No Event of Default or Potential Default has occurred
and is continuing.

      (h)   Investment and Holding Company Status. The Borrower is not (i) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (ii) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

      (i)   Use of Proceeds. No part of the proceeds of the Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of
Regulations U or X of the Board of Governors of the Federal Reserve System.

      (j)   Licenses, Permits, etc. The Borrower is a Certificated Air Carrier
and holds all licenses, permits and franchises from the appropriate Governmental
Authorities necessary to authorize the Borrower to lawfully engage in air
transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse Change.

      (k)   Compliance with Laws. Each of the Borrower and its Subsidiaries is
in compliance with all laws, regulations and orders of any governmental or
regulatory authority or agency applicable to it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change.

      (l)   Tax Returns. The Borrower and its Subsidiaries have timely filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all Taxes that are material in amount shown to
be due pursuant to such returns or pursuant to any assessment received by the
Borrower or any of its Subsidiaries, other than any such assessment that is
being contested in good faith through appropriate proceedings and against which
adequate reserves are being maintained and the nonpayment of which (individually
or in the aggregate) could reasonably be expected to cause a material impairment
of the ability of the Borrower to perform, or the Transaction Agents or the
Lenders to enforce, the obligations of the Borrower under the Transaction
Documents. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Borrower, adequate.

      (m)   Information. The Borrower's Annual Report on Form 10-K for 2003
filed with the SEC and each of the Borrower's Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K subsequently filed by the Borrower with the SEC, as
of the date it was filed with the SEC (or, if such report has been amended, in
each case as amended through the Funding Date) did not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.

      (n)   ERISA. The Borrower and its subsidiaries have no employee benefit
plans covered by the minimum funding requirements of ERISA.

                                      -12-
<PAGE>

      Section 3.2. The Engines. The Borrower represents and warrants to the
Transaction Agents and each Lender, as of the date of this Agreement and as of
the Funding Date, that:

      (a)   Good Title. The Borrower has good title to each Engine free and
clear of Liens other than the Permitted Liens and the Liens to be released by
the Releases. Each Engine is maintained in accordance with the Borrower's
FAA-approved maintenance program relating to such Engine.

      (b)   Filings. Except for (i) the filing for recordation (and recordation)
with the FAA of the FAA Filed Documents with respect to the Engines, (ii) the
filing of the Financing Statements (and continuation statements relating thereto
at periodic intervals) with the Secretary of State of the State of Delaware (UCC
Division) with respect to the Relevant Engines, and (iii) the affixation of the
nameplates with respect to such Engines referred to in Section 3.02(d) of the
Mortgage, no further action, including any filing or recording of any document
(including any financing statement in respect thereof under Article 9 of the
UCC) is necessary in order to establish and perfect the Security Trustee's
interest under the Mortgage in the Engines as against the Borrower and any other
Person, in each case, in any applicable jurisdiction in the United States.

      (c)   No Event of Loss. No Event of Loss has occurred with respect to any
Engine, and no circumstance, condition, act or event has occurred that, with the
giving of notice or lapse of time or both gives rise to or constitutes an Event
of Loss with respect to any Engine.

      (d)   Section 1110. The Security Trustee is entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to the Specified Engines as
provided in the Mortgage in the event of a case under Chapter 11 of the
Bankruptcy Code in which Borrower is a debtor.

      (e)   Condition. Each Engine is in the condition and state of repair
required under the FAA-approved maintenance program of Borrower relating to such
Engine, and no appliances, parts, interests, appurtenances, accessories or other
equipment of whatever nature which are incorporated or installed in or attached
to any Engine are leased by the Borrower.

      Section 3.3 Representations and Warranties of the Security Trustee. The
Security Trustee represents and warrants in its individual capacity that:

      (a)   Powers and Authorizations. It is a national banking association duly
organized and validly existing in good standing under the laws of the United
States and has full power and authority, in its individual capacity, to execute
and deliver this Agreement and (assuming the due authorization, execution and
delivery of this Agreement by the other parties hereto) perform its obligations
hereunder. The execution, delivery and performance by the Security Trustee of
the Transaction Documents to which it is or will be a party have been duly
authorized by all necessary action on its part and do not contravene the Charter
or By-laws of the Security Trustee; and the Transaction Documents to which the
Security Trustee is or will be a party have been duly authorized, executed and
delivered by the Security Trustee and constitute the legal, valid and binding
obligations, enforceable against it in accordance with its terms. This Agreement
and the other Transaction Documents to which the Security Trustee is or will be
a party, upon the due execution and delivery hereof, will constitute the legal,
valid and binding obligations of the

                                      -13-
<PAGE>

Security Trustee in its individual capacity, and the performance by the Security
Trustee (in its individual or trust capacity, as the case may be) of any of its
obligations hereunder and thereunder does not contravene any federal law or
regulation or contractual restriction binding on or governing the banking or
trust powers of the Security Trustee (in its individual or trust capacity, as
the case may be);

      (b)   Litigation. There are no pending (or, to the Security Trustee's
knowledge, threatened) actions, suits, investigations or proceedings against or
affecting it before any court, arbitrator, or administrative or governmental
body which, individually or in the aggregate, if decided adversely to the
interests of the Security Trustee would materially and adversely affect the
ability of the Security Trustee, either in its individual capacity or as
Security Trustee, as the case may be, to perform its obligations under this
Agreement or any other Transaction Document or which questions or would affect
the legality or validity of this Agreement or such Transaction Document;

      (c)   No Legal Bar. Neither the execution and delivery by the Security
Trustee of this Agreement or any other Transaction Document nor the consummation
by the Security Trustee of any of the transactions contemplated hereby or
thereby requires or will require the consent or approval of or the giving of
notice to, the registration with, or the taking of any other action in respect
of, any federal governmental authority or agency governing its banking or trust
powers.

      Section 3.4 Representations and Warranties of the Lenders. Each Lender
represents and warrants that:

      (a)   Accredited Investor. It is an accredited investor (as such term is
defined in Rule 501 under the Securities Act of 1933, as amended);

      (b)   Investment Intent. It is acquiring its interest in a Note, and any
interest in and to the Collateral, for its own account for investment and not
with a view to resale or distribution (subject, however, to the disposition of
its property being at all times within its control);

      (c)   ERISA. No part of the funds used by it to acquire its Notes
constitute the assets of any Plan. As used herein, "Plan" means an "employee
benefit plan (as such term is defined in Section 3(3) of ERISA or any "plan" (as
such term is defined in Section 4975(e)(1) of the Code which has been
established or maintained or contributed to by Borrower or an Affiliate that,
together with Borrower is treated as a single employer under Section 414(b), (c)
or (m) of the Code; and

      (d)   No Offering. Neither it nor anyone acting on its behalf has directly
or indirectly offered its Notes or any interest therein or any interest in and
to the Collateral, for sale to, or solicited any offer to acquire any of the
same from, the public or in any manner that would violate, or require the
registration of the issuance and sale of, such Notes or any interest therein, or
any transaction contemplated hereby, under the Securities Act of 1933, as
amended, the Trust Indenture Act of 1939, as amended, or applicable state
securities laws, or that might subject the Borrower to regulation under, require
Borrower to give notice to, or register with or take any other action in respect
of, any foreign governmental authority or agency.

                                      -14-
<PAGE>

                                   ARTICLE IV
                                    COVENANTS

      Section 4.1. Covenants of the Borrower. The Borrower shall comply with the
following covenants and agreements, unless the Required Lenders shall otherwise
consent:

            (a)   Financial Statements and Other Information. The Borrower will
      furnish to the Transaction Agents and each Lender:

                  (i)   within 120 days after the end of each fiscal year of the
            Borrower, a copy of the Form 10-K (excluding exhibits) filed by the
            Borrower with the SEC for such fiscal year (or in lieu of such copy
            an e-mail notice that such report has been filed with the SEC and
            providing a web site address at which such report may be accessed,
            provided that such e-mail notice will satisfy this requirement only
            if such report is in fact accessible at such web site address), or,
            if no such Form 10-K was so filed, its audited consolidated balance
            sheet and related statements of operations, stockholders' equity and
            cash flows as of the end of and for such year, setting forth in each
            case in comparative form the figures for the previous fiscal year,
            all reported on by the Borrower's independent public accountants of
            recognized national standing to the effect that such consolidated
            financial statements present fairly in all material respects the
            consolidated financial condition and results of operations of the
            Borrower and its Subsidiaries on a consolidated basis in accordance
            with GAAP;

                  (ii)  within 60 days after the end of each of the first three
            fiscal quarters of each fiscal year of the Borrower, a copy of the
            Form 10-Q (excluding exhibits) filed by the Borrower with the SEC
            for such quarterly period (or in lieu of such copy an e-mail notice
            that such report has been filed with the SEC and providing a web
            site address at which such report may be accessed, provided that
            such e-mail notice will satisfy this requirement only if such report
            is in fact accessible at such web site address), or if no such Form
            10-Q was so filed, its consolidated balance sheet and related
            statements of operations and cash flows as of the end of and for
            such fiscal quarter (in the case of the statement of operations) and
            the then elapsed portion of the fiscal year, setting forth in each
            case in comparative form the figures for the corresponding period or
            periods of (or, in the case of the balance sheet, as of the end of)
            the previous fiscal year, prepared in accordance with GAAP, subject
            to normal year-end audit adjustments and the absence of footnotes;

                  (iii) concurrently with any delivery of financial statements
            under clause (i) above, an Officer's Certificate of the Borrower
            certifying as to whether the Borrower has Actual Knowledge that a
            Potential Default or an Event of Default has occurred and is
            continuing and, if so, specifying the details thereof and any action
            taken or proposed to be taken with respect thereto;

                  (iv)  promptly following any request therefor, such other
            nonconfidential information regarding the Engines, the operations,
            business

                                      -15-
<PAGE>

            affairs and financial condition of the Borrower or any Subsidiary,
            or compliance with the terms of the Transaction Documents, as any
            Transaction Agent or Lender may reasonably request; and

                  (v)   in the event that Borrower or any Affiliate that,
            together with Borrower is treated as a single employer under Section
            414(b), (c) or (m) of the Code, establishes any employee benefit
            plan subject to Title IV of ERISA, upon the request of the Security
            Trustee or any Lender, Borrower shall provide copies of the most
            recent annual reports or returns (IRS Form 5500), audited or
            unaudited financial statements and actuarial valuations with respect
            to such plans.

            (b)   Existence; Conduct of Business. The Borrower will, and will
      cause each of its Subsidiaries to:

                  (i)   do or cause to be done all things necessary to preserve
            and maintain its legal existence; provided that the foregoing shall
            not prohibit any merger, consolidation, liquidation or dissolution
            permitted under Section 4.1(c); provided further that this Section
            4.1(b)(i) shall apply to the Subsidiaries of Borrower, if any, only
            to the extent that the dissolution, termination or other loss of
            legal existence of such Subsidiaries would reasonably be expected to
            (either individually or in the aggregate) cause a material
            impairment of the ability of the Borrower to perform, or the
            Transaction Agents or the Lenders to enforce, the obligations of the
            Borrower under the Transaction Documents.

                  (ii)  comply with the requirements of all applicable laws,
            rules, regulations and orders of governmental or regulatory
            authorities if failure to comply with such requirements would
            reasonably be expected to (either individually or in the aggregate)
            cause a material impairment of the ability of the Borrower to
            perform, or the Transaction Agents or the Lenders to enforce, the
            obligations of the Borrower under the Transaction Documents;

                  (iii) pay and discharge all Taxes imposed on it or on its
            income or profits or on any of its property prior to the date on
            which penalties attach thereto, except for any such Tax the payment
            of which is being contested in good faith and by proper proceedings
            and against which adequate reserves are being maintained, and the
            nonpayment of which (either individually or in the aggregate) could
            reasonably be expected to cause a material impairment of the ability
            of the Borrower to perform, or the Transaction Agents or the Lenders
            to enforce, the obligations of the Borrower under the Transaction
            Documents; and

                  (iv)  permit representatives of any Lender, during normal
            business hours and on reasonable notice, to discuss its business and
            affairs with its officers, all to the extent reasonably requested by
            such Lender; provided, however, that this Section 4.1(b)(iv) shall
            apply to Subsidiaries of Borrower, if any, only to the extent that
            an adverse circumstance with respect to the business and affairs of
            such Subsidiaries would reasonably be expected to cause a material
            impairment of

                                      -16-
<PAGE>

            the ability of the Borrower to perform, or the Transaction Agents or
            the Lenders to enforce, the obligations of the Borrower under the
            Transaction Documents.

            (c)   Mergers and Consolidations. The Borrower will not consolidate
      with or merge into any other Person or convey, transfer or lease all or
      substantially all of its assets as an entirety to any Person unless:

                  (i)   the Person formed by such consolidation or into which
            the Borrower is merged or the Person which acquires by conveyance,
            transfer or lease substantially all of the assets of the Borrower as
            an entirety shall be a Certificated Air Carrier;

                  (ii)  the Person formed by such consolidation or into which
            the Borrower is merged or the Person which acquires by conveyance,
            transfer or lease substantially all of the assets of the Borrower as
            an entirety shall execute and deliver to the Security Trustee a duly
            authorized, valid, binding and enforceable agreement in form and
            substance reasonably satisfactory to the Security Trustee containing
            an assumption by such Person of the due and punctual performance and
            observance of each covenant and condition of the Transaction
            Documents to be performed or observed by the Borrower;

                 (iii) immediately after giving effect to such transaction, no
            Event of Default shall have occurred and be continuing;

                  (iv)  all filings shall have been made as shall be necessary
            to preserve the perfection of (A) the Lien of the Mortgage on each
            Engine on a first priority and perfected basis (subject to Permitted
            Liens) and (B) the Lien of the Subordinated Mortgage on each Engine
            on a second priority and perfected basis (subject to Permitted
            Liens); and

                  (v)   promptly after the consummation of such transaction, the
            Borrower shall deliver to the Security Trustee a certificate of the
            Secretary or an Assistant Secretary of Borrower certifying as to
            Borrower's compliance with the conditions of this Section 4.1(c) and
            an opinion of Borrower's Legal Department as to Borrower's
            compliance with Sections 4.1(c)(i), 4.l(c)(ii) and 4.1(c)(iv).

      Upon any consolidation or merger, or any conveyance, transfer or lease of
      all or substantially all of the assets of the Borrower as an entirety in
      accordance with this Section 4.1(c), the Person formed by such
      consolidation or into which the Borrower is merged or to which such
      conveyance, transfer or lease is made shall succeed to, and be substituted
      for, and may exercise every right and power of, the Borrower under this
      Agreement and the other Transaction Documents with the same effect as if
      such Person had been named as the Borrower herein. No such conveyance,
      transfer or lease of all or substantially all of the assets of the
      Borrower as an entirety shall have the effect of releasing the Borrower or
      any Person which shall theretofore have become such in the manner
      prescribed in this Section 4.1(c) from the Borrower's liability in respect
      of any Transaction Document to which it is a party.

                                      -17-
<PAGE>

            (d)   Delivery of Post-Recording FAA Opinion. Promptly upon the
      recording of the Mortgage, the Subordinated Mortgage, and each Mortgage
      Supplement and each Subordinated Mortgage Supplement covering each Engine
      pursuant to the Act, the Borrower will cause Daugherty, Fowler, Peregrin &
      Haught, FAA counsel in Oklahoma City, Oklahoma, to deliver to the Security
      Trustee and the Borrower a favorable opinion addressed to each of them as
      to such recordation and the lack of filing of any intervening documents
      creating a Lien with respect to such Engines.

            (e)   Engine Reports. The Borrower shall, by the tenth Business Day
      of January, April, July and October of each year, commencing with such
      date in October of 2004, furnish to the Security Trustee a report stating,
      with respect to each Engine as of the last day of the calendar month
      immediately preceding the date of such report prior to the date of such
      report: (i) if such Engine is then installed on an airframe, the
      Borrower's tail number of such airframe, or, if not so installed, the
      status and location of such engine (ii) the hours and cycles of operation
      of such Engine since new and since its last major overhaul and (iii) the
      most limiting life limited part on such engine, (the "limiter"), and the
      cycles remaining on such limiter.

            (f)   Compliance with Mortgage. The Borrower will comply with the
      terms and provisions of the Mortgage.

                                    ARTICLE V
                       INCREASED COSTS; GENERAL INDEMNITY

      Section 5.1. Increased Costs. The Borrower shall pay directly to each
Lender from time to time, within ten (10) Business Days after demand therefor,
such additional amount or amounts as may be necessary to compensate such Lender
on a net after-tax basis for any increased costs incurred by such Lender which
are attributable to its making or maintaining its Percentage Share or its
Ratable Share of the Loan hereunder or its obligation to make its Percentage
Share of the Loan hereunder, or any reduction in any amount receivable by such
Lender under this Agreement in respect of the Loan or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any change after the date of this Agreement
in U.S. federal, state, municipal, or foreign or supranational laws or
regulations (including Regulation D of the Board of Governors of the Federal
Reserve System), or the adoption or making after the date of this Agreement of
any interpretations, directives, or requirements applying to a class of banks
including such Lender under any U.S. federal, state, municipal, or any foreign
laws or regulations (whether or not having the force of law) by any court,
central bank or monetary authority charged with the interpretation or
administration thereof (a "Regulatory Change"), which imposes or modifies any
reserve, special deposit, compulsory loan or similar requirements relating to
any extensions of credit or other assets of, or any deposits with other
liabilities of, such Lender (including its Percentage Share or its Ratable Share
of the Loan or any deposits referred to in the definition of LIBOR Rate or
related definitions) which is not otherwise included in the determination of the
applicable interest rate hereunder.

      Each Lender will notify the Borrower of any event occurring after the date
of this Agreement that will entitle such Lender to compensation pursuant to this
Section 5.1 as promptly

                                      -18-
<PAGE>

as practicable, but in any event within 60 days, after such Lender obtains
Actual Knowledge thereof; provided, however, that if any Lender fails to give
such notice within 60 days after it obtains Actual Knowledge of such an event,
such Lender shall, with respect to compensation payable pursuant to this Section
5.1 in respect of any costs resulting from such event, be entitled to payment
under this Section 5.1 only for costs incurred from and after the date 60 days
prior to the date that such Lender does give such notice; provided, further that
no compensation shall be payable by the Borrower to any Lender pursuant to this
Section 5.1 unless such Lender certifies to the Borrower that (x) such Lender is
assessing to its other borrowers (of loans similar to the Loans) comparable
allocable costs, and (y) such Lender believes that such costs are generally
applicable to lenders similarly situated to and in the same jurisdiction as such
Lender. Such notice shall describe in reasonable detail the calculation of the
amounts owed under this Section. Determinations by a Lender for purposes of this
Section 5.1 of the effect of any Regulatory Change on its costs of making or
maintaining its Percentage Share or its Ratable Share of the Loan or on amounts
receivable by it in respect of the Loan, and of the additional amounts required
to compensate such Lender in respect of any Additional Costs, shall be prima
facie evidence of the amount owed under this Section 5.1.

      Any assignee of a Lender that is not the initial Lender party to the Loan
Agreement shall not be entitled to any greater compensation under this Section
5.1 than that which would have been payable to the transferor Lender as of the
date of the transfer or sale of the Note to such transferee Lender; provided,
however, that, if subsequent to the date of transfer or sale of the Note there
occurs a Regulatory Change and such transferee Lender is domiciled in a
Designated Country, such transferee Lender shall be entitled to compensation
under this Section 5.1 as a result of such Regulatory Change.

      Section 5.2. Capital Adequacy. If (1) the adoption, after the date hereof,
of any applicable governmental law, rule or regulation regarding capital
adequacy, (2) any change, after the date hereof, in the interpretation or
administration of any such law, rule or regulation by any central bank or other
Governmental Authority charged with the interpretation or administration thereof
or (3) compliance by a Lender or any corporation or bank controlling a Lender
with any applicable guideline or request of general applicability, issued after
the date hereof, by any central bank or other Governmental Authority (whether or
not having the force of law) that constitutes a change of the nature described
in clause (2) ("Capital Adequacy Change"), has the effect of (x) requiring an
increase in the amount of capital required to be maintained by a Lender or any
corporation or bank controlling a Lender or (y) reducing the rate of return on
assets or capital of such Lender (or such corporation or bank) and such
adoption, change or compliance, as the case may be, relates to a category of
claims or assets that includes such Lender's Loan Amount, the Borrower shall pay
to such Lender from time to time such additional amount or amounts as are
necessary to compensate such Lender for such portion of such increase or
reduction as shall be reasonably allocable to such Lender's Loan Amount;
provided, that no such amounts shall be payable by the Borrower to any Lender
pursuant to this Section 5.2 unless such Lender certifies to the Borrower that
(A) such Lender is assessing to its other borrowers (of loans similar to the
Loans) comparable allocable costs, and (B) such Lender believes that such costs
are generally applicable to lenders similarly situated to and in the same
jurisdiction as such Lender. For the avoidance of doubt, the matters set forth
in the Consultative Document titled "The New Basel Capital Accord" issued by the
Basel Committee on Banking Supervision in April 2003 will not be treated, for
purposes of determining whether any Lender is entitled to

                                      -19-
<PAGE>

compensation under this Section 5.2, as having been enacted or having come into
effect before the date of this Agreement.

      Each Lender will notify the Borrower of any event occurring after the date
of this Agreement that will entitle such Lender to compensation pursuant to this
Section 5.2 as promptly as practicable but in any event within 60 days, after
such Lender obtains Actual Knowledge thereof; provided, however, that if any
Lender fails to give such notice within 60 days after it obtains Actual
Knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.2 in respect of any costs resulting from such
event, be entitled to payment under this Section 5.2 only for costs incurred
from and after the date 60 days prior to the date that such Lender does give
such notice. Such notice shall describe in reasonable detail the calculation of
the amounts owed under this Section. Determinations by a Lender for purposes of
this Section 5.2 of the effect of any increase in the amount of capital required
to be maintained by the bank and of the amount allocable to such Lender's
obligations to the Borrower hereunder shall be prima facie evidence of the
amounts owed under this Section.

      Any assignee of a Lender that is not the initial Lender party to the Loan
Agreement shall not be entitled to any greater compensation under this Section
5.2 than that which would have been payable to the transferor Lender as of the
date of the transfer or sale of the Note to such transferee Lender; provided,
however, that, if subsequent to the date of transfer or sale of the Note there
occurs a Capital Adequacy Change and such transferee Lender is domiciled in a
Designated Country, such transferee Lender shall be entitled to compensation
under this Section 5.2 as a result of such Capital Adequacy Change.

      Section 5.3. Withholding of Taxes.

            (a)   Payments to Be Free and Clear. All sums payable by the
      Borrower under this Agreement and the other Transaction Documents to each
      Lender and each Transaction Agent shall (except to the extent required by
      law) be paid free and clear of, and without any deduction or withholding
      on account of, any Tax imposed, levied, collected, withheld or assessed by
      or within any jurisdiction or by or within any political subdivision or
      taxing authority thereof or therein with respect to such payments.

            (b)   Grossing-up of Payments. If the Borrower or any other Person
      is required by law to make any deduction or withholding on account of any
      Tax from any sum paid or payable by the Borrower to any Transaction Agent
      or any Lender under any of the Transaction Documents:

                  (i)   the Borrower shall notify the Security Trustee in
            writing of such requirement;

                  (ii)  the Borrower shall pay such Tax before the date on which
            any interest, addition to Tax or penalties attach thereto, such
            payment to be made (if the liability to pay is imposed on the
            Borrower) for its own account or (if that liability is imposed on
            any Transaction Agent or such Lender, as the case may be) on behalf
            of and in the name of such Transaction Agent or such Lender;

                                      -20-
<PAGE>

                  (iii) in the case of any Tax other than an Excluded Tax, the
            sum payable by the Borrower in respect of which the relevant
            deduction, withholding or payment is required shall be increased to
            the extent necessary to ensure that, after the making of that
            deduction, withholding or payment, such Transaction Agent or such
            Lender, as the case may be, receives on the due date a net sum equal
            to what it would have received had no such deduction, withholding or
            payment been required or made; and

                  (iv)  within 30 days after paying any sum from which it is
            required by law to make any deduction or withholding, and within 30
            days after the due date of payment of any Tax which it is required
            by clause (b) above to pay, the Borrower shall deliver to the
            Security Trustee evidence reasonably satisfactory to the affected
            parties of such deduction, withholding or payment and of the
            remittance thereof to the relevant taxing or other authority.

      If any additional amounts are payable in respect of Taxes pursuant to
      clause (iii) above, the Borrower agrees to indemnify each Lender, each
      Transaction Agent and their successors, assigns and Affiliates for such
      Taxes required to be deducted or withheld and to reimburse such Persons,
      upon the written request of such Person, for the net increase in Tax
      imposed on or measured by the net income or net profits of such Lender
      (after taking into account current credits and deductions resulting from
      such Tax liability) pursuant to the laws of the jurisdiction in which such
      Lender is organized or in which the principal office or applicable Lending
      Office of such Lender is located or under the laws of any political
      subdivision or taxing authority of any such jurisdiction in which such
      Lender is organized or in which the principal office or applicable Lending
      Office of such Lender is located or in which such Lender is doing business
      (if the Taxes imposed on the net income, net profits or net gains of such
      Lender by such jurisdiction in which a Lender is doing business are
      treated as Excluded Taxes under this Agreement) and for any withholding of
      Taxes as such Lender shall reasonably determine (subject to verification
      pursuant to Section 5.3(c)(iv)) are payable by, or withheld from, such
      Lender in respect of such amounts so paid to or on behalf of such Lender
      pursuant to clause (iii) above and in respect of any amounts paid to or on
      behalf of such Lender pursuant to this sentence. Notwithstanding the
      foregoing provisions of this Section 5.3(b), no such additional amount
      shall be required to be paid to either Transaction Agent or any Lender
      under clause (iii) above in respect of United States federal withholding
      taxes except to the extent that such obligation to deduct or withhold
      results from a written change, after the date hereof in applicable law,
      treaty, or governmental rule, regulation or order, or any change in the
      official interpretation, administration or application thereof (other than
      the addition of or a change in an "anti-treaty-shopping" or "limitation of
      benefits" or similar provision of any income tax treaty affecting
      eligibility for benefits under such treaty).

            (c)   Evidence of Exemption from U.S. Withholding Tax.

                  (i)   Each Lender that is organized under the laws of any
            jurisdiction other than the United States or any state or other
            political subdivision thereof shall, to the extent it is entitled to
            do so, deliver to the Security Trustee for transmission to the
            Borrower, at or prior to the Closing (in the case of each

                                      -21-
<PAGE>

            Lender listed on the signature pages hereof) or on or prior to the
            date of the Transfer Supplement pursuant to which it becomes a
            Lender (in the case of each other Lender), (x) two original copies
            of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor
            forms), properly completed and duly executed by such Lender,
            together with any other certificate or statement of exemption
            required under the Internal Revenue Code or the regulations issued
            thereunder to establish that such Lender is entitled to an exemption
            or reduction in the amount of United States federal income tax
            required to be deducted or withheld from any payments to such Lender
            of interest, fees or other amounts payable under any of the
            Transaction Documents or (y) if such Lender is not a "bank" or other
            Person described in Section 881(c)(3) of the Internal Revenue Code
            and cannot deliver either Internal Revenue Service Form W-8BEN
            claiming exemption under a treaty or W-8ECI, pursuant to clause (x)
            above, a Certificate re Non-Bank Status together with two original
            copies of Internal Revenue Service Form W-8BEN (or any successor
            form), properly completed and duly executed by such Lender, together
            with any other certificate or statement of exemption required under
            the Internal Revenue Code or the regulations issued thereunder to
            establish that such Lender is entitled to an exemption or reduction
            in the amount of United States federal income tax required to be
            withheld from payments to such Lender of interest payable under any
            of the Transaction Documents.

                  Each Lender that is organized under the laws of the United
            States or any state or other political subdivision thereof shall
            deliver to the Security Trustee for transmission to the Borrower, at
            or prior to the Closing (in the case of each Lender listed on the
            signature pages hereof) or on or prior to the date of the Transfer
            Supplement pursuant to which it becomes a Lender (in the case of
            each other Lender), two original copies of Internal Revenue Service
            Form W-9 (or any successor form), properly completed and duly
            executed by such Lender, if requested by the Borrower in writing and
            required by the Internal Revenue Code or the regulations issued
            thereunder to permit the Borrower to pay to or for the account of
            such Lender interest, fees or other amounts pursuant to any of the
            Transaction Documents without deducting or withholding any United
            States federal income tax from such payment.

                  (ii)  Each Lender required to deliver any forms, certificates
            or other evidence with respect to United States federal income tax
            withholding matters pursuant to Section 5.3(c)(i) hereby agrees,
            from time to time after the initial delivery by such Lender of such
            forms, certificates or other evidence, whenever a lapse in time or
            change in circumstances (other than, unless notified by the
            Borrower, a change in applicable United States law, including United
            States income tax conventions and treaties) renders such forms,
            certificates or other evidence obsolete or inaccurate in any
            material respect, that such Lender, to the extent it is entitled to
            do so, shall promptly (x) deliver to the Security Trustee for
            transmission to the Borrower two new original copies of Internal
            Revenue Service Form W-8BEN or W-8ECI or W-9, or a Certificate re
            Non-Bank Status and two original copies of Internal Revenue Service
            Form W-8BEN, as the case may be, properly completed and duly
            executed by such Lender, together with any other

                                      -22-
<PAGE>

            certificate or statement of exemption required in order to confirm
            or establish that such Lender is entitled to an exemption or
            reduction in the amount of United States federal income tax required
            to be withheld from payments to such Lender under the Transaction
            Documents or (y) notify the Security Trustee and the Borrower of its
            inability to deliver any such forms, certificates or other evidence
            in which case such Lender shall not be required to deliver any such
            form or certificate pursuant to this Section 5.3(c).

                  (iii) The Borrower shall not be required to pay any additional
            amount to any Lender under clause (iii) of Section 5.3(b) if such
            Lender shall have failed to satisfy the requirements of clause (i)
            or (ii)(x) of this Section 5.3(c); provided that if such Lender
            shall have satisfied the requirements of Section 5.3(c)(i) at or
            prior to the Closing (in the case of each Lender listed on the
            signature pages hereof) or on the date of the Transfer Supplement
            pursuant to which it became a Lender (in the case of each other
            Lender), nothing in this Section 5.3(c)(iii) shall relieve the
            Borrower of its obligation to pay any additional amounts pursuant to
            Section 5.3(b) in the event that, as a result of any change in any
            applicable law, treaty or governmental rule, regulation or order, or
            any change in the interpretation, administration or application
            thereof, such Lender is no longer properly entitled to deliver
            forms, certificates or other evidence at a subsequent date
            establishing the fact that such Lender is not subject to withholding
            as described in Section 5.3(c)(i) or (ii).

                  (iv)  If the Borrower pays any additional amount under this
            Section 5.3 to a Lender and such Lender determines in its sole
            discretion that it has actually realized in connection therewith a
            net cash benefit (including a net cash benefit which the relevant
            taxing authority applies to satisfy any liability of such Lender for
            Excluded Taxes) due to any refund or any reduction of, or credit
            against, its liabilities for Excluded Taxes in any taxable year,
            provided no Special Default or Event of Default shall have occurred
            and be continuing, such Lender shall, to the extent it can do so
            without prejudice to the retention of such benefit, pay to the
            Borrower an amount that the Lender shall, in its sole discretion,
            determine (subject to confirmation as provided below) is equal to
            such net cash benefit which was obtained by the Lender in such year
            as a consequence of such refund, reduction or credit realized in
            connection with the payment of such additional amount. A Lender
            shall, upon written request from the Borrower, provide to the
            Borrower a letter from independent accountants selected by the
            Lender and reasonably acceptable to the Borrower confirming the
            accuracy of the Lender's calculations of any amount due pursuant to
            the next-to-last sentence of Section 5.3(b), or the amount of any
            net benefit determined by Lender pursuant to the preceding sentence,
            provided that the interpretation of this Agreement or any other
            Transaction Document shall not be within the scope of the
            accountants' confirmation. Nothing contained in this Section
            5.3(c)(iv) shall be construed as requiring any Lender to conduct its
            business or arrange or alter in any respect its tax or financial
            affairs so that it is entitled to receive a refund, reduction or
            credit or shall require any Lender to provide to the Borrower or its
            agents copies of any tax returns or other information with respect
            to the income, assets or operations

                                      -23-
<PAGE>

            attesting to such Lender's determination. The Borrower shall
            reimburse each Lender for all costs and expenses incurred by Lender
            in obtaining such accountants' letter, provided that the
            accountants' letter confirms, in all material respects, Lender's
            determination.

                  (v)   The Borrower shall have no obligation to pay to any
            Lender any additional amount under Section 5.3(b)(iii) or to
            indemnify any Lender under Section 5.4 for any United States federal
            income tax or withholding tax which was required by law to be
            deducted or withheld by the Borrower or any Transaction Agent from
            any prior payment to or for the benefit of such Lender pursuant to
            the Transaction Documents but which was not deducted or withheld due
            to the Borrower's or the Transaction Agent's reasonable reliance on
            an Internal Revenue Service Form W-8BEN or W-8ECI or W-9 (or
            applicable successor form) theretofore delivered by such Lender
            pursuant to Section 5.3(c)(i) or (ii) if such form was inaccurate in
            any material respect when delivered by such Lender and such Lender
            had actual knowledge of such inaccuracy at the time such Lender
            delivered such form.

      Section 5.4. (a) Other Taxes. In addition to the amounts described
elsewhere in this Article V, the Borrower shall pay, and indemnify, and hold
harmless on a net after-tax basis each Lender and the Security Trustee from and
against all Other Taxes (other than (i) Taxes imposed by deduction or
withholding from amounts payable by the Borrower to any Transaction Agent or
Lender, (ii) Excluded Taxes and (iii) Taxes imposed on or with respect to a
transfer (including a participation) of any interest in a Loan unless such
transfer is in connection with an Event of Default or at the Borrower's request)
which arise from any payment made hereunder or under any other Transaction
Document or from the execution, delivery, registration, filing, recording,
performance or enforcement of, or otherwise with respect to, this Agreement or
any other Transaction Document or otherwise in connection with or as a result of
the transactions contemplated by the Transaction Documents.

      (b)   Contest of Tax Claims. If a Lender or either Transaction Agent (each
a "Tax Indemnitee") receives a written claim from any taxing authority for any
Tax for which the Borrower is liable pursuant to Section 5.3 or 5.4 (a "Tax
Claim"), such Tax Indemnitee shall promptly notify the Borrower in writing. If
requested by the Borrower in writing within 30 days after receipt of such Tax
Indemnitee's written notice (provided that if a response to such Tax Claim is
due less than 40 days after the Borrower's receipt of such Tax Indemnitee's
notice, the Borrower's request must be made within 15 days or, if longer, the
period ending not later than the 10th day before the day on which the response
to such Tax Claim is due), such Tax Indemnitee shall in good faith contest or,
at such Tax Indemnitee's election, permit the Borrower to contest (unless such
contest involves Excluded Taxes or, in such Tax Indemnitee's reasonable, good
faith judgment, permitting the Borrower to contest may have a material adverse
effect on such Tax Indemnitee), in each case in accordance with and to the
extent permitted by applicable law and at the Borrower's expense, such Tax
Claim, provided that no Tax Indemnitee shall have any obligation to commence or
continue the contest of any such Tax Claim unless the following conditions are
satisfied at the time the contest is to be commenced and at all times during the
contest:

                                      -24-
<PAGE>

            (i)   no Event of Default (or event described in Section 7.1(a),
      (b), (f) which would become an Event of Default after passage of time)
      shall have occurred and be continuing,

            (ii)  contesting such Tax Claim would not result in (A) any risk of
      sale, forfeiture, confiscation, seizure or loss of, or the imposition of a
      Lien (other than a Lien for the Tax that is the subject of such contest
      provided that enforcement of such Lien is stayed until the final
      determination of such contest and the Borrower maintains adequate reserves
      with respect to such Lien) or (B) any risk of imposition of criminal
      liability,

            (iii) the aggregate amount of the Taxes that are to be contested
      exceeds Twenty-Five Thousand Dollars ($25,000),

            (iv)  such Tax Indemnitee shall have received a written confirmation
      of the Borrower that the Taxes that are the subject of such Tax Claim are
      Tax for which the Borrower is liable pursuant to Section 5.3 or 5.4,
      provided that the Borrower shall not be bound by such confirmation to the
      extent that the final determination of the contest articulates conclusions
      of law and fact that demonstrate that the Taxes that are the subject of
      such Tax Claim are Excluded Taxes,

            (v)   the Borrower, upon the written request of such Tax Indemnitee,
      shall have provided such Tax Indemnitee, at the expense of the Borrower,
      with an opinion of counsel selected by such Tax Indemnitee and reasonably
      acceptable to the Borrower to the effect that there is a substantial basis
      in law and fact to contest such Tax Claim and a realistic expectation that
      a contest of such Tax Claim would be successful,

            (vi)  if such Tax Indemnitee decides to contest such Tax Claim by
      paying the Taxes that are the subject of such Tax Claim and taking action
      to obtain a refund thereof, the Borrower shall have made an interest-free
      advance to such Tax Indemnitee in an amount equal to the amount of those
      Taxes and shall have delivered to such Tax Indemnitee a written
      undertaking to indemnify such Tax Indemnitee and its Affiliates on an
      after-tax basis for any adverse Tax consequences (taking into account all
      relevant Tax benefits and Tax detriments) to such Tax Indemnitee or any of
      its Affiliates resulting from such interest-free advance, and

            (vii) the Borrower shall be paying, on demand and on an after-tax
      basis, all reasonable costs and expenses incurred by such Tax Indemnitee,
      any Transaction Agent or any Lender in connection with the conduct of such
      contest (including, without limitation, reasonable attorneys' and
      accountants' fees and disbursements).

      (c)   Non-Parties. If a Tax Indemnitee is not a party to this Agreement,
the Borrower may require such Tax Indemnitee to agree in writing to the terms of
Sections 5.3 and 5.4 prior to making any payment to such Tax Indemnitee under
Section 5.3 or 5.4.

      Section 5.5. Indemnity. (a) Indemnity Obligation. The Borrower agrees to
indemnify and hold harmless each Lender, the Security Trustee, the
Administrative Agent, General Electric Capital Corporation under the Restructure
Letter and their respective

                                      -25-
<PAGE>

successors, assigns, directors, officers, employees and agents (hereinafter in
this Section 5.5 referred to individually as an "Indemnitee," and collectively
as "Indemnitees") on an after-tax basis against any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including reasonable attorneys'
fees, disbursements and other charges) (for the purposes of this Section 5.5 the
foregoing are collectively called "Losses") of whatsoever kind and nature
imposed on, asserted against or incurred or suffered by any of the Indemnitees
in any way relating to, or arising out of, or by reason of any investigation,
litigation, or other proceedings (including any threatened investigation,
litigation or other proceedings) relating to the Mortgage or the exercise or
enforcement by the Security Trustee of any of the terms, rights, or remedies
thereunder, or in any way relating to or arising out of the manufacture,
ownership, ordering, purchase, delivery, control, acceptance, lease, possession,
operation, condition, sale, return or other disposition, or use of the
Collateral (including latent or other defects, whether or not discoverable), the
violation of the Laws of any country, state or other governmental authority with
respect to or arising otherwise in connection with the Collateral, or any tort
(including claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage) with respect to or arising otherwise in
connection with the Collateral (but excluding any such Losses to the extent
incurred by reason of (i) the gross negligence or willful misconduct of such
Indemnitee or any related Indemnitee (as defined below), (ii) Taxes, reserve
requirements or similar regulatory requirements imposed by banking authorities
except as otherwise provided in Sections 5.1, 5.2, 5.3 and 5.4 hereof, (iii)
breaches by such Indemnitee of any Transaction Document to which it is a party
or (iv) to the extent attributable to the failure of any Transaction Agent to
distribute funds received and distributable by it in accordance any such
Transaction Documents). For purposes of subclause (i) above, an Indemnitee shall
be considered a "related" Indemnitee with respect to another Indemnitee if such
Indemnitee is an Affiliate or employer of such other Indemnitee or a director,
officer, employee or agent of such other Indemnitee, or a successor or assignee
of such other Indemnitee.

      (b)   Indemnification Procedures.

            (i)   Notice. In case any action, suit or proceeding shall be
brought against any Indemnitee for which such Indemnitee will seek
indemnification under Section 5.5(a), such Indemnitee shall notify the Borrower
of the commencement thereof and the Borrower may, subject to the provisions of
this Section 5.5, at its expense, participate in and to the extent that it shall
wish (subject to the provisions of the following subsections), assume and
control the defense thereof and, subject to Section 5.5(b)(iii), settle or
compromise the same. Notwithstanding the foregoing, the failure of any
Indemnitee to notify the Borrower as provided in this Section 5.5(b)(i) shall
not release the Borrower from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Loss to the Borrower (in which event the Borrower shall not be
responsible for such additional Loss) or materially impairs the Borrower's
ability to contest such claim.

            (ii)  Control. The Borrower or its insurer(s) shall have the right,
at its or their expense, to investigate and, if the Borrower or its insurer(s)
shall agree not to dispute liability to the Indemnitee giving notice of such
action, suit or proceeding under Section 5.5(a) or under any insurance policies
pursuant to which coverage is sought, control the defense of any action, suit or

                                      -26-
<PAGE>

proceeding relating to any Losses for which indemnification is sought pursuant
to this Section 5.5, and each Indemnitee shall cooperate with the Borrower or
its insurer(s) with respect thereto; provided, that the Borrower shall not be
entitled to control the defense of any such action, suit, proceeding or
compromise any such Losses during the continuance of any Event of Default and so
long as no such cooperation shall entail a material risk of (A) criminal
liability of such Indemnitee, (B) unindemnified civil liability of such
Indemnitee or (C) the sale, loss, forfeiture or seizure of the Collateral. In
connection with any such action, suit or proceeding being controlled by the
Borrower, such Indemnitee shall have the right to participate therein, at its
sole cost and expense.

            (iii) Settlement. In no event shall any Indemnitee enter into a
settlement or other compromise with respect to any Losses without the prior
written consent of the Borrower, unless such Indemnitee waives its right to be
indemnified with respect to such Losses under this Section 5.5.

            (iv)  Cooperation. Each Indemnitee agrees to cooperate with the
Borrower and its insurers in the exercise of their rights to investigate, defend
or compromise Losses for which indemnification may be claimed hereunder.

            (v)   Nonparties. If an Indemnitee is not a party to this Agreement,
the Borrower may require such Indemnitee to agree in writing to the terms of
this Section 5.5 prior to making any payment to such Indemnitee under this
Section 5.5.

            (vi)  No Requirement. Nothing contained in this Section 5.5(b) shall
be deemed to require an Indemnitee to assume responsibility for or control of
any judicial proceeding with respect to any Losses.

                                   ARTICLE VI
                              CONDITIONS PRECEDENT

      Section 6.1. General Conditions. The obligation of the Original Lenders to
make the Loan is subject to the conditions that on or prior to the Funding Date:

      (a)   The Borrower shall have delivered to the Administrative Agent (with
a copy for each Original Lender) the following:

            (i)   an executed counterpart of this Agreement;

            (ii)  an executed counterpart of the Payment and Indemnity
      Agreement;

            (iii) an executed counterpart of the Mortgage;

            (iv)  an executed counterpart of the Subordinated Mortgage;

            (v)   an executed counterpart of the Security Trustee Agreement;

            (vi)  an opinion of Vedder, Price, Kaufman & Kammholz, P.C., special
      New York counsel to the Borrower, substantially in the form of Exhibit D
      to this Agreement;

                                      -27-
<PAGE>

            (vii) an opinion of the Borrower's Legal Department, substantially
      in the form of Exhibit E to this Agreement;

            (viii) an opinion of Ray, Quinney & Nebeker, special counsel to the
      Security Trustee, in a form satisfactory to the Administrative Agent;

            (ix)  an opinion of Daugherty, Fowler, Peregrin & Haught, FAA
      counsel, substantially in the form of Exhibit H to this Agreement;

            (x)   (1) a certificate of the Secretary or an Assistant Secretary
      of the Borrower certifying (i) the resolutions of the Borrower's board of
      directors or executive committee of such board approving the transactions
      contemplated by this Agreement, (ii) the name and signature of each
      officer who executes a Transaction Document or Additional Document on the
      Borrower's behalf (on which certificate the Transaction Agents and each
      Lender may conclusively rely until a revised certificate is received),
      (iii) the Borrower's certificate of incorporation and (iv) a copy of the
      Borrower's By-Laws and (2) a good standing certificate of the Borrower
      from the Secretary of State of the State of Delaware; and

            (xi)  an executed counterpart of the Restructure Letter.

      (b)   The Borrower shall have paid the upfront fee specified in Section
1.3.

      Section 6.2. Additional Conditions. The obligation of the Lenders to make
the Loan is subject to the fulfillment, prior to or on the Funding Date, of the
following additional conditions precedent:

            (a)   The Security Trustee shall have received the following
      documents (with a copy for each Lender):

                  (i)   (1) a Series A Note (duly executed by the Borrower and
            authenticated by the Security Trustee) in an original principal
            amount equal to the Original Series A Lender's Commitment and (2)
            provided that the Original Series B Lender's Commitment is greater
            than zero, a Series B Note (duly executed by Borrower and
            authenticated by the Security Trustee) in an original principal
            amount equal to the Original Series B Lender's Commitment shall each
            have been issued to the applicable Original Lender;

                  (ii)  the Mortgage Supplement and Subordinated Mortgage
            Supplement;

                  (iii) the broker's report and insurance certificate required
            by Appendix B of the Mortgage and the Subordinated Mortgage with
            respect to the Engines;

                  (iv)  with respect to each Engine, a copy of the original bill
            of sale or other evidence of ownership reasonably satisfactory to
            the Security Trustee (which may be a copy of an invoice or a
            purchase order);

                                      -28-
<PAGE>

                  (v)   an Officer's Certificate of the Borrower, dated as of
            the Funding Date, stating that its representations and warranties
            set forth in Sections 3.1 and 3.2 of this Agreement are true and
            correct as of the Funding Date (or, to the extent that any such
            representation and warranty expressly relates to an earlier date,
            true and correct as of such earlier date);

                  (vii) the Financing Statements; and

                  (viii) the UCC Termination Statements.

            (b)   On the Funding Date, after giving effect to the filing of the
      FAA Filed Documents and the Financing Statements with respect to the
      Engines, (i) the Security Trustee under the Mortgage shall have received a
      duly perfected first priority security interest in all of the Borrower's
      right, title and interest in the Engines, subject only to Permitted Liens
      that are not Liens of record and (ii) the "Security Trustee" under the
      Subordinated Mortgage shall have received a duly perfected second priority
      security interest in all of the Borrower's right, title and interest in
      the Engines, subject only to the Lien of the Mortgage and other Permitted
      Liens (as defined in the Subordinated Mortgage) that are not Liens of
      Record.

            (c)   No change shall have occurred after the date of this Agreement
      in any applicable law that makes it a violation of law for (a) the
      Borrower, the Transaction Agents or any Lender to execute, deliver and
      perform the Transaction Documents or Additional Documents to which any of
      them is a party or (b) any Lender to make the Loans with respect to the
      Engines.

            (d)   On the Funding Date, no event shall have occurred and be
      continuing, or would result from the mortgage of the Engines, which
      constitutes an Event of Default or a Potential Default.

            (e)   No Event of Loss (as defined in the Mortgage) with respect to
      the Engines shall have occurred and no circumstance, condition, act or
      event that, with the giving of notice or lapse of time or both, would give
      rise to or constitute an Event of Loss with respect to the Engines shall
      have occurred.

            (f)   The Borrower shall have good title to the Engines, free and
      clear of all Liens, except, after giving effect to the Releases, Permitted
      Liens which are not Liens of Record.

            (g)   The Security Trustee shall be entitled to the benefits of
      Section 1110 of the Bankruptcy Code with respect to the Specified Engines
      as provided in the Mortgage in the event of a case under Chapter 11 of the
      Bankruptcy Code in which the Borrower is a debtor.

            (h)   On the Funding Date (i) the FAA Filed Documents with respect
      to the Collateral shall have been duly filed for recordation (or shall be
      in the process of being so duly filed for recordation) with the FAA in
      accordance with the Act and (ii) each Financing Statement and each of the
      UCC Termination Statements with respect to the

                                      -29-
<PAGE>

      Collateral shall have been duly filed (or shall be in the process of being
      so duly filed) in the appropriate jurisdiction.

            (i)   No action or proceeding shall have been instituted, nor shall
      any action be threatened in writing, before any Governmental Authority,
      nor shall any order, judgment or decree have been issued or proposed to be
      issued by any Governmental Authority, to set aside, restrain, enjoin or
      prevent the completion and consummation of this Agreement or any other
      Transaction Document, Additional Document or the transactions contemplated
      hereby or thereby.

            (j)   The representations and warranties in Sections 3.1 and 3.2
      shall be true and correct in all material respects on and as of such date
      (except to the extent such representations and warranties relate solely to
      an earlier date but then as of such earlier date).

            (k)   The Borrower shall have paid (or shall have given instructions
      for the initiation of wire transfers to pay) all amounts referred to in
      the first sentence of Section 9.3 for which it shall have received
      reasonably detailed invoices at least two Business Days before the Funding
      Date.

            (l)   No payment default (without giving effect to any grace period)
      by Borrower shall have occurred and be continuing under any of the AWA
      Operative Documents (as defined in the Payment and Indemnity Agreement) or
      any agreement to which the Borrower and any Lender or any Lender's
      Subsidiaries are parties (or any agreement to which the Borrower is a
      party relating to the same transaction as any such agreement).

            (m)   No payment default by the Borrower currently exists with
      respect to any financing facility of $5,000,000 or more and the Security
      Trustee and the Lenders shall have received a certification from the
      Borrower to such effect.

            (n)   All conditions to the funding of the loan contemplated by
      the Related Loan Agreement have been satisfied, and such loan is being
      funded contemporaneously with the Loan.

            (o)   The ATSB letter of approval, in form reasonably acceptable to
      each Lender and the Borrower, shall have been provided by the Borrower.

            (p)   (1) A certificate of the Secretary or an Assistant Secretary
      of the Security Trustee certifying (i) the name and signature of each
      officer who executes a Transaction Document or Additional Document on the
      Security Trustee's behalf, (ii) the Security Trustee's certificate of
      incorporation and (iii) the Security Trustee's bylaws; and (2) a good
      standing certificate of the Security Trustee from the Comptroller of the
      Currency.

            (q)   Such other documents relating to the Loan contemplated hereby
      as the Security Trustee or any Lender may reasonably request.

                                      -30-
<PAGE>

                                   ARTICLE VII
                                EVENTS OF DEFAULT

      Section 7.1. Events of Default. Each of the following events shall
constitute an "Event of Default," whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body:

            (a)   The Borrower shall fail to make any payment of principal of or
      interest on the Loan or LIBOR Breakage Costs within five Business Days
      after the same shall have become due hereunder; or

            (b)   The Borrower shall fail to pay any other amount payable
      hereunder or under any other Transaction Document when due and such
      failure shall continue for a period of ten Business Days after receipt by
      the Borrower of written notice that such payment is overdue given to the
      Borrower by any Transaction Agent or any Lender (through the Security
      Trustee); or

            (c)   Any representation or warranty made by the Borrower herein or
      pursuant to Section 6.2(a)(v) or any other Transaction Document or any
      amendment or modification hereof or thereof or waiver hereunder or
      thereunder, or in any report, certificate or other document (other than
      financial statements and other documents, including exhibits, filed with
      the SEC) prepared by the Borrower and furnished pursuant to or in
      connection with this Agreement or any other Transaction Document or any
      amendment or modification hereof or thereof or waiver hereunder or
      thereunder shall prove to have been incorrect in any material respect when
      made, such incorrect representation or warranty is material at the time in
      question, and, if curable, the same shall remain uncured for a period in
      excess of 30 days (or in the case of any representation or warranty made
      in Section 3.1(g) hereof with respect to a Potential Default, 60 days)
      after the date of written notice thereof from any Transaction Agent or any
      Lender (through the Security Trustee); or

            (d)   The Borrower shall fail to perform or observe any term,
      covenant or agreement contained in this Agreement or any other Transaction
      Document on its part to be performed or observed and such failure shall
      remain unremedied for a period of 30 days after written notice of such
      failure shall have been given to the Borrower by any Transaction Agent or
      any Lender (through the Security Trustee), unless such failure is capable
      of being corrected and the Borrower shall be diligently proceeding to
      correct such failure, in which case there shall be no Event of Default
      unless and until such failure shall continue unremedied for a period of 60
      days after receipt of such notice; or

            (e)   The Borrower shall consent to the appointment of or the taking
      of possession by a receiver, trustee or liquidator of itself or of
      substantially all of its property, or the Borrower shall admit in writing
      its inability to pay its debts generally as they come due, or does not pay
      its debts generally as they become due or shall make a general assignment
      for the benefit of creditors, or the Borrower shall file a voluntary
      petition in bankruptcy or a voluntary petition or an answer seeking
      reorganization,

                                      -31-
<PAGE>

      liquidation or other relief in a case under any bankruptcy laws or other
      insolvency laws (as in effect at such time), or the Borrower shall seek
      relief by voluntary petition, answer or consent, under the provisions of
      any other bankruptcy or other similar law providing for the reorganization
      or winding-up of corporations (as in effect at such time) or the
      Borrower's board of directors shall adopt a resolution authorizing any of
      the foregoing; or

            (f)   An order, judgment or decree shall be entered by any court of
      competent jurisdiction appointing, without the consent of the Borrower, a
      receiver, trustee or liquidator of the Borrower or of substantially all of
      its property, or substantially all of the property of the Borrower shall
      be sequestered, and any such order, judgment or decree of appointment or
      sequestration shall remain in force undismissed, unstayed and unvacated
      for a period of 90 days after the date of entry thereof; or a petition
      against the Borrower in a case under any bankruptcy laws or other
      insolvency laws (as in effect at such time) is filed and not withdrawn or
      dismissed within 90 days thereafter, or if, under the provisions of any
      law providing for reorganization or winding-up of corporations which may
      apply to the Borrower, any court of competent jurisdiction assumes
      jurisdiction, custody or control of the Borrower or of substantially all
      of its property and such jurisdiction, custody or control remains in force
      unrelinquished, unstayed and unterminated for a period of 90 days; or

            (g)   The Borrower shall fail to carry and maintain, or cause to be
      carried and maintained, insurance on and in respect of any Engine in
      accordance with the provisions of Section 3.05 of the Mortgage; or

            (h)   The Borrower shall cease to be a Certificated Air Carrier; or

            (i)   The Mortgage shall for any reason cease to be a valid first
      priority perfected security interest (subject to Permitted Liens) in favor
      of the Security Trustee in the Borrower's right, title and interest in and
      to the Engines under the laws of the United States of America (assuming
      the Engines are located within the United States of America) and, if any
      Engine is subject to a lease to a lessee domiciled in any other
      jurisdiction, such jurisdiction (assuming such Engine is located within
      such jurisdiction); or

            (j)   an "Event of Default" under the Related Loan Agreement shall
      have occurred and is continuing.

then, if an Event of Default referred to in clause (e) or (f) of this Section
7.1 shall have occurred and be continuing, (x) the principal of the Loan then
outstanding, together with interest accrued but unpaid thereon, LIBOR Breakage
Costs, the Prepayment Fee (if applicable), and all other amounts owing to the
Transaction Agents and any Lender hereunder or under any other Transaction
Document, shall immediately and without further act become due and payable, and
(y) the Commitments shall automatically terminate, in each case without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower and, if any other Event of Default shall have
occurred and be continuing, then the Administrative Agent shall, upon request of
the Required Lenders, by notice to the Borrower, terminate the

                                      -32-
<PAGE>

Commitments and declare the unpaid principal of the Loans then outstanding,
together with interest accrued but unpaid thereon, LIBOR Breakage Costs and all
other amounts due to the Transaction Agents and any Lender hereunder or under
any other Transaction Document, to be forthwith due and payable, whereupon the
Commitments shall terminate and the Loans, all such interest and all other
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower. In addition to any other remedies available to the
Transaction Agents and the Lenders under the Transaction Documents or at law or
otherwise, if an Event of Default shall have occurred and so long as the same
shall be continuing unremedied, then and in every such case the Security Trustee
may exercise any or all of the rights and powers and pursue any and all of the
remedies set forth in the Mortgage.

                                  ARTICLE VIII
                             THE TRANSACTION AGENTS

      Section 8.1. Appointment and Authorization. Each Lender hereby irrevocably
designates and appoints General Electric Capital Corporation as the
"Administrative Agent", and Wells Fargo Bank Northwest, National Association, as
the "Security Trustee" (collectively, the "Transaction Agents") under the
Transaction Documents and authorizes each Transaction Agent to take such actions
and to exercise such powers as are delegated to it thereby and to exercise such
other powers as are reasonably incidental thereto. No Transaction Agent shall
have any duties other than those expressly set forth in a Transaction Document
or any fiduciary relationship with any Lender, and no implied obligations or
liabilities shall be read into this Agreement, or otherwise exist, against any
Transaction Agent. The Transaction Agents do not assume, nor shall they be
deemed to have assumed, any obligation to, or relationship of trust or agency
with, the Borrower. Notwithstanding any provision of this Agreement or any other
Transaction Document, in no event shall any Transaction Agent ever be required
to take any action which exposes it to personal liability or which is contrary
to the provision of any Transaction Document or applicable law.

      Section 8.2. Delegation of Duties. Each of the Transaction Agents may
execute any of its duties through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.

      Section 8.3. Exculpatory Provisions. No Transaction Agent nor any of their
respective directors, officers, agents or employees shall be liable to any
Lender for any action taken or omitted (i) with the consent or at the direction
of the Required Lenders or (ii) in the absence of such Person's gross negligence
or willful misconduct. No Transaction Agent shall be responsible to any Lender
or other Person for (a) any recitals, representations, warranties or other
statements made by the Borrower or any of its Affiliates, (b) the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any
Transaction Document, (c) any failure of the Borrower or any of its Affiliates
to perform any obligation or (d) the satisfaction of any condition specified in
Article VI. No Transaction Agent shall have any obligation to any Lender to
ascertain or inquire about the observance or performance of any agreement
contained in any Transaction Document or to inspect the properties, books or
records of the Borrower or any of its Affiliates.

                                      -33-
<PAGE>

      Section 8.4. Reliance by Transaction Agents. As between the Transaction
Agents and the Lenders, each of the Transaction Agents shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any document,
other writing or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person and upon
advice and statements of legal counsel (including counsel to the Borrower or any
of its Affiliates), independent accountants and other experts selected by such
Transaction Agent. Each of the Transaction Agents shall in all cases be fully
justified in failing or refusing to take any action under any Transaction
Document unless it shall first receive such advice or concurrence of the
Lenders, and assurance of its indemnification, as it deems appropriate. Subject
to Section 9.1, no Transaction Agent shall effect any waiver or grant any
consent or make any determination (except as provided in Section 1.7(a)) without
the direction of the Required Lenders.

      Section 8.5. Notice of Events of Default. No Transaction Agent shall be
deemed to have knowledge or notice of the occurrence of any Potential Default
unless it has received notice from any Lender or the Borrower stating that a
Potential Default has occurred hereunder and describing such Potential Default.
Promptly upon receiving notice of the occurrence of any Potential Default, a
Transaction Agent shall notify each Lender and the other Transaction Agent of
such occurrence. The Transaction Agents shall take such action concerning a
Potential Default as may be directed by the Required Lenders (or, if required
for such action, all of the Lenders), but until a Transaction Agent receives
such directions, each Transaction Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, as such Transaction Agent deems
advisable and in the best interests of the Lenders.

      Section 8.6. Non-Reliance on Transaction Agents and Other Lenders; Lender
Representations. Except as set forth in Section 3.3 with respect to the Security
Trustee, each Lender expressly acknowledges that no Transaction Agent nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act by a
Transaction Agent hereafter taken, including any review of the affairs of the
Borrower or any of its Affiliates, shall be deemed to constitute any
representation or warranty by such Transaction Agent. Each Lender represents and
warrants to each of the Transaction Agents that, independently and without
reliance upon the Transaction Agents or any other Lender and based on such
documents and information as it has deemed appropriate, it has made and will
continue to make its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Borrower and its own decision to enter into this
Agreement and to take, or omit, action under any Transaction Document. Except
for items specifically required to be delivered hereunder, no Transaction Agent
shall have any duty or responsibility to provide any Lender with any information
concerning the Borrower or any of its Affiliates that comes into the possession
of such Transaction Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.

      Section 8.7. Transaction Agents and Affiliates. Each of the Transaction
Agents and its Affiliates may extend credit to, accept deposits from and
generally engage in any kind of business with the Borrower or any of its
Affiliates and, in its role as a Lender, General Electric Capital Corporation
may exercise or refrain from exercising its rights and powers as if it were not
Administrative Agent.

                                      -34-
<PAGE>

      Section 8.8. Indemnification. Each Lender shall indemnify and hold
harmless each of the Transaction Agents and its officers, directors, employees,
representatives and agents (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably in accordance
with its Percentage Share (or, after the Commitments have been terminated, its
Ratable Share) from and against any and all liabilities, obligations, losses,
damages, penalties, judgments, settlements, costs, expenses and disbursements of
any kind whatsoever (including in connection with any investigative or
threatened proceeding, whether or not such Transaction Agent or such Person
shall be designated a party thereto) that may at any time be imposed on,
incurred by or asserted against such Transaction Agent or such Person as a
result of, or related to, any of the transactions contemplated by the
Transaction Documents or the execution, delivery or performance of the
Transaction Documents or any other document furnished in connection therewith
(but excluding any such liabilities, obligations, losses, damages, penalties,
judgments, settlements, costs, expenses or disbursements resulting solely from
the gross negligence or willful misconduct of such Transaction Agent or such
Person as finally determined by a court of competent jurisdiction).

      Section 8.9. Successor Transaction Agents. Each Transaction Agent may,
upon at least 30 days notice to the Borrower and each Lender, resign its
position as a Transaction Agent. Such resignation shall not become effective
until a successor Transaction Agent acceptable to the Borrower is appointed by
the Required Lenders and has accepted such appointment. Upon such acceptance of
its appointment as a Transaction Agent hereunder by a successor Transaction
Agent, such successor Transaction Agent shall succeed to and become vested with
all the rights and duties of the retiring Transaction Agent, and the retiring
Transaction Agent shall be discharged from its duties and obligations under the
Transaction Documents. After any retiring Transaction Agent's resignation
hereunder, the provisions of Article V and this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was a
Transaction Agent.

      Section 8.10. Qualifications of Successor Security Trustee. Any successor
Security Trustee, however appointed, shall be a bank or trust company having a
combined capital and surplus of at least $500,000,000 and be incorporated in the
United States, so long as such an institution is willing, able and legally
qualified to perform the duties of the Security Trustee hereunder upon
reasonable or customary terms.

                                   ARTICLE IX
                                  MISCELLANEOUS

      Section 9.1. Amendments. Neither this Agreement nor any other Transaction
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated (excluding any Mortgage Supplement contemplated by the Mortgage)
unless such change, waiver, discharge or termination is in writing signed by the
Borrower and the Required Lenders, provided that no such change, waiver,
discharge or termination shall, without the consent of each Lender affected
thereby, (i) extend the final scheduled maturity of the Loan or any Note, or
reduce the rate or extend the time of payment of interest or fees thereon, or
reduce the principal amount thereof, (ii) increase the Commitment of any Lender,
(iii) release any Collateral (except as expressly provided in the Mortgage),
(iv) amend, modify or waive any provision of this Section 9.1, (v) reduce the
percentage specified in the definition of Required Lenders, (vi)

                                      -35-
<PAGE>

consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (vii) impair any indemnity under a
Transaction Document in favor of such Lender; provided, further, that no such
change, waiver, discharge or termination shall without the consent of a
Transaction Agent, amend, modify or waive any provision of Article VIII as same
applies to such Transaction Agent or any other provision as same relates to the
rights or obligations of such Transaction Agent.

      Section 9.2. Notices. Unless otherwise specified, all notices and other
communications hereunder shall be in writing (including by facsimile
communication), given to the appropriate Person at its address or facsimile
number set forth on the signature pages hereof, or at such other address or
facsimile number as such Person may specify, and effective when received at the
address specified by such Person. The number of days for any advance notice
required hereunder may be waived (orally or in writing) by the Person receiving
such notice and, in the case of notices to the Security Trustee, the consent of
each Person to which the Security Trustee is required to forward such notice.

      Section 9.3. Costs and Expenses. The Borrower agrees to pay at or prior to
Closing, after receipt of reasonably detailed invoices, all reasonable and
actual costs and expenses of the initial Lender and each Transaction Agent in
connection with the preparation, execution and delivery of the Transaction
Documents and Additional Documents (whether or not any such Transaction Document
or Additional Document is entered into), including, without limitation the
reasonable fees and expenses of (a) Holland & Knight LLP, special counsel to the
Lenders, (b) Weil, Gotshal & Manges, special bankruptcy counsel to the Lenders,
(c) Ray, Quinney & Nebeker, special counsel to the Security Trustee, and (d)
Daugherty, Fowler, Peregrin & Haught, FAA counsel. The Borrower further agrees
to pay on demand (i) the initial and annual fees, and the reasonable expenses
of, the Security Trustee in connection with the transactions contemplated hereby
and (ii) all reasonable and actual costs and expenses of each Transaction Agent
and the Lenders, if any (including, without limitation, reasonable counsel fees
and expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of the Transaction Documents after the
occurrence of an Event of Default (including, without limitation, reasonable
fees and expenses of one counsel for the Security Trustee and one counsel for
all of the Lenders in connection with the enforcement of their rights under the
Transaction Documents).

      Section 9.4. Certain Agreements . (a) Each Lender and each Transaction
Agent agrees as to itself with the Borrower that, so long as no Event of Default
shall have occurred and be continuing, such person shall not (and shall not
permit any Affiliate or other person claiming by, through or under it to) take
or cause to be taken any action contrary to the Borrower's right to quiet
enjoyment of the Collateral, and to possess, use, retain and control the Engines
and all revenues, income and profits derived therefrom without hindrance.

      (b)   Each Lender agrees to comply with its obligations under the
Mortgage.

      Section 9.5. Entire Agreement. The Transaction Documents and Additional
Documents constitute the entire understanding of the parties thereto concerning
the subject matter thereof. Any previous agreements, whether written or oral,
concerning such matters are superseded thereby.

                                      -36-
<PAGE>

      Section 9.6. Cumulative Rights and Severability. All rights and remedies
of the Lenders and the Transaction Agents hereunder shall be cumulative and
non-exclusive of any rights or remedies such Persons have under law or
otherwise. Any provision hereof that is prohibited or unenforceable in any
jurisdiction shall, in such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and without affecting such provision in any other jurisdiction.

      Section 9.7. Waivers. No failure or delay of any party hereto in
exercising any power, right, privilege or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right, privilege or remedy preclude any other or further exercise thereof or the
exercise of any other power, right, privilege or remedy. Any waiver hereof shall
be effective only in the specific instance and for the specific purpose for
which such waiver was given. After any waiver, the Borrower, the Lenders and the
Transaction Agents shall be restored to their former position and rights and any
Potential Default waived shall be deemed to be cured and not continuing, but no
such waiver shall extend to (or impair any right consequent upon) any subsequent
or other Potential Default.

      Section 9.8. Successors and Assigns; Participations; Assignments.

            (a)   Successors and Assigns. This Agreement shall be binding upon
      and inure to the benefit of the parties hereto and their respective
      successors and assigns. Except as otherwise provided herein, the Borrower
      may not assign or transfer any of its rights or delegate any of its duties
      without the prior consent of the Transaction Agents and each of the
      Lenders.

            (b)   Participations. Any Lender may sell to one or more Persons
      (each a "Participant") participating interests in the interests of such
      Lender hereunder. Such Lender shall remain solely responsible for
      performing its obligations hereunder, and the Borrower and the Transaction
      Agents shall continue to deal solely and directly with such Lender in
      connection with such Lender's rights and obligations hereunder. Each
      Participant shall be entitled to the benefits of Article V; provided that
      such Participant shall not be entitled to any greater benefit under
      Article V than the Lender that sold the participating interest to the
      Participant would have been entitled to thereunder and no Participant
      shall be entitled to any benefit thereunder unless it shall perform such
      obligations as are imposed on the Lenders under Article V. A Lender shall
      not agree with a Participant to restrict such Lender's right to agree to
      any amendment, waiver or modification hereto, except amendments described
      in the proviso to Section 9.1.

            (c)   Assignments. Notwithstanding the foregoing, any Lender may
      assign all or a portion of its Commitment and its outstanding Notes to a
      Qualified Affiliate of such Lender or assign all, or if less than all, a
      portion equal to at least $5,000,000 in the aggregate face amount of Notes
      and of such Commitment (and related Obligations) to one or more Eligible
      Assignees, each of which assignees referred to in Section 9.8(c) shall
      become a party to this Agreement as a Lender by execution of a supplement
      hereto in the form of Exhibit F (a "Transfer Supplement") hereto, provided
      that (i) such transfer or assignment will not be effective until recorded
      by the Security Trustee on the Register pursuant to Section 9.8(d) hereof,
      and (ii) the Original Series A Lender and the Original

                                      -37-
<PAGE>

      Series B Lender shall at all times retain, between them in the aggregate,
      at least 51% of the Aggregate Loan Amount. To the extent of any assignment
      pursuant to this Section 9.8(c) (other than an assignment to a Qualified
      Affiliate pursuant to the preceding sentence), the assigning Lender shall
      be relieved of its obligations hereunder with respect to its assigned
      Commitment. At the time of each assignment pursuant to this Section 9.8(c)
      to a Person which is not already a Lender hereunder, the respective
      assignee Lender shall provide to the Borrower and the Security Trustee the
      Internal Revenue Service forms (and, if applicable, a Certificate re
      Non-Bank Status) required by Section 5.3 (c)(i).

            (d)   Register. The Borrower hereby designates the Security Trustee
      to serve as the Borrower's agent, solely for purposes of this Section
      9.8(d), to maintain a register (the "Register") on which it will record
      the registered holder of the Notes of each Series and the registration of
      transfers of Notes of each Series made pursuant to and in accordance with
      Section 9.8(c). The Register shall be available for inspection by the
      Borrower or any Lender at any reasonable time and from time to time upon
      reasonable prior notice, and the Security Trustee shall, reasonably
      promptly after (a) any person becomes a Lender after the date hereof and
      (b) any Lender alters or modifies its name or address, notify the Borrower
      of and deliver to the Borrower a written update of the names and addresses
      of all Lenders. Failure to make any such recordation, or any error in such
      recordation shall not affect the Borrower's obligations in respect of the
      Loan Amount of any Lender. With respect to any Lender, the transfer of the
      Commitment of such Lender and the rights to the principal of, and interest
      on, the Loan Amount made pursuant to such Commitment shall not be
      effective until such transfer is recorded on the Register maintained by
      the Security Trustee with respect to ownership of such Commitment and Loan
      Amount and prior to such recordation all amounts owing to the transferor
      with respect to such Commitment and Loan Amount shall remain owing to the
      transferor. The registration of assignment or transfer of all or part of
      the Commitment and the Loan Amount shall be recorded by the Security
      Trustee on the Register only upon the acceptance by the Security Trustee
      of a properly executed and delivered Transfer Supplement. Coincident with
      the delivery of such a Transfer Supplement to the Security Trustee for
      acceptance and registration of assignment or transfer of all or part of a
      Loan Amount, or as soon thereafter as practicable, the assigning or
      transferor Lender shall surrender the Notes evidencing such Loan Amount,
      and thereupon one or more new Notes of the same series of Notes in the
      same aggregate principal amount shall be issued by the Borrower to the
      assigning or transferor Lender and/or the new Lender, as appropriate to
      reflect such assignment. Such new Notes shall be authenticated by the
      Security Trustee. By execution and delivery hereof, the Borrower request
      and directs the Security Trustee to authenticate and deliver the Notes to
      be issued hereunder and the Security Trustee agrees to do so.

      Section 9.9. Confidentiality. None of the Transaction Agents nor any
Lender shall disclose any nonpublic information relating to the Borrower
(provided to it by the Borrower) or any Transaction Document or Additional
Document to any other Person without the consent of the Borrower, other than (a)
to such Transaction Agent's or Lender's Affiliates and its officers, directors,
employees, agents and advisors and, as contemplated by Section 9.8, to actual or
prospective assignees and participants, and then, in all such cases, only with
an undertaking by

                                      -38-
<PAGE>

the party to whom such information is disclosed to keep such information
confidential, (b) as required by any law, rule or regulation or judicial
process, (c) as requested or required by any state, federal or foreign authority
or examiner regulating banks or banking, and (d) to the extent reasonably
necessary in connection with any dispute related to, or enforcement of, the
Transaction Documents or Additional Documents.

      Notwithstanding anything to the contrary set forth herein or in any other
agreement to which the parties hereto are parties or by which they are bound,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions described in the Transaction Documents and the Additional
Documents (the "Transaction"), shall not apply to the U. S. federal tax
structure or U. S. federal tax treatment of the Transaction, and each party
hereto (and any employee, representative, or agent of any party hereto) may
disclose to any and all persons, without limitation of any kind, the U. S.
federal tax structure and U. S. federal tax treatment of the Transaction. The
preceding sentence is intended to cause the Transaction to be treated as not
having been offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended,
and shall be construed in a manner consistent with such purpose. In addition,
each party hereto acknowledges that it has no proprietary or exclusive rights to
the U. S. federal tax structure of the Transaction or any U. S. federal tax
matter or U. S. federal tax idea related to the Transaction.

      Section 9.10. Counterparts. This Agreement may be executed by different
parties on any number of counterparts, each of which shall constitute an
original and all of which, taken together, shall constitute one and the same
agreement.

      Section 9.11. Governing Law; Submission to Jurisdiction; Venue.

      (a)   This Agreement and the rights and obligations of the parties
hereunder and thereunder shall be construed in accordance with and be governed
by the laws of the State of New York. Any legal action or proceeding with
respect to this Agreement may be brought in the courts of the State of New York
or the United States for the Southern District of New York located in the
Borough of Manhattan, and, by execution and delivery of this Agreement or a
Transfer Supplement, each party hereto hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Each party hereto hereby further irrevocably waives any
claim that any such courts lack jurisdiction over such party, and agrees not to
plead or claim, in any legal action or proceeding with respect to this Agreement
brought in any of the aforesaid courts, that any such court lacks jurisdiction
over such party. Each party hereto further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address specified pursuant to Section 9.2, such
service to become effective 30 days after such mailing. Nothing herein shall
affect the right of any party hereto to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party hereto in any other jurisdiction.

      (b)   Each party hereto hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement brought in
the courts referred to in clause (a) above and

                                      -39-
<PAGE>

hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

      Section 9.12. Waiver of Trial by Jury. To the extent permitted by
applicable law, each party hereto irrevocably waives all right of trial by jury
in any action, proceeding or counterclaim arising out of, or in connection with,
any Transaction Document or any matter arising thereunder.

      Section 9.13. Effective Date. Although this Agreement is dated as of
September 3, 2004, it shall not be effective unless and until executed by the
parties listed on the signature pages hereto.

                         [Remainder of this page blank]

                                      -40-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

                                      GENERAL ELECTRIC CAPITAL CORPORATION
                                         as the Administrative Agent

                                         By: /s/ Norman Liu
                                            ____________________________________
                                         Name: Norman Liu
                                         Title: Vice President

                                         Address:
                                         General Electric Capital Corporation
                                         c/o GE Capital Aviation Services, Inc.
                                         201 High Ridge Road
                                         Stamford, Connecticut 06927

                                         Attention: Customer Services
                                         Facsimile: (203) 357-3201
                                         email: Nanotices@gecas.com

<PAGE>

                                         WELLS FARGO BANK NORTHWEST,
                                         NATIONAL ASSOCIATION
                                           as the Security Trustee

                                         By: /s/ Michael D. Hoggan
                                             __________________________________

                                         Title: Vice President
                                                ______________________________

                                         Address:
                                         Wells Fargo Bank Northwest, National
                                         Association
                                         MAC: U1228-120
                                         299 South Main Street
                                         12th Floor
                                         Salt Lake City, Utah 84111

                                         Attention: Corporate Trust Services
                                         Telephone: (801) 246 5630
                                         Telecopy: (801) 246-5053
                                         Email: michael.hoggan@wellsfargo.com

<PAGE>

                                         AMERICA WEST AIRLINES, INC.

                                         By: /s/ Thomas T. Weir
                                            ____________________________________
                                         Name: Thomas T. Weir
                                         Title: Vice President and Treasurer

                                         Address:

                                         America West Airlines, Inc.
                                         4000 E. Sky Harbor Blvd.
                                         Phoenix, Arizona  85034

                                         Attention: Vice President and Treasurer
                                         Telephone: (480) 693-5886
                                         Telecopy: (480) 693-3685
                                         email: tom.weir@americawest.com

<PAGE>

                                         GENERAL ELECTRIC CAPITAL
                                         CORPORATION
                                           as Original Series A Lender

                                         By: /s/ Norman Liu
                                            ____________________________________
                                         Name: Norman Liu
                                         Title: Vice President

                                         GENERAL ELECTRIC CAPITAL
                                         CORPORATION
                                           as Original Series B Lender

                                         By: /s/ Norman Liu
                                            ____________________________________
                                         Name: Norman Liu
                                         Title: Vice President

                                         Notice Address and Lending Office:

                                         General Electric Capital Corporation
                                         c/o GE Capital Aviation Services, Inc.
                                         201 High Ridge Road
                                         Stamford, Connecticut 06927

                                         Attention: Customer Services
                                         Facsimile: (203) 357-3201
                                         email: Nanotices@gecas.com

<PAGE>

                                   SCHEDULE 1
                  DEFINITIONS AND OTHER INTERPRETIVE PROVISIONS

      1.    Definitions. The following terms have the meanings set forth, or
referred to, below:

            "Act" means part A of subtitle VII of title 49, United States Code.

            "Actual Knowledge" means, with respect to (i) any Lender, actual
      knowledge of any officer of such Lender having responsibility for the
      transactions contemplated by the Transaction Documents and (ii) any other
      Person, actual knowledge of a Vice President or more senior officer of
      such Person or any other officer of such Person having responsibility for
      the transactions contemplated by the Transaction Documents.

            "Additional Documents" means the Payment and Indemnity Agreement,
      the Subordinated Mortgage and each Subordinated Mortgage Supplement.

            "Administrative Agent" is defined in the first paragraph of this
      Agreement.

            "Administrative Agent's Account" means the Administrative Agent's
      account number 50-234-585, reference AWA Engine Loan, at Deutsche Bank
      Trust Company Americas, New York branch, ABA No. 021-001-033, Swift Code
      BKTRUS 33, or such other account at a bank in the United States designated
      to the Borrower and the Lenders by the Administrative Agent.

            "Affected Lender" is defined in Section 1.7(c).

            "Affected Loan Amount" is defined in Section 1.7(c).

            "Affiliate" means, with respect to any Person, any other Person,
      directly or indirectly, controlling, controlled by, or under common
      control with such Person. For purposes of this definition, "control" means
      the power, directly or indirectly, to direct or cause the direction of the
      management and policies of such Person whether through the ownership of
      voting securities, by contract or otherwise, and "controlling,"
      "controlled by," and "under common control with" have correlative
      meanings.

            "Aggregate Commitment" means $35,000,000.

            "Aggregate Loan Amount" means the sum of the Loan Amounts of all
      Lenders.

            "Agreement" is defined in the first paragraph of this Agreement.

            "Applicable Margin" means (a) with respect to the Original Series A
      Note and the Original Series B Note 3.0% per annum, and (b) with respect
      to any Replacement Note, the percentage set forth in such Note.

            "ATSB" means the Air Transportation Stabilization Board, or any
      agency which may succeed to the rights, duties and obligations thereof
      under applicable law.

<PAGE>

            "Bankruptcy Code" means Title 11 of the United States Code, as the
      same may be amended.

            "Bill of Sale" means a bill of sale, delivery invoice or such other
      evidence of title to an Engine issued by the applicable Engine
      Manufacturer to the Borrower.

            "Borrower" is defined in the first paragraph of this Agreement.

            "Borrower's Account" means initially the account set forth in
      Section 1.2(a) or any subsequent account designated in writing by the
      Borrower to the Security Trustee and Administrative Agent from time to
      time.

            "Business Day" means any day other than (i) a Saturday, Sunday or
      other day on which banks in New York City or Phoenix, Arizona are
      authorized or required by law to close, and (ii) with respect to all
      notices and determinations in connection with, and borrowings and payments
      of principal and interest on the Loan, any day which is a Business Day
      described in clause (i) above and which is also a day for trading by and
      between banks in the London interbank Eurodollar market.

            "Capital Adequacy Change" is defined in Section 5.2.

            "Certificate re Non-Bank Status" means a certificate substantially
      in the form of Exhibit G annexed hereto.

            "Certificated Air Carrier" is defined in the Mortgage.

            "Closing" means the time at which the Loan has been advanced to the
      Borrower.

            "Code" means the Internal Revenue Code of 1986, as amended from time
      to time.

            "Collateral" is defined in the Mortgage.

            "Commitment" means (a) with respect to the Original Series A Lender,
      its Series A Commitment and (b) with respect to the Original Series B
      Lender, its Series B Commitment. The aggregate amount of the Commitments
      is set forth in the definition of Aggregate Commitment.

            "Commitment Termination Date" means September 30, 2004.

            "Default Rate" is defined in Section 2.4.

            "Designated Country" means the United States, the United Kingdom,
      the Netherlands, Germany, France, Austria, Luxembourg, Switzerland, Italy,
      Japan and Ireland.

            "Designated Date" means the day coinciding with the thirtieth (30th)
      monthly anniversary of the Funding Date.

            "Dollar" and "$" means lawful currency of the United States of
      America.

                                      -2-
<PAGE>

            "Eligible Assignee" means (i) prior to the termination of the
      Commitments in full, a Person approved by the Borrower which approval
      shall not be unreasonably withheld or delayed and which approval shall not
      be required if an Event of Default shall be continuing and (ii) after the
      termination of the Commitments in full, a bank or other financial
      institution nominated by a Lender.

            "Engine" means any engine described in Annex A to a Mortgage
      Supplement and any engine substituted for an Engine in accordance with the
      terms of the Mortgage, but excluding any Engine that has been released
      from the Lien of the Mortgage in accordance with the terms thereof.

            "Engine Manufacturer" means (i) with respect to Engine models
      CFM56-3-B1 and CFM56-3-B2, CFM International, Inc., or (ii) with respect
      to Engine models RB211-535E4, Rolls Royce or (iii) with respect to Engine
      Models V2500-A1, V2524-A5, and V2527-A5, International Aero Engines, Inc.

            "Engine Payment Date" has the meaning specified in Section 1.1(d).

            "ERISA" means the Employee Retirement Income Security Act of 1974,
      as amended from time to time, and the relations promulgated and rulings
      issued thereunder. Section references to ERISA are to ERISA as in effect
      at the date of this Agreement and any subsequent provisions of ERISA
      amendatory thereof, supplemental thereto or substituted therefor.

            "Event of Default" is defined in Section 7.1.

            "Exchange Event" has the meaning set forth in the Restructure
      Letter.

            "Excluded Tax" of a Person means (A) any Tax imposed on all or part
      of the income, profits or gains (whether worldwide, or only insofar as
      such income, profits or gains are considered to arise in or to relate to a
      particular jurisdiction) of that Person, any franchise, doing business,
      net worth or capital-based Tax imposed on that Person, and any intangibles
      Tax or similar Tax imposed on the principal amount or value of the Loans,
      by any jurisdiction (including the United States) (i) in which that Person
      is organized, (ii) in which that Person's principal office or applicable
      Lending Office is located, or (iii) in which that Person is subject to
      such Tax as a result of that Person doing business unrelated to making a
      Loan under this Agreement, (B) any Tax imposed on a transferee (including
      a Participant) of a Lender or on payments to a transferee to the extent
      that, under applicable law in effect on the date of the transfer to such
      transferee, the amount of such Taxes exceeds the amount of such Taxes that
      would have been imposed on the transferor to such transferee or on
      payments to such transferor and indemnified against hereunder (with
      appropriate adjustment to reflect the amount of the Loan acquired by such
      transferee) or (C) any Tax to the extent that liability for such Tax is
      caused by, and would not have been incurred but for, (i) the gross
      negligence or willful misconduct of such Person or a "related" Indemnitee
      (as defined in Section 5.5(a)) or (ii) the inaccuracy of any
      representation of such Person in any Transaction Document or (iii) the
      breach by such Person of any of its obligations under Section 5.3(c)(i).

                                      -3-

<PAGE>

            "FAA" means the Federal Aviation Administration of the United States
      Department of Transportation, or any agency which may succeed to the
      rights, duties and obligations thereof under applicable law.

            "FAA  Filed Documents" means the Release, the Mortgage, the
      Subordinated Mortgage and the Mortgage Supplement and Subordinated
      Mortgage Supplement.

            "Federal Aviation Act" means Title 49 of the United States Code
      which, among other things, recodified and replaced the U.S. Federal
      Aviation Act of 1958 and the regulations promulgated thereunder, or any
      subsequent legislation that amends, supplements or supersedes such
      provisions.

            "Fee  Letter" means the Fee Letter dated as of September 3, 2004
      between the Administrative Agent and the Borrower.

            "Financing Statements" means Uniform Commercial Code financing
      statements covering all the security interests in the Collateral created
      by or pursuant to the Mortgage and Subordinated Mortgage necessary or
      desirable to perfect said security interests.

            "Funding Date" means September 10, 2004 (or such later date on or
      prior to the Commitment Termination Date on which the Borrower requests
      the Lenders to fund the Loan in accordance with Section 1.2).

            "GAAP" means generally accepted accounting principles as set forth
      in the statements of financial accounting standards issued by the
      Financial Accounting Standards Board of the American Institute of
      Certified Public Accountants, as such principles may at any time or from
      time to time be varied by any applicable financial accounting rules or
      regulations issued by the SEC and, with respect to any Person, means such
      principles applied on a basis consistent with prior periods except as may
      be disclosed in such Person's financial statements.

            "Governmental Authority" means any (a) governmental entity, board,
      bureau, agency or instrumentality, (b) administrative or regulatory
      authority (including any central bank or similar authority) or (c) court,
      judicial authority or arbitrator, in each case, whether foreign or
      domestic.

            "Interest Payment Date" means, subject to Section 1.8(b), the date
      numerically corresponding to the Funding Date in each of March, June,
      September and December, commencing the next such date occurring after the
      Funding Date and the final such date for any Note shall be the Maturity
      Date for such Note.

            "Interest Period" means a period used for calculating the interest
      rate applicable to the Loan, as determined pursuant to Section 2.2.

            "Interest Rate Determination Date" means, with respect to any
      Interest Period for a Loan, the second Business Day prior to the first day
      of such Interest Period.

            "Lenders" is defined in the first paragraph of this Agreement.

                                      -4-
<PAGE>

            "Lending Office" means the lending office of each Lender set forth
      on the signature page of this Agreement with respect to such Lender, or
      such other lending office as a Lender from time to time shall notify the
      Borrower as its lending office hereunder; provided that a Lender shall
      not, without the Borrower's request, change its Lending Office if it would
      increase the Borrower's obligations under Section 1.7, 5.1, 5.2 or 5.3.

            "LIBOR Breakage Costs" is defined in Section 1.7(d).

            "LIBOR Rate" means, with respect to any Interest Period, the rate
      appearing on Bloomberg Page BBAM 1 screen service (or on any successor or
      substitute page of such service, or any successor to or substitute for
      such service, providing rate quotations comparable to those currently
      provided on such page of such service) at approximately 11:00 a.m., London
      time, on the Interest Rate Determination Date for such Interest Period, as
      the rate for dollar deposits with a maturity of three months. In the event
      that such rate is not available at such time for any reason, then the
      "LIBOR Rate" for such Interest Period shall be the average (rounded
      upwards to the nearest 1/100%), as determined by the Administrative Agent,
      of the per annum interest rates at which dollar deposits of amounts
      comparable to the outstanding principal amount of the Loan and for a
      maturity of three months are offered by the principal London offices of
      the Reference Banks, in each case offered to prime banks in the London
      interbank market, in each case at or about 11:00 a.m., London time, on the
      Interest Rate Determination Date for such Interest Period.

            "Lien" means any mortgage, pledge, lien, charge, claim, encumbrance,
      lease, sublease, sub-sublease or security interest affecting the title to
      or any interest in property.

            "Lien of Record" means, with respect to any Engine, any Lien that is
      recorded against such Engine in the records of the aircraft registry
      maintained by the FAA in Oklahoma City, Oklahoma in accordance with the
      Act (or any successor thereto under applicable law).

            "Loan" means the aggregate amount of funds advanced by the Lenders
      to the Borrower on the Funding Date pursuant to the terms of this
      Agreement.

            "Loan Amount" means, for each Lender, the aggregate outstanding
      principal amount of the Notes held by such Lender.

            "Material Adverse Change" means a material adverse change in the
      business or financial condition of the Borrower and its Subsidiaries taken
      as a whole or the material impairment of the ability of the Borrower to
      perform, or the Transaction Agents or the Lenders to enforce, the
      obligations of Borrower under the Transaction Documents.

            "Maturity Date" means (a) with respect to the Original Series A Note
      and the Original Series B Note, the sixth (6th) anniversary of the Funding
      Date, and (b) with respect to any Replacement Note, the date designated
      therein as the Maturity Date.

            "Moody's" means Moody's Investors Service, Inc.

                                      -5-
<PAGE>

            "Mortgage" means the Engine Mortgage and Security Agreement in
      substantially the form of Exhibit A-1 to this Agreement entered into by
      the Borrower and the Security Trustee to secure the Loans.

            "Mortgage Supplement" is defined in the Mortgage.

            "Note" means a Series A or Series B promissory note of the Borrower
      issued in connection with a Loan made by a Lender and payable to the order
      of such Lender, in substantially the form of Exhibit B hereto, evidencing
      the indebtedness of the Borrower to such Lender resulting from such Loan.

            "Notice of Borrowing" means a notice substantially in the form of
      Exhibit C annexed hereto delivered by the Borrower to the Administrative
      Agent pursuant to Section 1.2(a) with respect to a proposed borrowing.

            "Obligations" is defined in the Mortgage.

            "Officer's Certificate" is defined in the Mortgage.

            "Original Lender" shall mean the Original Series A Lender and/or the
      Original Series B Lender.

            "Other Taxes" means any and all present or future Taxes arising from
      any payment made under any Transaction Document or from the execution,
      delivery, performance, filing, recording or enforcement of, or otherwise
      with respect to, any Transaction Document or the transactions contemplated
      by the Transaction Documents.

            "Participant" is defined in Section 9.8(b).

            "Payment and Indemnity Agreement" means the Payment and Indemnity
      Agreement [Engines] dated as of the date hereof among the Borrower, the
      Administrative Agent and the Security Trustee.

            "Payment Date" means, subject to Section 1.8(b), the date
      numerically corresponding to the Funding Date in each of March, June,
      September and December, commencing with such date in December, 2004. The
      final "Payment Date" for any Note shall be the Maturity Date for such
      Note.

            "Percentage Share" means, for each Lender, such Lender's Commitment
      divided by the Aggregate Commitment.

            "Permitted Disposition" is defined in the Mortgage.

            "Permitted Investments" is defined in the Mortgage.

            "Permitted Liens" is defined in the Mortgage.

                                      -6-
<PAGE>

            "Persons" or "persons" means individuals, firms, partnerships, joint
      ventures, trusts, trustees, Governmental Authorities, organizations,
      associations, corporations, limited liability companies, or any
      committees, departments, authorities and other bodies thereof, corporate
      or incorporate, whether having distinct legal status or not, or any member
      of any of the same.

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

            "Prepayment Date" has the meaning specified in Section 1.1(c)(i).

            "Prepayment Fee" means, with respect to any prepayment of the Loan
      (other than any prepayment pursuant to Section 1.1(d) or Section 1.6) on
      or before the forty second monthly anniversary of the Funding Date, an
      amount equal to one percent (1%) of the principal amount of the Loan so
      prepaid as of the date of such prepayment.

            "Qualified Affiliate" means, as to any Lender, an Affiliate of such
      Lender engaged in the business of making loans.

            "Ratable Share" means, for each Lender, such Lender's Loan Amount
      divided by the Aggregate Loan Amount.

            "Reference Banks" means (a) Deutsche Bank, (b) Citibank, N.A., (c)
      JPMorgan Chase Bank, and (d) such other bank or banks as may from time to
      time be agreed by the Borrower and the Required Lenders.

            "Register" is defined in Section 9.8(d).

            "Regulatory Change" is defined in Section 5.1.

            "Related Loan Agreement" means that certain Loan Agreement [Spare
      Parts] dated the date hereof among the Borrower, the Administrative Agent,
      the Security Trustee, the Original Series A Lender and the Original Series
      B Lender.

            "Release" means the Release in respect of each of the Engines from
      the Lien of the Spare Engine and Simulator Security Agreement, dated as of
      December 12, 1997 between the Borrower and Mizuho Corporate Bank, Ltd. as
      assignee from The Industrial Bank of Japan, Limited as Agent and assigned
      FAA Conveyance No. K15691, as amended and assigned.

            "Replacement Notes" means the Replacement Notes issued in accordance
      with the terms of Section 1.11.

            "Required Lenders" means Lenders having (i) Commitments in excess of
      50% of the Commitment of all Lenders or (ii) if the Commitments have been
      terminated, Loan Amounts in excess of 50% of the Aggregate Loan Amount.

                                      -7-

<PAGE>

            "Restructure Letter" means the Restructure Letter [Engines], dated
      as of September __, 2004 between the Administrative Agent and the
      Borrower.

            "SEC" means the Securities and Exchange Commission of the United
      States, or any Governmental Authority succeeding to the functions of such
      Securities and Exchange Commission.

            "Security Trustee" is defined in the first paragraph of this
      Agreement.

            "Security Trustee Agreement" the Security Trustee Agreement
      [Engines] dated as of the date hereof among the Beneficiaries (as defined
      therein) and the Security Trustee.

            "Series" means either the Series A Notes, collectively, or the
      Series B Notes, collectively.

            "Series A Commitment" means the amount set forth in Schedule 4
      hereof.

            "Series B Commitment" means the amount set forth in Schedule 4
      hereof.

            "Series A Note" means a promissory note substantially in the form of
      Exhibit B hereto designated on its face as a "Series A Note", duly
      completed and executed by Borrower.

            "Series B Note" means a promissory note substantially in the form of
      Exhibit B hereto designated on its face as a "Series B Note", duly
      completed and executed by Borrower.

            "Special Default" means any Event of Default pursuant to Section
      7.1(a), and/or (b) or any event or condition that with the lapse of time
      or giving of notice, or both, would constitute an Event of Default under
      Section 7.1(a) and/or (b).

            "Specified Engines" means the eight Engines bearing manufacturer's
      serial numbers V10120, V10335, V10516, V10549, V10676, V10642, V10817 and
      V10783.

            "Subordinated Mortgage" means the Subordinated Engine Mortgage and
      Security Agreement in substantially the form of Exhibit A-2 to this
      Agreement entered into by the Borrower and the Security Trustee to secure
      the obligations of the Borrower under the Payment and Indemnity Agreement.

            "Subordinated Mortgage Supplement" is defined in the Subordinated
      Mortgage.

            "Subsidiary" means, as to any Person, any other Person of which at
      least a majority of the voting stock (or equivalent equity interests) is
      owned or controlled by such first Person or by one or more other
      Subsidiaries.

            "Substitute Basis" is defined in Section 1.7(f).

                                      -8-
<PAGE>

            "Taxes" means all taxes, charges, fees, levies or other assessments
      (including income, gross receipts, profits, withholding, excise, property,
      sales, use, license, occupation and franchise taxes and including any
      related interest, penalties or other additions) imposed by any
      jurisdiction or taxing authority (whether international, foreign or
      domestic).

            "Threshold Amount" has the meaning set forth in Schedule 4 to this
      Agreement.

            "Transaction Agents" is defined in Section 8.1 hereof.

            "Transaction Documents" means this Agreement, the Notes, the
      Mortgage and each Mortgage Supplement, the Restructure Letter and the Fee
      Letter.

            "Transfer Supplement" is defined in Section 9.8(c).

            "UCC" or "Uniform Commercial Code" means the Uniform Commercial Code
      as in effect in any applicable jurisdiction.

            "UCC  Termination Statements" means the Delaware UCC Termination
      Statement in respect of (i) the UCC Financing Statement 10758255 relating
      to the IAE International Aero Engines bearing manufacturer serial numbers
      V10676, V10783 and V10817 subject to the Lien of the Spare Engine and
      Simulator Security Agreement, dated as of December 12, 1997, between the
      Borrower and Mizuho Corporate Bank, Ltd. as assignee from The Industrial
      Bank of Japan, Limited as Agent; and (ii) the UCC Financing Statement
      32330358 relating to the CFM International, Inc. Engines bearing
      manufacturer serial numbers 720601, 720772, 720867, 721179 and 721395, the
      IAE International Aero Engines bearing serial numbers V0089, V0340,
      V10120, V10335, V10516, V10549 and V10642 and the Rolls Royce Engine
      bearing manufacturer serial number 30503.

            "USA" means the United States of America (including all states and
      political subdivisions thereof).

      2.    Other Interpretive Provisions. (a) The foregoing definitions shall
be equally applicable to both the singular and plural forms of the defined
terms. All terms defined directly or by incorporation in this Agreement shall
have the defined meanings when used in any certificate or other document
delivered pursuant hereto unless otherwise defined therein. For purposes of this
Agreement and all such certificates and other documents, unless the context
otherwise requires: (i) accounting terms not otherwise defined in this
Agreement, and accounting terms partly defined in this Agreement to the extent
not defined, shall have the respective meanings given to them under GAAP; (ii)
references to any amount as on deposit or outstanding on any particular date
means such amount at the close of business on such day; (iii) the words
"hereof," "herein" and "hereunder" and words of similar import refer to this
Agreement (or the certificate or other document in which they are used) as a
whole and not to any particular provision of this Agreement (or such certificate
or document); (iv) references to any Section, Schedule or Exhibit are references
to Sections, Schedules and Exhibits in or to this Agreement (or the certificate
or other document in which the reference is made), and references to any

                                      -9-
<PAGE>

paragraph, subsection, clause or other subdivision within any Section or
definition refer to such paragraph, subsection, clause or other subdivision of
such Section or definition; (v) the term "including" means "including without
limitation"; (vi) references to any law or regulation refer to that law or
regulation as amended from time to time and include any successor law or
regulation; (vii) references to any agreement refer to that agreement as from
time to time amended or supplemented or as the terms of such agreement are
waived or modified in accordance with its terms; (viii) references to any Person
include that Person's successors and assigns; and (ix) headings are for
convenience of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.

      (b)   Each exhibit and schedule to this Agreement is incorporated in, and
shall be deemed a part of, this Agreement.

      (c)   All terms defined in the Mortgage and used herein have such
respective defined meanings unless otherwise defined herein.

                                      -10-
<PAGE>

                                   SCHEDULE 2
                               Engine Descriptions

<TABLE>
<CAPTION>
                    SERIAL           DATE OF            STIPULATED          STIPULATED           TERMINATION
 ENGINE TYPE        NUMBER           MANUF.            LOSS VALUE-A        LOSS VALUE-B             VALUE
 -----------        ------           ------            ------------        ------------             -----
<S>                 <C>              <C>              <C>                 <C>                   <C>
 CFM56-3B2          720601            Jan-87          $   1,370,000       $   1,250,000         $   2,400,000
 CFM56-3B2          721179            Apr-85          $   1,370,000       $   1,250,000         $   2,400,000
 CFM56-3B1          720772            May-88          $   1,120,000       $   1,010,000         $   1,950,000
 CFM56-3B1          720867            Jun-87          $   1,120,000       $   1,010,000         $   1,950,000
 CFM56-3B1          721395            Dec-85          $   1,120,000       $   1,010,000         $   1,950,000
RB211-535E4          30503            Oct-84          $   2,110,000       $   1,920,000         $   3,840,000
 V2500-A1            V0089            Jul-89          $   1,193,000       $   1,750,000         $   3,510,000
 V2500-A1            V0340            Nov-93          $   1,193,000       $   1,750,000         $   3,510,000
 V2500-A1            V0334            Aug-93          $   1,193,000       $   1,750,000         $   3,510,000
 V2527-A5           V10120            Jun-95          $   2,940,000       $   2,670,000         $   4,110,000
 V2527-A5           V10335            Feb-98          $   2,940,000       $   2,670,000         $   4,110,000
 V2527-A5           V10516            Dec-98          $   2,940,000       $   2,670,000         $   4,110,000
 V2527-A5           V10549            May-99          $   2,940,000       $   2,670,000         $   4,110,000
 V2527-A5           V10676            Dec-99          $   2,940,000       $   2,670,000         $   4,110,000
 V2527-A5           V10642            Sep-99          $   3,630,000       $   3,300,000         $   5,080,000
 V2527-A5           V10817            Aug-00          $   3,630,000       $   3,300,000         $   5,080,000
 V2524-A5           V10783            Dec-00          $   2,560,000       $   2,330,000         $   3,580,000
</TABLE>

<PAGE>

                                   SCHEDULE 3
                        Principal Payments for the Notes

<TABLE>
<CAPTION>
                                     RATIO OF                     AGGREGATE                 AGGREGATE
                               PRINCIPAL PAYMENT TO           PRINCIPAL PAYMENTS        PRINCIPAL BALANCE
PAYMENT DATE                    ORIGINAL PRINCIPAL              (IN DOLLARS)              (IN DOLLARS)
------------                   --------------------           -----------------         -----------------
<S>                            <C>                            <C>                       <C>
Closing                                                                                 $      35,000,000
December 10, 2004                        0                    $               0         $      35,000,000
March 10, 2005                           0                    $               0         $      35,000,000
June 10, 2005                            0                    $               0         $      35,000,000
September 10, 2005                       0                    $               0         $      35,000,000
December 10, 2005                        0                    $               0         $      35,000,000
March 10, 2006                  1,289,474 / 35,000,000        $       1,289,474         $      33,710,526
June 10, 2006                   1,289,474 / 35,000,000        $       1,289,474         $      32,421,052
September 10, 2006              1,289,474 / 35,000,000        $       1,289,474         $      31,131,578
December 10, 2006               1,289,474 / 35,000,000        $       1,289,474         $      29,842,104
March 10, 2007                  1,289,474 / 35,000,000        $       1,289,474         $      28,552,630
June 10, 2007                   1,289,474 / 35,000,000        $       1,289,474         $      27,263,156
September 10, 2007              1,289,474 / 35,000,000        $       1,289,474         $      25,973,682
December 10, 2007               1,289,474 / 35,000,000        $       1,289,474         $      24,684,208
March 10, 2008                  1,289,474 / 35,000,000        $       1,289,474         $      23,394,734
June 10, 2008                   1,289,474 / 35,000,000        $       1,289,474         $      22,105,260
September 10, 2008              1,289,474 / 35,000,000        $       1,289,474         $      20,815,786
December 10, 2008               1,289,474 / 35,000,000        $       1,289,474         $      19,526,312
March 10, 2009                  1,289,474 / 35,000,000        $       1,289,474         $      18,236,838
June 10, 2009                   1,289,474 / 35,000,000        $       1,289,474         $      16,947,364
September 10, 2009              1,289,474 / 35,000,000        $       1,289,474         $      15,657,890
December 10, 2009               1,289,474 / 35,000,000        $       1,289,474         $      14,368,416
March 10, 2010                  1,289,474 / 35,000,000        $       1,289,474         $      13,078,942
June 10, 2010                   1,289,474 / 35,000,000        $       1,289,474         $      11,789,468
September 10, 2010             11,789,468 / 35,000,000        $      11,789,468         $               0
</TABLE>

Series A Note and Series B Note Maturity Date: Sixth anniversary of the Funding
Date.

<PAGE>

                                   SCHEDULE 4

                               Certain Information

      "Maximum Self Insurance Amount" means, with respect to any Engine, the
standard market hull deductible in existence from time to time in the worldwide
airline insurance marketplace applicable to aircraft of the same type as the
aircraft on which such Engine is installed, but in no event greater than
$2,000,000 any one occurrence.

      "Minimum Liability Amount" means $600,000,000.

      "Series A Commitment" means $35,000,000.

      "Series B Commitment" means $0.

      "Threshold Amount" means $2,000,000.

<PAGE>

                                   EXHIBIT A-1

                            [Insert Form of Mortgage]

<PAGE>

                                   EXHIBIT A-2

                     [Insert Form of Subordinated Mortgage]

<PAGE>

                                    EXHIBIT B

                             FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES OR SIMILAR LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
EXCEPT WHILE SUCH A REGISTRATION UNDER THE ACT AND SUCH SECURITIES OR SIMILAR
LAWS IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.

THIS NOTE IS SUBJECT TO CERTAIN ADDITIONAL RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 9.8 OF THE LOAN AGREEMENT REFERRED TO BELOW.

               SERIES [*] NOTE [ENGINES] DUE SEPTEMBER [__], 2010

No. [*] - New York, New York

_______, 200[]

$__________________

            FOR VALUE RECEIVED, the undersigned, AMERICA WEST AIRLINES, INC., a
Delaware corporation (together with its successors and permitted assigns, the
"Borrower") hereby unconditionally promises to pay to _____________, or the
registered assignee thereof, the principal amount of ______________ DOLLARS
($_________), in lawful currency of the United States of America, in
installments on the Payment Dates set forth in Annex A hereto, each such
installment to be in the amount set forth in Annex A hereto opposite the Payment
Date on which such installment is due, and to pay interest in arrears on each
Interest Payment Date at the Debt Rate (as defined herein below) for the
Interest Period ending on such Interest Payment Date on the amount of such
principal amount remaining unpaid from time to time from the date hereof until
such principal amount is paid in full; provided that in the event (i) that this
Note shall have been prepaid in part pursuant to the Loan Agreement, from and
after the relevant Prepayment Date or Engine Payment Date (as the case may be),
the amounts of such installments shall be reduced, in inverse order of maturity,
by the amount of such partial prepayment and (ii) of any repayment or prepayment
of any principal amount hereof, accrued interest on the principal amount repaid
or prepaid shall be payable on the date of such repayment or prepayment; and
provided further that the final principal payment hereon shall in any and all
events equal the then outstanding principal balance hereof and such final
payment shall discharge all amounts due under this Note. Interest shall be
computed on the basis of a year of 360 days and the actual days elapsed
(including the first day but excluding the last day) in the period for which
interest is payable. The Applicable Margin for this Note is []% per annum. As
used herein, the term "Debt Rate" means the LIBOR Rate for the relevant Interest
Period plus the Applicable Margin, unless the Substitute Basis shall have become
applicable pursuant to Section 1.7 of the Loan Agreement, in which case the
"Debt Rate" shall mean the sum of the Substitute Basis and the Applicable
Margin.

<PAGE>

            Notwithstanding the foregoing, this Note shall bear interest at the
Default Rate on overdue principal and, to the extent permitted by applicable
law, on any interest and any other amounts payable hereunder not paid when due
and payable for any period during which the same shall be overdue, payable on
demand by the holder hereof.

      This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Loan Agreement [Engines] dated as of September 3, 2004, among
the Borrower, General Electric Capital Corporation, as Administrative Agent,
Wells Fargo Bank Northwest, National Association, as Security Trustee, General
Electric Capital Corporation, as Original Series A Lender, and General Electric
Capital Corporation, as Original Series B Lender and the Lenders from time to
time party thereto (as amended or modified from time to time, the "Loan
Agreement"; the terms defined therein being used herein as therein defined). The
Loan Agreement, among other things, (i) provides for the making of a Series A
Loan and/or a Series B Loan by the Lenders to the Borrower on the Funding Date
and (ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified. The obligations of the Borrower under this Note and the Loan
Agreement are secured by collateral as provided in the Engine Mortgage and
Security Agreement (as amended or supplemented from time to time) dated as of
September 3, 2004, executed by the Borrower and Wells Fargo Bank Northwest,
National Association, as Security Trustee (the "Mortgage").

      Each holder hereof, by its acceptance of this Note, agrees that each
payment received by it hereunder shall be applied, first, to the payment of any
amount (other than principal of or interest on this Note) then due in respect of
this Note, including, without limitation, LIBOR Breakage Costs, if any; second,
to the payment of accrued interest on this Note (as well as any interest on
overdue principal, or, to the extent permitted by law, on LIBOR Breakage Costs,
if any, on interest and on other amounts due hereunder) due and payable to the
date of such payment; and third, to the payment of principal then due hereunder
(applied, in the case of a partial prepayment, in inverse order of maturity).

      There shall be maintained a Note Register for the purpose of registering
transfers and exchanges of Notes at the Corporate Trust Office of the Security
Trustee or at the office of any successor security trustee in the manner
provided in Section 9.8(d) of the Loan Agreement. As provided in the Loan
Agreement and subject to certain limitations therein set forth, the Notes may be
assigned, and the Notes are exchangeable for a like aggregate original principal
amount of Notes of different authorized denominations, as requested by the
Lender surrendering the same.

      Unless the certificate of authentication hereon has been executed by or on
behalf of the Security Trustee by manual signature, this Note shall not be
entitled to any benefit under the Loan Agreement or the Mortgage or be valid or
obligatory for any purpose.

                                      -2-
<PAGE>

      THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK.

                                        AMERICA WEST AIRLINES, INC.

                                        By: ____________________________________
                                          Name:
                                          Title:

<PAGE>

                SECURITY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

      This is one of the Notes referred to in the within-mentioned Loan
Agreement and Mortgage.

                                        WELLS FARGO BANK NORTHWEST,
                                        NATIONAL ASSOCIATION,
                                        not in its individual capacity but
                                        solely as Security Trustee

                                        By: ____________________________________
                                          Name:
                                          Title:

<PAGE>

                                    EXHIBIT C

                           FORM OF NOTICE OF BORROWING

                               NOTICE OF BORROWING

                               _____________, _____

General Electric Capital Corporation
   as Administrative Agent
Attention:  [_______________]                                [__________, 2[__]]

Ladies and Gentlemen:

      We refer to the Loan Agreement [Engines] dated as of September 3, 2004,
among America West Airlines, Inc., General Electric Capital Corporation, as
Administrative Agent, Wells Fargo Bank Northwest, National Association, as
Security Trustee, General Electric Capital Corporation, as Original Series A
Lender and as Original Series B Lender and the Lenders from time to time party
thereto (as amended or modified from time to time, the "Loan Agreement"; the
terms defined therein being used herein as therein defined). We hereby give you
notice requesting a Loan pursuant to Section 1.2(a) of the Loan Agreement, and
in that connection we set forth below the required information relating to such
Loan (the "Proposed Loan"):

      (1)   The Funding Date on which the Proposed Loan shall be made is
            _______________.

      (2)   The aggregate principal amount of the Proposed Loan is
            $_______________.

                                        Very truly yours,

                                        AMERICA WEST AIRLINES, INC.

                                        By: ____________________________________
                                          Name:
                                          Title:

<PAGE>

                                    EXHIBIT D

             [Insert Form of Opinion of Special Counsel to Borrower]

<PAGE>

                                    EXHIBIT E

             [Insert Form of Opinion of Borrower's Legal Department]

<PAGE>

                                    EXHIBIT F

                           FORM OF TRANSFER SUPPLEMENT

                                                           Date __________, ____

      Reference is made to the Agreement described in Item 2 of Annex I hereto
(as such Loan Agreement may hereafter be amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"). Unless defined in Annex I
hereto, terms defined in the Loan Agreement are used herein as therein defined.
___________ (the "Assignor") and __________ (the "Assignee") hereby agree as
follows:

      1.    The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Loan Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations under the Loan Agreement relating to the
Loans and Commitments listed in Item 4 of Annex I hereto. After giving effect to
such sale and assignment, the amount of the outstanding Loans owing to the
Assignee will be as set forth in Item 4 of Annex I hereto.

      2.    The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Agreement
or the other Transaction Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or the
other Transaction Documents or any other instrument or document furnished
pursuant thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any party to the
Transaction Documents or the performance or observance by any party to the
Transaction Documents of any of their respective obligations under the Loan
Agreement or the other Transaction Documents to which they are a party or any
other instrument or document furnished pursuant thereto.

      3.    The Assignee (i) confirms that it has received a copy of the Loan
Agreement and the other Transaction Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Transfer Supplement; (ii) agrees that it will,
independently and without reliance upon the Transaction Agents, the Assignor or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Agreement; (iii) confirms that it is an
Eligible Assignee under Section 9.8(c) of the Loan Agreement; (iv) appoints and
authorizes the Transaction Agents to take such action as an agent on its behalf
and to exercise such powers under the Loan Agreement and the other Transaction
Documents as are delegated to the Transaction Agents, as the case may be, by the
terms thereof,

<PAGE>

together with such powers as are reasonably incidental thereto; (vi) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Agreement are required to be performed by it as a Lender;
(vii) makes the representations and warranties contained in Section 3.4 of the
Loan Agreement[; and (viii) attaches the forms described in Sections 5.3(c) and
9.8(c) of the Loan Agreement.](1)

      4.    Following the execution of this Transfer Supplement by the Assignor
and the Assignee, an executed original hereof (together with all attachments)
will be delivered to the Security Trustee. This Transfer Supplement shall be
effective, unless a later date is otherwise specified in Item 5 of Annex I
hereto (the "Settlement Date"), upon the date upon which each of the following
conditions shall have been satisfied: (i) each of the Assignor and Assignee
shall have executed a copy hereof and delivered the same to the other party,
(ii) the registration of the transfer on the Register as provided by Section
9.8(d) of the Loan Agreement and (iii) receipt by the Assignee of such other
documentation or fees specified on Item 9 of Annex I hereto.

      5.    Upon the delivery of a fully executed original hereof to the
Security Trustee, as of the Settlement Date of this Transfer Supplement, (i) the
Assignee shall be a party to the Loan Agreement and, to the extent provided in
this Transfer Supplement, have the rights and obligations of a Lender thereunder
and under the other Transaction Documents and (ii) the Assignor shall, to the
extent provided in this Transfer Supplement, relinquish its rights and be
released from its obligations under the Loan Agreement and the other Transaction
Documents.

      6.    It is agreed that the Assignee shall be entitled to all interest on
the Assigned Share of the Loans at the rates specified in Item 6 of Annex I
which are paid by the Borrower on and after the Settlement Date, such interest
to be paid by the Security Trustee directly to the Assignee. It is further
agreed that all payments of principal made on the Assigned Share of the Loans
which occur on and after the Settlement Date will be paid directly by the
Security Trustee to the Assignee. Upon the Settlement Date, the Assignee shall
pay to the Assignor an amount specified by the Assignor in writing which
represents the Assigned Share of the principal amount of the Loans pursuant to
the Loan Agreement which are outstanding on the Settlement Date, and which are
being assigned hereunder. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Loan Agreement for periods prior
to the Settlement Date directly between themselves.

      7.    The Borrower is an intended third party beneficiary of, and may
enforce, this Transfer Supplement.

      8.    THIS TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

-----------------
(1.)   Include if the Assignee is organized under the laws of a jurisdiction
       outside of the United States.

                                      -2-
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Transfer Supplement, as of the
date first above written, such execution also being made on Annex I hereto.

                                        [NAME OF ASSIGNOR],
                                        as Assignor

                                        By _____________________________________
                                          Title:

                                        [NAME OF ASSIGNEE],
                                        as Assignee

                                        By _____________________________________
                                        Title:

Acknowledged and Agreed:

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
  as Security Trustee

By ____________________________________
  Name:
  Title:

                                      -3-
<PAGE>

                          ANNEX FOR TRANSFER SUPPLEMENT

                                     ANNEX I

1.    Borrower: America West Airlines, Inc.

2.    Name and Date of Loan Agreement:

      Loan  Agreement [Engines], dated as of September 3, 2004, among America
      West Airlines, Inc., as Borrower, General Electric Capital Corporation, as
      Administrative Agent, Wells Fargo Bank Northwest, National Association, as
      Security Trustee, General Electric Capital Corporation, as Original Series
      A and Series B Lender, and the Lenders from time to time party thereto.

3.    Date of Assignment Agreement:

4.    Amounts (as of date of Item 3 above):

<TABLE>
<CAPTION>
                               Outstanding Principal         Aggregate
                                      of Loan                Commitment
                               ---------------------         ----------
<S>                            <C>                           <C>
a.    Aggregate Amount
      for all Lenders               $__________              $__________

b.    Assigned Share

c.    Amount of
      Assigned Share                $__________              $__________

5.    Settlement Date:

6.    Rate of Interest to the           As set forth in Section 2.1 of the Loan Agreement (unless
      Assignee:                         otherwise agreed to by the Assignor and the Assignee)*
</TABLE>

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

*     The Borrower and the Security Trustee shall direct the entire amount of
      the interest to the Assignee at the rate set forth in Section 2.1 of the
      Loan Agreement, with the Assignor and Assignee effecting the agreed upon
      sharing of the interest through payments by the Assignee to the Assignor.
<PAGE>

7.    Notice and Lending Office:

      ASSIGNOR:
        ________________________
        ________________________
        ________________________
        ________________________

        Attention:
        Telephone:
        Telecopier:

      ASSIGNEE:
        ________________________
        ________________________
        ________________________
        ________________________

        Attention:
        Telephone:
        Telecopier:

8.    Payment Instructions:

      ASSIGNOR:
        ________________________
        ________________________
        ________________________
        ________________________

        Attention:
        Reference:

      ASSIGNEE:

        ________________________
        ________________________
        ________________________
        ________________________

        Attention:
        Reference:

                                      -2-
<PAGE>

9.    Other Documents or Fees for Closing (if any):

Acknowledged and Agreed:

[NAME OF ASSIGNEE]                                  [NAME OF ASSIGNOR]

By ______________________________                   By _________________________

_________________________________                   ____________________________
(Print Name and Title)                              (Print Name and Title)

                                      -3-
<PAGE>

                                    EXHIBIT G

                     FORM OF CERTIFICATE RE NON-BANK STATUS

                         CERTIFICATE RE NON-BANK STATUS

      Reference is hereby made to the Loan Agreement [Engines], dated as of
September 3, 2004, among America West Airlines, Inc., General Electric Capital
Corporation, as Administrative Agent, Wells Fargo Bank Northwest, National
Association, as Security Trustee, General Electric Capital Corporation, as
Original Series A Lender, and General Electric Capital Corporation, as Original
Series B Lender and the Lenders from time to time party thereto (as amended or
modified from time to time, the "Loan Agreement"). Pursuant to the provisions of
Section 5.3(c) of the Loan Agreement, the undersigned hereby certifies that (i)
it is not a "bank" as such term is used in Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) it is not a controlled
foreign corporation (within the meaning of Section 957(a) of the Code) related
(within the meaning of Section 864(d)(4) of the Code) to the Borrower, and (iii)
it is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrower.

                                          [NAME OF LENDING INSTITUTION]

                                          By ___________________________________
                                            Title: _____________________________
                                            Date: ______________________________

<PAGE>

                                    EXHIBIT H

                     [Insert Form of FAA Counsel's Opinion]<PAGE>

                                                                    EXHIBIT 10.2

                                                               Execution Version

================================================================================

                     ENGINE MORTGAGE AND SECURITY AGREEMENT

                          Dated as of September 3, 2004

                                     between

                           AMERICA WEST AIRLINES, INC.

                                       and

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,

                               as Security Trustee

================================================================================

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                      <C>
ARTICLE 1.  DEFINITIONS................................................................................   1
      Section 1.01.  Certain Definitions...............................................................   1
      Section 1.02.  Certain Rules of Construction.....................................................   1

ARTICLE 2.  SECURITY...................................................................................   1
      Section 2.01.  Grant of Security Interest........................................................   1

ARTICLE 3.  COVENANTS OF THE COMPANY...................................................................   4
      Section 3.01.  Liens.............................................................................   4
      Section 3.02.  Possession, Operation and Use, Maintenance and
                     Registration......................................................................   5
      Section 3.03.  Replacement and Pooling of Parts; Alterations,
                          Modifications and Additions..................................................  12
      Section 3.04.  Event of Loss and Release of Engines..............................................  14
      Section 3.05.  Insurance.........................................................................  20
      Section 3.06.  Filings...........................................................................  21
      Section 3.07.  [Intentionally Left Blank]........................................................  21
      Section 3.08.  Notice of Change of the Company's Location........................................  21
      Section 3.09.  Inspection........................................................................  21

ARTICLE 4.  REMEDIES OF THE SECURITY TRUSTEE UPON AN EVENT
                OF DEFAULT.............................................................................  22
      Section 4.01.  Remedies with Respect to Collateral...............................................  22
      Section 4.02.  Remedies Cumulative...............................................................  25
      Section 4.03.  Discontinuance of Proceedings.....................................................  25
      Section 4.04.  Allocation of Payments............................................................  25

ARTICLE 5.   INTENTIONALLY LEFT BLANK..................................................................  27

ARTICLE 6.  SECURITY FUNDS
      Section 6.01.  Investment of Security Funds......................................................  27

ARTICLE 7.  MISCELLANEOUS..............................................................................  27
      Section 7.01.  Termination of Mortgage...........................................................  27
      Section 7.02.  Alterations to Mortgage...........................................................  28
      Section 7.03.  No Legal Title to Collateral......................................................  28
      Section 7.04.  Sale of the Engines by Security Trustee Is Binding................................  28
      Section 7.05.  Benefit of Mortgage...............................................................  28
      Section 7.06.  Section 1110 of the Bankruptcy Code...............................................  28
      Section 7.07.  Notices...........................................................................  28
      Section 7.08.  Severability......................................................................  29
      Section 7.09.  Separate Counterparts.............................................................  29
      Section 7.10.  Successors and Assigns............................................................  29
</TABLE>

                                      (i)
<PAGE>

<TABLE>
<S>                                                                                                      <C>
      Section 7.11.  Headings..........................................................................  29
      Section 7.12.  Governing Law.....................................................................  29

APPENDIX A           Definitions

APPENDIX B           Insurance

EXHIBIT A            Mortgage Supplement

EXHIBIT B            Form of Letter of Credit

SCHEDULE I           List of Permitted Countries
</TABLE>

                                      (ii)
<PAGE>

                     ENGINE MORTGAGE AND SECURITY AGREEMENT

            This ENGINE MORTGAGE AND SECURITY AGREEMENT, dated as of September
3, 2004 (the "Mortgage") between AMERICA WEST AIRLINES, INC., a Delaware
corporation (the "Company"), and WELLS FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, as Security Trustee (the "Security Trustee").

                              W I T N E S S E T H :

                  WHEREAS, the Lenders have agreed, pursuant and subject to the
terms and conditions of the Loan Agreement, to make the Loan to the Company
secured by a Lien on the Collateral; and

                  WHEREAS, the Company desires by this Mortgage, among other
things, to grant to the Security Trustee for the benefit of the Secured Parties
a first priority perfected Lien on the Collateral in accordance with the terms
hereof, as security for the Obligations; and

                  WHEREAS, all things necessary to make this Mortgage a legal,
valid and binding obligation of the Company and the Security Trustee, for the
uses and purposes herein set forth, in accordance with its terms, have been done
and performed and have occurred;

                  NOW, THEREFORE, to secure the due and punctual payment of the
Obligations, it is hereby covenanted and agreed by and between the parties
hereto as follows.

                                   ARTICLE 1.

                                   DEFINITIONS

                  Section 1.01. Certain Definitions. Unless otherwise defined
herein or the context requires otherwise, capitalized terms used herein shall
have the meanings set forth in Appendix A hereto.

                  Section 1.02. Certain Rules of Construction. The defined
terms and the other provisions of this Mortgage shall be construed in accordance
with the rules of construction set forth under the heading "General Provisions"
in Appendix A hereto.

                                   ARTICLE 2.

                                    SECURITY

                  Section 2.01. Grant of Security Interest. In order to secure
(i) the prompt payment when due of the Obligations and (ii) the performance and
observance by the Company of all agreements, covenants and provisions contained
herein and in the other Operative Documents to the extent same relate to the
Obligations and in consideration of the premises and

<PAGE>

                                                                               2

of the covenants herein contained, and of other good and valuable consideration,
the receipt of which is hereby acknowledged, the Company has granted, bargained,
sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
confirm unto the Security Trustee, its successors in trust and assigns, for the
security and benefit of the Secured Parties, a first priority security interest
in, and mortgage lien on, all right, title and interest of the Company in, to
and under the following described properties, rights, interests and privileges
(which, collectively, including all property hereafter specifically subjected to
the lien of this Mortgage by any instrument supplemental hereto, are referred to
herein as the "Collateral"):

                        (a) the Engines, each of which Engines has 750 or more
      rated takeoff horsepower or the equivalent of such horsepower (as more
      particularly described in each Mortgage Supplement executed and delivered
      in connection herewith), as the same is now and will hereafter be
      constituted, whether now owned or hereafter acquired, and whether or not
      any such Engine from time to time is installed on an airframe, together
      with (a) all Parts of whatever nature, which are from time to time
      included within the definition of "Engines", whether now owned or
      hereafter acquired, including all substitutions, renewals and replacements
      of and additions, improvements, accessions and accumulations to the
      Engines and (b) all Engine Documents;

                        (b) all warranty rights with respect to the Engines or
      any Part thereof that the Company may have to the extent that such
      warranty rights are assignable (the "Warranties") (it being understood
      that the Company has no obligation to obtain an assignment or consent or
      to take any further action with respect to the security interest granted
      pursuant to this clause (other than to include such Collateral in any UCC
      financing statements and continuation statements) notwithstanding any
      obligation of the Company in any Operative Document (including the last
      paragraph of this Section 2.01) to execute and deliver further instruments
      and documents or provide other further assurances, except that, if an
      Event of Default shall have occurred and be continuing, the Company will
      take reasonable action requested by the Security Trustee for the
      assignment of material Warranties with respect to an Engine to any person
      acquiring such Engine pursuant to Article 4); in each case together with
      all rights, powers, privileges, options and other benefits of the Company
      thereunder with respect to the Engines, including, without limitation, the
      right to make claims thereunder, and to do any and all other things which
      the Company is or may be entitled to do thereunder;

                        (c) each assigned Lease (to the extent assigned under
      any Lease assignment), and including, without limitation, all rents or
      other payments of any kind made under such assigned Lease, all collateral
      security or credit support with respect to such assigned Lease (in the
      nature of a guarantee, letter of credit, credit insurance, Lien on or
      security interest in any property or otherwise) for the obligations of the
      lessee thereunder (if any), and all rights of the Company to execute any
      election or option or to give any notice, consent, waiver, or approval
      under or with respect to any thereof or to accept any surrender of any
      Engine or any part thereof as well as any rights, powers or remedies on
      the part of the Company, whether arising under such assigned Lease or by
      statute or at law or in equity, or otherwise, arising out of any default
      under such assigned Lease (it being understood that, so long as no Event
      of Default shall have occurred and be

<PAGE>

                                                                               3

      continuing, the Company shall retain all rights as lessor under such
      Lease, including to receive all such payments thereunder, to hold, dispose
      of, or relinquish any such collateral or credit support and to take or
      refrain from taking all actions thereunder) (to the extent assigned under
      such Lease assignment);

                        (d) all proceeds with respect to the requisition of
      title to the Engines or any part thereof, and all insurance proceeds with
      respect to the Engines or any part thereof, but excluding any insurance
      maintained by the Company and not required under Section 3.05;

                        (e) all Eligible Accounts; all cash, Permitted
      Investments and other financial assets held therein by the Security
      Trustee or an Eligible Institution or otherwise paid or deposited to or
      with the Security Trustee or an Eligible Institution and held or required
      to be held by the Security Trustee or an Eligible Institution hereunder;
      and all security entitlements (as defined in Article 8 of the New York
      UCC) with respect thereto; and

                        (f) all proceeds of the foregoing;

PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions of this
Section 2.01, so long as no Event of Default shall have occurred and be
continuing, (i) the Company shall have the right, to the exclusion of the
Security Trustee, to quiet enjoyment of the Engines and the other Collateral,
and peaceably and quietly, without hindrance or molestation, to possess, use,
retain and control the Engines and the other Collateral, and (ii) the Company
shall have the right, to the exclusion of the Security Trustee, with respect to
the Warranties, to exercise in the Company's name all rights and powers as the
beneficiary of the Warranties and to retain any recovery or benefit resulting
from the enforcement of any warranty or indemnity under the Warranties;

            TO HAVE AND TO HOLD the Collateral unto the Security Trustee, its
successors and assigns, forever, upon the terms herein set forth, for the
benefit, security and protection of the Security Trustee, and for the uses and
purposes and subject to the terms and provisions set forth in this Mortgage.

            It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Company shall remain liable under any assigned
Lease and the Warranties to perform all of the obligations assumed by it
thereunder, all in accordance with and pursuant to the terms and provisions
thereof, and the Security Trustee shall have no obligation or liability under
any assigned Lease and the Warranties by reason of or arising out of the
assignment hereunder, nor shall the Security Trustee be required or obligated in
any manner to perform or fulfill any obligations of the Company under any
assigned Lease and the Warranties, or, except as herein expressly provided, to
make any payment, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts which may have been assigned to it
or to which it may be entitled at any time or times.

<PAGE>

                                                                               4

            The Company does hereby irrevocably constitute and appoint the
Security Trustee the true and lawful attorney of the Company (which appointment
is coupled with an interest) with full power (in the name of the Company or
otherwise) to ask, require, demand, receive, compound and give acquittance for
any and all moneys and claims for moneys (in each case including insurance and
requisition proceeds) and all other property which now or hereafter constitutes
part of the Collateral, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or to take any action or to
institute any proceeding which the Security Trustee may deem to be necessary or
advisable to collect such property which constitutes Collateral; provided that
the Security Trustee shall not exercise any such rights except upon the
occurrence and during the continuance of an Event of Default. Without limiting
the provisions of the foregoing, during the continuance of any Event of Default,
but subject to the terms hereof and any mandatory requirements of applicable
Law, the Security Trustee shall have the right under such power of attorney in
its discretion to file any claim or to take any other action or proceedings,
either in its own name or in the name of the Company or otherwise, that the
Security Trustee may reasonably deem necessary or appropriate to protect and
preserve the right, title and interest of the Security Trustee in and to the
security intended to be afforded hereby. The Company hereby agrees that promptly
on receipt thereof, except as otherwise contemplated by the Operative Documents,
it will transfer to the Security Trustee any and all moneys from time to time
received by the Company constituting part of the Collateral, for distribution by
the Security Trustee pursuant to this Mortgage.

            The Company does hereby warrant and represent that it has not sold
or assigned, and hereby covenants that it will not sell or assign, so long as
this Mortgage shall remain in effect and the Lien hereof shall not have been
released pursuant to the provisions hereof, any of its estate, right, title or
interest hereby assigned, to any Person other than the Security Trustee, except
as expressly permitted herein, in any other Operative Document or in the
Subordinated Mortgage.

            The Company agrees that at any time and from time to time, upon the
written request of the Security Trustee, the Company will promptly and duly
execute and deliver or cause to be duly executed and delivered any and all such
further instruments and documents as the Security Trustee may reasonably deem
necessary to perfect and protect the priority of the security interests and
assignments created hereby and to obtain the full benefits of the security
interest granted hereunder and of the rights and powers herein granted.

                                   ARTICLE 3.

                            COVENANTS OF THE COMPANY

            Section 3.01. Liens. The Company will not directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to the
Company's interest in the Collateral, except:

                  (a) the Lien of this Mortgage and the Subordinated Mortgage;

                  (b) the rights of others under agreements or arrangements to
      the extent permitted by Section 3.02 hereof;

<PAGE>

                                                                               5

                  (c) Liens for Taxes of the Company (or any Lessee) and its
      U.S. Federal tax law consolidated group either not yet due or payable or
      being contested in good faith by appropriate proceedings so long as such
      Liens and such proceedings do not involve any material risk of the sale,
      forfeiture or loss (including loss of use) of any Engine or any interest
      therein or any discernible risk of criminal liability or any material risk
      of civil penalty against any Secured Party or impair the Lien of this
      Mortgage;

                  (d) materialmen's, mechanic's, workmen's, repairmen's,
      employees' or other like Liens arising in the ordinary course of business
      (including those arising under maintenance agreements entered into in the
      ordinary course of business) securing obligations that are not overdue for
      more than 60 days or are being contested in good faith by appropriate
      proceedings so long as such Liens and such proceedings do not involve any
      material risk of civil penalty or any discernible risk of criminal
      liability against any Secured Party or any material risk of the sale,
      forfeiture or loss of any Engine or adversely affect the Lien of this
      Mortgage;

                  (e) Liens arising out of any judgment or award against the
      Company (or against any Lessee), so long as such judgment or award shall,
      within sixty (60) days after the entry thereof, have been discharged or
      vacated, or execution thereof stayed pending appeal or shall have been
      discharged, vacated or reversed within sixty (60) days after the
      expiration of such stay and so long as during any such 60-day period there
      is not, or any such judgment or award does not involve, any material risk
      of the sale, forfeiture or loss (including loss of use) of any Engine, or
      any interest therein or any discernible risk of criminal liability or any
      material risk of civil penalty against any Secured Party or impair the
      Lien of this Mortgage;

                  (f) salvage or similar rights of insurers under policies of
      insurance maintained by the Company under Section 3.05 hereof;

                  (g) any other Lien with respect to which the Company (or any
      Lessee) shall have provided a bond, cash collateral or other security
      adequate in the reasonable opinion of the Security Trustee;

                  (h) Liens attributable to the Security Trustee; and

                  (i) Liens approved in writing by the Security Trustee.

Liens described in clauses (a) through (i) above are referred to herein as
"Permitted Liens." The Company shall promptly, at its own expense, take such
action as may be necessary to duly discharge (by bonding or otherwise) any such
Lien on the Collateral other than a Permitted Lien arising at any time.

            Section 3.02. Possession, Operation and Use, Maintenance and
Registration.

            (a) Possession. Except as expressly provided herein, the Company
shall not, without the prior written consent of the Security Trustee, sell,
lease or otherwise in any manner deliver, transfer or relinquish possession of
any Engine; provided that if and for so long as all approvals, consents or
authorizations required in connection with any such lease or such

<PAGE>

                                                                               6

delivery, transfer or relinquishment of possession by the FAA (or, if at the
time thereof, the Engine is installed on an airframe registered with any
non-U.S. Government Entity, such other Government Entity) have been obtained and
remain in full force and effect, then the Company may, without the prior written
consent of the Security Trustee:

            (i) so long as no Event of Default shall have occurred and be
      continuing, subject or permit any Lessee to subject any Engine to normal
      interchange, pooling or borrowing, or similar arrangements with persons
      who are domiciled in the United States, in each case for no more than six
      months and customary in the airline industry and entered into in writing
      by the Company (or any Lessee) in the ordinary course of its business;
      provided that (A) no such agreement or arrangement shall contemplate,
      require or result in the transfer of title to such Engine, (B) if the
      Company's title to any Engine 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 and the Company shall comply with Section
      3.04(a) hereof in respect thereof, and (C) the Company (or a Lessee) shall
      not relinquish possession of an Engine pursuant to this clause (i) for a
      period longer than 180 consecutive days;

            (ii) deliver or permit any Lessee to deliver possession of any
      Engine or any Part (A) to the manufacturer thereof or to any FAA certified
      third-party maintenance provider (or certified by a foreign authority so
      long as work performed on such Engine or Part shall comply with Section
      3.02(c)), for testing, service, repair, maintenance or overhaul work on
      such Engine or Part or to the extent required or permitted by the terms of
      Section 3.03(d) for alterations or modifications in or additions to such
      Engine or Part or (B) to licensed or bonded common carriers qualified in
      the shipping and transport of items such as such Engine or Part for the
      purpose of transport to a Person referred to in the preceding clause (A);
      provided that, if an Event of Default shall have occurred and be
      continuing, then, prior to delivering (permitting delivery of) possession
      of any Engine or Part to any Person described in clause (A), the Company
      shall put into place such measures as are reasonably satisfactory to the
      Security Trustee to ensure that such Person shall not assert a Lien
      against such Engine or Part and shall not have any other right of
      detention of such Engine or Part;

            (iii) install or permit any Lessee to install an Engine on an
      airframe owned by the Company (or such Lessee) free and clear of all
      Liens, except: (A) those of the type permitted under clauses (c), (d), (e)
      and (f) of Section 3.01 and those that apply only to the engines (other
      than Engines) and/or only to parts, appliances, instruments,
      appurtenances, accessories, furnishings and other equipment (other than
      Parts), and (B) the rights of third parties under normal interchange,
      pooling or borrowing, or similar arrangements which would be permitted
      under clause (i) above;

            (iv) install or permit any Lessee to install an Engine on an
      airframe leased to the Company (or such Lessee) or owned by the Company
      (or such Lessee) subject to a mortgage, conditional sale or other security
      agreement; provided that (x) such airframe is free and clear of all Liens,
      except: (A) the rights of the parties to the lease or conditional sale or
      other security agreement covering such airframe, or their assignees, and
      (B) Liens of the type permitted by subclauses (A) and (B) of clause (iii)
      of this Section 3.02(a) and

<PAGE>

                                                                               7

      (y) the Company or Lessee, as the case may be, shall have received from
      the lessor, mortgagee, secured party or conditional seller, in respect of
      such airframe, a written agreement (which may be a copy of the lease,
      mortgage, security agreement, conditional sale or other agreement covering
      such airframe), whereby such Person agrees that neither such Person nor
      its successors or assigns will acquire or claim any right, title or
      interest in, or Lien on, such Engine by reason of such Engine being
      installed on such airframe at any time while such Engine is subject to the
      Lien of this Mortgage;

            (v) so long as no Event of Default shall have occurred and be
      continuing, install or permit any Lessee to install an Engine on an
      airframe leased to the Company (or such Lessee) or owned by the Company
      (or such Lessee) subject to a mortgage, conditional sale or other security
      agreement under circumstances where neither clause (iii) nor clause (iv)
      of this Section 3.02(a) is applicable; provided that such Engine shall be
      deemed to have suffered an Event of Loss as of the date of such
      installation and the Company shall (or shall cause such Lessee to) comply
      with Section 3.04(a) hereof in respect thereof (it being understood that
      until Section 3.04(a) has been fully complied with the Lien of this
      Mortgage on any such Engine shall continue in full force and effect);

            (vi) transfer possession of any Engine to the U.S. Government
      pursuant to the Civil Reserve Air Fleet Program or any similar program, so
      long as the Company shall promptly notify the Security Trustee thereof
      and, in the case of a transfer pursuant to the Civil Reserve Air Fleet
      Program, provide the Security Trustee with the name, address and telephone
      number of the Contracting Office Representative for the Air Mobility
      Command of the United States Air Force to whom notice must be given
      pursuant to Section 4.01(a);

            (vii) so long as no Special Default or Event of Default shall have
      occurred and be continuing, enter into a lease with the U.S. Government
      under which the lessee's obligations are guaranteed or supported by the
      full faith and credit of the United States, but only if such lease
      complies, or the Company shall comply, as the case may be, with the
      requirements of subclauses (A) (to the extent practicable), (C)(i) (other
      than with respect to insurance), (C)(ii)-(iii), and (J) of Section
      3.02(a)(viii); or

            (viii) so long as no Special Default or Event of Default shall have
      occurred and be continuing, enter into any lease with respect to any
      Engine with any Permitted Air Carrier, but only if:

                  (A) the Company shall provide at least 15 days' advance
            written notice to the Security Trustee;

                  (B) At the time that the Company enters into such lease, such
            Permitted Air Carrier shall not be insolvent (it being agreed that,
            for purposes hereof, "insolvent" shall mean not paying its debts as
            they become due) or subject to any bankruptcy, insolvency,
            liquidation, reorganization, dissolution or similar proceeding,
            shall not be seeking any reorganization or any readjustment of its
            debts and shall not be, and shall not have substantially all of its
            property, in the possession of any liquidator, trustee, receiver or
            similar person;

<PAGE>

                                                                               8

                  (C) Any such lease (i) shall include provisions for the
            maintenance, operation, possession, inspection and insurance of such
            Engine that are substantially the same as, or (from a lessor's
            perspective) more favorable than, the applicable provisions of
            Sections 3.02(a), 3.02(b), 3.02(c), 3.05 and 3.09 and (ii) shall
            provide that such Permitted Air Carrier may not further lease or
            transfer its interests (except transfers of the type permitted in
            clauses (i) through (vi), inclusive, of Section 3.02(a)) in such
            Engine;

                  (D) In connection with a lease to a Permitted Air Carrier
            which is not a U.S. Air Carrier, all necessary governmental
            approvals, if any, required for such Engine to be imported to, and
            exported from (upon repossession thereof by the Security Trustee or
            other termination or expiration of such lease), the applicable
            jurisdiction shall have been obtained prior to commencement of any
            such lease, and any foreign exchange permits necessary to allow all
            rent and other payments provided for under such lease shall be in
            full force and effect; and the Company shall have provided to the
            Security Trustee a power-of-attorney, reasonably satisfactory in
            form and substance to the Security Trustee and, to the extent
            permitted by applicable Law, valid and enforceable in the applicable
            jurisdiction, permitting the Security Trustee to exercise all rights
            of the Company under such lease in such jurisdiction, upon the
            occurrence and continuation of an Event of Default;

                  (E) In connection with a lease to a Permitted Air Carrier
            which is not a U.S. Air Carrier, (aa) either the jurisdiction in
            which such Permitted Air Carrier is based maintains normal
            diplomatic relations with the United States, or such Permitted Air
            Carrier is based in Taiwan, Republic of China (which shall be deemed
            an acceptable jurisdiction notwithstanding the absence of normal
            diplomatic relations with the United States), and (bb) the Company
            shall have furnished the Security Trustee a favorable opinion of
            counsel, reasonably satisfactory to the Security Trustee, in the
            country of domicile of such Permitted Air Carrier, in form and
            substance reasonably satisfactory to the Security Trustee, that,
            subject to customary exceptions and qualifications: (i) the terms of
            such lease and this Mortgage are the legal, valid and binding
            obligations of the parties thereto enforceable under the Laws of
            such jurisdiction, (ii) it is not necessary for any Secured Party to
            register or qualify to do business in such jurisdiction, if not
            already so registered or qualified, as a result, in whole or in
            part, of the proposed lease, (iii) the Security Trustee's Lien in
            respect of such Engine will be recognized in such jurisdiction and
            the Security Trustee shall have a first priority perfected security
            interest (subject to Permitted Liens) in the Engines subject to such
            Lease under the Laws of such jurisdiction, (iv) the Laws of such
            jurisdiction of domicile require fair compensation by the government
            of such jurisdiction, payable in a currency freely convertible into
            Dollars, for the loss of use of or title to such Engine in the event
            of the requisition by such government of such use or title (unless
            the Company shall provide insurance in the amounts required with
            respect to hull insurance under Section 3.05 covering the
            requisition of use of or title to such Engine by the government of
            such jurisdiction so long as such Engine is subject to such lease)
            and (v) the agreement of such Permitted Air Carrier that

<PAGE>

                                                                               9

            its rights under the lease are subject and subordinate to all the
            terms of this Mortgage is enforceable against such Permitted Air
            Carrier under applicable Law and the Security Trustee shall be able
            to repossess such Engine, and return it to the United States,
            without undue expense, penalty or delay, upon the occurrence and
            continuation of an Event of Default;

                  (F) The Company shall furnish to the Security Trustee evidence
            reasonably satisfactory to the Security Trustee that the insurance
            required by Section 3.05 remains in effect;

                  (G) All necessary action, if any, shall have been taken to
            continue in full force and effect (i) the perfection of the Security
            Trustee's first-priority perfected Lien on such Engine (subject to
            Permitted Liens) and (ii) the Security Trustee's rights under this
            Mortgage;

                  (H) All necessary documents shall have been duly filed,
            registered or recorded in such public offices as may be required
            fully to preserve the priority of the interest of the Security
            Trustee in such Engine;

                  (I) Each such lease shall be assigned by the Company to the
            Security Trustee as security for the performance of all of the
            Company's obligations under this Mortgage (with the Company
            retaining all rights of lessor thereunder, to the extent consistent
            with this Section 3.02(a)(viii), if and for so long as there shall
            not have occurred and be continuing an Event of Default), with the
            express consent of such Permitted Air Carrier;

                  (J) The Company shall furnish to the Security Trustee a
            written confirmation (which may be contained in any relevant
            operative agreement) from the lessee and any owner, lessor or
            mortgagee of any aircraft on which such Engine is installed by such
            Lessee that each such party shall recognize the Company's rights and
            interests in, and the rights and interests of the Security Trustee
            in the leased Engine and, notwithstanding any contrary provisions of
            applicable Laws, its rights and benefits under which are hereby
            waived to the extent in conflict with this provision, no such party
            shall claim, as against the Company or the Security Trustee, any
            right, title or interest in such Engine as a result of such Engine
            being subject to such lease or installed on any aircraft as a result
            of such lease; and

                  (K) The Company shall reimburse the reasonable out-of-pocket
            fees and expenses, including, without limitation, reasonable fees
            and disbursements of counsel, incurred by the Security Trustee in
            connection with any such lease.

            Notwithstanding anything to the contrary in this Section 3.02(a),
the rights of any Lessee or other transferee who receives possession of an
Engine by reason of a transfer permitted by this Section 3.02(a) (other than the
transfer of an Engine which is deemed an Event of Loss) shall be subject and
subordinate to, and any lease permitted by this Section 3.02(a) shall include a
provision that makes it expressly subject and subordinate to, all the terms of
this Mortgage and

<PAGE>

                                                                              10

to the Lien of this Mortgage, including, without limitation, (i) the Security
Trustee's rights to foreclosure and possession pursuant to Section 4.01, (ii)
the Security Trustee's right to terminate and avoid such lease, delivery,
transfer or relinquishment of possession upon the occurrence and continuation of
an Event of Default and (iii) the right to require such person to forthwith
deliver such Engine subject to such transfer upon the occurrence and
continuation of an Event of Default. The Company shall remain primarily liable
hereunder for the performance of all of the terms of this Mortgage to the same
extent as if such lease or transfer had not occurred, and, except as otherwise
provided herein, the terms of any such lease shall not permit any Lessee to take
any action not permitted to be taken by the Company in this Mortgage with
respect to the Engines. No pooling arrangement, lease or other relinquishment of
possession of any Engine or Engine Documents shall in any way discharge or
diminish any of the Company's obligations to the Security Trustee hereunder or
constitute a waiver of the Security Trustee's rights or remedies hereunder.
Except as otherwise provided herein and without in any way relieving the Company
from its primary obligation for the performance of its obligations under this
Mortgage, the Company may in its sole discretion permit a Lessee to exercise any
or all rights which the Company would be entitled to exercise under Article III,
and may cause a Lessee to perform any or all of the Company's obligations under
Article III (provided that a Lessee may not lease or otherwise in any manner
deliver, transfer or relinquish possession of an Engine except as expressly
permitted by this Mortgage), and the Security Trustee agrees to accept actual
and full performance thereof by a Lessee in lieu of performance by the Company.
Any Wet Lease shall not constitute a delivery, transfer or relinquishment of
possession for purposes of Section 3.02(a) and shall not be prohibited by the
terms hereof. Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under paragraph (c), (d) or (e) of the definition of
such term (as set forth in Appendix A) shall not be deemed to violate the
provisions of this Section 3.02.

            (b) Operation and Use. The Company shall not, and shall not allow
any other person to, operate, use, maintain, service, repair or overhaul the
Engines (i) in violation of any Law binding on or applicable to the Company or
to any Engine, or any of the Engine Documents, or to the operation, use,
maintenance, service, repair or overhaul of, or similar dealings in, any Engine,
or (ii) in violation of any airworthiness certificate, license or registration
of any Government Entity relating to the Company or to any Engine, except (1)
immaterial or non-recurring violations with respect to which corrective measures
are taken promptly by the Company or a Lessee, as the case may be, upon
discovery thereof, and (2) to the extent the Company or any Lessee is contesting
the validity or application of any such Law, rule, regulation, order,
certificate, license or registration in good faith in any reasonable manner
which does not involve any material risk of the sale, forfeiture or loss
(including loss of use) of any Engine or any of the Engine Documents or any
interest therein or any discernible risk of criminal liability or any material
risk of civil penalty against any Secured Party or impair the lien of the
Mortgage. The Company agrees not to operate, use or locate any Engine, or allow
any Engine to be operated, used or located (A) in any area excluded from
coverage by any insurance required by the terms of Section 3.05, except in the
case of a requisition by the U.S. Government where the Company obtains an
indemnity in lieu of such insurance from the U.S. Government, or insurance from
the U.S. Government, covering such area, in accordance with Section 3.05(c) or
(B) in any recognized or threatened area of hostilities unless fully covered in
accordance with Appendix B by war-risk insurance as required by the terms of
Section 3.05 (including, without limitation, Section 3.05(c)), unless the Engine
is only temporarily located in such area as a result

<PAGE>

                                                                              11

of an emergency, equipment malfunction, navigational error, hijacking, weather
condition or other similar unforeseen circumstances, so long as the Company
diligently and in good faith proceeds to remove the Engine from such area
immediately.

      (c) Maintenance. The Company, at its own cost and expense, shall (or shall
cause a Lessee to) maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) each Engine in accordance with
the requirements of an FAA or JAA approved maintenance program so as to keep
each Engine serviceable (except when undergoing overhaul) and in as good
operating condition as when initially subjected to the Lien hereof, ordinary
wear and tear excepted, and as may be necessary and required under applicable
Law, including the Federal Aviation Act, airworthiness directives, and other
applicable rules, regulations and requirements by any government authority,
utilizing, except during any period that a Lease is in effect, the same manner
and standard of maintenance, service, repair or overhaul used by the Company
with respect to engines similar to such Engine operated by the Company and
utilizing, during any period that a Lease is in effect, the same manner and
standard of maintenance, service, repair or overhaul used by the Lessee with
respect to engines similar to such Engine operated by the Lessee. The Company
further agrees that the Engines will be maintained, used, serviced, repaired,
overhauled or inspected in compliance with applicable Laws with respect to the
maintenance of the Engines and in compliance with each applicable airworthiness
certificate, license and registration of any Government Entity, including the
FAA, relating to any Engine, other than minor or nonrecurring violations with
respect to which corrective measures are taken upon discovery thereof and except
to the extent the Company or Lessee is contesting in good faith the validity or
application of any such Law or requirement relating to any such certificate,
license or registration in any reasonable manner which does not create a risk of
sale, loss or forfeiture of any Engine or the interest of the Security Trustee
therein, any material risk of civil liability or any risk of criminal liability.
If an Engine becomes unserviceable, the Company shall commence the restoration
process with respect to such Engine in due course; provided, however, that the
Company shall not be responsible for any delays by a third-party maintenance
provider unless such delay is caused by a breach of an obligation of the Company
to the third-party maintenance provider. If an Engine is not installed on an
airframe for a period in excess of thirty consecutive days and is not undergoing
maintenance during such period, the Company (or a Lessee) shall store such
Engine in accordance with the requirements of the Company's (or, if applicable,
a Lessee's) FAA or JAA approved maintenance program. The Company agrees that an
Engine may only be serviced, overhauled and repaired in an FAA-approved
maintenance facility. The Company agrees that it will commence the restoration
process with respect to any Engine that is not in serviceable condition on a
timely basis. The Company shall maintain or cause to be maintained all Engine
Documents in respect of each Engine in accordance with the requirements of the
Company's (or if such Engine is subject to a Lease, Lessee's) FAA or JAA
approved maintenance program.

      (d) Identification of Security Trustee's Interest. As promptly as
possible, and in any case within 180 days following the Closing Date, the
Company agrees to affix and maintain (or cause to be affixed and maintained), at
its expense, on each Engine a nameplate (which shall be provided to the Company
by the Security Trustee) bearing the inscription:

<PAGE>

                                                                              12

            "THIS ENGINE IS SUBJECT TO A MORTGAGE AND SECURITY AGREEMENT IN
            FAVOR OF WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, AS
            SECURITY TRUSTEE"

(such nameplate to be replaced if there is a successor Security Trustee). Such
nameplate may be removed temporarily in the course of maintenance of an Engine.

            Section 3.03. Replacement and Pooling of Parts; Alterations,
Modifications and Additions.

            (a) Replacement of Parts. So long as an Engine is subject to the
Lien of this Mortgage, the Company, at its own cost and expense, will promptly
replace or cause to be replaced all Parts which may from time to time be
incorporated or installed in or attached to any Engine and which may from time
to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason whatsoever,
except as otherwise provided in Section 3.03(d) hereof or if an Engine to which
a Part relates has suffered an Event of Loss. In addition, the Company (or any
Lessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use; provided that the Company (or such Lessee),
except as otherwise provided in Section 3.03(d) hereof, will, at its own cost
and expense, replace such Parts as promptly as practicable. All replacement
Parts shall be free and clear of all Liens (except Permitted Liens, pooling
arrangements to the extent permitted by Section 3.03(c) and except in the case
of replacement property temporarily installed on an emergency basis) and shall
be in good operating condition, and shall have a value and utility (without
regard to hours and cycles) at least equal to, the Parts replaced (assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof); provided that each replacement Part shall have at least enough
remaining hours, cycles and calendar life (as applicable) at the time of its
installation on the relevant Engine to last until the next expected maintenance
event of such Engine. Notwithstanding anything to the contrary set forth
elsewhere in this Section 3.03(a), (x) no removal and replacement of Parts
pursuant to this Section 3.03(a) shall be permitted for the purpose of
diminishing the value, utility or remaining useful life of any Engine, and (y)
neither the Company nor any Lessee shall be permitted to remove or replace any
Parts pursuant to this Section 3.03(a) in any manner, for any reason, or on any
basis that would discriminate against the interests of the Security Trustee in
any Engine (as compared to other aircraft engines of the same type owned, leased
or operated by the Company or any Lessee, as the case may be).

            (b) Parts Subject to Lien. Except as otherwise provided in Section
3.03(d) hereof, all Parts at any time removed from any Engine shall remain
subject to the Lien of this Mortgage, 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 Engine and which meet the requirements for
replacement Parts specified in Section 3.03(a) hereof. Immediately upon any
replacement part becoming incorporated or installed in or attached to an Engine
as provided in Section 3.03(a) hereof, without further act (subject only to
Permitted Liens and except in the case of replacement property temporarily
installed on an emergency basis), (i) the replaced Part shall thereupon be free
and clear of the Lien of this Mortgage and all rights of the Security Trustee
and

<PAGE>

                                                                              13

shall no longer be deemed a Part hereunder and (ii) the replacement part shall
be deemed a Part hereunder and such replacement Part shall become subject to the
Lien of this Mortgage and be deemed part of such Engine for all purposes hereof
to the same extent as the Parts originally incorporated or installed in or
attached to such Engine.

            (c) Pooling of Parts. Any Part removed from any Engine as provided
in Section 3.03(a) hereof may be subjected by the Company (or any Lessee) to a
normal pooling arrangement customary in the commercial airline industry of which
the Company (or any Lessee) is a party entered into in the ordinary course of
the Company's (or such Lessee's) business; provided that the Part replacing such
removed Part shall be incorporated or installed in or attached to such Engine in
accordance with Sections 3.03(a) and 3.03(b) hereof as promptly as practicable
after the removal of such removed Part. In addition, any replacement Part when
incorporated or installed in or attached to any Engine in accordance with
Section 3.03(a) hereof may be owned by any third party subject to such a normal
pooling arrangement; provided that the Company (or any Lessee), at its expense,
as promptly thereafter as practicable, either (i) causes such replacement Part
to become subject to the Lien of this Mortgage, free and clear of all Liens
except Permitted Liens, at which time such temporary replacement Part shall
become a Part or (ii) replaces such replacement Part by incorporating or
installing in or attaching to such Engine a further replacement Part which is
subject to the Lien of this Mortgage, free and clear of all Liens except
Permitted Liens.

            (d) Alterations; Modifications and Additions. The Company, at its
own expense, will make or cause to be made such alterations and modifications in
and additions to any Engine as may be required to be made from time to time to
meet the applicable standards of the FAA or JAA, to the extent made mandatory in
respect of the Engines; provided, however, that the Company in good faith and by
appropriate proceedings may contest the validity or application of any such
mandatory modification in any reasonable manner which does not involve any risk
of loss, sale or forfeiture of any Engine, or result in any risk of criminal
liability or material civil liability to any Secured Party or materially
adversely affect the Security Trustee's interest in such Engine. In addition,
the Company, at its own expense, may, or may permit a Lessee at its own cost and
expense to, from time to time make or cause to be made such alterations and
modifications in and additions to any Engine (each an "Optional Modification")
as the Company or such Lessee may deem desirable in the proper conduct of its
business including, without limitation, removal of Parts which the Company deems
are obsolete or no longer suitable or appropriate for use in such Engine;
provided, however, that (i) no such Optional Modification shall materially
diminish the value, utility, or useful life of any Engine below its value,
utility or useful life immediately prior to such Optional Modification (assuming
such Engine was in the condition required by the Mortgage immediately prior to
such Optional Modification) and (ii) such Optional Modification shall have been
approved by the applicable Engine Manufacturer or the FAA or JAA, as applicable.
Except as otherwise expressly provided herein, all Parts incorporated or
installed in or attached or added to any Engine as the result of any such
alteration, modification or addition (the "Additional Parts") shall become
subject to the Lien of this Mortgage. Notwithstanding the foregoing sentence,
the Company (or any Lessee) may remove or suffer to be removed any Additional
Part; provided that such Additional Part (i) is in addition to, and not in
replacement of or in substitution for, any Part originally incorporated or
installed in or attached to such Engine on the date that the Company originally
acquired such Engine or any Part in replacement of, or in substitution for, any
such Part, (ii) is not required to

<PAGE>

                                                                              14

be incorporated or installed in or attached or added to such Engine pursuant to
the terms of Section 3.02(c) hereof, the terms of the insurance policies
required to be carried hereunder or any applicable law or the first sentence of
this Section 3.03(d), and (iii) can be removed from such Engine without
materially diminishing the value, utility or remaining useful life which such
Engine would have had at the time of removal had such alteration, modification
or addition not occurred, assuming that such Engine was in the condition and
repair required to be maintained by the terms hereof. Upon the removal by the
Company (or any Lessee) of any such Part as above provided, such Part shall,
without further act, be free and clear of the Lien of this Mortgage and all
rights of the Security Trustee and such Part shall no longer be deemed a Part
hereunder.

            Section 3.04. Event of Loss and Release of Engines.

            (a) Event of Loss With Respect to an Engine. Upon the occurrence of
an Event of Loss with respect to an Engine, the Company shall promptly (and in
any event within ten (10) Business Days after such occurrence) give the Security
Trustee written notice of such Event of Loss. The Company shall, within thirty
(30) days after the occurrence of an Event of Loss with respect to an Engine
give the Security Trustee written notice of its election to perform one of the
following options (it being agreed that, if the Company shall not have given
notice of such election within such 30-day period, the Company shall be deemed
to have elected the option in clause (i) of the next sentence). The Company may
elect either to (i) repay a principal amount of the Loan in an amount equal to
the Stipulated Loss Value of such Engine (or the Termination Value of such
Engine, if Section 3.04(h)(3)(ii) is applicable), plus accrued interest thereon
and any other amounts in accordance with Section 1.1(d) of the Loan Agreement,
on or prior to the earlier of (A) the sixty-first (61st) day following the Event
of Loss and (B) the third Business Day following the receipt of insurance
proceeds with respect to such occurrence (but in any event not earlier than the
date of the Company's election under the preceding sentence of this Section to
make payment under this clause (i)), or (ii) cause to be subjected to the Lien
of this Mortgage in replacement thereof not later than the sixtieth (60th) day
following the occurrence of such Event of Loss, a Replacement Engine, owned by
the Company and free and clear of all Liens except Permitted Liens; provided
that if the Company does not perform its obligation to effect such replacement
in accordance with this Section 3.04(a) during the period of time provided
herein, then the Company shall be deemed to have elected to make the payment
contemplated by clause (i) of this sentence within the period of time specified
therein. The Company shall not be entitled to elect the replacement option
pursuant to clause (ii) of the preceding sentence if, at the time the Company
gives notice pursuant to the preceding sentence there shall have occurred and be
continuing a Special Default or an Event of Default. A Replacement Engine for an
Engine suffering an Event of Loss must meet each of the following conditions:

            (1) be of the same model as the Engine to be replaced thereby, or an
      improved model, manufactured by the same Engine Manufacturer;

            (2) have a value, utility and remaining useful life at least equal
      to and be in at least as good operating condition as, the Engine to be
      replaced thereby (assuming that such Engine was of the value and utility
      and in the condition and repair required by the terms hereof immediately
      prior to the occurrence of the Event of Loss);

<PAGE>

                                                                              15

            (3) have been first placed in service after October 22, 1994, or, if
      different, meet whatever conditions or requirements as may be required in
      order for the Security Trustee to be entitled to the benefits of Section
      1110 of the Bankruptcy Code with respect to such Replacement Engine in the
      event of a case under Chapter 11 of the Bankruptcy Code in which the
      Company is a debtor; provided, however, that the requirement set forth in
      this subclause (3) shall not apply (A) with respect to the first Engine to
      suffer an Event of Loss, or (B) if, after giving effect to the replacement
      of the Engine suffering the Event of Loss by the Replacement Engine
      proposed by the Company, the ratio (both by number of Engines and by
      value) of Engines for which the Security Trustee is entitled to the
      benefits of Section 1110 of the Bankruptcy Code in the event of a case
      under Chapter 11 of the Bankruptcy Code in which the Company is a debtor
      to all Engines then subject to the Lien of this Mortgage is equal to or
      greater than the ratio of the Specified Engines to all Engines subject to
      the Lien of this Mortgage as of the Closing Date.

            (b) Effect of Replacement or Repayment. Upon the Company having
provided a Replacement Engine as provided in Section 3.04(a) above, the Lien of
this Mortgage shall attach to such Replacement Engine as though no Event of Loss
had occurred. Upon the Company having provided a Replacement Engine or having
made a repayment of the Loan pursuant to Section 3.04(a), the Security Trustee
shall, at the cost and expense of the Company, release from the Lien of this
Mortgage the Engine subject to such Event of Loss, and all Engine Documents and
Warranties relating to such Engine, by executing and delivering to the Company
such documents and instruments as the Company may reasonably request to evidence
such release and shall assign without recourse or representation to the Company
all claims it may have against any other Person arising from the Event of Loss
and the Company shall receive all insurance proceeds and other proceeds from any
award in respect of condemnation, confiscation, seizure or requisition,
including all investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Engine as provided in Sections
3.04(d)(i) and 3.05 hereof.

            (c) Conditions to Engine Replacement. The Company's right to make a
replacement under Section 3.04(a) hereof shall be subject to the fulfillment, at
the Company's cost and expense, of the following conditions precedent:

            (1) On the date that the Replacement Engine is made subject to the
      Lien of this Mortgage (the "Replacement Closing Date"), no Special Default
      or Event of Default shall have occurred and be continuing;

            (2) On the Replacement Closing Date, an executed counterpart of each
      of the following shall have been delivered to the Security Trustee, in
      each case in form and substance reasonably satisfactory to the Security
      Trustee:

                  (A) a Mortgage Supplement covering the Replacement Engine
            (which shall be filed for recordation pursuant to the Federal
            Aviation Act);

                  (B) such Uniform Commercial Code financing statements covering
            the Lien created by this Mortgage as deemed necessary by the
            Security Trustee to protect the security interests of the Security
            Trustee in the Replacement Engine;

<PAGE>

                                                                              16

                  (C) a certificate of a qualified aircraft engineer (who may be
            an employee of the Company) or, if the Security Trustee makes
            written request to the Company within five Business Days after the
            Company shall have furnished to the Security Trustee the information
            referred to in Section 3.04(c)(5)(C), an independent appraiser
            specified in such request (provided such appraiser is reasonably
            acceptable to the Company), whose fees and expenses shall be paid by
            the Security Trustee if the appraiser's report supports the
            certificate delivered by the Company's aircraft engineer pursuant to
            this Section 3.04(c)(2)(C) and paid by the Company in all other
            circumstances, certifying that such Replacement Engine meets all of
            the requirements set forth in subclauses (1), (2) and (3) of
            Section 3.04(a), as applicable; and

                  (D) a copy of a bill of sale, manufacturer's invoice or other
            evidence of the Company's title with respect to the Replacement
            Engine.

            (3) The Security Trustee shall have received evidence satisfactory
      to the Security Trustee as to the due compliance with Section 3.05 hereof
      with respect to the Replacement Engine;

            (4) On the Replacement Closing Date, the Company shall be the owner
      of the Replacement Engine and shall cause the Replacement Engine to be
      subjected to the Lien of this Mortgage, free and clear of Liens (other
      than Permitted Liens);

            (5) The Security Trustee shall, at the expense of the Company, have
      received (A) an opinion addressed to the Security Trustee, reasonably
      satisfactory to the Security Trustee, to the effect that (i) the
      Replacement Engine has been made subject to the Lien of this Mortgage,
      (ii) the Security Trustee will be entitled to the benefits of Section 1110
      of the Bankruptcy Code (or any successor or replacement statute) with
      respect to the Replacement Engine to the extent that the benefits of
      Section 1110 of the Bankruptcy Code (or any successor or replacement
      statute) are required to be available to the Security Trustee with respect
      to such Replacement Engine in accordance with Section 3.04(a)(3) and (iii)
      to such further effect as the Security Trustee may reasonably request
      (including, if the Replacement Engine will be subject to a Lease to a
      Permitted Air Carrier which is not a U.S. Air Carrier upon effectiveness
      of such replacement, to the effect provided in clause (iii) of Section
      3.02(a)(viii)(E)), (B) an opinion of FAA counsel addressed to the Security
      Trustee, reasonably satisfactory to the Security Trustee, respecting the
      due filing for recordation with the FAA of the Mortgage Supplement with
      respect to such Replacement Engine, the perfection and priority of the
      Lien of this Mortgage thereon and as to such other matters concerning the
      Federal Aviation Act as the Security Trustee may reasonably request and
      (C) at least six Business Days before the Replacement Closing Date the
      information specified in Section 4.1(e) of the Loan Agreement with respect
      to the Replacement Engine as of a date within 30 days prior to the date
      such information is furnished to the Security Trustee; and

            (6) The Company shall have taken such other actions and furnished
      such other certificates and documents as the Security Trustee shall have
      reasonably requested in order that such Replacement Engine be duly and
      properly subjected to the Lien of this

<PAGE>

                                                                              17

      Mortgage to the same extent as initially required under the Operative
      Documents with respect to the Engine so replaced.

            (d) Payments Received on Account of an Event of Loss. As between the
Security Trustee and the Company, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of which is
provided for in Section 3.05 hereof, or elsewhere in this Mortgage, as the case
may be, or payments in respect of damage to the business or property of the
Company) with respect to an Engine received at any time by the Security Trustee
or by the Company from any Government Entity or other Person will be applied as
follows:

            (i) if such payments are received with respect to an Event of Loss
      as to an Engine and such Engine is being replaced by the Company pursuant
      to Section 3.04(a) hereof, such payments shall be paid over to, or
      retained by, the Security Trustee as security; and upon completion of such
      replacement (or upon the closing therefor) and compliance with the
      provisions of Section 3.04(a) and (c) with respect to the Event of Loss
      for which such payments are made, all such payments, including all
      investment earnings thereon shall be promptly paid over to, or retained
      by, the Company; and

            (ii) if the Company has elected or is deemed to have elected to make
      the repayment referred to in clause (i) of the third sentence of Section
      3.04(a), such payments shall be applied as follows:

            first, if the sum described in such clause (i) has not then been
      paid in full by the Company, such payments shall be deposited with the
      Security Trustee as cash collateral up to the amount required to be paid
      under such clause (i), and the Security Trustee shall apply such deposit
      to payment under clause (i) on such date in compliance with clause (i) as
      the Company shall specify to the Security Trustee or, if no such date has
      been specified, on the last date available for repayment in compliance
      with such clause (i); and

            second, the balance, if any, shall be paid to, or retained by, the
      Company.

            (e) Requisition of Use. In the event of a requisition for use by a
Government Entity of such Engine not constituting an Event of Loss, any payments
received by the Security Trustee or the Company (or any Lessee of the applicable
Engine) from such government with respect to such requisition shall be retained
by or paid to the Company (or such Lessee, as the case may be).

            (f) Application of Payments During Existence of Event of Default.
Any amount referred to in this Section 3.04 or Section 3.05 which is payable to
or retainable by the Company (or any Lessee) shall not be paid to or retained by
the Company (or such Lessee), if at the time of such payment or retention a
Special Default or an Event of Default shall have occurred and be continuing,
but shall be held by or paid over to the Security Trustee as security for the
Obligations. Upon the earlier of (a) such time as there shall not be continuing
any such Special Default or Event of Default or (b) the termination of this
Mortgage in accordance with Section 7.01, such amount, and any interest realized
thereon pursuant to Section 6.01 hereof, shall be paid over to the Company (or
such Lessee) to the extent not previously applied in

<PAGE>

                                                                              18

accordance with the preceding sentence, provided that if at the time of the
termination of this Mortgage a "Special Default" or "Subordinated Event of
Default" (as such terms are defined in the Subordinated Mortgage) has occurred
and is continuing, then such amount, and any such interest, not so previously
applied shall be held or paid over to the Subordinated Trustee as security under
the Subordinated Mortgage.

            (g) Engine Exchange. Upon not less than ten (10) Business Days'
prior written notice from the Company to the Security Trustee, provided no
Special Default or Event of Default shall have occurred and be continuing, and
subject to compliance with Section 3.04(i) hereof if the final sentence of such
Section is then applicable, the Security Trustee shall release from the Lien of
this Mortgage pursuant to Section 3.04(b) one or more Engines specified in such
notice (herein, the "Released Engines") upon the replacement of such Engines
with other engines (the "Exchanged Engines") meeting the requirements of Section
3.04(a). Any such Exchanged Engine shall be deemed to be a "Replacement Engine"
and the Security Trustee and the Company shall comply with the provisions of
Section 3.04 with regard to the Exchanged Engine and the Released Engine,
provided that if the Security Trustee requests a certificate of an independent
appraiser pursuant to Section 3.04(c)(2)(C), then, notwithstanding anything to
the contrary in Section 3.04(c)(2)(C), the fees and expenses of such appraiser
shall be paid by the Security Trustee if the Security Trustee does not have a
reasonable basis for requesting such appraisal and the appraisal supports the
report of the Company's aircraft engineer, and such fees and expenses shall be
paid by the Company in all other circumstances.

            (h) Permitted Dispositions. Upon not less than ten (10) Business
Days' prior written notice from the Company to the Security Trustee, provided no
Special Default or Event of Default shall have occurred and be continuing, the
Security Trustee shall release from the Lien of this Mortgage pursuant to
Section 3.04(b) one or more Engines specified in such notice (the "Disposed
Engines") that the Company is disposing, or intends to dispose, in the ordinary
course of its business (a "Permitted Disposition") (treating such Disposed
Engines, for the purposes of Sections 3.04(a) and (b) as Engines having suffered
an Event of Loss) if, but only if, each of the following conditions is
satisfied:

            (1) the Company delivers to the Security Trustee an Officer's
      Certificate certifying that (i) each of the Disposed Engines is surplus to
      the operational needs of the Company and is not required to meet the fleet
      planning needs of the Company in the ordinary course of its business, and
      (ii) the Company has not, and does not intend to, acquire by any means
      whatsoever any replacement for any of the Disposed Engines as support for
      the Company's operations (it being expressly understood that any purchase,
      lease or sublease of one or more other engines and any other arrangement
      permitting the Company access to or use of one or more other engines would
      all be considered a replacement of the Disposed Engines within the meaning
      of this Section 3.04(h)(1)(ii));

            (2) except with respect to the first Disposed Engine to be disposed
      of by the Company and released from the Lien of this Mortgage pursuant to
      this Section 3.04(h) during the term of this Mortgage (for which it is
      agreed that the condition set forth in this subclause (2) shall not
      apply), after giving effect to the disposal of the Disposed Engines, the
      ratio (both by number of Engines and by value) of remaining Engines for
      which the Security Trustee is entitled to the benefits of Section 1110 of
      the Bankruptcy Code in the

<PAGE>

                                                                              19

      event of a case under Chapter 11 of the Bankruptcy Code in which the
      Company is a debtor to all Engines then remaining subject to the Lien of
      this Mortgage is equal to or greater than the ratio of the Specified
      Engines to all Engines subject to the Lien of this Mortgage as of the
      Closing Date;

            (3) the Security Trustee shall have received, in immediately
      available funds, a prepayment of the principal amount of the Loan (plus
      accrued interest thereon and any other amounts payable therewith in
      accordance with Section 1.1(d) of the Loan Agreement) in an amount equal
      to (i) with respect to any such disposition occurring on or after the
      Designated Date, and any such disposition of up to four Disposed Engines
      at any time prior to the Designated Date (provided that if all such
      Disposed Engines are manufactured by CFM International, Inc., up to five
      Disposed Engines prior to the Designated Date), the Stipulated Loss Value
      of the Disposed Engine, and (ii) with respect to any such disposition of a
      Disposed Engine as to which the preceding clause (i) does not apply, the
      Termination Value of the Disposed Engine.

            (i) Additional Collateral. If (i) the Company exercises its
right to make one or more Exchanged Engines subject to the Lien of this
Mortgage, (ii) any such Exchanged Engine has fewer hours or cycles or less
calendar time remaining to the next expected major overhaul than the
corresponding Released Engine (any such Exchanged Engine being referred to
herein as a "Short Time Engine") and (iii) at any time thereafter two
consecutive quarterly engine reports (prepared in accordance with Section 4.1(e)
of the Loan Agreement) indicate that all of the Engines subject to the Lien of
this Mortgage have on average less than 4,393 hours or less than 2,899 cycles
remaining until the next expected major overhaul, then the Company shall, within
five (5) Business Days following the due date of the second of such quarterly
engine reports, comply with all of the following requirements:

            (1) With respect to all such Short Time Engines, the Company shall
      furnish the Security Trustee with a certificate of an independent
      appraiser selected by the Security Trustee and reasonably satisfactory to
      Company certifying as to difference in value, if any, set forth in
      dollars, based on the difference in hours, cycles and calendar time since
      last shop visit or since new, as applicable, as of the date of such
      exchange, between each such Short Time Engine and the corresponding
      Released Engine (the cumulative aggregate amount of any and each such
      deficiency in value between a Short Time Engine and the corresponding
      Released Engine being referred to herein as the "Exchange Shortfall
      Amount"); and

            (2) If the independent appraiser's report prepared pursuant to
      Section 3.04(i)(1) hereof sets forth an Exchange Shortfall Amount, the
      Company shall provide the Security Trustee with a letter of credit that is
      in an amount equal to the Exchange Shortfall Amount and that otherwise
      meets all of the following requirements (each such letter of credit, a
      "Letter of Credit"):

                  (i) Such Letter of Credit must be issued and payable by a
            Pre-Approved Bank or another bank acceptable to the Security Trustee
            in its sole and absolute discretion and in substantially the form of
            Exhibit B or in another form and substance acceptable to the
            Security Trustee in its sole and absolute

<PAGE>

                                                                              20

            discretion, and, if not issued by a Pre-Approved Bank or the New
            York branch of a major international bank acceptable to the Security
            Trustee in its sole and absolute discretion from time to time, will
            be confirmed by and payable at a Pre-Approved Bank or the New York
            branch of a major international bank acceptable to the Security
            Trustee in its sole and absolute discretion from time to time, and
            shall remain in full force and effect and may be drawn down by the
            Security Trustee upon demand at any time or times following the
            occurrence of an Event of Default until the Required LC Expiry Date.

                  (ii) Such Letter of Credit may have a validity period or
            periods ending prior to the Required LC Expiry Date, provided that
            (i) the Letter of Credit shall, in each case, be renewed, extended
            or reissued and delivered to the Security Trustee not later than
            sixty (60) days prior to its expiry; and (ii) a Letter of Credit
            shall remain in force at all times up to the Required LC Expiry
            Date.

                  (iii) If at any time while the Lien of this Mortgage remains
            in effect, the Security Trustee determines in its sole and absolute
            discretion that the current issuing or confirming bank for the
            Letter of Credit is no longer an acceptable issuing or confirming
            bank (whether by virtue of a material adverse change in its
            financial condition, a decrease in any credit rating of its
            long-term unsecured debt obligations or for any other reason) the
            Security Trustee shall notify the Company of such fact and the
            Company shall within five (5) Business Days after the date of such
            notice cause the Letter of Credit to be replaced by a Letter of
            Credit issued by a Pre-Approved Bank or another bank acceptable to
            the Security Trustee in its sole and absolute.

Provided that no Special Default or Event of Default shall have occurred and is
continuing, the Security Trustee shall release and return to the Company each
such Letter of Credit at such time as the Short Time Engine to which such Letter
of Credit relates has completed a major overhaul. The proceeds of any drawing
upon a Letter of Credit for any reason other than the occurrence of an Event of
Default shall be held by the Security Trustee as cash collateral in accordance
with Section 6.01 hereof. If the Company proposes to exercise its right to
provide a Short Time Engine hereunder at any time when a Letter of Credit is in
place with respect to a prior exercise of such right, the Company shall provide
the report described in clause (1) above with respect to the proposed exchange
and, if such report shows a further Exchange Shortfall Amount, the Company shall
comply with clause (2) above as a condition to making such exchange.

            Section 3.05. Insurance.

                  (a) Obligation to Insure. The Company shall comply with, or
      cause to be complied with, each of the provisions of Appendix B, which
      provisions are hereby incorporated by this reference as if set forth in
      full herein.

                  (b) Insurance for Own Account. Nothing in Section 3.05 shall
      limit or prohibit (a) the Company from maintaining the policies of
      insurance required under Appendix B with higher limits than those
      specified in Appendix B, or (b) the Security Trustee or any Lender from
      obtaining insurance for its own account (and any proceeds

<PAGE>

                                                                              21

      payable under such separate insurance shall be payable as provided in the
      policy relating thereto); provided, however, that no insurance may be
      obtained or maintained that would limit or otherwise adversely affect the
      coverage of any insurance required to be obtained or maintained by the
      Company pursuant to this Section 3.05 and Appendix B.

                  (c) Indemnification by Government in Lieu of Insurance.
      Security Trustee agrees to accept, in lieu of insurance against any risk
      with respect to any Aircraft or Engine described in Appendix B,
      indemnification from, or insurance provided by, the U.S. Government, or
      upon the written consent of Security Trustee, other Government Entity,
      against such risk in an amount that, when added to the amount of insurance
      (including permitted self-insurance), if any, against such risk that the
      Company (or any Lessee) may continue to maintain, in accordance with this
      Section 3.05, shall be at least equal to the amount of insurance against
      such risk otherwise required by this Section 3.05.

                  (d) Application of Insurance Proceeds. All proceeds of
      insurance required to be maintained by the Company, in accordance with
      Section 3.05 and Section B of Appendix B, in respect of any property
      damage or loss, whether or not constituting an Event of Loss, shall be
      adjusted, paid and applied in the manner specified in Section B of
      Appendix B.

            Section 3.06. Filings. The Company will take, or cause to be taken,
at the Company's cost and expense, such action with respect to the recording,
filing, re-recording and re-filing of this Mortgage, each Mortgage Supplement
and any financing statements or other instruments as are necessary, or
reasonably requested by the Security Trustee and appropriate, to maintain, so
long as this Mortgage is in effect, the perfection and priority of the Lien
created by this Mortgage, or will furnish to the Security Trustee timely notice
of the necessity of such action, together with such instruments, in execution
form, and such other information as may be required to enable the Security
Trustee to take such action. In addition, the Company will pay any and all
recording, stamp and other similar taxes payable in the United States, in
connection with the execution, delivery, recording, filing, re-recording and
refiling of this Mortgage or any such financing statements or other instruments.

            Section 3.07. [Intentionally Left Blank].

            Section 3.08. Notice of Change of the Company's Location. The
Company will notify the Security Trustee of any change in the location of the
Company (within the meaning of Section 9-307 of the Uniform Commercial Code)
promptly after making such change and in any event within a reasonable period of
time prior to the date by which it is necessary under applicable Law to make any
filing in order to prevent the lapse of perfection (absent refiling) of
financing statements filed under or with respect to this Mortgage.

            Section 3.09. Inspection.

            (a) At reasonable times (but, so long as no Default has occurred and
is continuing, no more frequently than once in any 12-month period), the
Security Trustee and its authorized representatives (the "Inspecting Parties")
may inspect the Engines (including without

<PAGE>

                                                                              22

limitation, the Engine Documents) and the Company shall cooperate, and shall
cause any Lessee to cooperate, with the Inspecting Parties in connection with
any such inspection (including, without limitation, permitting any such
Inspecting Party to make copies of Engine Documents not reasonably deemed
confidential by the Company or such Lessee) at its own cost and expense.

            (b) Any inspection of the Engines hereunder shall be limited to a
visual inspection, shall be in compliance with the Company's work and safety
rules and shall not include the disassembling, or opening of any components, of
any Engine, and no such inspection shall interfere with the Company's or any
Lessee's maintenance or use of any Engine.

            (c) With respect to such rights of inspection, the Security Trustee
      shall not:

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

            (ii) so long as no Event of Default has occurred and is continuing,
      exercise its inspection rights hereunder other than on reasonable notice
      and, whether or not an Event of Default has occurred and is continuing, so
      as not to unreasonably interfere with the Company's or any Lessee's
      maintenance and operation of the Aircraft and Engines.

            (d) Each person inspecting the Engines hereunder shall bear its own
expenses in connection with any such inspection, unless an Event of Default
shall have occurred and be continuing, in which case the Company shall bear all
such expenses.

            (e) If requested by the Security Trustee, the Company shall provide,
or shall cause any Lessee to provide, to the Security Trustee the date(s), if
then scheduled, upon which any Engine undergoes its next scheduled maintenance
visit and next major check and next off-the-wing maintenance, and shall advise
the Security Trustee of the name and location of the relevant maintenance
performer, if then selected, and shall, if requested by the Security Trustee in
connection with a major check, at least 5 days prior to commencement of such
major check or maintenance, make available for inspection by the Security
Trustee all relevant Engine Documents at the Company's records facility in the
United States, or at such Lessee's records facility, or at the premises of the
maintenance performer.

                                   ARTICLE 4.

            REMEDIES OF THE SECURITY TRUSTEE UPON AN EVENT OF DEFAULT

            Section 4.01. Remedies with Respect to Collateral.

            (a) Remedies Available. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, the Security
Trustee may do one or more of the following; provided, however, that during any
period an Engine is subject to the Civil Reserve Air Fleet Program in accordance
with the provisions of Section 3.02(a) hereof and in possession of the U.S.
Government, the Security Trustee shall not, on account of any Event of

<PAGE>

                                                                              23

Default, be entitled to exercise any of the following remedies in such manner as
to limit the Company's control under this Mortgage of such Engine, unless at
least sixty (60) days' (or such other period as may then be applicable under the
Civil Reserve Air Fleet Program) written notice of such Event of Default
hereunder shall have been given by the Security Trustee by registered or
certified mail to the Company (and any Lessee) with a copy addressed to the
Contracting Office Representative for the Air Mobility Command of the United
States Air Force under any contract with the Company (or by Lessee) relating to
such Engine:

            (i) cause the Company, upon the written demand of the Security
      Trustee, at the Company's expense, to deliver promptly, and the Company
      shall deliver promptly, all or any of the Engines constituting the
      Collateral at such location designated by the Security Trustee within the
      continental United States of America, together in each case with the
      Engine Documents for such Engine(s) as the Security Trustee may so demand,
      to the Security Trustee or its order, or the Security Trustee, at its
      option, may peaceably enter upon the premises where all or any of such
      Engine(s) and/or Engine Documents are located and take immediate
      possession (to the exclusion of the Company and all Persons claiming under
      or through the Company) of and remove the same by summary proceedings;

            (ii) sell all or any part of the Collateral at public or private
      sale, whether or not the Security Trustee shall at the time have
      possession thereof, as the Security Trustee may determine, or lease or
      otherwise dispose of all or any part of the Collateral as the Security
      Trustee, in its sole discretion, may determine, all free and clear of any
      rights or claims of whatsoever kind of the Company; provided, however,
      that the Company shall be entitled at any time prior to any such
      disposition to redeem the Collateral by paying in full all of the
      Obligations;

            (iii) draw upon any Letters of Credit then held and apply such
      amounts as provided in Section 4.04 hereof; or

            (iv) exercise any or all of the rights and powers and pursue any and
      all remedies of a secured party under applicable Law.

            Upon every such taking of possession of Collateral under this
Section 4.01, the Security Trustee may, from time to time, make all such
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Collateral, as it may deem proper. In
each such case, the Security Trustee shall have the right to maintain, store,
lease, control or manage the Collateral and to exercise all rights and powers of
the Company relating to the Collateral in connection therewith, as the Security
Trustee shall deem best, including the right to enter into any and all such
agreements with respect to the maintenance, insurance, storage, leasing,
control, management or disposition of the Collateral or any part thereof as the
Security Trustee may determine; and the Security Trustee shall be entitled to
collect and receive directly all tolls, rents, revenues, issues, income,
products and profits of the Collateral and every part thereof, without
prejudice, however, to the right of the Security Trustee under any provision of
this Mortgage to collect and receive all cash held by, or required to be
deposited with, the Security Trustee hereunder. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the expenses of
storage, leasing, control,

<PAGE>

                                                                              24

management or disposition of the Collateral, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Security Trustee may be required or may elect to make, if any, for
taxes, assessments, insurance or other proper charges upon the Collateral or any
part thereof (including the employment of engineers and accountants to examine,
inspect and make reports upon the properties and books and records of the
Company), and all other payments which the Security Trustee may be required or
authorized to make under any provision of this Mortgage, as well as compensation
for the services of the Security Trustee, and of all Persons engaged and
employed by the Security Trustee. If the income and proceeds of the Collateral
shall not be sufficient to pay in full the Obligations, the Company shall be
liable for any deficiency.

            In addition, the Company shall be liable for all reasonable legal
fees and other costs and expenses incurred by reason of the occurrence of any
Event of Default or the exercise of the Security Trustee's remedies with respect
thereto, including, without limitation, all costs and expenses incurred in
connection with the retaking or return of any Engine in accordance with the
terms hereof or under applicable Law, which amounts shall, until paid, be
secured by the Lien of this Mortgage.

            If an Event of Default shall have occurred and be continuing, at the
request of the Security Trustee the Company shall promptly execute and deliver
to the Security Trustee such instruments of title and other documents as the
Security Trustee may deem necessary or advisable to enable the Security Trustee
or an agent or representative designated by the Security Trustee, at such time
or times and place or places as the Security Trustee may specify, to obtain
possession of all or any part of the Collateral to which the Security Trustee
shall at the time be entitled hereunder. If the Company shall for any reason
fail to execute and deliver such instruments and documents after such request by
the Security Trustee, the Security Trustee may obtain a judgment conferring on
the Security Trustee the right to immediate possession of the Collateral and
requiring the Company to execute and deliver such instruments and documents to
the Security Trustee, to the entry of which judgment the Company hereby
specifically consents to the fullest extent it may lawfully do so.

            The Company agrees that if an Event of Default has occurred and is
continuing, and only for so long as the Security Trustee is exercising its
foreclosure rights with respect to the Engines and requires use of an engine
stand owned by the Company for transporting an Engine, the Company shall permit
the Security Trustee or its agents or representatives to use such an engine
stand suitable for use with such Engine, available at the location of such
Engine and which is not otherwise being used by the Company, for the sole
purpose of transporting such Engine. The Security Trustee shall return each such
engine stand to the location from which it was taken promptly after it has
transported such Engine using such engine stand. The Security Trustee further
agrees to return each such engine stand to the Company in as good condition as
when furnished to the Security Trustee (or its agents or representatives),
ordinary wear and tear excepted, and the Security Trustee acknowledges that it
has no security interest in any such engine stand. The costs of the Security
Trustee in transporting an engine stand and restoring the condition of an engine
stand pursuant to this paragraph shall be an expense of the Lenders, and the
Company shall have no obligation to reimburse such expense (directly or from the
proceeds of the sale of any Collateral).

<PAGE>

                                                                              25

            The Company agrees that if an Event of Default has occurred and is
continuing and only for so long as the Security Trustee is exercising its
foreclosure rights with respect to the Engines and requires use of the Company's
engine stands for transporting such Engines, the Company shall provide the
Security Trustee or its agents or representatives with full and complete access
to the use of the engine stands owned by the Company on which any Engines are
then installed or those which are not otherwise being utilized at the time of
such foreclosure. The Security Trustee agrees to return each such engine stand
used by it promptly after it has transported an Engine using such engine stand
and acknowledges that it has no security interest in any such engine stand.

            (b) Notice of Sale. The Security Trustee shall give the Company at
least fifteen (15) days' prior written notice of the date fixed for any public
sale of any Engine or of the date on or after which any private sale will be
held, which notice the Company hereby agrees is reasonable notice, and any such
public sale shall be conducted in general so as to afford the Company a
reasonable opportunity to bid.

            Section 4.02. Remedies Cumulative. Each and every right, power and
remedy herein specifically given to the Security Trustee or otherwise in this
Mortgage shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Security
Trustee, and the exercise or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of the right to exercise at the
time or thereafter any other right, power or remedy. No delay or omission by the
Security Trustee in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Company or to be an
acquiescence therein.

            Section 4.03. Discontinuance of Proceedings. If the Security Trustee
shall have proceeded to enforce any right, power or remedy under this Mortgage
by foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason, then and in every such case the
Company and the Security Trustee shall be restored to their former positions and
rights hereunder with respect to the property, subject to the Lien of this
Mortgage, and all rights, remedies and powers of the Security Trustee shall
continue, as if no such proceedings had been undertaken (but otherwise without
prejudice).

            Section 4.04. Allocation of Payments. Notwithstanding any other
provisions of the Loan Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Security Trustee or any Lender on account of the Obligations shall be
paid over or delivered as follows:

            FIRST, to the payment of all reasonable out-of-pocket costs and
      expenses (including without limitation reasonable attorneys' fees and
      expenses actually incurred) of the Security Trustee in connection with
      enforcing the rights of the Security Trustee under the Operative
      Documents;

          SECOND, to payment of any fees owed to any Transaction Agent;

<PAGE>

                                                                              26

            THIRD, to the payment of all reasonable out-of-pocket costs and
      expenses (including without limitation, reasonable attorneys' fees and
      expenses actually incurred) of each of the Lenders in connection with
      enforcing its rights under the Operative Documents or otherwise with
      respect to the Obligations owing to such Lender (it being understood,
      however, that (i) the Original Series A Lender, the Original Series B
      Lender and their respective Affiliates shall use joint counsel, and (ii)
      all other Lenders shall use reasonable endeavors to select joint counsel,
      but may retain separate counsel if in the reasonable judgment of such
      other Lenders joint counsel would not be able to provide effective
      representation, whether due to conflicts of interest among such Lenders, a
      conflict of interest between the proposed joint counsel's representation
      of any Lender and its representation of any other client, or for any other
      reason);

            FOURTH, to all other Obligations (other than as covered by Clause
      "FIFTH", "SIXTH" and "SEVENTH" below) which shall have become due and
      payable under the Operative Documents or otherwise and not repaid pursuant
      to clauses "FIRST" through "THIRD" above; and

            FIFTH, to the payment of all accrued interest on the Obligations;

            SIXTH, to the payment of LIBOR Breakage Costs, if any, due under the
      Loan Agreement in respect of the Loan;

            SEVENTH, to the payment of the outstanding principal amount of the
      Loan;

            EIGHTH, so long as the Lien of the Subordinated Mortgage has not
      been discharged, to the Subordinated Trustee to be held as security under
      the Subordinated Mortgage; and

            NINTH, to the payment of the surplus, if any, to whoever may be
      lawfully entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category and (ii) if amounts available are insufficient to pay all
amounts due within any category, such available amounts shall be paid pro rata
to the parties entitled thereto based upon the amount due under such category to
each such party or, in the case of Clauses FOURTH, FIFTH and SIXTH, applied
among the parties entitled thereto in accordance with written instructions of
the Administrative Agent (as defined in the Loan Agreement).

<PAGE>

                                                                              27

                                   ARTICLE 5.

                            INTENTIONALLY LEFT BLANK

                                   ARTICLE 6.

                                 SECURITY FUNDS

            Section 6.01. Investment of Security Funds. Any monies paid to or
received by the Security Trustee as cash collateral or which are required to be
paid to the Company or applied for the benefit of the Company (including,
without limitation, amounts payable to the Company under Sections 3.04(d),
3.04(f) and 3.05(d) hereof), but which the Security Trustee is entitled to hold
under the terms hereof pending the occurrence of some event or the performance
of some act (including, without limitation, the remedying of an Event of
Default), shall, until paid to the Company or applied as provided herein, be
invested by the Security Trustee at the written authorization and direction of
the Company (or, if an Event of Default shall have occurred and be continuing,
the Security Trustee) from time to time at the sole expense and risk of the
Company in Permitted Investments. All Permitted Investments held by the Security
Trustee pursuant to this Section 6.01 shall either be (a) registered in the name
of, payable to the order of, or specially endorsed to, the Security Trustee or
(b) held in an Eligible Account. At the time of such payment or application,
there shall be remitted to the Company any gain (including interest received)
realized as the result of any such investment (net of any fees, commissions,
other expenses or losses, if any, incurred in connection with such investment)
unless an Event of Default shall have occurred and be continuing. The Security
Trustee shall not be liable for any loss relating to a Permitted Investment made
pursuant to this Section 6.01. The Company will promptly pay to the Security
Trustee, on demand, the amount of any loss (net of any gains, including interest
received) realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment).

                                   ARTICLE 7.

                                  MISCELLANEOUS

            Section 7.01. Termination of Mortgage. Upon (or at any time after)
payment in full of the unpaid principal of, and accrued interest on, the Loans
and all other Obligations then due and payable (and regardless of whether any
Default or Event of Default shall have occurred and be continuing), the Security
Trustee shall, upon the written request of the Company execute and deliver to,
or as directed in writing by, the Company an appropriate instrument (in due form
for recording) releasing the Engines and the balance of the Collateral from the
Lien of this Mortgage and, in such event, this Mortgage shall terminate and this
Mortgage shall be of no further force or effect, provided that the Security
Trustee shall have no obligation to release such Engines and Collateral from the
Lien of this Mortgage or otherwise terminate this Mortgage prior to such payment
in full. Upon any release of an Engine from the Lien of this Mortgage in
accordance with the terms of this Mortgage, the Parts, Engine Documents and
other Collateral referred to in subsections (b), (c), (d) and (e) of Section
2.01 relating to such Engine shall also be released.

<PAGE>

                                                                              28

            Section 7.02. Alterations to Mortgage. This Mortgage shall not be
varied except in accordance with the Loan Agreement.

            Section 7.03. No Legal Title to Collateral. No Secured Party shall
have legal title to any part of the Collateral. No transfer, by operation of Law
or otherwise, of a Note or any right, title and interest of any Secured Party in
and to the Collateral or this Mortgage shall operate to terminate this Mortgage
or entitle any successor or transferee to an accounting or to the transfer to it
of legal title to any part of the Collateral.

            Section 7.04. Sale of the Engines by Security Trustee Is Binding.
Any sale or other conveyance of the Collateral, or any part thereof or any
interest therein by the Security Trustee made pursuant to and in accordance with
the terms of this Mortgage shall bind the Secured Parties, and shall be
effective to transfer or convey all right, title and interest of the Security
Trustee, the Secured Parties and the Company, in and to such Collateral, or such
part thereof or interest therein. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or regularity
of such sale or conveyance or as to the application of any sale or other
proceeds with respect thereto by the Security Trustee.

            Section 7.05. Benefit of Mortgage. Nothing in this Mortgage, whether
express or implied, shall be construed to give to any Person other than the
Company, the Secured Parties and the Security Trustee any legal or equitable
right, remedy or claim under or in respect of this Mortgage.

            Section 7.06. Section 1110 of the Bankruptcy Code. It is the
intention of the parties hereto that the security interest created hereby
entitles the Security Trustee on behalf of the Lenders to all of the benefits of
Section 1110 of Chapter 11 of the Bankruptcy Code in respect of the Specified
Engines in the event the Company becomes a debtor under such Chapter.

            Section 7.07. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, any notice or other communication herein required
or permitted to be given shall be in writing and may be personally served or
sent by telefacsimile, United States mail, courier service or overnight delivery
and shall be effective when received addressed:

            (i)   if to the Company, at its office at

                  America West Airlines, Inc.
                  4000 Sky Harbor Blvd.
                  Phoenix, AZ 85034
                  Telecopy: (480) 693-5886

                  Attention:      Vice President and Treasurer
                  Telephone:      (480) 693-5886
                  Telecopy:       (480) 693-3685
                  email:tom.weir@americawest.com

<PAGE>

                                                                              29

            (ii)  if to the Security Trustee, at its office at

                  MAC: U1228-120
                  299 South Main Street,
                  12th Floor
                  Salt Lake City, Utah 84111

                  Attention:     Corporate Trust Services
                  Telephone:     (801) 246-5630
                  Telecopy:      (801) 246-5053
                  email:         michael.hoggan@wellsfargo.com

            (iii) if to any Lender, at its address for notices to it provided
                  under the Loan Agreement,

            or, as to any party, at such other address as such party shall from
            time to time designate by written notice to the other parties in
            accordance with this Section 7.07.

            Section 7.08. Severability. Should any one or more provisions of
this Mortgage be determined to be illegal or unenforceable by a court of any
jurisdiction, such provision shall be ineffective to the extent of such
illegality or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provisions in any
other jurisdiction. The Company and the Security Trustee agree, as to such
jurisdiction and to the extent permitted by such jurisdiction's Laws, to replace
any provision of this Mortgage which is so determined to be illegal or
unenforceable by a valid provision which has as nearly as possible the same
effect; provided that such replacement provision shall not expand the Company's
or the Security Trustee's obligations hereunder.

            Section 7.09. Separate Counterparts. This Mortgage may be executed
in any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Mortgage
executed by a party hereto shall be an original counterpart of this Mortgage,
and all of such counterparts together shall constitute one instrument.

            Section 7.10. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Company
and its successors and permitted assigns, and the Security Trustee and its
successors and permitted assigns, all as herein provided.

            Section 7.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

            Section 7.12. Governing Law. THIS MORTGAGE IS BEING DELIVERED IN THE
STATE OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW

<PAGE>

                                                                              30

YORK. The provisions of Sections 9.11 and 9.12 of the Loan Agreement are
incorporated herein by reference, mutatis mutandis.

                       [Remainder of this page is blank.]

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to
be duly executed by their respective officers, as the case may be, thereunto
duly authorized, as of the day and year first above written.

                                         AMERICA WEST AIRLINES, INC.

                                         By: /s/ Thomas T. Weir
                                            ____________________________________
                                             Name: Thomas T. Weir
                                             Title: Vice President and Treasurer

                                         WELLS FARGO BANK NORTHWEST, NATIONAL
                                                ASSOCIATION, as Security
                                                Trustee

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

<PAGE>

                                                                      APPENDIX A

                           DEFINITIONS RELATING TO THE
                         MORTGAGE AND SECURITY AGREEMENT

                               General Provisions

(a)   Unless otherwise expressly provided, a reference to:

      (i)   each of "the Company," "Security Trustee" or any other person
            includes, without prejudice to the provisions of any Operative
            Document, any successor in interest to it and any permitted
            transferee or permitted assignee of it;

      (ii)  words importing the plural include the singular and words importing
            the singular include the plural;

      (iii) any agreement, instrument or document, or any annex, schedule or
            exhibit thereto, or any other part thereof, includes, without
            prejudice to the provisions of any Operative Document, that
            agreement, instrument or document, or annex, schedule or exhibit, or
            part, respectively, as amended, modified or supplemented from time
            to time in accordance with its terms and in accordance with the
            Operative Documents, and any agreement, instrument or document
            entered into in substitution or replacement therefor;

      (iv)  any provision of any Law includes any such provision as amended,
            modified, supplemented, substituted, reissued or reenacted prior to
            the Closing Date, and thereafter from time to time;

      (v)   the words "Mortgage," "this Mortgage," "hereby," "herein," "hereto,"
            "hereof" and "hereunder" and words of similar import when used in
            the Mortgage refer to the Mortgage as a whole and not to any
            particular provision of the Mortgage;

      (vi)  the words "including," "including, without limitation," "including,
            but not limited to," and terms or phrases of similar import when
            used in the Mortgage, with respect to any matter or thing, mean
            including, without limitation, such matter or thing; and

      (vii) a "Section," an "Exhibit," an "Appendix," an "Annex" or a "Schedule"
            referred to in the Mortgage, or in any annex thereto, is a reference
            to a section of, or an exhibit, an appendix, an annex or a schedule
            to, the Mortgage or such annex, respectively.

(b)   Each exhibit, appendix, annex and schedule to the Mortgage is incorporated
      in, and shall be deemed to be a part of, the Mortgage.

(c)   Headings used in the Mortgage are for convenience only and shall not in
      any way affect the construction of, or be taken into consideration in
      interpreting, the Mortgage.

<PAGE>

                                                                      APPENDIX A

                                                                              2

(d)   The occurrence and continuance of a Default, Special Default or Event of
      Default referred to in Section 7.1 of the Loan Agreement shall not be
      deemed to prohibit the Company from taking any action or exercising any
      right that is conditioned on no Default, Special Default or Event of
      Default having occurred and be continuing if such Default, Special Default
      or Event of Default consists of the institution of reorganization
      proceedings with respect to the Company under Chapter 11 of the Bankruptcy
      Code and the trustee or debtor-in-possession in such proceedings shall
      have agreed to perform its obligations under the Mortgage with the
      approval of the applicable court and thereafter shall have continued to
      perform such obligations in accordance with Section 1110 of the Bankruptcy
      Code.

                                   Definitions

            "Additional Parts" has the meaning specified in Section 3.03(d) of
the Mortgage.

            "Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.

            "Aircraft" means an airframe on which an Engine is then installed.

            "Bankruptcy Code" means Title 11 of the United States Code.

            "Business Day" means any day except Saturday, Sunday and any day
which shall be in New York City or Phoenix, Arizona a day on which banking
institutions are authorized or required by Law to close.

            "Certificated Air Carrier" means a Person holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, United States Code, for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo.

            "Citizen of the United States" has the meaning specified in Section
40102(a)(15) of Title 49 of the United States Code.

            "Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program, currently administered by the United States Air Force Military Command
pursuant to Executive Order No. 11490, as amended, or any substantially similar
program.

            "Closing Date" means the date on which the Loan is made pursuant to
the Loan Agreement.

            "Collateral" has the meaning given such term in Section 2.01 of the
Mortgage.

<PAGE>

                                                                      APPENDIX A
                                                                               3

            "Company" means America West Airlines, Inc., a Delaware corporation.

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

            "Designated Date" has the meaning given such term in the Loan
Agreement.

            "Disposed Engine" has the meaning set forth in Section 3.04(h).

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

            "Eligible Account" means an account established by and with an
Eligible Institution at the request of the Security Trustee, which institution
agrees, for all purposes of the New York UCC including Article 8 thereof, that
(a) such account shall be a "securities account" (as defined in Section 8-501 of
the New York UCC), (b) such institution is a "securities intermediary" (as
defined in Section 8-102(a)(14) of the New York UCC), (c) all property (other
than cash) credited to such account shall be treated as a "financial asset" (as
defined in Section 8-102(9) of the New York UCC), (d) the Security Trustee shall
be the "entitlement holder" (as defined in Section 8-102(7) of the New York UCC)
in respect of such account, (e) it will comply with all entitlement orders
issued by the Security Trustee to the exclusion of the Company, (f) it will
waive or subordinate in favor of the Security Trustee all claims (including
without limitation, claims by way of security interest, lien or right of set-off
or right of recoupment), and (g) the "securities intermediary jurisdiction"
(under Section 8-110(e) of the New York UCC) shall be the State of New York.

            "Eligible Institution" means (a) the Security Trustee, acting solely
in its capacity as a "securities intermediary" (as defined in Section 8-102(14)
of the New York UCC), or (b) a depository institution organized under the Laws
of the United States of America or any of the states thereof or the District of
Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured
debt rating from Moody's and Standard & Poor's of at least A3 or its equivalent.

            "Engine" means (a) each of the engines listed in Annex A to each
Mortgage Supplement executed and delivered by the Company pursuant to the Loan
Agreement and (b) any and all Parts. Upon substitution of a Replacement Engine
or an Exchanged Engine in accordance with Section 3.04 of this Mortgage, any
such Replacement Engine or Exchanged Engine shall become subject to the Mortgage
and shall be an "Engine" for all purposes of this Mortgage and the Loan
Agreement. Upon substitution of a Replacement Engine or an Exchanged Engine in
accordance with Section 3.04 of the Mortgage, the Engine released pursuant to
such Section shall no longer be subject to the Mortgage, and such released
Engine shall cease to be an "Engine." Each Engine shall be bare and shall not
include parts associated with any Aircraft.

            "Engine Documents" means all technical data, manuals and log books,
and all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the Company's (or, in the
case of any Engine subject to a Lease, such Lessee's) maintenance program in
accordance with the requirements of the FAA or the JAA, as the case may be, to
be maintained with respect to the Engines or Parts, and such term

<PAGE>

                                                                      APPENDIX A
                                                                               4

shall include all additions, renewals, revisions and replacements of any such
materials from time to time made, or required to be made, in accordance with FAA
or JAA, as the case may be, regulations, and in each case in whatever form and
by whatever means or medium (including, without limitation, microfiche,
microfilm, paper or computer disk) such materials may be maintained or retained
by or on behalf of the Company (provided, that all such materials shall be
maintained in the English language).

            "Event of Default" has the meaning given such term in the Loan
Agreement.

            "Event of Loss" means, with respect to any Engine, any of the
following circumstances, conditions or events with respect to such Engine, for
any reason whatsoever:

            (a) the destruction of such Engine, damage to such Engine beyond
      practical or economic repair or rendition of such Engine permanently unfit
      for normal use by the Company;

            (b) the actual or constructive total loss of such Engine or any
      damage to such Engine, or requisition of title or use of such Engine,
      which results in an insurance settlement with respect to such Engine on
      the basis of a total loss or constructive or compromised total loss;

            (c) any theft, hijacking or disappearance of such Engine for a
      period of 180 consecutive days or more;

            (d) any seizure, condemnation, confiscation, or taking of, or
      requisition of title to, such Engine by any Government Entity or purported
      Government Entity (other than a requisition of use by the U.S. Government)
      for a period exceeding 180 consecutive days;

            (e) any seizure, condemnation, confiscation, taking or requisition
      of use of such Engine that continues until the earliest of (i) the date
      upon which such Engine is modified, altered or adapted in such a manner as
      would render conversion of such Engine for use in normal commercial
      passenger service impractical or uneconomical, (ii) the date on which such
      Engine is operated or located in any area excluded from coverage by any
      insurance policy required to be maintained in respect of such Engine
      pursuant to the Mortgage (unless an indemnity in lieu of insurance is
      provided to the Security Trustee in accordance with Section 3.05(c) of the
      Mortgage) or (iii) the date that is 180 days following the commencement of
      such loss of use (unless such loss of use results from action by the U.S.
      Government, in which case this clause (iii) shall not apply to such loss
      of use); and

            (f) as a result of any Law, rule, regulation, order or other action
      by the FAA, the use of such Engine in the normal course of the Company's
      (or any Lessee's) business of passenger air transportation is prohibited
      for a period expiring on the date that is 180 days following commencement
      of such prohibition, provided that if the Company (or such Lessee), prior
      to the expiration of such 180-day period, shall have undertaken and shall
      be diligently carrying forward all steps which are necessary or desirable
      to permit the normal use of such Engine by the Company, then the date that
      is 18 months

<PAGE>

                                                                      APPENDIX A
                                                                               5

      following commencement of such prohibition; provided that no Event of Loss
      shall be deemed to have occurred if such prohibition has been applicable
      to the Company's (or such Lessee's) entire U.S. fleet of such property and
      the Company (or such Lessee), prior to the expiration of such 18-month
      period, shall have conformed at least one unit of such property in its
      fleet to the requirements of any such law, rule, regulation, order or
      other action and commenced regular commercial use of the same in such
      jurisdiction and shall be diligently carrying forward, in a manner which
      does not discriminate against such property in so conforming such
      property, steps which are necessary or desirable to permit the normal use
      of such Engine by the Company (or such Lessee), but in any event if such
      use shall have been prohibited for a period of three years.

The date of such Event of Loss shall be the date of such loss, damage, insurance
settlement, seizure, condemnation, confiscation, taking or requisition of title
or use or prohibition, except that, for purposes of clauses (c), (d), (e) and
(f) above, no Event of Loss shall be deemed to have occurred until the date of
expiration of the applicable period referred to therein.

            "Exchange Shortfall Amount" has the meaning set forth in Section
3.04(i).

            "Exchanged Engine" has the meaning set forth in Section 3.04(g).

            "Federal Aviation Act" means Part A of Subtitle VII of Title 49,
United States Code.

            "Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration, and any agency or instrumentality of the United
States government succeeding to its functions.

            "Funding Date" has the meaning given to such term in the Loan
Agreement.

            "Government Entity" means (a) any federal, state, provincial or
similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Documents or
relating to the observance or performance of the obligations of any of the
parties to the Operative Documents.

            "JAA" means the European Joint Aviation Authorities, and any agency
or instrumentality succeeding to its functions.

            "Law" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Government Entity, and (b) any
judicial or administrative interpretation or application of, or decision under,
any of the foregoing.

            "Lease" means any lease permitted by the terms of Section
3.02(a)(vii) or (viii) of the Mortgage.

            "Lender" has the meaning given to that term in the Loan Agreement.

<PAGE>

                                                                      APPENDIX A
                                                                               6

            "Lessee" means any lessee permitted by the terms of Section
3.02(a)(vii) or (viii) of the Mortgage.

            "Letter of Credit" has the meaning set forth in Section 3.04(i).

            "Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
or security interest affecting the title to or interest in property.

            "Loan" has the meaning given to that term in the Loan Agreement.

            "Loan Agreement" means the Loan Agreement [Engines], dated as of
September 3, 2004 among the Company, General Electric Capital Corporation, the
Security Trustee and the Lenders from time to time party thereto.

            "Maximum Self-Insurance Amount" has the meaning set forth in
Schedule 4 to the Loan Agreement.

            "Minimum Liability Amount" has the meaning set forth in Schedule 4
to the Loan Agreement.

            "Moody's" means Moody's Investors Service, Inc.

            "Mortgage" means the Engine Mortgage and Security Agreement covering
the Collateral dated as of September 3, 2004, between the Company and the
Security Trustee.

            "Mortgage Supplement" means any supplement to the Mortgage from time
to time executed and delivered.

            "New York UCC" means the Uniform Commercial Code as in effect in the
State of New York.

            "Note" has the meaning given to that term in the Loan Agreement.

            "Obligations" means the principal of and interest on the Loan, any
LIBOR Breakage Costs (as defined in the Loan Agreement), the Prepayment Fee (as
defined in the Loan Agreement), if applicable, and all other obligations of
every nature of the Company from time to time owed to the Security Trustee, the
other Secured Parties or any of them under the Loan Agreement or any other
Operative Document.

            "Officer's Certificate" means, as to any company, a certificate
signed by the Chairman, any Vice Chairman, the President, any Executive Vice
President, any Senior Vice President, any Vice President, any Assistant Vice
President, the Treasurer, any Assistant Treasurer, the Secretary, or any
Assistant Secretary of such company.

            "Operative Documents" means the Loan Agreement, each Note, the
Restructure Letter, the Mortgage and each Mortgage Supplement.

<PAGE>

                                                                      APPENDIX A
                                                                               7

            "Parts" means any and all appliances, parts, instruments,
appurtenances, modules, accessories, and other equipment of whatever nature
which may from time to time be incorporated or installed in or attached to any
Engine or removed therefrom unless the Lien of the Mortgage shall not be
applicable to such Parts in accordance with Section 3.03 of the Mortgage.

            "Permitted Air Carrier" means any U.S. Air Carrier or any air
carrier with its principal executive offices in a country listed on Schedule I
to the Mortgage and which is authorized to conduct commercial airline operations
and to operate jet aircraft under the applicable Laws of such country.

            "Permitted Disposition" has the meaning set forth in Section
3.04(h).

            "Permitted Investments" means (i) securities issued or directly and
fully guaranteed by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), the Federal Home Loan Mortgage
Corporation, the Student Loan Marketing Association and the Federal National
Mortgage Association, in all cases having a maturity of not more than 90 days
or, in the case of auction rate notes issued by any of the foregoing, having an
action reset interval of not more than 30 days; (ii) certificates of deposit,
bankers' acceptances, repurchase agreements or time deposits issued or accepted
or guaranteed by any bank, trust company or national banking association
incorporated under the Laws of the United States of America or one of the states
thereof having combined capital and surplus and retained earnings as of its last
report of condition of at least $500,000,000 and having a rating of Aa or better
by Moody's or AA or better by Standard & Poor's and having a final maturity of
90 days or less from date of purchase thereof; and (iii) commercial paper of any
holding company of a bank, trust company or national banking association
described in (ii) and commercial paper of any corporation or finance company
incorporated or doing business under the Laws of the United States of America or
any state thereof having a rating assigned to such commercial paper of A1 by
Standard & Poor's or P1 by Moody's and having a final maturity of 90 days or
less from the date of purchase thereof; provided that the aggregate amount at
any one time invested in certificates of deposit issued by any one bank shall
not be in excess of 5% of such bank's capital and surplus.

            "Permitted Liens" has them meaning given such term in Section 3.01
of the Mortgage.

            "Person" has the meaning given to such term in the Loan Agreement.

            "Pre-Approved Bank" means any bank organized under the laws of the
United States or any State thereof, or the New York branch of a major
international bank, in each case for only so long as its long-term Dollar
denominated unsecured debt (or if it does not have long-term unsecured Dollar
denominated debt, its parent corporation's long-term unsecured Dollar
denominated debt) carries a rating from Standard & Poor's of A or better.

            "Released Engines" has the meaning set forth in Section 3.04(g).

            "Replacement Closing Date" has the meaning given such term in
Section 3.04(c) of the Mortgage.

<PAGE>

                                                                      APPENDIX A
                                                                               8

            "Replacement Engine" means an engine substituted for an Engine
pursuant to Section 3.04 of the Mortgage.

            "Required LC Expiry Date" means the day that is the ninety-first
(91st) day following the Maturity Date of the Notes issued pursuant to the Loan
Agreement.

            "Restructure Letter" means the Restructure Letter [Engines], dated
as of September 3, 2004 between General Electric Capital Corporation and the
Company.

            "Secured Parties" means the Lenders, the Security Trustee and the
parties (except the Company) from time to time party to the Restructure Letter.

            "Security Trustee" means Wells Fargo Bank Northwest, National
Association, in its capacity as security trustee under the Mortgage.

            "Short Time Engine" has meaning set forth in Section 3.04(i).

            "Special Default" has the meaning given to that term in the Loan
Agreement.

            "Standard & Poor's" has the meaning given to such term in the Loan
Agreement.

            "Stipulated Loss Value" means, in the case of each Engine, (i)
Stipulated Loss Value-A" for such Engine (or the Engine that such Engine
replaced) on Schedule 2 to the Loan Agreement, with respect to an Event of Loss
that occurs prior to the Designated Date, and (ii) the "Stipulated Loss Value-B"
for such Engine (or the Engine that such Engine replaced) on Schedule 2 to the
Loan Agreement, with respect to an Event of Loss that occurs on or after the
Designated Date.

            "Subordinated Mortgage" has the meaning given to that term in the
Loan Agreement.

            "Subordinated Trustee" means the "Security Trustee" as defined in
the Subordinated Mortgage.

            "Taxes" has the meaning given to that term in the Loan Agreement.

            "Termination Value" means, in the case of each Engine, the
"Termination Value" for such Engine (or the Engine that such Engine replaced) on
Schedule 2 to the Loan Agreement.

            "Threshold Amount" has the meaning set forth in Schedule 4 to the
Loan Agreement.

            "Transaction Agents" has the meaning given to that term in the Loan
Agreement.

            "UCC" or "Uniform Commercial Code" means the Uniform Commercial Code
as in effect in any applicable jurisdiction.

            "U.S. Air Carrier" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant to Part
121 of the regulations under the

<PAGE>

                                                                      APPENDIX A
                                                                               9

Federal Aviation Act, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provisions therefor or in the
absence thereof.

            "U.S. Government" means the federal government of the United States,
or any instrumentality or agency thereof the obligations of which are guaranteed
by the full faith and credit of the federal government of the United States.

            "Warranties"" has the meaning given to that term in Section 2.01 of
the Mortgage.

            "Wet Lease" means any arrangement whereby the Company or a Lessee
agrees to furnish an Aircraft to a third party pursuant to which such Aircraft
(including any Engines attached thereto) shall at all times be in the
operational control of, and insured by, the Company or such Lessee, provided
that the Company's obligations under the Mortgage shall continue in full force
and effect notwithstanding any such arrangement.

<PAGE>

                                                                      APPENDIX B

                                    INSURANCE

            Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference in Appendix A to the
Mortgage.

      A.    BODILY INJURY LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.

            1. Except as provided in paragraph 2 of this Section A, and subject
to the self insurance to the extent permitted by Section D hereof, the Company
will at all times carry and maintain or cause to be carried and maintained, at
no expense to the Security Trustee, on a non-discriminatory basis, comprehensive
airline liability insurance, including passenger legal liability, bodily injury
liability, products liability, property damage liability and contractual
liability (exclusive of manufacturer's product liability insurance) with respect
to the Aircraft and the Engines (a) in an amount per occurrence not less than
the greater of (x) the amount of comprehensive airline legal liability insurance
from time to time applicable to aircraft owned or leased and operated by the
Company of the same type and operating on similar routes as the Aircraft and (y)
the Minimum Liability Amount, (b) of the type and covering the same risks as
from time to time applicable to aircraft operated by the Company (or any lessee
to whom such Engine is leased under and in accordance with Section 3.02(a)(viii)
hereof, a "Permitted Lessee") of the same type which comprise the Company's (or
such Permitted Lessee's) fleet and (c) which is maintained in effect with
insurers or reinsurers of recognized responsibility. The Company shall maintain
cargo liability insurance in an amount not less than the amount of cargo
liability insurance maintained for other aircraft operated by the Company. Such
insurance shall in any event include cover for war risks and allied perils
liability insurance in accordance with London form AVN52D as in effect on
September 1, 2004 or its substantive equivalent, or in the case that such
coverage is maintained through the FAA, Chapter 443 of Title 49 of the United
States Code as in effect on September 1, 2004, and such war risks and allied
perils liability insurance shall be for an amount not less than the greater of
(i) the Minimum Liability Amount and (ii) the amount carried by the Company in
respect of similar aircraft owned or otherwise operated by the Company.

            2. During any period that the Aircraft or an Engine is on the ground
and not in operation, the Company may carry or cause to be carried, in lieu of
the insurance required by paragraph 1 above, and subject to the self-insurance
to the extent permitted by Section D hereof, insurance otherwise conforming to
the provisions of said paragraph 1 except that (a) the amounts of coverage shall
not be required to exceed the amounts of bodily injury liability and property
damage liability insurance from time to time applicable, in the case of the
Aircraft, to aircraft owned or leased by the Company (or any Permitted Lessee)
of the same or similar type as the Aircraft which comprise the Company's (or
such Permitted Lessee's) fleet, or, in the case of an Engine, to engines owned
or operated by the Company (or such Permitted Lessee) of the same type as such
Engine, and in any such case which are on the ground and not in operation and
(b) the scope of the risks covered and the type of insurance shall be consistent
with industry practice for airlines operating only similarly-sized equipment on
similar routes and the same as from time to time shall be applicable, in case of
Aircraft, to aircraft owned or leased by the Company (or any Permitted Lessee)
of the same or similar type which comprise the Company's (or such Permitted
Lessee's) fleet, or in the case of an Engine, to engines owned or operated by

<PAGE>

                                                                      APPENDIX B
                                                                               2

the Company (or such Permitted Lessee) of the same type as such Engine, and in
any case which are on the ground and not in operation.

      B.    INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT OR THE ENGINES.

            1. Except as provided in paragraph 2 of this Section B, and subject
to the provisions of Section D hereof permitting self-insurance, the Company
shall at all times carry and maintain or cause to be carried and maintained in
effect with insurers or reinsurers of recognized responsibility (i) "all risk"
aircraft hull insurance covering the Aircraft and the Engines, (ii) fire,
transit and extended coverage of Engines and Parts while removed from the
Aircraft and not replaced by similar components, and (iii) war risk and allied
perils insurance, including governmental confiscation and expropriation (other
than by the government of registry of the Aircraft) and hijacking insurance
(collectively, "WAR RISK INSURANCE") as contained in London form LSW 555B or its
substantive equivalent, or in the case that such insurance is maintained through
the FAA, Chapter 443 of Ttile 49 of the United States Code as in effect on
September 1, 2004; provided, further, that the foregoing insurance shall at all
times while the Engines are subject to this Mortgage be for an amount (taking
into account self-insurance to the extent permitted by Section D) in the
aggregate applicable to all the Engines not less than the Stipulated Loss Value
of the Engines, and that when any Engine is installed on an Aircraft, the agreed
value of that Aircraft under the relevant policy shall be automatically
increased by the amount of the Stipulated Loss Value of such Engine.

            All losses will be adjusted with the insurers by the Company (giving
due regard to the interest of the Security Trustee). However, in the event an
Event of Default has occurred and is continuing, all losses will be adjusted
among the Company, the insurers and the Security Trustee.

            As between the Security Trustee and the Company, the insurance
payments for any property damage loss to any Engine not constituting an Event of
Loss with respect thereto shall be paid, to the extent such proceeds are not
paid by the insurer(s) directly to the person effecting the repair, as follows:
all proceeds less than or equal to the Threshold Amount shall be paid to the
Company (or any Permitted Lessee if directed by the Company), and all proceeds
greater than the Threshold Amount shall be paid to the Security Trustee, to be
held as collateral security for the Obligations, and applied to reimburse the
Company for accomplishing repairs and/or replacements as required, or to pay
suppliers directly for such repairs and/or replacements as directed by the
Company (or any Permitted Lessee if directed by the Company). In the case of any
payment to the Security Trustee (other than in respect of an Event of Loss of an
Engine), the Security Trustee shall, upon receipt of evidence reasonably
satisfactory to it that the damage giving rise to such payment shall have been
repaired or that such payment shall then be required to pay for repairs then
being made, pay the amount of such payment, and any interest or income earned
thereon, to the Company or its order.

            2. During any period that an Aircraft or an Engine is on the ground
and not in operation, the Company may carry or cause to be carried, in lieu of
the insurance required by paragraph 1 above, and subject to the self-insurance
to the extent permitted by Section D hereof, insurance otherwise conforming with
the provisions of said paragraph 1 except that the scope of the risks and the
type of insurance shall be consistent with industry practice for airlines
operating

<PAGE>

                                                                      APPENDIX B
                                                                               3

only similar-sized equipment on similar routes the same as from time to time
applicable to aircraft and engines owned or leased and operated by the Company
(or any Permitted Lessee) of the same or similar type which comprise the
Company's (or such Permitted Lessee's) fleet similarly on the ground and not in
operation, provided that, subject to the self-insurance to the extent permitted
by Section D hereof, the Company shall maintain or cause to be maintained
insurance against risk of loss or damage to each Engine in an amount at least
equal to the Stipulated Loss Value of such Engine during such period that such
Engine is on the ground and not in operation.

            C. Reports, Etc. The Company will furnish, or cause to be furnished,
to the Security Trustee on or before the Closing Date and annually on or before
the renewal dates of the Company's (or the Permitted Lessee's) relevant
insurance policies required hereunder, a report, signed by any reputable
recognized independent firm of insurance brokers selected by the Company, which
brokers may be regularly retained by the Company or any Permitted Lessee (the
"INSURANCE BROKER"), describing in reasonable detail the hull and liability
insurance then carried and maintained with respect to the Aircraft and the
Engines and stating the opinion of such firm that, to its knowledge, such
insurance complies with the terms of this Appendix B. Such information shall
remain confidential as provided in Section 9.9 of the Loan Agreement. The
Company will cause such Insurance Broker to agree to advise the Security Trustee
in writing of any default in the payment of premium and to advise the Security
Trustee at least thirty (30) days (seven (7) days in the case of War Risk
Insurance and ten (10) days in the case of nonpayment of premium) prior to the
cancellation or material adverse change of any insurance maintained pursuant to
this Appendix B, provided that, in respect of the War Risk Insurance, the
Insurance Broker shall provide for such shorter period as may be obtainable in
the international insurance market. In the event that the Company shall fail to
maintain or cause to be maintained insurance as herein provided, the Security
Trustee may, at its sole option, provide such insurance and, in such event, the
Company shall, upon demand, reimburse the Security Trustee for the cost thereof.

            D. Self-Insurance. The Company may self-insure, by way of
deductible, premium adjustment provisions in insurance policies, or otherwise,
under a program applicable to all aircraft in the Company's fleet, the risks
required to be insured against pursuant to Sections A and B hereof but in no
case shall the self-insurance with respect to all of the aircraft in the
Company's fleet (including, without limitation, the Aircraft and the Engines)
exceed the lesser of (x) 50% of the largest replacement value of any single
aircraft in the Company's fleet or (y) 1.5% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft on which the Company
carries insurance, unless the Insurance Broker shall certify that the standard
among major U.S. airlines is a higher level of self-insurance, in which case the
Company may self-insure the Aircraft and the Engines to such higher level.
Notwithstanding the foregoing, the insurance required by Section B.1(i) hereof
may be subject to a per occurrence deductible. With respect to the Aircraft and
the Engines when on-wing, such deductible shall be no greater than the Maximum
Self-Insurance Amount for any one occurrence. Said deductible shall not apply in
the case of a total loss of the Aircraft.

            E. Terms of Insurance Policies. Any policies carried in accordance
with Sections A and B hereof covering the Aircraft and the Engines, and any
policies taken out in substitution or replacement for any such policies, as
applicable, (1) shall name the Security

<PAGE>

                                                                      APPENDIX B
                                                                               4

Trustee and each other Secured Party (the "Additional Insureds") as additional
insureds, as their interests may appear, (2) in the case of hull insurance,
shall name the Security Trustee as sole loss payee to the extent provided in
clause (12) below, (3) may provide for self-insurance to the extent permitted in
Section D, (4) shall provide that if the insurers cancel such insurance for any
reason whatsoever, or the same is allowed to lapse for nonpayment of premium or
if any material change is made in the insurance which adversely affects the
interest of any Additional Insured, such cancellation, lapse, or change shall
not be effective as to the Additional Insureds for thirty (30) days (or ten (10)
days in the case of nonpayment of premium) after issuance to (but, in the case
of War Risk Insurance, seven (7) days after sending to) the Additional Insureds
of written notice by such insurers of such cancellation or change, provided,
however, that if, the Company's War-Risk Insurance provider does not provide for
provision of direct notice to Additional Insureds of cancellation, change or
lapse in the insurance required hereunder, the Company hereby agrees that, upon
receipt of notice (including any notice by publication, if applicable) of any
cancellation, change or lapse thereof from such insurance provider it shall give
the Additional Insureds immediate notice of each cancellation or lapse and
prompt notice of each change of such insurance, (5) shall provide that in
respect of the Additional Insureds' respective interests in such policies the
insurance shall not be invalidated by any action or inaction of the Company (or
any Permitted Lessee) and shall insure the respective interests of the
Additional Insureds regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Company (or any
Permitted Lessee), (6) in the case of liability insurances, shall be primary
without any right of contribution from any other insurance which is carried by
any Additional Insured, (7) in the case of liability insurances, shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if a separate policy covered each insured,
(8) shall waive any right of subrogation of the insurers or any right of the
insurers to set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional Insured,
(9) shall provide that losses (other than for total loss of an Engine) shall be
adjusted with the Company (or, if an Event of Default or Special Default shall
have occurred which is continuing, with the Security Trustee), (10) shall
provide that the Additional Insureds are not liable for any insurance premiums,
(11) shall be effective with respect to both domestic and international
operations, (12) shall provide that (i) except as specified in clause (iii)
below, in the event of a loss involving proceeds in excess of the Threshold
Amount, all proceeds in respect of such loss up to the amount of Stipulated Loss
Value for an affected Engine shall, to the extent such proceeds are not paid by
the insurer(s) directly to the person effecting the repair, be payable to the
Security Trustee to be held by the Security Trustee (whether such payment is
made to the Company (or any Permitted Lessee) or any third party), it being
understood and agreed that in the case of any payment to the Security Trustee
otherwise than in respect of an Event of Loss of the Engine, the Security
Trustee shall, upon receipt of evidence reasonably satisfactory to it that the
damage giving rise to such payment shall have been repaired or that such payment
shall then be required to pay for repairs then being made or the replacement of
the Engine suffering the Event of Loss, pay the amount of such payment, and any
interest or income earned thereon, to the Company or its order, (ii) except as
specified in the following clause (iii), all proceeds equal to or less than the
Threshold Amount (regardless of the total amount of proceeds resulting from such
loss) and any proceeds of any loss in excess of Stipulated Loss Value for the
Engine suffering such loss shall be paid to the Company or its order and (iii)
notwithstanding anything to the contrary contained in the preceding clauses (i)
and (ii), if a Special Default shall have

<PAGE>

                                                                      APPENDIX B
                                                                               5

occurred and be continuing and the insurers have been notified thereof by the
Security Trustee, all proceeds of loss (other than in excess of the Stipulated
Loss Value) shall be paid to the Security Trustee, (13) if separate hull and war
risk coverage is maintained, shall contain a 50/50 clause in accordance with AVS
103, (14) shall operate on a worldwide basis subject to certain territorial
restrictions which are usual and customary in the War Risks market from time to
time and (15) shall contain a provision entitling the Security Trustee to
initiate a claim if an Event of Default shall be continuing.

      F. Reinsurance. The Company shall procure that in respect of insurances
maintained by the Company in accordance with the provisions in this Appendix B
the insurers shall maintain, if such insurances do not provide for direct
coverage in the markets hereafter referred to, reinsurance covering identical
subject matter and risk for an amount which shall not be less than 100% of the
coverage amount under Sections A and B hereof in Lloyd's of London or other
internationally recognized aviation insurance and/or reinsurance markets. Such
reinsurance shall contain a customary "cut-through" endorsement and shall
provide that any payment by the reinsurers shall be made notwithstanding any
bankruptcy, insolvency or liquidation of the original insurer and/or that the
original insurer has made no payment under the original policies.

<PAGE>

                                                                       EXHIBIT A

                              MORTGAGE AND SECURITY
                           AGREEMENT SUPPLEMENT NO. __

            Mortgage and Security Agreement Supplement No. __ dated _________,
20__ ("MORTGAGE SUPPLEMENT") of AMERICA WEST AIRLINES, INC. (the "COMPANY").

                              W I T N E S S E T H:

            WHEREAS, the Engine Mortgage and Security Agreement, dated as of
September 3, 2004 (the "MORTGAGE"), between the Company and Wells Fargo Bank
Northwest, National Association (the "SECURITY TRUSTEE"), provides for the
execution and delivery of supplements thereto substantially in the form hereof
which shall particularly describe the Engines (such term and other defined terms
in the Mortgage being used herein with the same meanings);

            NOW, THEREFORE, this Mortgage Supplement WITNESSETH that the Company
hereby confirms that the Lien of the Mortgage on the Collateral covers all of
the Company's right, title and interest in and to the property described on
Annex A hereto.

            To have and to hold all and singular the aforesaid property unto the
Security Trustee, its successors and assigns, for the benefit, security and
protection of the Security Trustee, and for the uses and purposes and subject to
the terms and provision set forth in the Mortgage.

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

            IN WITNESS WHEREOF, the Company has caused this Mortgage Supplement
No. __ to be duly executed by one of its duly authorized officers, as of the day
and year first above written.

                             AMERICA WEST AIRLINES, INC.

                             By:________________________________________________
                                 Name:
                                 Title:

<PAGE>

                                                                       EXHIBIT A

This Letter of Credit is transferable and constitutes an obligation to make
payment against documents.

(1) Except as provided above, this Letter of Credit is issued subject to the
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce Publication No. 500 and is governed by New
York law. Unless you otherwise require, any disputes arising out of or in
connection with this letter of credit shall be resolved before the United States
District Court for the Southern District of New York and any New York state
court sitting in the County of New York, New York, and all related appellate
courts.

All bank charges, including, but not by way of limitation, fees or commissions,
shall be for the applicant's account.

--------------
(1) Alternatively where bank wants to use ISP 98: Except as provided above, this
Letter of Credit is issued subject to the International Standby Practices 1998
and is governed by New York law. Unless you otherwise require, any disputes
arising out of or in connection with this letter of credit shall be resolved
before the United States District Court for the Southern District of New York
and any New York state court sitting in the County of New York, New York, and
all related appellate courts.

<PAGE>

                                                                      ANNEX A TO
                                                             MORTGAGE SUPPLEMENT

                             DESCRIPTION OF ENGINES

                                     ENGINES

Manufacturer                    Model                Manufacturer's Serial No.

Each engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.

<PAGE>

                                                                       EXHIBIT B

                                    EXHIBIT B

                            FORM OF LETTER OF CREDIT

Wells Fargo Bank Northwest, National Association,
      as Security Trustee
299 South Main Street, 12th Floor
Salt Lake City, UT 84111

Dated _________

This Letter of Credit is provided pursuant to the Engine Mortgage and Security
Agreement dated as of September 3, 2004 between America West Airlines, Inc. ,
and Wells Fargo Bank Northwest, National Association, as Security Trustee (the
"SECURITY TRUSTEE"). This letter of credit however creates primary obligations
on us and is independent from the mortgage.

On the instructions of America West Airlines, Inc. and for its account, we
hereby establish this irrevocable Letter of Credit to authorize the Security
Trustee, to draw on [APPROPRIATE BRANCH/DEPARTMENT DETAILS/ADDRESS OF ISSUING
BANK] an amount or amounts not exceeding a total of USD [AMOUNT IN FIGURES
(AMOUNT IN WORDS] United States Dollars) upon receipt by us of a signed demand
certificate from you in the following format (with the square bracketed sections
completed):

"The undersigned as an authorized signatory or representative of the Security
Trustee hereby draws upon your irrevocable Letter of Credit dated [DATE OF THIS
LETTER OF CREDIT] and instructs you to transfer US$ [AMOUNT IN FIGURES] ([AMOUNT
IN WORDS] United States Dollars) to [INSERT APPROPRIATE BANK DETAILS]
immediately."

We will honor drawings under this Letter of Credit upon our receipt of such a
demand certificate (by facsimile to fax number: [BANK FAX NUMBER], mail, courier
service or by hand) and will make payment to the account specified in the demand
certificate, for value no later than close of business on the next succeeding
banking day following our receipt of the demand certificate. If any drawing
hereunder does not conform with these terms, we shall promptly notify you of
that, state the reason(s) why and hold the document(s) presented at your
disposal (or return them to you if you so request).

Partial drawings are permitted.

This letter of credit expires on [INITIAL EXPIRY DATE] ("Expiry Date") but shall
be automatically extended, without the need for amendment, for one year from the
said Expiry Date and annually thereafter unless at least 60 days prior to the
then applicable Expiry Date we have notified you by registered mail that we will
not renew the letter of credit for the following year.

<PAGE>

                                                                      SCHEDULE I

                               PERMITTED COUNTRIES

Argentina                  Indonesia                       Poland
Australia                  Ireland                         Portugal
Austria                    Italy*
                                                           Singapore
Bahamas                    Jamaica                         Slovakia*
Belgium                    Japan                           South Africa
Brazil                     Jordan                          South Korea
                                                           Sweden
Canada                     Kuwait                          Switzerland
Chile
Cyprus*                    Luxembourg                      Trinidad and Tobago
Czech Republic                                             Tunisia
                           Malaysia
Denmark                    Malta                           United Kingdom
                           Mexico                          Uruguay*
France
                           Netherlands*                    Venezuela*
Germany                    New Zealand
Greece                     Norway

Hungary                    Paraguay*
                           People's Republic of China
Iceland                    Philippines

------------
*Notwithstanding anything to the contrary set forth elsewhere in this Mortgage,
a lease of any Engine to an operator domiciled in any of these jurisdictions
shall be permitted only if (i) the Company and International Aero Engines, Inc.
(IAE) shall have entered into a lease with respect to such Engine that is fully
recourse to IAE, and (ii) the lease of such Engine to the operator is a sublease
from IAE to such operator. For the avoidance of doubt, with respect to any such
arrangement, IAE, and not the operator, would be deemed the "Lessee" or
"Permitted Lessee" as such terms are used in this Mortgage.

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