Document:

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                                                                    EXHIBIT 10.7

December 9, 2002

Jeffrey D. Pinneo
President and Chief Executive Officer
Horizon Air Industries, Inc.

Dear Jeff:

This letter will document the agreement between Horizon Air Industries, Inc. and
you regarding certain retirement benefits at the time of your election to the
position of President and Chief Executive Officer of Horizon Air Industries,
Inc. ("Horizon").

ALASKA AIRLINES SALARIED RETIREMENT PLAN BENEFITS
As you know, you ceased to accrue additional benefits under the Alaska Airlines
Salaried Retirement Plan ("DB Plan") when you transferred to Horizon. This is
because Horizon does not offer the DB Plan or any other similar plan. ERISA laws
preclude continued benefit accruals by a participant who transfers to a company
that does not offer the DB Plan to its employees.

SPECIAL SUPPLEMENTAL RETIREMENT BENEFIT
In connection with your election to the position of President and Chief
Executive Officer, Horizon agrees to supplement the retirement benefits you will
receive under the DB Plan with the benefits described in this letter. The
supplemental retirement benefit will equal the difference between (a) the
retirement benefits you actually receive under the DB Plan, and (b) the
retirement benefits you would have received under the DB Plan if your
compensation and service earned while you are the President and CEO of Horizon
were treated as compensation and service with Alaska Airlines. This supplemental
benefit will be determined on the earlier of your retirement, severance of
employment from Alaska Air Group and all of its subsidiaries, or disability (as
defined in the DB Plan), and will be paid at the same time and in the same
payment form as the benefit paid from the DB Plan. In the event of your death
before benefit payments under the DB Plan begin, this supplemental benefit will
be paid to your beneficiary who receives benefits under the DB Plan, at the same
time and in the same payment form as that beneficiary receives your DB Plan
benefit.

This letter agreement represents the entire agreement between you and Horizon as
to the matters described herein and supersedes any prior oral agreement. The
sole method of changing this agreement is by written amendment signed by you and
Horizon.

Although the calculation of this benefit is based upon the DB Plan, the special
supplemental retirement benefit would not be paid out of the DB Plan. Under this
agreement, your rights to these supplemental benefits are as a general,
unsecured creditor of Horizon. The supplemental benefits will be paid only to
you, or to your beneficiary in the event of death, and the benefits cannot be
assigned or alienated.

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The ERISA claims procedures in Section 8.8 of the Alaska Air Group, Inc. 1995
Elected Officers Supplementary Retirement Plan, as amended, are incorporated
into this letter by reference and apply to the supplemental retirement benefit
described in this agreement.

ALASKA AIR GROUP, INC. 1995 ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN You
became a participant in the Alaska Air Group, Inc. 1995 Elected Officers
Supplementary Retirement Plan ("1995 OSRP") when you were elected to be the
President and Chief Executive Officer of Horizon. Under the 1995 OSRP, you will
earn retirement benefits based upon your years of service as the President and
CEO of Horizon or as an Elected Officer of Alaska Air Group, Inc. or Alaska
Airlines, Inc. Attached is a copy of the 1995 OSRP dated August 8, 1995 for your
reference. It details the benefits provided under the 1995 OSRP. Under the 1995
OSRP as amended by the Board of Directors on January 30, 2002, the OSRP benefit
otherwise payable to plan participants is reduced by any benefits under the DB
Plan that are earned while serving as an elected officer. Your 1995 OSRP benefit
will be similarly reduced by the special supplemental retirement benefits
described in this agreement, and the 1995 OSRP will be amended accordingly.

HORIZON SAVINGS INVESTMENT 401(k) PLAN
You continue to be eligible to make contributions and receive employer-matching
contributions under the Horizon Air Industries, Inc. Savings Investment Plan
("401(k) Plan"). As you know, employees of Horizon are not eligible to make
contributions to the Alaskasaver 401(k) Plan, and your eligibility for
contributions under that plan ceased when you transferred to Horizon.

HORIZON AIR SUPPLEMENTAL SAVINGS PLAN
Because of the additional benefit described in this agreement, you cease to be
eligible to make additional contributions or receive additional employer
contributions under the Horizon Air Industries, Inc. Supplemental Savings Plan
while you are President and CEO of Horizon.

Please sign this letter and one of the other two originals confirming your
agreement with the terms outlined above, retain one of the three originals for
your files and return the other two signed originals to Keith Loveless.

_________________________________________
John F. Kelly
Chairman, Horizon Air Industries, Inc.
Chairman, President and Chief Executive Officer, Alaska Air Group, Inc.

I agree to the terms outlined above:

Signed: _____________________________________            Date: _________________
Jeffrey D. Pinneo
President and Chief Executive Officer
Horizon Air Industries, Inc.

Enclosures: Two copies of this letter
            1995 OSRP documentExhibit 4.(b)

                                                             Executed in 6 Parts
                                                             Counterpart No. ( )

                              NATIONAL EQUITY TRUST

             SHORT-TERM LOW FIVE COVERED WRITE OPTION TRUST SERIES 7

                            REFERENCE TRUST AGREEMENT

      This Reference Trust Agreement dated March 11, 2003 among Prudential
Investment Management Services LLC, as Depositor, Prudential Securities
Incorporated, as Portfolio Supervisor, and The Bank of New York, as Trustee,
sets forth certain provisions in full and incorporates other provisions by
reference to the document entitled "National Equity Trust, Trust Indenture and
Agreement" (the "Basic Agreement") dated August 8, 2001. Such provisions as are
set forth in full herein and such provisions as are incorporated by reference
constitute a single instrument (the "Indenture").

                                WITNESSETH THAT:

      In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:

                                     Part I.

                     STANDARD TERMS AND CONDITIONS OF TRUST

      Subject to the provisions of Part II hereof, all the provisions contained
in the Basic Agreement are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and to the same
extent as though said provisions had been set forth in full in this instrument.

      (i) The first sentence of Section 9.05 - Written Notice shall be amended
by deleting the language "Prudential Securities Incorporated at One Seaport
Plaza, New York, New York 10292" and replacing it with "Prudential Investment
Management LLC at 100 Mulberry Street, Gateway Center Three, Newark, New Jersey
07102".

<PAGE>

                                       -2-

                                    Part II

                      SPECIAL TERMS AND CONDITIONS OF TRUST

      The following special terms and conditions are hereby agreed to:

      A. The Trust is denominated National Equity Trust, Short-Term Low Five
Covered Write Option Trust Series 7.

      B. The publicly traded stocks listed in Schedule A hereto are those which,
subject to the terms of this Indenture, have been or are to be deposited in
Trust under this Indenture as of the date hereof subject to the Purchase Rights
listed in Schedule A hereto.

      C. The term "Depositor" shall mean Prudential Investment Management
Services LLC.

      D. The term "Portfolio Supervisor" shall mean Prudential Securities
Incorporated.

      E. The aggregate number of Units referred to in Sections 2.03 and 9.01 of
the Basic Agreement is 2,587,455 as of the date hereof.

      F. A Unit of the Trust is hereby declared initially equal to 1/2,587,455th
of the Trust.

      G. The term "First Settlement Date" shall mean March 17, 2003.

      H. The term "Distribution Date" shall be as soon as possible after the
Termination Date to Unit Holders of record on the Termination Date.

      I. The term "Termination Date" shall mean September 24, 2003.

      J. The Trustee's Annual Fee shall be $.90 (per 1,000 Units).

      K. The Portfolio Supervisor's portfolio supervisory service fee shall be
$.25 per 1,000 Units.

               [Signatures and acknowledgments on separate pages]

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                                       -3-

The Schedule of Portfolio Securities in Part A of the prospectus included in
this Registration Statement for National Equity Trust, Short-Term Low Five
Covered Write Option Trust Series 7 is hereby incorporated by reference herein
as Schedule A hereto.

<PAGE>

                                            PRUDENTIAL INVESTMENT MANAGEMENT
                                            SERVICES LLC,
                                            (Depositor)

                                            By /s/ Richard R. Hoffmann
                                               ---------------------------
                                               Richard R. Hoffmann
                                               Vice President

                                            PRUDENTIAL SECURITIES INCORPORATED
                                            (Portfolio Supervisor)

                                            By /s/ Richard R. Hoffmann
                                               ---------------------------
                                               Richard R. Hoffmann
                                               Vice President

<PAGE>

                                            THE BANK OF NEW YORK
                                            Trustee

                                            By: /s/ Brian Aarons
                                               ---------------------------
                                               Brian Aarons
                                               Title: Vice President

(SEAL)

ATTEST:

By: /s/ Dorothy Alencastro
    ------------------------------
    Dorothy Alencastro
    Title: Assistant Vice President

STATE OF NEW YORK          )
                              : ss.:
COUNTY OF NEW YORK         )

      I, Emanuel T. Lytle, Jr., a Notary Public in and for the said County in
the state aforesaid, do hereby certify that Brian Aarons and Dorothy Alencastro
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President and
Assistant Vice President, respectively of The Bank of New York, appeared before
me this day in person, and acknowledged that they signed, sealed with a
corporate seal of The Bank of New York, and delivered the said instrument as
their free and voluntary act as such Vice President and Assistant Vice
President, respectively, and as the free and voluntary act of The Bank of New
York, for the uses and purposes therein set forth.

          GIVEN, under my hand and notarial seal this 11th day of March, 2003.

                                            /s/ Emanuel T. Lytle, Jr.
                                            ---------------------------------
                                            Emanuel T. Lytle, Jr.
                                            Notary Public

(SEAL)

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