Document:

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                                                                   Exhibit 10.49

                                                              DUPLICATE ORIGINAL

                            AIRCRAFT LEASE AGREEMENT

                                  dated as of
                               September 27, 1996

                                    between

                                BANK OF HAWAII,

                                                   LESSOR

                                      and

                             ALOHA AIRLINES, INC.,

                                                   LESSEE

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                                                          RECORDED

                                              FEDERAL AVIATION ADMINISTRATION

                                              Date  10-1-96        Time  2:01
                                                   ---------            ------

                                              Conveyance Number  2A270153
                                                               ------------

                                              By /s/       [Illegible]
                                                      --------------------
                                                      Conveyances Examiner

                            AIRCRAFT LEASE AGREEMENT

        THIS AIRCRAFT LEASE AGREEMENT, made as of this 27th day of September,
1996 (the "Lease"), by and between BANK OF HAWAII, a banking corporation formed
under the laws of Hawaii ("LESSOR"), and ALOHA AIRLINES, INC. a corporation
formed under the laws of Hawaii ("LESSEE").

        WHEREAS, LESSEE desires to lease the Aircraft (as hereinafter defined)
from LESSOR and LESSOR is willing to lease the Aircraft to LESSEE, in
accordance with and subject to the terms and conditions of this Lease.

        NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties hereto, LESSOR and LESSEE
agree as follows:

                                   SECTION 1

                                  DEFINITIONS

        The following terms shall have the following respective meanings for
all purposes of this Lease and shall be equally applicable to both the singular
and the plural forms of the terms herein defined. Any agreement referred to
below shall mean such agreement, as amended, supplemented and modified from
time to time:

        "ACQUISITION COST" means (i) LESSOR's cost to purchase the Aircraft,
plus (ii) all sales and excise taxes paid by LESSOR on, or with respect to the
acquisition of the Aircraft, plus (iii) all costs and expenses approved and
paid by LESSOR in connection with the delivery of the Aircraft.

        "ACT" shall mean Subtitle VII of Title 49 of the United States Code and
the rules and regulations promulgated thereunder, as amended from time to time.

        "AFFILIATE" shall mean, with respect to any Person, any other Person
which, directly or indirectly, controls or is controlled by or is under common
control with such Person.

        "AGREED VALUE" with respect to war risks and all risks insurance shall
mean Twelve Million (US$12,000,000) Dollars with respect to the hull (including
all engines installed thereon).

        "AIRGROUP" shall mean Aloha Airgroup, Inc., a corporation formed under
the laws of Hawaii.

        "AIR AUTHORITY" shall mean the United States
Federal Aviation Administration, or any predecessor or
successor thereto

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                                                                               2

having jurisdiction over the registration, use, operation and maintenance of the
Aircraft.

        "AIR CARRIER" shall mean a citizen of the United States (as defined in
40102 of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo.

        "AIRCRAFT" shall mean the Airframe, together with the two (2) Engines
(or any Replacement Engine substituted for either of such Engines hereunder),
all as more particularly described on Exhibit "A" hereto, whether or not any of
such initial or Replacement Engines may, from time to time, be installed on
such Airframe or may be installed on any other airframe or any other aircraft.

        "AIRCRAFT DOCUMENTS" shall mean the items identified in Exhibit "B"
hereto.

        "AIRFRAME" means (i) the Boeing model 737-230ADV aircraft (excluding
Engines or engines from time to time installed thereon), bearing United States
registration no. N821AL and manufacturer's serial no. 23155, and (ii) any and
all Parts, so long as the same shall be incorporated in such Airframe, and any
and all Parts removed from such Airframe, so long as title to such Parts shall
remain vested in LESSOR in accordance with the terms of Section 8(A).

        "APPROVED INSURER" shall mean any reputable and financially sound
insurance company or insurance broker, in the U.S., London, French, German or
Japanese insurance markets, that provides or confirms the existence of any
insurance required under this Lease.

        "AUTHORIZED MAINTENANCE PERFORMER" shall mean LESSEE, Air New Zealand
(Christ Church), Sabre Tech (Arizona), Pemco (Alabama), Tramco (Washington),
Evergreen Air Center, Inc. (Arizona), Mobile Aerospace (Alabama), Greenwich Air
Services (Florida), TIMCO (North Carolina) or such other FAA certified
maintenance performer of comparable quality and reputation to that of any of
the above listed entities, and which is approved in advance by Lessor.

        "BASE TERM" means the period commencing on the Effective Date and
expiring on the Expiration Date.

        "BASE RATE" shall mean, at any time, the primary index rate (the "Index
Rate") established by the Bank of Hawaii from time to time in good faith in the
ordinary course of its business and with due consideration of the money market,
and published by intrabank circular letters or memoranda for the guidance of
its loan officers in pricing all of the Bank of Hawaii's loans in respect of
which the interest rate floats with or above the Base Rate; provided that if
the Index Rate is discontinued and replaced by a comparable rate, the
comparable rate shall be substituted in

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                                                                               3

place of the discontinued Index Rate.

        "BASIC RENT" shall mean One Hundred Thirty Two Thousand(US$132,000)
Dollars per month during the Base Term.

        "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day
on which banks are required or authorized to close in Honolulu, Hawaii.

        "CAPITAL LEASE" shall mean any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance
sheet.

        "CASH FLOW" shall mean LESSEE's net cash provided by operating
activities, as determined in accordance with generally accepted accounting
principles, consistently applied, adjusted for interest paid during such
period, calculated on a rolling twelve month basis and computed at the end of
each calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.

        "CERTIFICATE OF ACCEPTANCE" shall mean the written certificate of
LESSEE, in substantially the form of Exhibit "C" hereto, pursuant to which
LESSEE accepts delivery of the Aircraft and confirms that the Aircraft is in
the condition required by this Lease.

        "CODE" means the Internal Revenue Code of 1986, as amended and as may
hereafter be amended, and the rules and regulations promulgated pursuant
thereto.

        "COMPENSATION" shall have the meaning set forth in Section 12(D).

        "COMPONENT INVENTORY" shall have the meaning set forth in Section 3(D)
hereof.

        "COVERED MAINTENANCE" shall have the meaning set forth in Section
7(D)(iii) hereof.

        "CYCLE" shall mean one takeoff and landing of the Aircraft.

        "DEBT SERVICE" shall mean the sum of regularly scheduled principal
payments, interest payments and payments under Capital Leases made by LESSEE,
calculated on a rolling twelve months basis and computed at the end of each
calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.

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

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        "DELIVERY LOCATION" shall mean Berlin, Germany.

        "DOLLARS" or "$" shall mean the legal currency of the United States of
America.

        "DOT" shall mean the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.

        "EFFECTIVE DATE" shall mean the date on which LESSEE signs and delivers
to LESSOR Lease Supplement No. 1 to this Lease.

        "ENGINE" means (i) on the Effective Date, each of the two (2) Pratt &
Whitney model JT8D-15 engines, bearing manufacturer's serial nos. 687334 and
708328, respectively, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, (ii) within
six (6) months of the Effective Date, each of the two (2) Pratt & Whitney model
JT8D-9A engines identified on a Lease Supplement to this Lease, whether or not
from time to time installed on the Airframe or installed on any other airframe
or any other aircraft, and (iii) any Replacement Engine, whether or not from
time to time installed on the Airframe or any other airframe or any other
aircraft, together, in each case, with any and all Parts incorporated in such
Engine and any and all Parts removed from such Engine, so long as title to such
Parts shall remain vested in LESSOR in accordance with the terms of Section
8(A). At such time as a Replacement Engine shall be substituted hereunder and
the Engine for which the substitution is made shall be released, such
Replacement Engine shall constitute an Engine hereunder and such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines leased hereunder.

        "ENGINE MANUFACTURER" means United Technologies Corporation, Pratt &
Whitney Group, Commercial Products Division, a Delaware corporation, in its
capacity as manufacturer of the Engines, and its successors and
assigns.

        "EQUIPMENT CHANGE" shall have the meaning set forth in Section 8(C)
hereof.

        "EVENT OF DEFAULT" shall have the meaning set forth in Section 18
hereof.

        "EVENT OF LOSS" shall mean, with respect to the Aircraft, Airframe or
any Engine, any of the following events with respect to such property: (i) loss
of such property due to destruction, damage beyond repair or rendition of such
property unfit for normal use by LESSEE by any cause whatsoever, or any damage
to such property which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive total loss or a
compromised total loss; (ii) the disappearance, loss, theft, hijacking or
condemnation, of such property for a period in excess of thirty (30)
consecutive days; (iii) the confiscation or seizure of, or requisition of use
or title of such property for a period in excess of sixty (60) consecutive
days; or (iv) any

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divestiture of title to an Engine treated as an Event of Loss pursuant to
Section 12(B) or any other provision hereof. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe which constitutes a part of the Aircraft.

        "EXPIRATION DATE" shall mean Sept. 26, 2004.

        "FAA" shall mean the Federal Aviation Administration of the DOT or any
governmental person, agency or other authority succeeding to some or all of the
functions of the Federal Aviation Administration.

        "FAR" shall mean the United States Federal Aviation Regulations
currently in effect or as hereafter amended or modified.

        "FIXED CHARGES COVERAGE RATIO" shall mean Cash Flow divided by Debt
Service.

        "FLIGHT HOUR" shall mean each hour or fraction thereof elapsed from the
moment the wheels of the Aircraft leave the ground through the moment the
wheels of the Aircraft touch down upon the ground.

        "GOVERNMENTAL ENTITY" shall mean and include: (i) any national
government and any political subdivision thereof or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality, court
or agency of the foregoing, however constituted; and (iii) any association,
organization or institution of which any of the foregoing is a member, or to
whose jurisdiction any of the foregoing is subject, or in whose activities any
of the foregoing is a participant, but only to the extent that any such
association, organization or institution has jurisdiction over the Aircraft or
its operations.

        "HUSHKIT" shall mean one (1) shipset of Nordam high gross weight
hushkits installed on the Aircraft on the Effective Date.

        "INDEMNITEE" means LESSOR, and its respective successors and permitted
assigns and its respective directors, officers, shareholders, members and
employees.

        "JETZ VENTURES" shall mean Jetz Ventures Inc.

        "LAW" shall mean and include: (i) any statute, decree, constitution,
regulation, order or other directive of any Governmental Entity; (ii) any
treaty, pact, compact or other agreement to which any Governmental Entity is a
signatory or party; (iii) any judicial or administrative interpretation or
application of any of the foregoing; and (iv) any amendment or revision of any
of the foregoing.

        "LEASE," "THIS LEASE," "THIS AGREEMENT," "HEREBY," "HEREIN," "HEREOF,"
"HEREUNDER" or other like words shall mean this Aircraft Lease Agreement, as
the same may be supplemented or

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                                                                               6

amended, in writing, from time to time.

        "LEASE DOCUMENTS" shall mean this Lease, each Lease Supplement, the
Certificate of Acceptance and the Power of Attorney.

        "LEASE SUPPLEMENT" means a supplement to this Lease, substantially in
the form attached as Exhibit "D" hereto, subjecting the property described
therein to this Lease.

        "LESSEE'S ADDRESS" shall mean 371 Aokea Street, Honolulu, Hawaii 96819;
Attn.: Senior Vice President and CFO; Telefax No.: 808-833-3100.

        "LESSOR'S ADDRESS" shall mean 130 Merchant Street, Bancorp Tower, 19th
Floor, Honolulu, Hawaii 96813 Attn.: Gabriel S. H. Lee; Telefax 808-526-0964.

        "LESSOR'S LIENS" means the Liens of any Person claiming by, through or
under LESSOR, which arises as a result of (i) claims by or against any such
Person not related to, or expressly permitted by, the Lease, (ii) any act or
omission of any such Person which is not expressly permitted by the Lease,
(iii) taxes or expenses imposed by or against any such Person (or the
consolidated group of taxpayers of which it is a member) for which LESSEE is
not obligated to indemnify pursuant to Section 11, or (iv) claims by or against
any such Person arising out of any transfer by such Person of its interest in
the Aircraft, other than a transfer resulting from LESSOR's exercise of
remedies while an Event of Default has occurred and is continuing pursuant to
Section 19.

        "LIEN" shall mean any mortgage, pledge, lien, encumbrance, security
interest or other claim affecting the title to, or any interest in, property.

        "LUFTHANSA" shall mean Deutsche Lufthansa Aktiengesellschaft.

        "MAINTENANCE PROGRAM" shall mean LESSEE's FAA approved Part 121
maintenance program or the Air Authority FAR Part 121 approved maintenance
program of an approved sublessee, covering scheduled maintenance,
condition-monitored maintenance and on-condition maintenance of airframe,
engines and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
system checks, overhauls, approved modifications, service bulletins,
engineering orders, airworthiness directives, corrosion control inspections and
treatments.

        "MANUFACTURER" shall mean The Boeing Company, a Washington corporation,
in its capacity as manufacturer of the Airframe, and its successors and
assigns.

        "MINIMUM LIABILITY COVERAGE" shall mean Three Hundred Fifty
Million(US$350,000,000) Dollars per occurrence.

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                                                                               7

        "OFFICER'S CERTIFICATE" shall mean a certificate signed by the
chairman, the president, any vice president, the treasurer, any assistant
treasurer, the secretary or any assistant secretary of the Person providing
such certificate.

        "OVERDUE RATE" shall mean a floating rate per annum equal to the Base
Rate, plus six percentage points (6%).

        "PARTS" means all appliances, parts, instruments, avionics,
appurtenances, accessories, furnishings and other equipment or components, of
whatever nature (other than complete Engines) and other than removable Parts,
along with any seats and galleys leased from third parties, which are, from
time to time, incorporated in the Airframe or any Engine, or so long as title
to such Parts shall remain vested in LESSOR, in accordance with Section 8(A)
hereof, after removal from the Airframe or any Engine.

        "PERMITTED LIENS" shall mean, with respect to the Aircraft, the
Airframe or any Engine (a) the respective rights of the parties under this
Lease and each Lease Supplement; (b) LESSOR's Liens; (c) liens for taxes,
assessments or other governmental charges either not yet due or being contested
in good faith by appropriate proceedings, so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft,
the Airframe or any Engine and provided that with respect to such liens,
assessments or governmental charges, LESSEE has provided for adequate reserves,
as determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties thereon, or
has posted a bond, issued by a bonding or insurance company reasonably
acceptable to LESSOR, and in an amount sufficient to satisfy in full the amount
of such lien plus interest and penalties thereon; (d) materialmen's,
mechanic's, worker's, repairer's, employee's or other like liens for amounts,
the payment of which is either not yet delinquent for more than thirty (30)
days or is being contested in good faith by appropriate proceedings, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Aircraft, the Airframe or any Engine and so long as LESSEE has
provided for adequate reserves, as determined in accordance with generally
accepted accounting principles, to satisfy in full the amount of such lien plus
interest and penalties thereon, or has posted a bond, issued by a bonding or
insurance company reasonably acceptable to LESSOR, and in an amount sufficient
to satisfy in full the amount of such lien plus interest and penalties thereon;
(e) liens arising out of any judgment or award, unless the judgment secured
shall not, within thirty (30) days after entry thereof, have been discharged or
vacated or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the execution of
such stay, and provided such lien presents no material danger of the sale,
forfeiture or loss of the Aircraft, the Airframe or any Engine or of LESSOR's
interest therein and so long as LESSEE has provided for adequate reserves, as
determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties

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                                                                               8

thereon, or has posted a bond, issued by a bonding or insurance company
reasonably acceptable to LESSOR, and in an amount sufficient to satisfy in full
the amount of such lien plus interest and penalties thereon.

        "PERSON" shall mean and include any individual, corporation, limited
liability company, partnership, limited liability partnership, firm, joint
venture, trust, unincorporated organization, association, Governmental Entity,
or any organization or association of which any of the foregoing is a member or
participant.

        "POWER OF ATTORNEY" shall mean that certain power of attorney from
LESSEE to LESSOR, to be executed in the form attached hereto as Exhibit "E",
pursuant to which LESSEE designates LESSOR as attorney-in-fact to do all things
which LESSEE could do under this Lease in the event LESSEE fails to fulfill any
of its obligations hereunder, including but not limited to, terminating this
Lease and LESSEE's interest herein.

        "RENT" shall mean Basic Rent and Supplemental Rent.

        "RENT DATE" shall mean each date on which a payment of Basic Rent is
due. The first Rent Date shall be the Effective Date and each subsequent Rent
Date shall be the corresponding date in each consecutive month during the Base
Term. If a Rent Date shall in any month not be a Business Day, then the Rent
Date shall be the immediately following Business Day.

        "REPLACEMENT ENGINE" shall have the meaning set forth in Section
12(B) hereof.

        "RETURN LOCATION" shall mean LESSEE's maintenance facilities in
Honolulu, Hawaii or such location in the western continental United States, as
LESSOR shall designate (provided that facilities exist at such location
designated by LESSOR so as to permit the performance of a boroscope inspection
and engine power assurance run), or such other location as LESSOR and LESSEE
shall agree upon. In the event LESSOR directs LESSEE to return the Aircraft in
the western continental United States, LESSOR shall pay LESSEE's ferry costs
(including the cost of fuel, which cost to LESSOR shall be the same cost as
charged to LESSEE at the point of fueling) from Honolulu to such location
(unless the Aircraft is being returned due to the occurrence of an Event of
Default).

        "RETURN OCCASION" shall have the meaning set forth in Section 17(A)
hereof.

        "SUPPLEMENTAL RENT" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which LESSEE assumes or agrees to pay to LESSOR or any
other Person hereunder, including, without limitation, all amounts required to
be paid by LESSEE under its indemnification pursuant to Section 14 hereof.

        "TAXES" shall mean any and all sales, withholding, use, excise,
personal property, ad valorem, value added, stamp, interest

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                                                                               9

equalization, taxes levied upon LESSEE's income, gross levies, customs or other
duties, or other charges of any nature, together with any penalties, fines or
interest thereon, imposed, levied or assessed by, or otherwise payable to, any
Governmental Entity. Excluded from this definition shall be (i) any taxes
imposed by any taxing authority within the jurisdiction of the Delivery
Location, (ii) any taxes based on or measured by the gross or net income of
LESSOR or any Indemnitee (including, without limitation, any franchise tax, any
capital gains tax, any minimum or alternative minimum tax and any taxes
measured on or by any items of tax preference), and (iii) the Hawaii Capital
Goods Excise Tax and Hawaii General Excise Tax, or any successor thereto,
assessed by the State of Hawaii on the sale of goods or services.

                                   SECTION 2

                               LEASE OF AIRCRAFT

        LESSOR hereby agrees to lease the Aircraft to LESSEE and LESSEE hereby
agrees to lease the Aircraft from LESSOR pursuant to the provisions of this
Lease.

                                   SECTION 3

                         DELIVERY AND ACCEPTANCE; TERM

        (A) DATE OF DELIVERY. LESSEE shall take delivery of the Aircraft and
Aircraft Documents and execute and deliver to Lessor Lease Supplement No. 1 to
this Lease on the Effective Date on not less than five (5) days' prior written
notice from LESSOR to LESSEE.

        (B) PLACE OF DELIVERY AND ACCEPTANCE. The Aircraft and Aircraft
Documents shall be delivered to and accepted by LESSEE at the Delivery
Location, unless LESSOR and LESSEE otherwise agree in writing upon another
location subsequent to the execution of this Lease.

        (C) CASUALTY TO AIRCRAFT PRECEDING DELIVERY. In the event that an Event
of Loss occurs with respect to the Aircraft prior to the Effective Date hereof,
this Lease shall thereupon terminate and neither LESSOR nor LESSEE shall have
any further obligation to the other hereunder.

        (D) ACCEPTANCE OF AIRCRAFT. The Aircraft to be leased hereunder shall be
delivered to LESSEE in its "AS IS," "WHERE IS" condition, SUBJECT TO EACH AND
EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SUBSECTION
6(A) HEREOF, except that the Aircraft shall comply with the conditions set forth
on Exhibit "F". LESSEE shall indicate and confirm its acceptance of the Aircraft
by delivery to LESSOR of a (i) Lease Supplement, and (ii) Certificate of
Acceptance, dated on the Effective Date. At or

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                                                                              10

preceding the time of acceptance of the Aircraft, LESSOR shall deliver to
LESSEE a written equipment inventory of the Aircraft, prepared by LESSOR (the
"Component Inventory") or Lufthansa.

        (E) TERM OF LEASE. The term of this Lease, as to the Aircraft, shall be
for the Base Term.

                                   SECTION 4

                              CONDITIONS PRECEDENT

        (A) CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS. LESSOR's obligation
to lease the Aircraft hereunder to LESSEE shall be subject to the receipt by
LESSOR or the performance or occurrence, on or before the Effective Date (or
such other date as provided for herein), of the following from LESSEE, all of
which shall be satisfactory in form and substance to LESSOR:

        (1) Certified copy of a resolution of LESSEE's Board of Directors,
certified by an officer of LESSEE, authorizing the entering into and
performance of this Lease together with an incumbency certificate as to the
person or persons authorized to execute and deliver this Lease and the other
Lease Documents on behalf of LESSEE;

        (2) Certified copy of LESSEE's articles or certificate of incorporation
and by-laws certified by an officer of LESSEE;

        (3) A favorable opinion of counsel to LESSEE, dated the Effective Date,
addressed to LESSOR, and which opinion shall opine, among other things, that
the Lease and all of the terms thereof constitutes the valid and binding
obligation of LESSEE enforceable in accordance with its terms and that the
interests of LESSOR in the Aircraft and this Lease are fully protected and
perfected;

        (4) A copy of LESSEE's air carrier operating certificate, as issued by
the Secretary of Transportation of the United States pursuant to Chapter 47 of
Title 49 of the United States Code for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo, duly certified as being true,
correct, accurate and complete by an officer of LESSEE;

        (5) The LESSOR shall be satisfied that all necessary licenses and
permits for the exportation of the Aircraft from Germany and the importation of
the Aircraft into United States have been obtained by LESSEE and remain valid
and in full force and effect and that any applicable customs duties, stamp
duties and all other Taxes, if any, shall have been paid by LESSEE as a
consequence of the importation of the Aircraft, the entering into of this
Lease, the performance of the terms of this Lease and the leasing of the
Aircraft;

        (6) An Officer's Certificate of LESSEE, dated as of the Effective Date,
stating that:

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                                                                              11

                (a) The representations and warranties contained in Subsection
        6(C) hereof are true and accurate on and as of such date as though made
        on and at such time (except to the extent that such representations and
        warranties relate solely to an earlier date); and

                (b) No event has occurred and is continuing, or would result
        from the leasing of the Aircraft, which constitutes a Default or an
        Event of Default or would constitute a Default or an Event of Default
        with the giving of notice or the passage of time or both;

        (7) Not less than three (3) Business Days prior to the Effective Date,
certificates and a broker's undertaking letter, signed by an Approved
Insurer(s), as to due compliance with the insurance provisions of Section 13
hereof with respect to the Aircraft;

        (8) The Power of Attorney;

        (9) A written statement, on the letterhead of LESSEE, for presentation
to the export control authority of the Federal Republic of Germany (Bundesamt
fur Wirtschaft) that neither the Aircraft nor parts thereof nor any spare
parts, if any, delivered to the LESSEE shall directly or indirectly be sold,
leased, released, assigned, transferred, conveyed or in any manner disposed of
in or to any country other than the United States of America without due prior
written consent of the Bundesamt fur Wirtschaft, except to Australia, Austria,
Belgium, Luxembourg, Denmark, France, Greece, Great Britain, Ireland, Italy,
Switzerland or Turkey; and

        (10) Such other documents which LESSOR or its counsel may reasonably
require.

        (B) CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS. LESSEE's obligation
to lease the Aircraft hereunder from LESSOR shall be subject to the receipt by
LESSEE or the performance or occurrence, on or before the Effective Date (or
such other date as provided for herein),of the following from LESSOR, all of
which shall be satisfactory in form and substance to LESSEE:

        (1) The Aircraft shall be in the condition required by Exhibit "F"
hereto;

        (2) The Aircraft shall be registered in the United States in the name
of LESSOR;

        (3) Lufthansa shall have provided to LESSEE, on a reasonably timely
basis prior to the Effective Date, such information as LESSEE shall reasonably
require in connection with obtaining all necessary licenses, permits and
authorizations for the exportation of the Aircraft from Germany and the
importation of the Aircraft to the United States; and

        (4) LESSOR shall have tendered the Aircraft to LESSEE for delivery not
later than November 26, 1996.

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                                                                              12

                                   SECTION 5

                         RENT AND MAINTENANCE RESERVES

        (A) RENT. LESSEE covenants and agrees to pay to LESSOR, or to any of
LESSOR's assigns designated to LESSEE in writing by LESSOR, the Rent.

                (1) BASIC RENT. The Basic Rent shall be paid by LESSEE to LESSOR
        in respect of the Aircraft, in advance, on each Rent Date. The first
        payment of Basic Rent shall be paid by LESSEE to LESSOR on the Effective
        Date.

                (2) SUPPLEMENTAL RENT. LESSEE agrees to pay to LESSOR, or to
        whomsoever shall be entitled thereto, any and all Supplemental Rent
        promptly as the same shall become due and owing, and in the event of any
        failure on the part of LESSEE to pay any Supplemental Rent, LESSOR shall
        have all rights, powers and remedies provided for in this Lease or by
        Law or equity or otherwise in the case of nonpayment of Basic Rent.
        LESSEE will also pay to LESSOR, on demand, as Supplemental Rent, to the
        extent permitted by applicable Law, interest at the Overdue Rate on any
        part of any installment of Basic Rent not paid when due for the period
        from and including the Rent Date to and including the date of actual
        payment in full, and on any Supplemental Rent not paid when due or
        demanded by LESSOR for any period for which the same shall be overdue.

        (B) FORM OF PAYMENT. Payment of Rent and any other payments due under
this Lease, shall be made in Dollars in immediately available funds to LESSOR
or its assignee at such address and account as LESSOR may specify in writing.
Payment shall be made on the Rent Date, or the Business Day thereafter if the
Rent Date is not a Business Day, so as to reach LESSOR or its designated
depository not later than 3:00 p.m. Hawaii time, on the Rent Date or the
Business Day thereafter, as the case may be.

        (C) RENT NOT REDUCED BY TAXES. LESSEE agrees that each payment of Rent
pursuant to this Lease shall be free of all Taxes and, in the event that any
Taxes are imposed, levied, assessed by, or otherwise payable with respect to or
arising out of the leasing or operation of the Aircraft by LESSEE, LESSEE shall
pay such amounts as are necessary to enable LESSOR and each assignee of LESSOR
to whom payments of Rent are to be made by LESSEE, to receive each payment of
Rent hereunder, under any circumstances and in any event, in the full amounts
required hereunder on an aftertax basis, without any reduction whatsoever.

        (D) MAINTENANCE RESERVE. Provided Airgroup meets the Credit Standards,
then LESSEE shall not be required to pay Reserves for any period for which
Reserves would otherwise be payable, as

<PAGE>

                                                                              13

provided below. Airgroup shall be deemed to have satisfied the Credit Standards
provided Airgroup maintains (1) a Fixed Charges Coverage Ratio equal to not
less than 1.05, calculated on a rolling twelve month basis and (2) a minimum
tangible net worth (tangible net worth being determined in accordance with
Generally Accepted Accounting Principles, consistently applied) of $4,000,000,
calculated on a rolling twelve month basis and computed at the end of each
calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.

        Commencing as of the calendar quarter ending March 31, 1997, and for
each calendar quarter thereafter (each such date a "Review Date") during the
Base Term, if LESSEE failed to meet the Credit Standards as calculated on a
rolling twelve month basis, LESSEE shall pay to LESSOR Reserves on account of
the operation for the Aircraft for each subsequent month following the Review
Date on which it was determined that LESSEE failed to meet the Credit Standards
up through and including the next Review Date on which it is determined that
LESSEE meets the Credit Standards, in an amount equal to Two Hundred Forty Five
(US$245.00) Dollars per each Flight Hour incurred on the Aircraft in the
previous calendar month, which amount shall be allocated at Seventy Five
(US$75.00) Dollars per Flight Hour for the Airframe (the "Airframe Reserve"),
Seventy (US$70.00) Dollars per Engine for each Engine Flight Hour (the "Engine
Reserve"), Twenty ($20.00) Dollars per Flight Hour for the landing gear (the
"Landing Gear Reserve") and Ten ($10.00) Dollars per Flight Hour for the APU
(the "APU Reserve") (each a "Reserve" and collectively, the "Reserves"). All
Reserves to be paid by LESSEE to LESSOR shall be paid in arrears, not later
than ten (10) days following the last day of the month for which the Reserves
payment was calculated except the Reserve payment for the month immediately
preceding the date of the Return Occasion (as defined in Section 17(A)) shall
be paid on the date of the Return Occasion. All Reserves paid by LESSEE to
LESSOR will be held by LESSOR and shall be disbursed by LESSOR (or LESSOR shall
cause the same to be disbursed) only to pay for Covered Maintenance pursuant to
Section 7(D) hereof.

        (E) NET LEASE, LESSEE'S OBLIGATIONS; NO SETOFF; COUNTERCLAIM, ETC. This
is a net operating lease. It is the intent of the parties hereto that this
Lease be a "true lease" and a lease for United States federal income tax
purposes. LESSEE acknowledges and agrees that it has no interest herein other
than that of a lessee. Except as otherwise provided herein, LESSEE's obligation
to pay all Rent payable hereunder shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever, including, without limitation,
(i) any Taxes (other than Taxes applicable to said Rent for which LESSEE has no
indemnification obligation under Section 11 hereof), any setoff, counterclaim,
recoupment, defense or other right which LESSEE may have against LESSOR; (ii)
any defect in the title, airworthiness, condition, design, operation or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, Airframe
or any Engine, or any interruption or cessation in the use or possession
thereof by LESSEE for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against

<PAGE>

                                                                              14

LESSEE; (iv) any restriction, prevention or curtailment of, or interference
with, any use of the Aircraft, Airframe or any Engine; (v) any invalidity or
unenforceability or disaffirmance of this Lease or any provision hereof,
whether against or by LESSEE or otherwise; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
The foregoing provisions shall not be construed as a waiver by LESSEE of any
right to bring a separate action against LESSOR to recover amounts allegedly
due from LESSOR to LESSEE.

                                   SECTION 6

                         REPRESENTATIONS AND WARRANTIES

      (A) DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN TO
THE CONTRARY, LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE, BY
VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE, AND LESSOR HEREBY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
AIRWORTHINESS, VALUE, CONDITION, COMPLIANCE WITH SPECIFICATIONS, DURABILITY,
RELIABILITY, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR
PARTICULAR PURPOSE OF THE AIRCRAFT, OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, OR ANY PART THEREOF, OR AS TO ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT
TO THE AIRCRAFT, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY IN CONTRACT, TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE,
STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR
DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS,
OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES,
AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES.

            As an exception to the foregoing, LESSOR represents and warrants
that, on the Effective Date:

                (1) LESSOR shall have the lawful right to lease the Aircraft to
        LESSEE in accordance with the terms of this Lease;

                (2) LESSOR is a Hawaii banking corporation and has the corporate
        and banking power and authority to enter into and perform its
        obligations under this Lease and all other Lease Documents to which
        LESSOR is a party; and

                (3) This Lease and all other Lease Documents to which LESSOR is
        a party have been duly entered into and delivered by LESSOR and
        constitutes a valid, legal and binding obligation of LESSOR, enforceable
        in accordance with its terms, except as such enforceability may be
        limited by bankruptcy, moratorium, reorganization and similar Laws and
        by general principles of equity, whether considered in a proceeding at
        Law or in equity.

<PAGE>

                                                                              15

                THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE PRECEDING
        EXCEPTION CLAUSE CONSTITUTE THE SOLE EXCEPTION TO THIS SUBSECTION 6(A)
        AND IS EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES
        OF LESSOR EXPRESS OR IMPLIED.

        (B) MANUFACTURER'S WARRANTIES. So long as no Event of Default under
this Lease has occurred and is continuing, LESSOR agrees to assign or otherwise
make available to LESSEE such rights as LESSOR may have, if any, under any
warranty, express or implied, with respect to the Aircraft made by the
Manufacturer, Engine Manufacturer, any subcontractor or supplier thereof, to
the extent that the same may be assigned or otherwise made available to LESSEE
and, to the extent that the same may not be assigned or otherwise made
available to LESSEE, LESSOR agrees to exert its reasonable efforts, at LESSEE's
sole cost and expense, to enforce such rights as LESSOR may have with respect
thereto for the benefit of LESSEE; provided, however, that upon an Event of
Default all such rights shall, without further action or notice, immediately
revert to LESSOR, including all claims thereunder, whether or not perfected;
provided that notwithstanding any provision in this Lease to the contrary,
LESSEE agrees that the LESSOR shall have the right to assert and prosecute all
of LESSOR's claims with respect to any and all such warranties and to receive
and keep all payments in respect of such claims solely for LESSOR's account to
the extent that such claims of LESSOR do not conflict and are not inconsistent
with the LESSEE's claims in respect thereof as to which LESSEE has asserted or
notified LESSOR in writing that LESSEE will assert.

        (C) LESSEE'S REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants, as of the Effective Date, and all such representations and warranties
being continuing, that:

            (1) LESSEE is a corporation duly organized and existing in good
standing under the Laws of Hawaii and has the corporate power and authority to
carry on its business as presently conducted and to perform its obligations
under this Lease and the other Lease Documents;

            (2) LESSEE is not a Governmental Entity or government owned or
controlled and neither LESSEE or its properties is immune from the jurisdiction
of any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) nor does it have the defense of sovereign immunity or similar
defense available to it in any legal action or proceeding;

            (3) LESSEE is a citizen of the United States (as defined in 40102
of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo;

            (4) At the time of delivery of the Aircraft to LESSEE, the Aircraft
will be eligible for U.S. registration

<PAGE>

                                                                              16

(assuming LESSOR meets the citizenship requirements for registration of an
Aircraft as set forth in the FAR's) and may be operated by LESSEE in accordance
with all applicable Hawaii and Federal Aviation rules and regulations
notwithstanding the fact, among other things, that the Aircraft will now be
operated in the United States (not having previously been operated in the United
States), will be added to the U.S. aircraft registry and the Aircraft will not
meet the Stage III noise regulations set forth in FAR Part 36;

            (5) In the event LESSEE files a petition for relief under Chapter
11 of the United States Bankruptcy Code, as amended, or has such a petition
filed against it, LESSOR will be entitled to the rights provided to a "lessor"
under the provisions of 11 U.S.C. Section 1110(a)(1) and LESSEE will not oppose
and will consent to any motion made by LESSOR under said Section 1110 to take
possession of the Aircraft pursuant to the provisions thereof;

            (6) This Lease and all other Lease Documents to which LESSEE is a
party have been duly authorized by all necessary corporate action on the part
of LESSEE, do not require any approval of the stockholders of LESSEE (or if
such approval is required, such approval has been obtained), and neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby nor compliance by LESSEE with any of the terms and
provisions hereof will contravene any Law applicable to LESSEE or result in any
breach of, or constitute any default under, or result in the creation of, any
lien, charge or encumbrance upon any property of LESSEE under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank
loan or credit agreement, corporate charter or by-law, or other agreement or
instrument to which LESSEE is a party or by which LESSEE or its properties or
assets may be bound or affected;

            (7) LESSEE has received or has complied with every necessary
consent, approval, order, or authorization of, or registration with, or the
giving of prior notice to, any Governmental Entity having jurisdiction with
respect to the use and operation of the Aircraft and the execution and delivery
of this Lease and all other Lease Documents to which LESSEE is a party or the
validity and enforceability hereof and thereof;

            (8) This Lease and all other Lease Documents to which LESSEE is a
party have been duly entered into and delivered by LESSEE and constitutes a
valid, legal and binding obligation of LESSEE, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
reorganization, moratorium or other similar Laws and by general principles of
equity, whether considered in a proceeding at Law or in equity;

            (9) There are no suits or proceedings pending, or to the knowledge
of LESSEE, threatened against or affecting LESSEE or its properties, which may
have a material adverse effect on the financial condition or business of LESSEE
or upon LESSEE's ability to perform its obligations hereunder;

            (10) LESSEE has filed or caused to be filed all

<PAGE>

                                                                              17

material tax returns which are required to be filed by LESSEE and has paid or
caused to be paid all Taxes shown to be due or payable on said returns or on
any assessment received by LESSEE, except those the validity of which is
contested by LESSEE in good faith by appropriate proceedings duly instituted
and diligently prosecuted;

            (11) It is not necessary or advisable under any applicable Law in
order to ensure the validity, effectiveness and enforceability of this Lease
that this Lease or any other instrument relating thereto be filed, registered
or notarized or that any other action be taken, other than the filing and
registration of this Lease with the FAA and filing of UCC-1 financing
statements with the Bureau of Conveyances of the State of Hawaii;

            (12) Except for the registrations and filings described in (11)
above, no other filing or registration of any instrument or document is
necessary under any applicable Law in order to protect LESSOR'S title to and
ownership of the Aircraft and interest in this Lease;

            (13) Neither the payment of Rent nor the payment of any other
amount required under this Agreement is subject to deduction or withholding
under any applicable Law;

            (14) No Default or Event of Default has occurred and is continuing;

            (15) The obligations of LESSEE to make payments hereunder will rank
at least PARI PASSU in right of payment with all other unsecured,
unsubordinated obligations of LESSEE;

            (16) LESSEE has furnished to LESSOR copies of Airgroup's audited
consolidated financial statements as of December 31, 1995, as certified by
Airgroup's independent certified public accountants, and uncertified quarterly
consolidated financial statements of Airgroup for the quarter ending March 31,
1996, and in each instance prepared in accordance with generally accepted
accounting principles, consistently applied. Such financial statements present
a true and accurate view of the financial condition of LESSEE and Airgroup,
respectively, as of the date of such financial statements. Since the date of
such financial statements, no material adverse change has occurred in LESSEE's
or Airgroup's financial condition or their results of operations, and nothing
has occurred that can reasonably be expected to have a material adverse effect
on the ability of LESSEE and Airgroup to carry on their respective businesses
and operations and for LESSEE to perform its obligations under this Lease;

            (17) Neither the financial statements of Airgroup nor any other
material document furnished by or on behalf of LESSEE or Airgroup to LESSOR in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained in this Lease not misleading. LESSEE knows of no
fact that materially adversely affects or, so far as LESSEE can now reasonably
foresee,

<PAGE>

                                                                              18

will materially adversely affect the business, financial condition, operations
or properties of LESSEE or the ability of LESSEE to perform its obligations
under the Lease Documents; and

            (18) Airgroup owns one hundred percent (100%) of the issued and
outstanding stock of LESSEE.

        (D) NOTIFICATION. During the Term of this Lease, at the end of each
calendar quarter, LESSEE shall send an officer's certificate to LESSOR
notifying LESSOR of any condition that materially changes the content of any of
the representations and warranties made as of the Effective Date under Section
6(C) hereof or certifying that there has been no such change.

                                   SECTION 7

              POSSESSION, USE, MAINTENANCE, TITLE AND REGISTRATION

        (A) POSSESSION. Except as expressly provided in Subsection 8(B) and
Section 22, LESSEE shall not transfer possession of the Aircraft or any Engine
or part thereof to any Person without the prior written consent of LESSOR,
which consent shall not be unreasonably withheld, provided that, so long as no
Default or Event of Default or event which would constitute an Event of Default
with the giving of notice or lapse of time, or both, shall have occurred and be
continuing and so long as LESSEE shall comply with the provisions of Section 13
hereof, LESSEE may, so long as the action to be taken shall not deprive LESSOR
of any of its title to and interest in the Aircraft, the Airframe or any Engine
and shall not adversely affect the registration of the Aircraft under the Laws
of the United States, without the prior written consent of LESSOR, deliver
possession of the Aircraft, the Airframe or any Engine or other Part thereof to
the Manufacturer, the Engine Manufacturer or Authorized Maintenance Performer,
as appropriate, for testing, service, repair, maintenance or overhaul work on
the Aircraft, the Airframe, any Engine or Part, or for alterations,
modifications, or additions thereto, to the extent required or permitted by the
terms of Subsection 7(D) hereof.

        (B) USE. LESSEE shall use the Aircraft solely in commercial passenger
carrying operations in accordance with all Laws applicable to it and shall not
use or permit the Aircraft to be used for any purpose for which the Aircraft is
not designed or reasonably suited. LESSEE shall not use or permit the use of
the Aircraft for the carriage of (i) whole animals, living or dead, except in
cargo compartments according to International Air Transport Association
("I.A.T.A.") regulations and except domestic pet animals carried in suitable
containers to prevent the escape of any fluids and to ensure the welfare of the
animal, (ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes or any other nuclear assemblies except as
permitted for passenger aircraft under the "Restriction of Goods" schedule
issued by I.A.T.A. from time to time, or (iii) any other goods, materials or
items of cargo that would not be adequately covered by the insurance required
or obtained pursuant to this

<PAGE>

                                                                              19

Lease.

        (C) LAWFUL INSURED OPERATIONS. LESSEE shall not permit the Aircraft to
be maintained, used, or operated in violation of any Law of any Governmental
Entity having jurisdiction, or contrary to the Manufacturer's or Engine
Manufacturer's operating manuals and instructions, or in violation of any
airworthiness certificate, license, or registration relating to the Aircraft
issued by the FAA or any other Governmental Entity having jurisdiction, unless
the validity thereof is being contested in good faith and by appropriate
proceedings duly instituted and diligently prosecuted, but only so long as such
proceedings will not result in the sale, forfeiture, loss of valid insurance
coverage upon, or loss of, the Aircraft, the Airframe, any Engine or any Part.
LESSEE shall comply with the foregoing, at its sole cost and expense, and shall
maintain the Aircraft in proper condition for operation under such Laws. LESSEE
agrees not to operate the Aircraft, or to permit or suffer the Aircraft to be
operated, within or into any geographic area:

            (1) unless the Aircraft is at all such times covered by insurance as
        required by the provisions of Section 13 hereof;

            (2) contrary to the terms of such insurance as required by the
        provisions of Section 13 hereof; and

            (3) in violation of any Law, rule, order or regulation of any
        Governmental Entity.

LESSEE shall deliver to LESSOR such documents and assurances as LESSOR may
request under the provisions of Section 16 hereof to evidence compliance with
the foregoing.

        (D) MAINTENANCE.

            (i)  LESSEE, at its own cost and expense, shall:

                 (a) service, repair, maintain, overhaul, test, or cause the
        same to be done to the Aircraft so as to keep the Aircraft in as
        good operating condition as when delivered to LESSEE hereunder,
        ordinary wear and tear excepted, and such operating condition as
        required by the Maintenance Program and as may be necessary to
        enable the airworthiness certification of the Aircraft to be
        maintained in good standing at all times under the applicable rules
        and regulations of the FAA;

                 (b) perform all routine and non-routine services, checks and
        corrosion control and inspections, including any structural
        inspections requirements (SSID's) and "A", "B", "C" or "D" checks
        (or the equivalent thereof) required by the Maintenance Program,
        the Manufacturer or the Air Authority;

                 (c) maintain, in accordance with FAR Part 121,

<PAGE>

                                                                              20

        all records, logs and other materials required by applicable Laws
        of any Governmental Entity and the Air Authority to be maintained
        in respect of the Aircraft, including but not limited to
        serviceable component tags required by the Air Authority;

                 (d) throughout the Base Term of this Lease, at the end of each
        calendar quarter, provide LESSOR with a written projection of the
        next scheduled commencement date of each "C" or "D" check to be
        performed on the Aircraft and each scheduled engine overhaul and
        the location where such checks and overhauls are scheduled to be
        performed;

                 (e) designate representatives to coordinate with LESSOR or
        LESSOR's representatives on maintenance and warranty matters;

            (ii) All maintenance of the Aircraft and Engines shall be performed
by the Authorized Maintenance Performer.

            (iii) (A) "Covered Maintenance" means, at any time, the D check for
the Airframe, the scheduled heavy maintenance check or hot section inspection
for the engine, the scheduled overhaul for the landing gear and the scheduled
heavy maintenance check or hot section inspection for the APU, respectively,
pursuant to the Maintenance Program. Excluded from Covered Maintenance shall be
overhaul or repairs caused by F.O.D, operational mishandling or by events that
can be insured against. The cost of Covered Maintenance shall be limited to the
actual cost of replacement parts plus the cost of the associated labor at
LESSEE's in-house labor rates if the work is performed by LESSEE, or at
third-party costs charged to LESSEE if the work is performed by third parties,
and shall in no event include, late charges, interest, mark-ups or premium
charges by LESSEE or other similar amounts.

                   (B) Unless an Event of Default shall have occurred and be
continuing, to the extent that LESSEE has paid Reserves pursuant to the terms
of this Lease and such Reserves have not previously been disbursed by LESSOR in
accordance with the terms hereof, the LESSOR shall pay to the LESSEE, within
five (5) Business Days after receipt of:

                       (a) an Officer's Certificate stating:

                           (1) that Covered Maintenance has been performed on
                the Airframe, Engines, APU or landing gear, respectively, and
                the cost thereof, or

                           (2) that advance payments are required by a
                third-party Authorized Maintenance Performer under a contract
                covering any such work, and the amount of such payments; and

                       (b) appropriate documentation with respect to such work
                or payments,

an amount equal to the actual cost of such work or such advance

<PAGE>

                                                                              21

payment, as the case may be, up to the amount of the then unutilized Airframe
Reserves for such Covered Maintenance on the Airframe, up to the amount of the
then unutilized Engine Reserves for such Covered Maintenance on the Engines, up
to the amount of the then unutilized APU Reserves for such Covered Maintenance
on the APU and up to the amount of the then unutilized Landing Gear Reserves
for such Covered Maintenance on the landing gear; PROVIDED, HOWEVER, that (i)
at no time shall the amount of any Reserve to be made available by LESSOR for
Covered Maintenance exceed the aggregate amount remaining in such Reserve as of
the date the Covered Maintenance was completed, and (ii) all Reserves
(including but not limited to the Reserves for each Engine) shall be kept
segregated and, except as expressly provided below, LESSEE may only draw upon
the Reserves specifically allocated to the item on which Covered Maintenance
was performed. Upon the termination of this Lease for any reason whatsoever
(including, without limitation, the occurrence of an Event of Default), any
amounts paid to LESSOR as Reserves and not used to reimburse LESSEE for Covered
Maintenance shall be retained by LESSOR free and clear of any claim by LESSEE.
Notwithstanding the foregoing, but subject to the condition precedent that no
Event of Default has occurred and is continuing, in the event that LESSEE
performs or is required to perform Covered Maintenance on the Airframe, either
Engine, the APU or the landing gear, as the case may be, in order to meet in
full, on the Expiration Date, the return conditions set forth herein, and the
allocated Reserve amount for such item is insufficient to pay in full the cost
of the Covered Maintenance for such item, then in any such event, and only in
such event, LESSEE shall be entitled to draw upon and receive from the other
Reserves then held by LESSOR, that amount equal to the difference between the
actual cost of the Covered Maintenance and the amount that was allocated in the
Reserves for such item. Further, so long as no Event of Default has occurred
and is continuing, in the case of a return of the Aircraft on the Expiration
Date where a financial adjustment is due to LESSOR with respect to an item
where Reserves have been paid, LESSEE may draw upon the Reserves then held by
LESSOR and use same solely toward satisfaction of such financial adjustment
obligation.

              (f) LESSEE agrees that it will not discriminate against the
       Aircraft (as compared to other aircraft of the same TYPE OWNED or
       operated by LESSEE) in the operation, use and performance of
       maintenance, including, but not limited to, in contemplation of the
       expiration or termination of this Lease with respect to the
       maintenance of the Aircraft (including, but not limited to, the
       substitution or replacements of Parts other than where the failure
       to replace Parts would result in LESSEE failing to meet the return
       conditions for the Aircraft set forth herein). The foregoing shall
       not be deemed to be a prohibition on LESSEE's withdrawing the
       Aircraft from revenue service in order to prepare the Aircraft for
       return to LESSOR upon the expiration or termination of this Lease
       nor shall the foregoing be deemed to expand LESSEE's obligations
       beyond those set forth in any specific return provision set forth
       herein.

<PAGE>

                                                                             22

        (E) AIRWORTHINESS DIRECTIVES; SERVICE BULLETINS.

             (i) If the FAA, the Air Authority, the Manufacturer or the Engine
Manufacturer, or the manufacturer of any Parts, publishes an airworthiness
directive, mandatory service bulletin or mandatory modification after the
commencement date of this Lease or already has published such airworthiness
directive, mandatory service bulletin or a mandatory modification which
modification is required to be completed or terminated during the Base Term or
at any time during the ninety (90) day period following the end of the Base
Term or the termination of this Lease, LESSEE shall take all such action as is
necessary to comply with such airworthiness directive, mandatory service
bulletin or mandatory modification prior to the return of the Aircraft by
LESSEE to LESSOR and shall, except as hereinafter stated, bear the entire
expense thereof. As an exception to the foregoing, LESSOR agrees that it will
reimburse LESSEE fifty percent (50%) of the cost (labor and material at the
cost actually incurred by LESSEE without premium, mark-up, surcharge or
interest expense) in excess of One Hundred Thousand Dollars (US$100,000) for
each airworthiness directive accomplished during the last twenty four (24)
months of the Base Term, and one hundred percent (100%) of the costs for each
airworthiness directive and service bulletin which are accomplished by LESSEE
and fall due within ninety (90) days after the Expiration Date; provided,
however, that LESSOR shall have no obligation to reimburse LESSEE for
airworthiness directives and service bulletins accomplished by LESSEE and which
fall due within ninety (90) days after the Expiration Date unless LESSEE had
prior to accomplishing such airworthiness directive or service bulletin
received written authorization from LESSOR to accomplish same. LESSOR shall pay
to LESSEE its share, if any, of the cost of complying with airworthiness
directives performed by LESSEE, within ten (10) Business Days of receipt from
LESSEE of evidence reasonably satisfactory to LESSOR that the airworthiness
directive has been fully and satisfactorily complied with.

                (ii) LESSEE shall comply with all applicable mandatory service,
maintenance, repair and overhaul regulations, directives and instructions of
the FAA, the Air Authority, the Manufacturer, the Engine Manufacturer and the
manufacturer of all Parts and shall bear the entire expense thereof except as
provided in (i) above.

        (F) TITLE, REGISTRATION, PERFECTION AND INSIGNIA. LESSEE acknowledges
and agrees that title to the Aircraft shall remain vested in LESSOR during the
Base Term in accordance with the terms of this Lease. The Aircraft shall, at
all times during the Base Term, be registered in the United States in the name
of LESSOR or such Person as LESSOR may designate, in accordance with the Laws
of United States. LESSEE agrees that it shall take no action which shall cause
the Aircraft to cease to be so registered in the name of LESSOR under the
applicable Laws of United States. Unless otherwise requested, within fifteen
(15) days of the Effective Date, LESSEE shall fasten or cause to be fastened in
the cockpit, in a location reasonably adjacent to and not less prominent than
the airworthiness certificate for such Aircraft and on each Engine,

<PAGE>

                                                                             23

an insignia plate supplied by LESSEE and in the form set forth in Exhibit "G"
hereto or in any other form subsequently designated by LESSOR to LESSEE.

            LESSEE will not allow the name of any Person to be placed on the
Aircraft or any Engine as a designation that might be interpreted as a claim of
ownership; provided, however, that LESSEE may cause the Aircraft to be lettered
in an appropriate manner for convenience of identification of the interest of
LESSEE therein, including but not limited to, the customary livery of LESSEE.

        (G) MAINTENANCE REPORTS AND RECORDS. During the Term, LESSEE shall:

              (a)  provide maintenance information and reporting requirements
          to LESSOR and any other party so designated by LESSOR including but
          not limited to: (i) written notification at the end of each
          calendar quarter with respect to the issuance during such calendar
          quarter of any airworthiness directive or service bulletin, and
          written notification, as promptly as possible, of any legal
          requirement materially affecting the use, operation or maintenance
          of the Aircraft, Airframe, Engines or Parts; (ii) quarterly written
          projections of scheduled Airframe, Engine, landing gear and APU
          heavy maintenance; (iii) prompt written notification of damage to
          the Aircraft, Airframe, Engines or Parts where the estimated cost
          of repair is in excess of $500,000 in the aggregate; (iv) promptly
          upon the request of LESSOR, written notification of Engine
          removals, exchanges or foreign object damage (said report to
          include details of circumstances and plan of action to repair); (v)
          reports of Flight Hours and Cycles on a monthly basis; (vi)
          promptly upon the request of LESSOR, a report of all service
          bulletins completed; and (vii) promptly upon the request of LESSOR,
          copies of all material reports sent to the Air Authority or any
          other Governmental Entity concerning the Aircraft.

              (b) LESSEE will, during the Base Term, maintain all records,
          logs and other materials required to be maintained with respect to
          the Aircraft by Persons in operational control of the Aircraft
          under any applicable rules, Laws or regulations and shall supply
          all such records, logs and other materials to LESSOR or third
          parties, as reasonably requested, as shall be necessary in order to
          implement the Maintenance Program and any and all warranties and
          guarantees that apply to the Aircraft. LESSEE will provide LESSOR
          with copies of all records of maintenance performed during the Base
          Term as requested by LESSOR. All such records shall be kept as
          required under the rules and regulations of the Air Authority and
          shall be maintained in English.

                                 SECTION 8

<PAGE>

                                                                             24

                      REPLACEMENT OF PARTS: ALTERATIONS,
                          MODIFICATIONS AND ADDITIONS

        (A) REPLACEMENT OF PARTS. Except as otherwise provided herein, LESSEE,
at its own cost and expense, shall promptly replace all Parts which may, from
time to time, be incorporated or installed in, or attached to, the Aircraft,
the Airframe or any Engine and be an accession thereto, and which may, from
time to time, become lost, stolen, seized, confiscated or unserviceable. In
addition, in the ordinary course of maintenance, service, repair, overhaul or
testing, LESSEE may remove any Parts, provided that LESSEE shall replace such
Parts as promptly as may be practicable. All replacement Parts shall be free
and clear of all Liens, except Permitted Liens, shall meet all requirements of
the Air Authority, and shall be in as good operating condition as, and have a
value and utility at least equal to, the Parts replaced, assuming such replaced
Parts were maintained in the condition required pursuant to the requirements of
this Lease.

            All Parts owned by LESSOR at any time removed from the Aircraft
shall remain the property of LESSOR, no matter where located, until such time
as such Parts shall be replaced by Parts which have been incorporated or
installed in, or attached to, such Aircraft and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Parts
becoming incorporated or installed in or attached to the Aircraft as above
provided, and without further act:

              (1)  title to the removed Part shall vest in LESSEE, free and
          clear of all rights of LESSOR and LESSOR Liens;

              (2)  title to the replacement Parts shall vest in LESSOR, free
          and clear of all rights of third parties, including, but not
          limited to, LESSEE; and

              (3)  such replacement Parts shall become subject to this Lease
          and shall be deemed part of the Aircraft into which such Parts were
          incorporated or with respect to which such Parts were required, for
          all purposes hereof to the same extent as the Parts originally
          incorporated or installed in, or attached or related to such
          Aircraft.

         (B) POOLING; ETC.

              (i)  LESSEE may subject the Aircraft or any Engine to normal
interchange agreements customary among major Air Carriers entered into by the
LESSEE in the ordinary course of its business, and may subject any Engine to
pooling arrangements customary among major Air Carriers and entered into by
the LESSEE in the ordinary course of its business.

              (ii) LESSEE may install an Engine on an airframe owned by the
LESSEE provided such airframe is free and clear of all liens and encumbrances,
except

<PAGE>

                                                                             25

              (a)  Permitted Liens; and

              (b)  the rights of Air Carriers under normal interchange
          arrangements which are customary among major Air Carriers and which
          do not contemplate, permit or require the transfer of title to the
          Airframe or Engines installed thereon.

             (iii) LESSEE may install an Engine on an airframe leased to, or
purchased by the LESSEE, subject to a lease, conditional sale, trust indenture
or other security agreement, but only if

              (a)  such airframe is clear of all liens and encumbrances,
          except Permitted Liens and the rights of the parties to the lease,
          conditional sale, trust indenture or other security agreement
          covering such airframe; and

              (b)  LESSOR shall have received from the lessor, conditional
          seller, indenture trustee, or secured party of such airframe, a
          written agreement (which may be the lease, conditional sale, trust
          indenture or other security agreement covering such airframe),
          whereby such lessor, conditional seller, indenture trustee or
          secured party expressly agrees that neither it nor its successors
          or assigns will acquire or claim any right, title or interest in
          any Engine by reason of such Engine being incorporated in such
          airframe at any time while such Engine is subject to this Lease; and

              (c)  LESSOR, upon request, shall have received from counsel to
          the LESSEE an opinion, in form and substance satisfactory to
          LESSOR, to the effect that no creditors of, or bona fide purchasers
          from, the lessor, conditional seller, indenture trustee or secured
          party of such airframe will acquire any right, title or interest in
          such Engine by reason of such Engine being installed on such
          airframe at any time while such Engine is subject to this Lease. In
          the event that LESSOR requires an opinion, the cost of such opinion
          shall be shared equally by LESSOR and LESSEE.

               (iv) No permitted interchange or pooling agreement, transfer or
other relinquishment of possession permitted hereunder shall affect the title
to, or registration of or effect any transfer of the Aircraft, Airframe or
Engines or shall constitute consent to any action not permitted to the LESSEE
in this Lease.

               (v) LESSOR agrees, for the benefit of any lessor, indenture
trustee or other secured party to LESSEE, that it will not acquire or claim any
right, title or interest in any engine by reason of such engine being
incorporated in the Airframe at any time while such engine is subject to a
lease, conditional sale, trust indenture, or other security agreement covering
such engine.

<PAGE>

                                                                             26

        (C) EQUIPMENT CHANGES. LESSEE, at its own expense, shall make such
alterations and modifications in and additions to the Aircraft ("Equipment
Changes") as may be required from time to time to meet the standards of the Air
Authority and of the Governmental Entity in the jurisdiction of which LESSEE
elects to fly the Aircraft and whose approval or consent is required to permit
LESSEE to fly over and/or into any geographical area with respect to which the
Governmental Entity exercises authority. In addition, the term "Equipment
Changes" shall mean modifications to or additions to the Aircraft that LESSEE,
at its own expense, may from time to time deem desirable in the proper conduct
of its business, provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the value, utility,
condition and airworthiness thereof immediately prior to such Equipment Change,
assuming the Aircraft was then in the condition required to be maintained by
the terms of this Lease, and provided further that LESSEE shall not change the
configuration (other than the seating configuration) of the Aircraft during the
Term hereof unless such configuration is approved by the Manufacturer, LESSOR
and the Air Authority. Any Equipment Change with an estimated cost in excess of
Two Hundred Fifty Thousand (US$250,000) Dollars must be approved in advance by
LESSOR, which approval will not be unreasonably withheld.

        In connection with the provisions of the preceding paragraph, LESSOR
and LESSEE hereby acknowledge and agree that (1) LESSEE may modify the cockpit
of the Aircraft in order to standardize same with LESSEE's fleet of Boeing
737-200 aircraft (provided such cockpit standardization is performed in
accordance and complies with, the Maintenance Program and the rules and
regulations of the FAA, in each case to the extent applicable, (2) all Parts
removed from the cockpit of the Aircraft in connection with such cockpit
standardization shall become the property of LESSEE (subject to the provisions
of clause (3) of this sentence) and all Parts installed in the cockpit of the
Aircraft in connection with such cockpit standardization shall become the
property of LESSOR and subject to the terms of this Lease, (3) in connection
with the cockpit standardization the Omega Navigation System (Litton 211) and
the Doppler Radar System (collectively, the "Removed Cockpit Parts") will not
be replaced (and are not required to be replaced) and that such Removed Cockpit
Parts shall be returned to LESSOR upon the completion of such cockpit
standardization and LESSEE shall have no claim, right, title or interest
therein and such Removed Cockpit Parts shall be the property of LESSOR and not
subject to the terms of this Lease, and (4) upon the return of the Aircraft by
LESSEE to LESSOR on a Return Occasion, LESSEE, in its sole discretion, shall
have the right to return the Aircraft with the cockpit configured in LESSEE's
standard configuration for Boeing 737-200 aircraft or in the configuration that
the cockpit was in on the Effective Date. Any and all modifications
contemplated by this paragraph shall be effected at the sole cost and expense
of LESSEE.

            Title to all Parts incorporated, installed in, attached or added to
the Aircraft as the result of any such Equipment Change shall, without further
act, vest in LESSOR;

<PAGE>

                                                                             27

provided, however, that during the Base Term LESSEE may remove any such Part
if: (1) such Part is in addition to any Part originally incorporated or
installed in or attached to such Aircraft at the time of delivery thereof
hereunder; and (2) such Part is not required by the Air Authority or the
Governmental Entity having jurisdiction to be incorporated, installed in,
attached or added to the Aircraft; and (3) such Part can be removed from the
Aircraft or can be replaced with a part of equal value to the Part installed
upon delivery without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time, had such
Equipment Change not occurred. Upon the removal by LESSEE of any Part as above
provided, title thereto shall, without further act, vest in LESSEE and such
Part shall no longer be deemed part of the Aircraft from which it was removed.
Any Part not removed from the Aircraft by LESSEE as provided above prior to a
Return Occasion shall remain the property of LESSOR. Notwithstanding the
foregoing provisions of Section 8(C), LESSOR agrees that LESSEE may install
replacement seats and galleys on the Aircraft. If the replacement seats and
galleys are (i) owned by any third party and leased to LESSEE, (ii) sold to
LESSEE subject to a conditional sales contract or other security interest, or
(iii) lease to LESSEE pursuant to a lease which is subject to a security
interest in favor of any third party, then LESSOR will not acquire or claim, as
against such lessor, conditional vendor or secured party, any right, title or
interest in such seats and galleys as the result of such seats and galleys
being installed in the Aircraft; provided, however (a) that LESSOR's inability
to so acquire or claim is subject to the express condition that such lessor,
conditional vendor or secured party shall not acquire or claim, as against
LESSOR, any right, title or interest in the Aircraft, or any Part other than
its interest in such seats or galleys by reason of such seats or galleys being
installed thereon, and (b) that all of LESSEE's right, title and interest in
and to any seats or galleys (but none of its obligations with respect thereto)
not removed by LESSEE within thirty (30) days after an Event of Default shall,
at such time, automatically become the property of LESSOR and subject to this
Lease.

        Notwithstanding anything set forth herein to the contrary, in
connection with a return of the Aircraft by LESSEE to LESSOR on the Expiration
Date, LESSEE shall be entitled to remove and retain (with title vesting in
LESSEE) the avionics black boxes installed by LESSEE with respect to the TCAS
and windshear detection systems. All wiring installed by LESSEE in connection
with the installation of the TCAS and windshear detection systems shall remain
in the Aircraft and shall be deemed the property of LESSOR.

        In the event the FAA requires LESSEE to comply with the Stage III noise
regulations set forth in FAR Part 36 and LESSEE cannot obtain an exemption or
deferment for complying, if no Default or Event of Default has occurred and is
continuing, LESSOR will, upon the request of LESSEE, provide financing to
LESSEE for the acquisition of a shipset of Stage III hushkits suitable for
installation on the Aircraft or, at LESSOR's election, provide such hushkits to
LESSEE. Should LESSOR provide financing or the hushkits to LESSEE as
contemplated in the preceding sentence, the Basic Rent will be adjusted upward
so as to fully amortize the

<PAGE>

                                                                             28

financing or the cost of the hushkits over the remaining term of the Lease
based on the amount of the financing or the cost of the hushkits, as the case
may be, and the prevailing interest rates applicable to an entity with the
credit of LESSEE at such time. In the event LESSEE is required to install
hushkits during the last twelve (12) months of the Base Term in order to meet
Stage III noise regulations, LESSEE shall have the option of either (i)
retaining the hushkits at the end of the Base Term (provided no Default or
Event of Default has occurred and is continuing, and further provided, that
LESSEE restores the Aircraft to the condition that it was in prior to the
installation of the hushkits), in which case LESSOR will transfer title to
the hushkits to LESSEE, or (ii) extending the term of the Lease on terms and
conditions mutually acceptable to LESSEE and LESSOR. In the event LESSEE
exercises the option set forth in (ii), LESSEE shall send a notice to LESSOR
not later than one hundred twenty (120) days prior to the end of the Base
Term and LESSOR and LESSEE shall have agreed on the terms and conditions of
such extension not later than sixty (60) days prior to the end of the Base
Term. In the event LESSEE has exercised option (ii), above, and LESSOR and
LESSEE fail to reach an agreement on the terms and conditions for the
extension of the Lease with the time period set forth above, then, in such
event, the Base Term will be deemed to be extended for a one (1) year period
of time from the Expiration Date and all other terms and conditions of this
Lease will remain unchanged, except the amount of Basic Rent which shall be
equal to the greater of (x) the then current fair market rental value for the
Aircraft as of the Expiration Date and (y) the amount of Basic Rent then in
effect immediately prior to the Expiration Date.

            LESSOR shall bear no liability in respect of, or cost for, any
Equipment Change, grounding of the Aircraft, suspension of certification
thereof, or loss of revenue therefrom.

        (D) (i) On the Effective Date, the Engines installed on the Aircraft
shall be Pratt & Whitney model JT8D-15 engines (the "-15's") and the Hushkits
will be installed on the Aircraft. Within six (6) months of the Effective Date,
LESSOR shall deliver, or cause to be delivered, to LESSEE's maintenance base in
Honolulu, Hawaii or to such other location designated in writing by LESSEE, two
Pratt & Whitney model JT8D-9A engines (the "-9A's"). LESSEE shall, at its cost
and expense (a) remove the -15's and the Hushkits and ship the -15's (along
with all components removed in installing the -9A's) to such location as Jetz
Ventures shall designate and ship the Hushkit to such location as LESSOR shall
designate (in each instance, together with all records, manuals and logs
relating to the -15's and the Hushkits, respectively) to a location designated
by LESSOR, and (b) install the -9A's on the Aircraft. LESSEE agrees that when
installing the -9A's, the mixers from the -15's will be returned to LESSOR as
part of the Hushkit.

(ii) LESSOR and LESSEE agree that the -9A's shall be in the following condition
at the time of delivery of same to LESSEE:

        (a) the minimum total number of cycles remaining to the next scheduled
overhaul of each -9A shall be equal to the difference between 5,000 and the
number of cycles consumed by

<PAGE>

                                                                             29

LESSEE in the operation of the -15 that the -9A is replacing, but in no event
shall any -9A engine have less than 2,500 cycles remaining to the next
scheduled overhaul. In the event that LESSEE's utilization of any -15 engine
exceeds 2,500 cycles, LESSEE shall pay to Jetz Ventures (whom LESSEE
understands has agreed to supply the -9A's to LESSOR in exchange for the -15's
in order to enable LESSOR to meet its obligations under the provisions of this
Section 8(D)), with respect to such engine, the dollar amount obtained by
multiplying the number of cycles in excess of 2,500 and ninety Dollars
($90.00);

        (b) be in bare Pratt & Whitney QEC configuration;

        (c) have an FAA serviceable tag from an FAA approved engine
maintenance facility;

        (d) have a rated take-off horsepower of 750 or more;

        (e) shall be in compliance with all airworthiness directives and
mandatory service bulletins requiring compliance on such date;

        (f) be free and clear of all liens and encumbrances and interests of
others;

        (g) all logs, manuals, historical information on life limited parts
(including, "back to birth" records), technical information and data and all
inspection, modification and overhaul records required to be maintained with
respect thereto under applicable rules and regulations of the FAA and any other
governmental body having jurisdiction shall be in compliance with such rules
and regulations; and

        (h) have undergone a borescope inspection and maximum power assurance
run to evidence that there are no discrepancies outside of the limits set under
the manufacturer's maintenance manual for such engine. Should there be any such
discrepancies, the party tendering such engines shall cause same to be
corrected or propose a substitute engine that will meet the requirements of
this Section.

(iii) LESSOR and LESSEE agree that the -15's shall meet the same conditions set
forth in sub-paragraphs (b)-(h) of sub-section (ii) above at the time of
delivery of same to Jetz Ventures; PROVIDED, HOWEVER, that with respect to
sub-paragraph (c) above, the -15's may be returned with zero time on the lowest
limiter, but otherwise serviceable, and with respect to sub-paragraph (g)
above, LESSEE's obligation is to return only those items delivered to it by
LESSOR with respect to the -15's as updated by LESSEE in accordance with the
Maintenance Program-and applicable FAA rules and regulations.

(iv) Simultaneously with the installation of the -9A's and the removal of the
-15's and the Hushkits, (i) LESSOR and LESSEE shall execute a partial lease
termination for the purpose of releasing the -15's and Hushkit from the terms
of this Lease, (ii) LESSOR and LESSEE shall execute a Lease Supplement to this
Lease for the

<PAGE>

                                                                             30

purpose of subjecting the -9A's to the terms of this Lease, (iii) LESSEE shall
execute and deliver to LESSOR a Delivery Receipt and Acceptance Certificate
with respect to the -9A's, (iv) LESSOR shall execute a Delivery Receipt and
Acceptance Certificate with respect to the Hushkit, (v) LESSOR shall cause Jetz
Ventures to execute a Delivery Receipt and Acceptance Certificate with respect
to the - 15's, and (vi) LESSEE and LESSOR shall execute releases and/or
amendments to all UCC financing statement previously executed and filed to
reflect the release of the -15's and the Hushkit and the inclusion of the
-9A's. LESSOR and LESSEE agree that there shall be no reduction in the amount
of Basic Rent payable by LESSEE to LESSOR as a result of the substitution of
the -9A's for the -15's and the release of the Hushkits from the terms of this
Lease.

                                 SECTION 9

                      INSPECTION; FINANCIAL INFORMATION

        (A) During the Base Term, in addition to the information and reports
required to be provided by LESSEE to LESSOR pursuant to Section 7(G) of this
Lease, LESSEE shall furnish to LESSOR such additional information concerning
the location, condition, use and operation of the Aircraft as LESSOR may
reasonably request.

        (B) The right of LESSOR, or its designated representatives, to inspect
the Aircraft during any "C" or "D" check or equivalent (as defined in the
Maintenance Program), performed by or on behalf of LESSEE during the Base Term,
shall be absolute. LESSEE shall also provide LESSOR with maintenance schedules
relating to the Aircraft upon the delivery of the Aircraft to LESSEE, and from
time to time as such maintenance schedules are adjusted or updated. LESSEE
further agrees to provide LESSOR with quarterly written projections of the
scheduled date for "C" and "D" checks, in order to enable LESSOR to inspect the
Aircraft at the time and place such checks occur. During such checks, LESSEE
agrees to allow LESSOR, or its authorized representative, to inspect any area
of the Aircraft which LESSOR requests to inspect which would normally require
inspection during such major checks. LESSEE also shall permit any Person
designated by LESSOR in writing to:

              (1)  visit and inspect the Aircraft, its condition, use and
              operation, and the records maintained in connection therewith;

              (2) visit and inspect the properties of LESSEE;

              (3) discuss the finances and accounts of LESSEE with the
              principal officers of LESSEE,

all at such times and frequencies as LESSOR, or the assignee of LESSOR, may
reasonably request. Notwithstanding the foregoing or any other right to inspect
granted to LESSOR under this Lease, neither LESSOR nor the assignee of LESSOR
shall have any duty to make any such inspection and neither LESSOR nor the
assignee of

<PAGE>

                                                                             31

LESSOR shall incur any liability or obligation by reason of not making any
such inspection;

              (4) obtain such other financial information as LESSOR may
          reasonably request. In this regard, during the Base Term, LESSEE
          shall deliver to LESSOR annual consolidated financial statements of
          Airgroup prepared in accordance with generally accepted accounting
          principles consistently applied and audited by recognized,
          independent certified public accountants reasonably satisfactory to
          LESSOR as soon as practicable and in any event within 120 days
          after the end of LESSEE's fiscal year, as well as quarterly
          unaudited financial statements of LESSEE, certified as being true,
          accurate and complete by the chief financial officer of LESSEE,
          within 60 days following the close of each of LESSEE's fiscal
          quarters; and

              (5) inspect LESSEE's Maintenance Program for the Aircraft and
          make copies and take extracts thereof.

LESSOR hereby agrees that if LESSOR exercises any of the rights listed in
clauses (1) through (5) above, it shall do so in such a manner so as not to
unreasonably interfere with the business and operations of LESSEE.

        (C) LESSEE shall also furnish any other information or records on the
Aircraft that LESSOR may reasonably request.

        (D) LESSOR agrees to keep confidential any information provided to it
by LESSEE under the terms of this Lease; provided, however, that LESSOR shall
have no obligation to keep such information confidential (i) if such
information is public information at the time received by LESSOR or becomes
public at the time same is disclosed by LESSOR, (ii) from LESSOR's attorneys,
accountants, auditors and aircraft technical experts, and (iii) if compelled by
court order or the provisions of any Law to disclose same.

                                 SECTION 10

                             COVENANTS OF LESSEE

        LESSEE represents, warrants, covenants and agrees, in addition to all
other representations, warranties and covenants set forth in this Lease, that:

        (A) MAINTENANCE OF CORPORATE EXISTENCE. LESSEE shall preserve and
maintain its existence, valid legal status, and all of its rights, privileges,
and franchises necessary to remain duly incorporated and to operate as a
passenger airline under the Laws of the United States and the State of Hawaii.

        (B) PAYMENT OF TAXES. LESSEE shall:

<PAGE>

                                                                             32

              (1) Pay or cause to be paid all Taxes imposed, levied or
          assessed upon LESSEE (or for which LESSEE has assumed the
          obligation pursuant to this Lease) or its income or profits, or
          upon any property or assets belonging to or used by it, prior to
          the date on which penalties attach thereto;

              (2) Pay or otherwise discharge all lawful claims, which, if not
          paid, might become a Lien or charge upon the property of LESSEE
          (provided, however, that LESSEE shall not be required to pay any
          such Taxes or claims, the payment of which is being contested in
          good faith and by appropriate proceedings and for which adequate
          reserves have been provided, except that LESSEE will pay or cause
          to be paid all such Taxes or claims forthwith in the event LESSEE
          is unable to stay or suspend enforcement or execution of a warrant
          of restraint or foreclosure of any Liens which attach as security
          therefor).

        (C) SALE OF ASSETS, MERGER, ETC. Without the prior written consent of
LESSOR, which consent shall not be unreasonably or arbitrarily withheld, LESSEE
will not sell, lease, assign, transfer or otherwise dispose of substantially
all of its assets, whether now owned or hereafter acquired, except in the
ordinary course of its business as presently conducted and for a full and
adequate consideration, and will not merge or consolidate with or into, or
acquire substantially all of the assets and assume substantially all of the
liabilities of, any corporation or other entity unless the surviving entity is
the LESSEE or the surviving entity assumes this Lease and the financial
condition of LESSEE or the surviving entity after such sale of assets, merger,
consolidation or acquisition is equal to or better than that of LESSEE
immediately prior thereto as LESSOR in its reasonable judgment shall determine.

        (D) AIR CARRIER. Throughout the Base Term, LESSEE shall, at all times,
be an Air Carrier in good standing.

        (E) U.S. CITIZEN. Throughout the Base Term, LESSEE shall, at all
times, be a citizen of the United States as defined in 40102 of Title 49 of
the United States Code.

        (F) AIRWORTHINESS CERTIFICATE. Prior to operating the Aircraft in
revenue service, LESSEE shall provide to LESSOR a copy of the Certificate of
Airworthiness for the Aircraft issued by the Air Authority or other
Governmental Entity having jurisdiction, duly certified as being true, accurate
and complete by an officer of LESSEE.

        (G) COMMUNICATIONS. LESSEE shall deliver to LESSOR promptly any
communications received by LESSEE from the Air Authority or any Governmental
Entity which materially affects the Aircraft.

                                 SECTION 11

<PAGE>

                                                                             33
                                    TAXES

        (A) GENERAL TAX INDEMNITY. LESSEE agrees to pay and to indemnify and
hold harmless the Indemnitees from all Taxes against or upon any of the
Indemnitees, LESSEE, the Aircraft, or any part thereof during the Base Term and
arising out of this Lease, or upon the leasing, selling, possession, use,
operation, repair, maintenance, overhaul, settlement of any insurance claim, or
return thereof, or upon any Rent, receipts or earnings arising from the
operation thereof, or upon or with respect to this Lease unless, and to the
extent only that, any such Tax is being contested by LESSEE in good faith and
by appropriate proceedings duly instituted and diligently prosecuted with
adequate reserves having been provided on account thereof and only so long as
such proceedings do not involve any danger of the sale, forfeiture or loss of
the Aircraft. In case any report or return is required to be made with respect
to any obligation of LESSEE under or arising out of this Section 11, LESSEE
shall either make such report or return in such manner as will show the
ownership of the Aircraft in LESSOR and send a copy of such report or return to
LESSOR, or shall notify LESSOR of such requirement and make such report or
return in such manner as shall be satisfactory to LESSOR. If claim is made
against any Indemnitee for any Taxes arising during the term of this Lease,
such Indemnitee shall promptly notify LESSEE. Any such Indemnitee shall, at
LESSEE's expense, take such action as LESSEE may reasonably request in writing
with respect to such asserted liability, and if reasonably requested by LESSEE
and upon the prior payment to such Indemnitee by LESSEE of an amount equal to
such Tax, any payment by an Indemnitee of such Tax shall be made under protest.
If payment is made, the Indemnitee shall, at LESSEE's expense, take such action
as LESSEE may reasonably request to recover such payment and shall, if
requested, permit LESSEE in the Indemnitee's name to file a claim or prosecute
an action to recover such payment. All of the obligations of LESSEE in this
Section 11 with respect to Taxes imposed or accrued before the expiration or
other termination of this Lease shall continue in full force and effect
notwithstanding such expiration or other termination, and are expressly made
for the benefit of, and shall be enforceable by, each Indemnitee. LESSEE
further agrees that, with respect to any payment or indemnity hereunder, such
payment or indemnity shall include any amount necessary to hold the recipient
of the payment or indemnity harmless on an after-tax basis from all Taxes
required to be paid by such recipient with respect to such payment or indemnity
under the Laws of any Governmental Entity. Excluded from the tax
indemnification set forth above are any income taxes assessed or due on an
Indemnitee's net income or any state franchise or similar corporate taxes
payable by an Indemnitee.

        In the event that during the Base Term a federal value added tax or
consumption tax is enacted and becomes effective which replaces the federal
income tax, LESSOR and LESSEE shall negotiate in good faith a restructuring of
the provisions of this Section ll(A), consistent with the principles for tax
indemnification reflected in this Section ll(A), so as to achieve substantially
the same degree of tax indemnification obligations of LESSEE as existed

<PAGE>

                                                                             34

prior to the enactment of such federal value added tax or consumption tax.

        (B) SPECIAL TAX INDEMNITY. (i) TAX ASSUMPTIONS. In entering into the
Lease and the transactions contemplated hereby, LESSOR has made the following
tax assumptions for the Aircraft (the "Tax Assumptions"):

            (1) LESSOR is entitled to the benefit of depreciation for Federal
income tax purposes under the Accelerated Cost Recovery System provided for in
Section 168 of the Code and depreciation deductions for Hawaii state income tax
purposes based upon one hundred percent (100%) of the Acquisition Cost of the
Aircraft, and on the basis that the Aircraft shall have seven year recovery
period and property classification, and that LESSOR shall be entitled to use
the method of depreciation and depreciation convention equal to 200% declining
balance method of depreciation, switching to the straight line method at the
point in time that maximizes the depreciation allowance for LESSOR (the
"Recovery Deduction");

            (2) with respect to the Aircraft, Lessor will be entitled to the
benefit of deductions for Federal and State Of Hawaii income tax purposes for
interest payable with respect to any indebtedness incurred by LESSOR in
connection with any financing by LESSOR of any portion of the Acquisition Cost
of the Aircraft (the "Interest Deduction"); and

            (3) for each year of the Base Term of the Lease, including any year
in which a Tax Loss (hereinafter defined) occurs, LESSOR will be subject to tax
as follows:

                 (x) for such year up to and including the year in which such
Tax Loss occurs, at a composite Federal and state income tax rate that is equal
to the highest marginal rate (provided that, in computing such highest marginal
rate, there shall be excluded any surcharges to normal Federal and state income
tax rates which are applicable to brackets of income which are limited as to
their upper level, such as but not limited to those described in the last two
sentences of Section 11(a)(1) of the Code, and, it is understood that
surcharges which are applicable to brackets of income which are not limited as
to their upper level shall be included in computing such highest marginal rate)
provided for under the Code and the laws of the State of Hawaii (the "Highest
Composite Marginal Tax Rate") and that is actually in effect for each such year
and assuming that any state tax used in the calculation of such marginal rate
shall be taken as a deduction for purposes of computing Federal tax so that the
Composite Rate is a lower rate than that obtained by merely adding the state
rate to the Federal rate (assuming LESSOR has received a tax benefit from such
deduction), and

                 (y) for such year following the year in which such Tax Loss
occurs, at a composite Federal and state income tax rate that is equal to the
Highest Composite Marginal Tax Rate actually in effect in the year in which
such Tax Loss occurs and

<PAGE>

                                                                             35

which, under the provisions of the Code and the laws of the State of Hawaii
then in effect, is to be applicable to each such following year.

        (ii) LESSEE'S TAX REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants to LESSOR that:

            (1) at all times during the Base Term, with respect to the
Aircraft, such Aircraft will not, due to any act or failure to act on the part
of LESSEE, constitute property "used predominantly outside the United States"
or "tax-exempt use property" within the meaning of Sections 168(g)(1)(A),
168(g)(4)(a) and 168(h)(1)(A), respectively, of the Code and Proposed Code
Regulation Section 1.168-2(g)(5)(iii)(A).

        (iii) INDEMNITY. If by reason of the breach or inaccuracy of any of
LESSEE's representations and warranties set forth in this Section, LESSOR shall
lose the benefit of, or shall not have or shall lose the right to claim, or
shall suffer a disallowance or recapture of, or delay in claiming, all or any
portion of the Recovery Deduction or, if LESSOR finances any portion of its
Acquisition Cost, the Interest Deduction, with respect to the Aircraft (any
such loss, failure to have or loss of the right to claim, disallowance,
recapture, delay in claiming, treatment, or inclusion referred to in any of the
foregoing clauses of this section being hereinafter called a "Tax Loss"), then
a Tax Loss shall be deemed to have occurred and LESSEE shall on the Rent Date
next following written notice by LESSOR to LESSEE that a Tax Loss has occurred
pay to LESSOR an amount sufficient to indemnify LESSOR for such Tax Loss and
penalties, if any thereon, on an after-tax basis.

        (iv) IDENTIFICATION OF LESSOR. For purposes of this Section, the term
"LESSOR" shall include Lessor's successors and assigns.

        (v) CONTESTS. If an Indemnitee should receive notice of any claim by a
taxing authority that may result in liability on the part of LESSEE under
Section 11 (B) (iii), such Indemnitee shall promptly notify LESSEE of such
claim and LESSEE and such Indemnitee shall have the same rights and privileges
with respect to such contest of such claim as are described above in Section
ll(A).

        (C) EXCLUSIONS. Notwithstanding the foregoing provisions of this
Section 11, the LESSEE shall not be required to indemnify for any liability
which occurs directly and primarily as a result of any of the following events:

            (1) a failure by an Indemnitee to timely or properly claim a
deduction or other tax benefit, the gross negligence of an Indemnitee or the
failure of an Indemnitee to timely notify LESSEE of a claim against such
Indemnitee by a taxing authority, provided such failure to timely notify LESSEE
has a material adverse affect on LESSEE's rights under this Section 11;

            (2) the treatment of the Aircraft in 1996 or the year

<PAGE>

                                                                             36

in which the Base Term (or any extension thereof) expires as used predominantly
outside the United States for purposes of Code Section 168(g)(1)(A), if such
treatment would not have occurred but for such use of the Aircraft outside of
the United States prior to or subsequent to the term of the Lease;

            (3) an event which occurs after the end of the Base Term with
respect to the Aircraft and the return thereof in accordance with the Lease; or

            (4)(a) a material change in the Code, the Income Tax Regulations
promulgated by the United States Treasury Department or a change in the
administrative or judicial interpretations thereof (collectively, a "Change in
Law"), which is enacted, adopted or promulgated and becomes effective after the
Effective Date and during the Base Term; provided, however, that with respect
to such Change in Law, (i) there is no pending contest, appeal or review
process with respect thereto, and (ii) the Internal Revenue Service has
recognized and is enforcing such Change in Law.

               (b) should a Change in Law occur and become effective during the
Base Term, LESSEE shall have the right to send a notice to LESSOR (a "LESSEE's
Change Notice") advising LESSOR of the Change in Law and LESSEE's intention not
to indemnify LESSOR for those matters which are the subject of the Change in
Law. LESSOR shall have ninety (90) days from the date of the giving of LESSEE's
Change Notice to send LESSEE a notice (the "LESSOR's Response") advising LESSEE
that it either (i) acknowledges and agrees that it will not be indemnified by
LESSEE for those matters which are the subject of the Change in Law, or (ii)
that it has elected to terminate the Lease ninety (90) days from the date of
the giving of the LESSOR's Response. In the event that LESSOR in the LESSOR's
Response has elected option (ii), LESSEE shall have thirty (30) days from the
date of the giving of LESSOR's Response to send a written notice to LESSOR
modifying LESSEE's Change Notice (a "LESSEE Modification Notice") and agreeing
to indemnify LESSOR for those matters which are the subject of the Change in
Law. In the event LESSEE does not give a LESSEE Modification Notice within said
thirty (30) day period, LESSOR shall have ten (10) days from the end of such
thirty (30) day period to send to LESSEE a notice modifying the LESSOR's
Response (a "LESSOR Modification Notice") and agreeing to option (i) above. In
the event that LESSEE has declined to indemnify LESSOR for those matters which
are the subject of the Change in Law, LESSEE would have no obligation to
indemnify for those matters for the period of time following the giving of
LESSEE's Change Notice.

        (D) TAX SAVINGS OR REFUND. (i) If an Indemnitee shall receive a refund
on account of any Tax for which such Indemnitee was indemnified or which was
advanced by LESSEE, then such Indemnitee shall, and LESSOR shall use its
reasonable efforts to cause such Indemnitee to, promptly pay the amount of such
refund to LESSEE (together with the amount of any interest and attorneys fees
received by such Indemnitee in relation to such refund).

        (ii) If an Indemnitee, as a result of a loss or expense

<PAGE>

                                                                             37

for which an indemnity payment has been made pursuant to this Section 11 or as
a result of deferred depreciation deductions or increased basis (i.e.,
depreciation deductions or basis in any tax year which are greater than they
would have been had the circumstances giving rise to LESSEE's liability for
indemnity not occurred), shall realize an aggregate net reduction in United
states federal income tax or state or local incomes taxes which such Indemnitee
would not have realized but for such loss, expense, deferred depreciation
deductions or increased basis, the Indemnitee shall pay, and the Lessor shall
cause the Indemnitee to pay, the LESSEE an amount equal to such aggregate net
reduction in United states federal income tax plus any other tax savings
realized by such Indemnitee on account of the same. Any payment due to the
LESSEE from an Indemnitee pursuant to this Section 11 shall be paid promptly
after the Indemnitee actually realizes any such aggregate net reduction in
United States federal income tax or state or local income taxes.
Notwithstanding anything set forth herein to the contrary, in no event shall
any Indemnitee be required to make any payment to LESSEE pursuant to the terms
of this subsection (ii) in excess of the amount of indemnification payments
made by LESSEE to such party pursuant to this Section 11.

(E) HAWAII CAPITAL GOODS EXCISE TAX CREDIT. Without limiting the generality of
the foregoing provisions of this Section 11, the LESSEE acknowledges that, as
between LESSOR and LESSEE, the LESSOR is and will continue to be entitled to
the Hawaii capital Goods Excise Tax Credit (the "Excise Tax Credit") with
respect to the Aircraft. LESSEE agrees that (i) it will not directly or
indirectly take any action or file any returns or other documents inconsistent
with or which interferes with LESSOR's right to take and have the benefit of
the Excise Tax Credit with respect to the Aircraft, and (ii) that it will file
such returns, take such action and execute such documents as may be reasonably
necessary to facilitate the accomplishment of the intent of this
Section 11 (E).

(F) PARTIES ENTITLED TO BENEFITS OF THIS SECTION. In determining the extent of
LESSOR's obligations under this Section 11, there shall be taken into account
the affiliated group of corporations of which LESSOR is presently or may become
a member and which file a consolidated return, the members thereof, and the
following attributes of such group, such members and each of them (which shall
in turn be attributed to LESSOR): (i) knowledge or notice of any Tax claim as
described in Section 11(A) or Section 11(B)(v), (ii) tax refund(s) as described
in Section 11(D)(i), and (iii) net reduction in income taxes as described in
Section 11(D)(ii).

                                 SECTION 12

                                EVENT OF LOSS

        (A) EVENT OF LOSS REGARDING THE AIRCRAFT. In the event that an Event
of Loss occurs with respect to the Aircraft, LESSEE shall forthwith (and, in
any event, not later than three (3) days after the occurrence of the Event of
Loss) give LESSOR written notice of such Event of Loss and, not later than
the earlier of: (a) the sixtieth day following the occurrence of such Event of

<PAGE>

                                                                             38

Loss; or (b) the day of receipt of insurance proceeds in respect of such Event
of Loss; pay to LESSOR or its assignees, in funds of the type specified in
Subsection 5(B) hereof, the sum of all unpaid Rent and all other amounts due
hereunder with respect to such Aircraft and which have accrued through and
including the date of payment of the Agreed Value, plus an amount equal to the
Agreed Value. In the event of payment in full of such Agreed Value, together
with all such amounts due or accrued hereunder on or prior to the date of such
payment, the obligation of LESSEE to pay Rent hereunder shall terminate. on the
date of payment of the Agreed Value, LESSOR shall credit or refund to LESSEE
all pre-paid Basic Rent, if any, and all accrued Reserves.

            Upon payment of all Rent due and the Agreed Value, LESSOR shall
transfer to LESSEE (subject to the rights of the insurers) all of LESSOR's
right, title, and interest in and to: (i) the Aircraft which sustained such
Event of Loss, as well as all of LESSOR's right, title, and interest in and to
any Engines constituting part of such Aircraft; and (ii) all claims for damages
to such Aircraft and/or Engines, if any, against third Persons arising from
such Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), without any representation, warranty, or recourse of any kind
whatsoever, express or implied, except a warranty that such Aircraft is free
and clear of any Liens, mortgages and encumbrances, other than Liens which
LESSEE is required to discharge hereunder or defects in title resulting from
acts by or claims against LESSEE.

            In the event of an Event of Loss involving the Aircraft wherein one
or more of the Engines are not attached to the Airframe, the Aircraft, for
purposes of this Section 12(A), shall be deemed to include all Engines on lease
hereunder and LESSOR shall cooperate in transferring title to such non-attached
Engines, free and clear of all LESSOR Liens, to the owner of the engine
attached to the Airframe at the time of the Event of Loss.

            In the event of an Event of Loss to an airframe involving an Engine
attached to an airframe owned by LESSEE or another party, such airframe shall
be deemed to include the Engine attached thereto and LESSEE shall promptly
transfer title to, or cause the party on whose airframe the Engine was attached
to promptly transfer title to, a Replacement Engine (as defined below) in
accordance with the terms and conditions set forth in Section 12(B).

        (B) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon any Event of Loss
with respect to an Engine not then installed on the Aircraft, or an Event of
Loss with respect to only an Engine installed on the Aircraft not involving an
Event of Loss to the Aircraft, LESSEE shall give LESSOR prompt written notice
thereof and LESSEE shall replace such Engine as soon as reasonably possible
after such Event of Loss by duly conveying to LESSOR, as a replacement for such
Engine, title to another engine owned by LESSEE (a "Replacement Engine"), which
Replacement Engine shall be free and clear of all Liens and shall have a value
and utility at least equal to, and be in as good operating condition as, the

<PAGE>

                                                                             39

Engine which sustained such Event of Loss (assuming the Engine which sustained
such event of loss was maintained in the condition in which LESSEE was required
to maintain such Engine pursuant to this Lease). Such Replacement Engine, after
approval and acceptance by LESSOR, shall be deemed an "Engine" as defined
herein. LESSEE agrees to take such action as LESSOR may reasonably request in
order that any such Replacement Engine shall be duly and properly leased
hereunder to the same extent as the Engine subject to the Event of Loss and
shall be titled in LESSOR. Upon request by LESSOR, LESSEE shall cause to be
delivered to LESSOR an opinion of FAA counsel (to be provided at LESSEE's
expense) as to the lien free status of such engine along with an opinion of FAA
counsel that such replacement engine has been made subject to this Lease.
LESSEE's obligation to pay Rent hereunder shall continue in full force and
effect regardless of the occurrence of an Event of Loss with respect to an
Engine, but LESSEE shall be entitled to be reimbursed by LESSOR the amount of
insurance or condemnation proceeds, if any, received by LESSOR with respect to
such Engine. Upon receipt of title by LESSOR to the Replacement Engine as
hereinabove provided, LESSOR shall convey to LESSEE, free and clear of all
Liens (except, subject to the rights of the insurers), title to the Engine
which sustained such Event of Loss.

        (C) DAMAGE OR REQUISITION NOT CONSTITUTING AN EVENT OF LOSS. In the
event of material damage or requisition of the Aircraft or any Engine not
constituting an Event of Loss, LESSEE shall promptly notify LESSOR in writing
of such damage or requisition and shall remain obligated to make all payments
of Rent in respect of such Aircraft or Engine which may become due hereunder in
the same manner as if such damage or requisition had not occurred and to
perform all other obligations of LESSEE hereunder. All payments at any time
received by LESSEE, or by LESSOR from any Person other than LESSEE in excess of
$500,000 with respect to any such damage or requisition shall be paid over to,
or retained by, LESSOR, and shall be paid to LESSEE upon repair of the Aircraft
or Engine. To the extent that LESSEE has paid Rent and LESSOR receives a
requisition payment for the period of time for which LESSEE had paid Rent,
LESSOR agrees that it shall, as promptly as is reasonably practicable, pay to
LESSEE that amount of the requisition payment received by it equal to the Rent
for such period previously paid to LESSOR by LESSEE.

        (D) RECEIPT AND APPLICATION OF COMPENSATION. Following an Event of Loss
or an occurrence not constituting an Event of Loss with respect to which
payments, including insurance proceeds, are made by or are due from any Person
(any such payments or proceeds being hereinafter referred to as
"Compensation"), LESSOR shall be entitled to receive, and shall receive, and
LESSEE hereby assigns to LESSOR any right or interest which LESSEE may have or
may hereafter acquire, in such Compensation, to be applied as follows:

             (1) If such Compensation is received with respect to the
          Aircraft, so much thereof as shall not exceed the Agreed Value and
          other amounts due under Subsection 12(A) shall be retained by
          LESSOR, in reduction of LESSEE's obligation to pay such Agreed
          Value and other amounts due

<PAGE>

                                                                             40

          as was not theretofore paid by LESSEE, or, if such Agreed Value and
          other amounts have already been paid to LESSOR, such Compensation
          shall be applied to reimburse LESSEE for its payment of such Agreed
          Value, and may be paid to LESSEE.

             (2) If such Compensation is received with respect to an Engine
          under the circumstances described in Subsection 12(B), such
          Compensation shall be held in an account established for LESSOR
          with a bank or trust company as depository, as designated by
          LESSOR, such sums to be held, invested and distributed as provided
          below. All of LESSEE's interest in all moneys and investments
          standing to the credit of such account are hereby pledged to LESSOR
          and LESSOR is hereby granted a general lien upon and security
          interest in all of LESSEE's interest, if any, in all such moneys
          and investments as security for the performance and payment in full
          of all of LESSEE's covenants contained in this Lease. The bank or
          trust company holding such Compensation shall be deemed to be
          LESSOR's agent for the purpose of perfecting LESSOR's security
          interest in such sums and shall be notified of, and accept such
          appointment as agent. If LESSEE shall replace such Engine in
          accordance with the provisions of Subsection 12(B), LESSOR shall,
          so long as no Default or Event of Default or event which, with the
          giving of notice or the passage of time, or both, would constitute
          a Default or an Event of Default shall have occurred and be
          continuing, return, or cause to be returned, all moneys and
          investments then held in such account to LESSEE.

          (E) PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. Any payment
referred to in Subsection 12(A),(B),(C) or (D) hereof which is payable to
LESSEE hereunder shall not be paid to LESSEE, or, if previously paid directly
to LESSEE, shall not be retained by LESSEE, if at the time of such payment a
Default or an Event of Default or an event which with the giving of notice or
the passage of time, or both, would constitute a Default or an Event of Default
hereunder shall have occurred and be continuing, but shall be paid to and
retained by LESSOR as security for the obligations of LESSEE under this Lease
until such time as such Default or Event of Default or event which with the
giving of notice or the passage of time, or both, would constitute a Default or
Event of Default shall have been remedied, whereupon such payment shall be made
to LESSEE.

                                 SECTION 13

                                 INSURANCE

          (A) PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.
LESSEE will carry and maintain in effect, at its own expense, with Approved
Insurers, public liability insurance (including, but not limited to,
contractual liability, and passenger legal liability), and property damage
liability insurance with respect to the Aircraft, in amounts per occurrence
of not less than the Minimum Liability Coverage, or such greater amounts as

<PAGE>

                                                                             41

LESSEE may carry from time to time on other similar aircraft in its fleet.
LESSEE shall not discriminate against the Aircraft in providing such insurance
coverage. Each and any policy of insurance carried in accordance with this
Subsection (A), and each and any policy obtained in substitution or replacement
for ANY of such policies, (i) shall designate LESSOR, Jetz Ventures, Lufthansa
and the party who conveys title to the -9A's to Jetz Ventures or directly to
LESSOR (the "-9A Vendor") and their respective officers, directors,
shareholders, members, employees, agents and assigns (collectively, the
"Additional Insureds"), as additional insureds as their interests may appear
(but without imposing upon the Additional Insureds any obligation imposed upon
the insured, including, without limitation, the liability to pay any premiums
for any such policies, but LESSOR, Jetz Ventures, the -9A Vendor and/or
Lufthansa shall have the right to pay such premiums if it shall so elect), and
(ii) shall expressly provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance will not be invalidated by
any action or inaction of the LESSEE, and shall insure the Additional Insureds,
regardless of any breach or violation by LESSEE of any warranty, declaration or
condition contained in such policies, (iii) shall provide that if such
insurance is canceled by insurers for any reason whatsoever, or is adversely
changed in any way by insurers with respect to the interests of the Additional
Insureds, or if such insurance is allowed to lapse for nonpayment of premiums,
such cancellation, change or lapse shall not be effective as to the Additional
Insureds for 30 days (seven (7) days or such shorter period as may be customary
in the case of any war risks and allied perils coverage), in each instance,
after the issuance to LESSOR, Jetz Ventures, the -9A Vendor and Lufthansa of
written notice by such insurer or insurers and/or brokers to LESSOR, Jetz
Ventures, the -9A Vendor and Lufthansa of such prospective cancellation,
change or lapse, (iv) shall provide coverage on a worldwide basis, subject to
such territorial exclusions as may be usual and customary in the worldwide
airline insurance industry for airlines similarly situated with LESSEE, (v)
shall provide that, as against the Additional Insureds, the insurer shall waive
any rights of set-off, counterclaim or any other deduction, whether by
attachment or otherwise, and waives any right of subrogation it may have
against the Additional Insureds but only to the same extent that LESSEE has
waived its right of recovery against the Additional Insureds under the Lease
Documents. Each liability policy shall be primary without right of contribution
from any other insurance which may be carried by LESSOR, Jetz Ventures, the -9A
Vendor, Lufthansa or their assigns, and shall expressly provide that all of the
provisions thereof shall operate in the same manner as if there were a separate
policy covering each insured, provided that such provisions shall not operate
to increase the insurer's limit of liability. No liability policy shall permit
any deductible or self-insurance provision except for baggage and cargo as is
customary in the London or U.S. aviation insurance industry and such other
deductibles only with the consent of the LESSOR, which consent shall not be
unreasonably withheld or delayed, which from time to time LESSEE can
demonstrate are standard in comprehensive liability insurance and, in
particular, public liability risks (including, INTER ALIA, contractual
liability and passenger

<PAGE>

                                                                             42

liability coverage) for major international passenger air carriers in the
then current London or U.S. aviation insurance market.

        (B) HULL WAR RISKS INSURANCE. LESSEE will carry and maintain in effect
with Approved Insurers, at its own expense, hull war risks and allied perils
insurance on the Aircraft (which shall include, but not be limited to, a
disappearance clause and coverage for hijacking, declared or undeclared war and
insurrections, strikes, riots, commotion's or labor disturbances, malicious
acts or acts of sabotage and unlawful seizure or wrongful exercise of control
of the Aircraft in flight by a person on board such Aircraft acting without the
consent of LESSEE) in an amount not less than the Agreed Value or such greater
amounts as LESSOR may request from time to time (and for which LESSOR shall
reimburse LESSEE for its cost of increased premium, if any, for such greater
amounts of insurance) and covering those perils which, from time to time, are
customarily covered by similar insurance maintained by major international
passenger air carriers insuring in the London or U.S. Aviation insurance
market.

        (C) ALL RISKS HULL INSURANCE. LESSEE, at its own expense, will maintain
in effect with Approved Insurers all risks ground and flight aircraft hull
insurance covering such Aircraft, and fire, transit, spares and extended all
risks coverage insurance with respect to Engines and Parts while not installed
on such Aircraft or an aircraft, which in each case is of the type maintained
by major international passenger air carriers similarly situated to LESSEE and
operating similar aircraft and engines which comprise LESSEE's fleet. At all
times while the Aircraft is subject to this Lease, such insurance shall be for
an amount not less than the Agreed Value or such greater amounts as LESSOR may
request from time to time (and for which LESSOR shall reimburse LESSEE, at its
own cost of increased premium, if any, for such greater amounts of insurance).

            Notwithstanding anything above, each and every policy of insurance
obtained and maintained pursuant to Subsection (B) and this Subsection (C), and
each and every policy obtained in substitution or replacement for any such
policies, (i) shall designate LESSOR as owner of the Aircraft covered thereby,
and shall designate LESSOR, or its assigns, as loss payee, as their respective
interests may appear (but without imposing upon LESSOR or its assigns, any
obligation imposed upon the insured, including, without limitation, the
liability to pay any premiums for any such policies, but LESSOR and/or its
assigns shall have the right to pay such premiums if they shall so elect), (ii)
shall expressly provide that, in respect of the interests of LESSOR or its
assigns in such policies, the insurance shall not be invalidated by any action
or inaction of LESSEE and shall insure LESSOR or its assigns, regardless of any
breach or violation of any warranty, declaration or condition contained in such
policies by LESSEE, (iii) shall provide that if such insurance is canceled for
any reason whatsoever, or is adversely changed in any way with respect to the
interest of the LESSOR or its assigns, or if such insurance is allowed to lapse
for nonpayment of premium, such cancellation change or lapse shall not be
effective as to LESSOR or its assigns,

<PAGE>

                                                                             43

for thirty (30) days (seven (7) days or such shorter period as may be customary
in the case of any war risks or allied perils coverage) after issuance to
LESSOR of written notice by such insurer or insurers of such prospective
cancellation, change or lapse, (iv) shall provide coverage on a worldwide
basis, subject to such territorial exclusions as may be usual and customary in
the worldwide airline insurance industry for airlines similarly situated with
LESSEE, (v) shall provide that, as against the LESSOR or its assigns, the
insurer shall waive any rights of set-off, counterclaim or any other deduction,
whether by attachment or otherwise, and waives any right of subrogation it may
have against LESSOR or its assigns but only to the same extent that LESSEE has
waived its right of recovery against LESSOR or its assigns under the Lease
Documents, (vi) shall provide that in the event of any damage or loss which is
an Event of Loss hereunder and which results in a payment, such payment shall
be payable solely and directly to LESSOR, for the account of all interests,
(vii) shall provide that in the event of any damage or loss which is not an
Event of Loss hereunder and which results in a payment for any one occurrence
in excess of $500,000.00, such payment shall be payable directly to LESSOR,
(viii) shall provide that payments for any one occurrence not in excess of
$500,000.00 shall be payable directly to LESSEE provided there exists no
Default or Event of Default by LESSEE, and (ix) shall provide for a 50/50
claims funding arrangement between the all risks hull and war risks
underwriters.

            LESSEE shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to LESSEE. Similarly, LESSOR shall have the right to carry additional
and separate insurance for its own benefit at its own expense, without,
however, thereby limiting LESSEE's obligations under this Section 13.

            LESSEE shall at all times maintain a deductible amount in its all
risks hull and war risks insurance policies which is no more than Five Hundred
Thousand (US$500,000.00) Dollars.

        (D) APPLICATION OF INSURANCE PROCEEDS NOT IN EXCESS OF $500,000.00.
LESSEE shall be entitled to receive any insurance proceeds not in excess of
Five Hundred Thousand ($500,000.00) Dollars as soon as such funds are paid by
the insurance company and shall promptly receive such additional insurance
proceeds, if any, upon presentation to LESSOR of a vendor's or LESSEE's
invoice, provided that repair work is in progress, replacement parts are
ordered, or such work is complete. All insurance proceeds received by LESSEE
pursuant to this Subsection 13(D) shall be used by the LESSEE exclusively for
the repair of any damage to the Aircraft or Engines on account of which the
insurance proceeds were paid. Any amount referred to in this Subsection 13(D)
which is payable to LESSEE shall not be paid to LESSEE if, at the time of
such payment, any Default or Event of Default shall have occurred and be
continuing or if the amount of the insurance proceeds payable is less than
the estimated total cost of the repairs and LESSEE does not deliver evidence
to LESSOR that such additional amount needed to pay the estimated total cost
of repairs has been paid, but shall be held by LESSOR as security for the
obligations of LESSEE under

<PAGE>

                                                                             44

this Lease and such amount shall be paid to LESSEE at such time as there shall
not be continuing any such Default or Event of Default.

        (E) APPLICATION IN DEFAULT. Any insurance proceeds referred to in this
Lease which are otherwise payable to LESSEE, or if it has been previously paid
to LESSEE and not yet applied by LESSEE as permitted or required hereunder,
shall be delivered from LESSEE to LESSOR if, at the time of such payment, a
Default or an Event of Default shall have occurred and be continuing. In such
case, all such amounts shall be paid to and held by LESSOR as security for the
obligations of LESSEE hereunder.

        (F) CERTIFICATES. Not less than three (3) Business Days prior to the
Effective Date, and thereafter on each renewal by the LESSEE of the insurance
required hereby, LESSEE will furnish to LESSOR a certificate executed and
delivered by an Approved Insurer, appointed by LESSEE, describing in reasonable
detail, and in accordance with customary practice, insurance carried on the
Aircraft and certifying that the insurance then maintained on the Aircraft
complies with the terms of this Lease. LESSEE will cause such Approved Insurer,
identified to and reasonably acceptable to LESSOR, to agree to hold all
insurance contracts and slips for the benefit of LESSOR and to advise LESSOR in
writing at least thirty (30) days (seven (7) days in the case of any war risk
and allied perils coverage) prior to the non-renewal, termination, or
cancellation for any reason (including, without limitation, failure to pay
premiums therefor) of any such insurance.

            In the event LESSEE shall fail to maintain insurance as herein
provided, LESSOR may at its option provide such insurance and, in such event,
LESSEE shall, upon demand, reimburse LESSOR, as Supplemental Rent for the cost
thereof.

        (G) CHANGES IN INDUSTRY PRACTICE. If there shall be a fundamental
change in the generally accepted industry-wide practice with respect to the
insurance of aircraft (whether relating to all or any of the types of insurance
required to be effected pursuant to the terms of this Section 13) and, as a
consequence thereof, LESSOR shall be of the reasonable opinion that the
insurance required pursuant to the provisions of this Section 13 shall be
insufficient to protect the interests of LESSOR, the insurance requirements set
forth in this Section 13 shall be varied as may be mutually agreed so as to
include such additional or varied requirements to be effected pursuant to the
terms of this Section 13, and as so varied, shall provide the same protection
to LESSOR as it would have done had such change in generally accepted
industry-wide practice not occurred. If any such change in generally accepted
industry-wide practice would enable LESSEE, but for the requirements in this
Section 13, to reduce its expenditures in relation to all or any of the types
of insurance required to be effected pursuant to the terms of this Section 13
without, in the reasonable opinion of LESSOR, prejudicing the interest of
LESSOR, the insurance requirements in this Section 13 shall be amended to take
account of such change in generally accepted industry-wide practice to the
extent required to enable LESSEE to reduce such expenditures, provided,
however, that in no event shall such public

<PAGE>

                                                                             45

liability insurance coverage set forth in Section 14 be less than Three Hundred
Fifty Million (US$350,000,000) Dollars.

                                 SECTION 14

                               INDEMNIFICATION

        (A) LESSEE agrees to indemnify, reimburse, defend, protect, save and
hold harmless the Indemnitees from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action, legal
proceedings, whether civil or criminal, penalties, fines, other sanctions, and
any costs and expenses in connection herewith, including, but not limited to,
attorney's fees and expenses (any and all of which are hereafter referred to as
"Claims") which in any way may result from, pertain to, or arise in any manner
out of, or are in any manner related to the Aircraft or this Lease, arising out
of events occurring on or subsequent to the Effective Date through and
including the date this Lease terminates and all obligations of LESSEE have
been fully and satisfactorily performed, or the breach of any representation,
warranty or covenant made by LESSEE hereunder, including, but not limited to,
(i) the condition, ownership, manufacture, delivery, non-delivery, lease,
acceptance, rejection, possession, return, disposition, use, or operation of
the Aircraft either in the air or on the ground; or (ii) any defect in the
Aircraft arising from the material or any articles used therein or from the
design, testing, or use thereof or from any maintenance, service, repair,
overhaul, or testing of such Aircraft, regardless of when such defect shall be
discovered (including, but not limited to, infringement of patent or other
right or latent and other defects whether or not discoverable by LESSEE or
LESSOR), whether or not such Aircraft is at the time in the possession of
LESSEE, and regardless of where such Aircraft may then be located; or (iii)
this Lease or any other transaction, approval, or document contemplated hereby
or given or entered into in connection herewith; provided, however, that LESSEE
shall be subrogated to all rights and remedies which LESSOR may have against
the Manufacturer or Engine Manufacturer.

            LESSEE hereby waives and releases any claim now or hereafter
existing against any Indemnitee, on account of any Claims for or on account of
or arising or in any way connected with injury to or death of personnel of
LESSEE or loss or damage to property of LESSEE or the loss of use of any
property which may result from or arise in any manner out of or in relation to
the leasing, condition, use, or operation of the Aircraft, either in the air or
on the ground during the Base Term hereof, or which may be caused during such
Base Term by any defect in such Aircraft from any material or any article used
therein or from the design or testing thereof, or use thereof or from any
maintenance, service, repair, overhaul, or testing of such Aircraft regardless
of when such defect may be discovered, whether or not such Aircraft is at the
time in the possession of LESSEE, and regardless of the location of such
Aircraft at any such time.

            Without limitation upon LESSEE's liability under this Section 14,
LESSEE hereby agrees to indemnify, reimburse, defend,

<PAGE>

                                                                             46

protect, save and hold each Indemnitee harmless from any Claims in any manner
imposed upon or accruing against each Indemnitee because of the manufacture of
the Aircraft, any originally manufactured design or design incorporated prior
to the operation of the Aircraft by LESSEE, any change or alteration of design
by LESSEE, or material therein or relating thereto, because of infringement of
patent or any other right. With respect to any claim for infringement of patent
or any other right which is alleged to have occurred prior to LESSEE leasing
the Aircraft, LESSEE's indemnification obligation with respect to such claims
shall be limited to claims that are asserted during the Base Term of this Lease
or any extension thereof. The foregoing limitation shall not apply to claims
for infringement of patent or any other right which is alleged to have occurred
at any time during the Base Term or any extension thereof regardless of when
such claims are asserted.

       LESSEE hereby agrees, and shall have the right, to assume and conduct,
promptly and diligently, at its sole cost and expense, the entire defense of
any Indemnitee against any such Claims, and any claim, suit, or action for
which any Indemnitee is required to assume liability.

            LESSOR agrees to give LESSEE prompt notice of any Claim hereunder
following LESSOR's actual knowledge of such Claim. The failure of LESSOR to
give the notice required by this Section 14 of any Claim shall not constitute a
release by LESSOR or the Indemnitees of any obligations of LESSEE to any
Indemnitees in respect of any such Claim, unless LESSEE is materially adversely
affected solely by such failure of LESSOR to give such notice. No settlement of
any Claim by an Indemnitee may be made without the consent of LESSEE, which
consent or withholding of consent shall be promptly noticed to LESSOR and the
Indemnitee seeking indemnification. LESSEE may only withhold consent to a
proposed settlement of a Claim if LESSEE posts a bond issued by a reputable
bonding or insurance company reasonably satisfactory to LESSOR, in an amount
not less than the full amount of the Claim together with interest and
penalties, if any, thereon.

            The indemnifications contained in this Section 14 shall continue in
full force and effect notwithstanding any expiration or other termination of
this Lease and are expressly made for the benefit of and shall be enforceable
by each Indemnitee and their respective successors and assigns.

        (B) EXCEPTIONS. In no event shall the indemnity provided for in Section
14(A) extend to any Claim or disbursement of any Indemnitee resulting from,
pertaining to or arising in any manner out of, or in any manner relating to,
the gross negligence or willful misconduct of any Indemnitee.

                                 SECTION 15

                                   LIENS

       LESSEE shall not directly or indirectly create, incur, assume, or suffer
to exist any Lien on or with respect to the

<PAGE>

                                                                              47

Aircraft, title thereto, any interest therein, this Lease or any interest
therein, except Permitted Liens. LESSEE shall promptly, at its own expense,
take such action as may be necessary to duly discharge any Lien (except for
Permitted Liens) directly or indirectly created, incurred, assumed or suffered
to exist by LESSEE if the same shall arise at any time with respect to the
Aircraft, title thereto, any interest therein, this Lease or any interest
therein.

                                   SECTION 16

                   PERFECTION OF TITLE AND FURTHER ASSURANCES

        (A) Except through the action or inaction of LESSOR after due notice
and request having been made upon it, if, at any time, any filing or recording
is reasonably necessary to protect the interest of LESSOR, LESSEE shall, at its
own cost and expense, cause this Lease, any assignment of this Lease, any
security agreement with respect to the Aircraft, financing statements with
respect thereto, and any and all additional instruments which shall be executed
pursuant to the terms hereof, so far as permitted by applicable Law, to be
kept, filed and recorded and to be re-executed, re-filed and re-recorded at all
times in the appropriate office pursuant or in relation to any Laws of any
Governmental Entity, as LESSOR may request, to perfect, protect, and/or
preserve the rights and interests of LESSOR hereunder and in the Aircraft, and
LESSEE shall furnish to LESSOR evidence satisfactory to LESSOR of each such
filing, re-filing, recordation and re-recordation.

        (B) Without limiting the foregoing, LESSEE shall do or cause to be
done, at LESSEE's cost and expense, any and all acts and things which may be
required under the terms of the Convention on the International Recognition of
Rights in Aircraft ("Mortgage convention") to perfect and preserve the title of
LESSOR to the Aircraft (assuming, that with respect to the U.S. registration of
the. Aircraft, LESSOR meets the citizenship requirements for such registration)
within the jurisdiction of any signatory which has ratified the Mortgage
Convention, as LESSOR may reasonably request. LESSEE shall also do or cause to
be done, at its own expense, any and all acts and things which may be required
under the terms of any other Law involving any jurisdictions in which LESSEE
will operate, or any and all acts and things which LESSOR may reasonably
request to perfect and preserve LESSOR's ownership rights regarding the
Aircraft within any such jurisdiction.

        (C) LESSEE will not suffer any matter or thing whatsoever whereby the
LESSOR's title in and to the Aircraft may be impaired.

                                   SECTION 17

                       RETURN OF AIRCRAFT AND RECORDS

        (A) RETURN. On the Expiration Date, or pursuant to Section 19 hereof
(such date or event being hereinafter referred to as a "Return Occasion"),
LESSEE, at its own expense, on or prior to

<PAGE>

                                                                              48

the Return Occasion, shall return such Aircraft to LESSOR at the Return
Location or such other location as may be mutually agreed upon by LESSOR and
LESSEE, fully equipped as delivered or modified as provided hereunder with all
required Engines installed thereon.

        (B) RECORDS. Upon a Return Occasion applicable to the Aircraft, LESSEE,
at its own expense, shall deliver to LESSOR all Aircraft Documents listed in
Exhibit "B", as updated, amended or supplemented along with such other records
and documents in such form as are necessary to qualify the Aircraft for the
issuance, at LESSOR's election, of an Export Certificate of Airworthiness
issued by the Air Authority or the issuance by the FAA of an FAA Standard
Airworthiness Certificate so as to permit operation of the Aircraft under the
Act and FAR Part 121. Such records and manuals shall be current and shall
constitute an accurate representation of the condition of the Aircraft.

        (C) CONDITION OF AIRCRAFT. Upon a Return Occasion applicable to the
Aircraft, LESSEE shall return the Aircraft to LESSOR in such condition so that
the Aircraft shall: (1) comply with each and every return condition requirement
set forth in Exhibit "H" hereto; (2) have accomplished all work necessary to
obtain a valid Certificate of Airworthiness for Export or Standard
Airworthiness Certificate (other than (i) having TCAS and windshear detection
systems installed, (ii) complying with Stage III noise requirements, subject to
the provisions of Section 8(C) of this Lease, and (iii) a fresh C check
(however, the Aircraft shall be returned to LESSOR with a fresh B check)) as
LESSOR shall elect, in each case issued by the FAA; and (3) shall be free and
clear of all Liens, except LESSOR's Liens and Liens which may have existed
prior to the Effective Date and were not created by or consented to by LESSEE.

        (D) FINAL INSPECTION. Upon or next preceding a Return Occasion with
respect to the Aircraft hereunder, LESSEE shall make such Aircraft available to
LESSOR not less than ten (10) days prior to the date of the Return Occasion for
detailed inspection in order to verify that the condition of such Aircraft
complies with the requirements set forth above (such inspection being
hereinafter referred to as the "Final Inspection"). Such Final Inspection may
be scheduled at an appropriate maintenance facility of the Authorized
Maintenance Performer then performing maintenance of such Aircraft, pursuant to
Subsection 7(D) hereof, and LESSEE shall give LESSOR not less than ten (10)
days' prior written notice of the location and commencement date of such Final
Inspection. The period allowed for the Final Inspection shall, if necessary, be
extended so as to have such duration as to permit the performance of all of the
following, each of which must occur during such period:

            (1) a B check performed in accordance with LESSEE's Maintenance
        Program;

            (2) the opening, in order to verify any aspect of the condition of
        any area of the Aircraft which would normally be accessible during the
        maintenance check being

<PAGE>

                                                                              49

        performed, or at LESSOR's request, the opening of any areas of the
        Aircraft if LESSOR reasonably believes, based on prior inspections
        or other evidence, that opening of such areas would reveal that the
        Aircraft does not completely comply with the requirements of this
        Section 17 and Exhibit "H"; and

            (3) No less than three (3) of LESSOR's representatives shall be
        permitted to attend each phase of activity required to be conducted
        during the Final Inspection. A Final Inspection shall commence on
        or before the date of a Return Occasion with respect to the
        Aircraft and shall continue on consecutive days until all activity
        required pursuant to the terms of Exhibit "H" and the above
        provisions have been concluded. To the extent that any portion of
        the Final Inspection extends beyond the date of a Return Occasion,
        the Base Term with respect to the Aircraft undergoing the Final
        Inspection shall be deemed to be automatically extended (but LESSEE
        shall have no right to operate the Aircraft during such time except
        in connection with any required re-delivery test flights), and the
        LESSEE shall be obligated to continue to insure the Aircraft, in
        accordance with the provisions of this Lease, and to pay Rent
        hereunder on a daily basis, calculated at a daily rate equal to
        1/15 of the Basic Rent, until the Final Inspection shall have been
        concluded (provided, however, that LESSEE's shall have no
        obligation to pay Basic Rent beyond the originally scheduled
        Expiration Date if the Final Inspection is not completed on or
        before the Expiration Date due to LESSOR's failure to timely appear
        for such inspection unless such failure is caused by LESSEE denying
        access to the Aircraft and/or Aircraft documents at a time when
        same were to be made available to LESSOR or if LESSEE unreasonably
        interferes with such Final Inspection by LESSOR). All storage
        expenses attributable to any extension of the Base Term pursuant to
        the preceding sentence shall be payable by LESSEE.

        (E) AIRCRAFT DOCUMENTATION. In order to enable LESSOR to prepare for
its Final Inspection of the Aircraft pursuant to Subsection 17(D) above, LESSEE
agrees to make available at LESSEE's maintenance base to LESSOR, not later than
ten (10) days prior to the commencement of such Final Inspection, the Aircraft
Documents listed in Exhibit "B" hereto, together with such other documentation
regarding the condition, use, maintenance, operation and history of the
Aircraft as LESSOR may reasonably request.

        (F) LESSEE'S CORRECTION AND SUBSEQUENT CORRECTIONS. To the extent that
the Aircraft, any Engine or any of the Aircraft Documents fails upon a Return
Occasion to conform to any requirement imposed by Section 17 hereof and Exhibit
"H", LESSOR may, at its option:

            (1) continue the Lease in effect in the manner provided for in
        Subsection 17(D)(3) above with regard to

<PAGE>

                                                                              50

        automatic extension with respect to such Aircraft until such time as
        the nonconforming items are corrected; or

            (2) request LESSEE to pay, and LESSEE shall pay to LESSOR, an
        amount equal to the amount required (labor and materials) by the
        then current Authorized Maintenance Performer or any other Person
        designated by LESSOR, as the case may be, to correct such
        nonconforming items. Any such amount payable by LESSEE to LESSOR
        for such correction shall become Supplemental Rent, payable by
        LESSEE within five (5) days following the submission of a written
        statement by LESSOR to LESSEE identifying the items corrected or to
        be corrected and setting forth the expense of such correction.
        LESSEE's obligation to pay such Supplemental Rent shall survive the
        passage of the early termination of the Base Term or other
        termination of this Lease. In addition to the foregoing, but
        subject to Sections A(ix) and (xi) of Exhibit "H", and under the
        same payment terms, LESSEE, with regard to any time-limited
        component installed on such Aircraft which does not satisfy the
        return condition requirements of this Section 17 and Exhibit "H"
        upon a Return Occasion, shall pay LESSOR, at the time of a Return
        Occasion, an amount equal to the amount which would be required to
        be paid to the Person selected by LESSOR for putting such item in
        such condition.

        (G) DISPUTE AS TO COMPLIANCE WITH RETURN CONDITIONS. Should there be
any dispute as to whether the Aircraft meets the return conditions, the matter
shall be resolved by an independent knowledgeable aviation maintenance expert
reasonably acceptable to LESSOR and LESSEE.

                                   SECTION 18

                               EVENTS OF DEFAULT

        Each of the following events shall constitute a Default and after the
applicable grace, notice or cure period, if any, an Event of Default:

        (A) LESSEE shall fail to make any payment of Rent when due under this
Lease and such payment shall remain unpaid for a period of three (3) days from
the due date;

        (B) LESSEE shall fail to carry and maintain insurance on or with
respect to the Aircraft in accordance with the provisions of Section 13
hereof or shall operate the Aircraft or permit the Aircraft to be operated in
violation of any insurance policy required to be provided pursuant to Section
13 hereof;

        (C) Except as otherwise expressly provided in this Section 18 and
Subsection 18(B) above, for which no notice is required, LESSEE shall fail to
perform or observe any covenant, condition or agreement to be performed or
observed by LESSEE under

<PAGE>

                                                                              51

the Lease and such failure shall continue for a period of thirty (30) days after
written notice thereof from LESSOR to LESSEE;

        (D) Any representation or warranty made by LESSEE herein, or in any
notice, certificate or other document furnished by or on behalf of LESSEE
herein to LESSOR or its assigns, shall prove to have been incorrect in any
material respect when made;

        (E) LESSEE or Airgroup shall consent to the appointment of a receiver,
trustee or liquidator for itself or for a substantial part of its property, or
LESSEE or Airgroup shall admit in writing its inability to pay its debts
generally as they become due, or shall make a general assignment for the
benefit of creditors, or LESSEE or Airgroup shall file a voluntary petition in
bankruptcy or a voluntary petition or answer seeking reorganization in a
proceeding under any Laws dealing with bankruptcy, insolvency, moratorium or
creditors' rights generally (any or all of which are hereinafter referred to as
"Bankruptcy Laws"), or an answer admitting the material allegations of a
petition filed against LESSEE or Airgroup, in any such proceeding, or LESSEE or
Airgroup, shall by voluntary petition, answer or consent to or seek relief
under the provisions of any Bankruptcy Laws;

        (F) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of LESSEE or Airgroup,
as the case may be, a receiver, trustee or liquidator for LESSEE or Airgroup or
any substantial part of its property, or any substantial part of the property
of LESSEE or Airgroup shall be sequestered, and any such order, judgment,
decree or appointment, or sequestration, shall remain in force undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of entry
thereof;

        (G) A petition against LESSEE or Airgroup in a proceeding under the
Bankruptcy Laws of any Governmental Entity shall be filed and shall not be
withdrawn or dismissed within sixty (60) days thereafter, or if, under the
provisions of any Bankruptcy Laws which may apply to LESSEE or Airgroup, any
court of competent jurisdiction shall assume jurisdiction, custody or Control
of LESSEE or Airgroup, or of any substantial part of its property, and such
jurisdiction, custody or control shall remain in force unrelinquished, unstayed
or unterminated for a period of ninety (90) days;

        (H) LESSEE or Airgroup shall be dissolved or liquidated, terminate its
existence or suspend its operations, shall lose any right, privilege or
franchise necessary to maintain its corporate existence, or shall dispose of
all or substantially all of its properties to any Person;

        (I) LESSEE shall make or permit any assignment or transfer of this
Lease or of possession of the Aircraft other than as permitted hereunder;

        (J) Any license, permit, certificate, authorization, consent, approval,
notification, registration or filing now or hereafter necessary to enable
LESSEE to perform or comply with its

<PAGE>

                                                                              52

obligations under the Lease shall fail to be timely issued, granted or made, or
shall expire or lapse and shall not be forthwith renewed or extended or shall be
revoked, withdrawn, withheld or adversely modified, or shall cease to be in full
force and effect;

        (K) All or a substantial part of the properties of LESSEE or Airgroup
shall be condemned, seized or otherwise appropriated for custody or control, or
such property shall be assumed by any Governmental Entity or any court or other
Person purporting to act under the authority of any Governmental Entity, or
LESSEE or Airgroup shall be prevented from exercising normal control over all
or a substantial part of its properties and the events as set forth in this
Subsection 18(K) are not remedied within sixty (60) days after they occur;

        (L) LESSEE shall fail to pay when due any obligation for the payment of
money in excess of Four Hundred Thousand (US$400,000) Dollars under any
agreement to which LESSEE is a party where such failure would constitute an
event of default thereunder or permit the party to whom such payment was owed
(hereinafter referred to as a "Creditor") to exercise remedies under such
agreement as a result of such non-payment; provided, however, that the
foregoing shall only constitute a Default and not an Event of Default hereunder
for the period of time that the Creditor states in a letter, addressed to and
delivered to LESSOR, that it irrevocably agrees for such period of time to
forebear from the exercise of remedies or the taking of other action against
LESSEE (the "Forbearance Period") as a result of such non-payment of money.
Upon the expiration of the Forbearance Period, unless such period has been
extended by the Creditor(but in no event may the Forbearance Period, in the
aggregate, be greater than sixty (60) days from the original due date for such
payment), unless LESSEE has delivered to LESSOR written confirmation from the
Creditor that it has been paid in full or has otherwise waived its claim
against LESSEE or has otherwise settled with LESSEE, the Default set forth in
this subsection (L) shall automatically and without any further action on the
part of LESSOR be deemed to constitute an Event of Default hereunder;

        (M) LESSEE shall voluntarily suspend all or substantially all of its
commercial revenue passenger operations, or the franchises, concessions,
permits, licenses, rights or privileges required for the conduct of the
commercial revenue passenger operations of LESSEE shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result the principal business activity of
LESSEE shall cease to be that of commercial revenue passenger airline;

        (N) If for any reason or at any time Airgroup owns less than seventy
percent (70%) of the outstanding voting stock of LESSEE; or

        (O) An "Event of Default" shall occur and be continuing under any other
lease agreement entered into between LESSOR (or any affiliated or related
entity to LESSOR) and LESSEE.

<PAGE>

                                                                              53

                                   SECTION 19

                                    REMEDIES

        Upon the occurrence of any Event of Default, and at any time thereafter
so long as the same shall be continuing, LESSOR may, at its option, declare
this Lease to be in default, and at any time thereafter, so long as LESSEE
shall not have remedied any outstanding Event of Default, LESSOR may exercise
one or more of the following remedies with respect to the Aircraft as LESSOR,
in its sole discretion, shall elect, to the extent available and permitted by,
and subject to compliance with, any mandatory requirements of applicable Law
then in effect; PROVIDED, HOWEVER, that upon the occurrence of any Event of
Default specified in paragraphs (E),(F),(G) or (H) of Section 18, LESSOR shall
be entitled automatically, as of the day prior to such occurrence, to exercise
any of the following remedies without declaring this Lease to be in default or
making demand or giving notice or the taking of any other action:

        (A) Demand that LESSEE, and LESSEE shall, upon the written demand of
LESSOR, at LESSEE's expense, return the Aircraft and Aircraft Documents
promptly to LESSOR in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Section 17 and Exhibit "H" hereof; or
LESSOR, at its option and to the extent permitted by applicable Law, may enter
upon the premises where all or any part of the Aircraft and Aircraft Documents
are located and take immediate possession of and remove the same, by summary
proceedings or otherwise, all without liability accruing to LESSOR for or by
reason of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise;

        (B) Sell the Aircraft at public or private sale, as LESSOR may
determine, or otherwise dispose of, hold, use, operate, lease to others, or
keep idle the Aircraft, as LESSOR, in its sole discretion, may determine, all
free and clear of any rights of LESSEE and without any duty to account to
LESSEE with respect to such action or inaction, or for any proceeds with
respect thereto;

        (C) Demand (whether or not LESSOR, pursuant to Subsection 19(B) hereof,
may have sold the Aircraft) that LESSEE pay LESSOR, and LESSEE shall upon such
demand pay to LESSOR, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Rent for such Aircraft due after such payment occurs),
any accrued and unpaid Rent for such Aircraft due up to the time LESSOR demands
such payment, plus the amount by which the fair market value of such Aircraft
(assuming the condition of the Aircraft and the Aircraft Documents fully and
satisfactorily meets all of the return conditions set forth herein and on
Exhibit "H") exceeds the net cash proceeds of any sale of such Aircraft,
together with interest at the Overdue Rate on such fair market value or portion
thereof and such unpaid Rent from the date of LESSOR's demand to the date
such payment is made;

<PAGE>

                                                                              54

        (D) Proceed by appropriate court action or actions, either at Law or in
equity, to enforce performance by LESSEE of the applicable obligations and
covenants of LESSEE under this Lease and to recover damages for the breach
thereof, or to rescind this Lease as to the Aircraft;

        (E) Terminate this Lease or any of LESSEE's rights hereunder by written
notice, and repossess the Aircraft and Aircraft Documents, provided such
termination shall not release LESSEE from its financial obligations hereunder
or any other obligations hereunder which can be satisfied by the payment of
money (including the payment of money for the performance of services); or

        (F) Exercise any and all other rights and remedies provided for under
applicable law whether or not such rights and remedies are specifically
enumerated herein.

            Further, should the LESSEE fail to return the Aircraft and Aircraft
Documents upon termination of the Lease for any reason whatsoever except due to
an Event of Loss and as set forth in Subsection 17(F), without prejudice to
LESSOR's rights hereunder to demand return of the Aircraft in the condition
required by this Section, LESSEE shall continue to pay Rent to LESSOR for each
day the Aircraft remains in LESSEE's possession at the rate of 1/15 of the
monthly Basic Rent then in effect.

            In addition, LESSEE shall be liable for any and all unpaid Rent due
hereunder before or during the exercise of any of the foregoing remedies, and
for all attorneys' fees, legal expenses and other costs and expenses incurred
by LESSOR, or its respective agents by reason of the occurrence of any Event of
Default or the exercise of LESSOR's remedies with respect thereto, including
all costs and expenses incurred in connection with the return of the Aircraft,
in accordance with the terms of Section 17 and Exhibit "H" hereof, or with
placing such Aircraft in such condition.

            Except as otherwise expressly provided above, no remedy referred to
in this Section 19 is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
LESSOR under any applicable Law, and the exercise or commencement of exercising
by LESSOR of any one or more of such remedies shall not preclude the
simultaneous or later exercise by LESSOR of any or all such other remedies. No
express or implied waiver by LESSOR of any Default or Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent Default
or Event of Default. LESSEE hereby agrees that, except as provided in this
Section 19, any financing profit or savings accruing to LESSOR by virtue of
LESSEE's default and LESSOR's subsequent sale, re-letting, or award shall in no
way reduce, offset or mitigate the damages for which LESSEE is liable
hereunder.

            To facilitate LESSOR in the termination of this Lease and the
exercise of its remedies upon the occurrence and continuation of an Event of
Default, LESSEE hereby appoints LESSOR as LESSEE's irrevocable agent and
attorney-in-fact, pursuant to

<PAGE>

                                                                              55

the Power of Attorney attached hereto as Exhibit "E", to execute all documents
deemed necessary to release, terminate and void LESSEE's interest in the
Aircraft leased hereunder and to otherwise enable and/or assist LESSOR in the
exercise of its remedies hereunder, and to file said documents for recordation
with the FAA and any other appropriate Governmental Entity following the
occurrence of an Event of Default, where LESSOR, at its sole discretion, may
deem use of such Power of Attorney necessary to effect any remedy which LESSOR
chooses to exercise.

                                   SECTION 20

                                   ALIENATION

        (A) There shall be no restriction upon LESSOR's right to assign, sell,
transfer, pledge, hypothecate or encumber any interest of LESSOR (hereinafter
referred to generally as "Alienation") to any other Person in the Aircraft,
this Lease and/or the proceeds thereof and hereof, subject to rights of the
LESSEE under the provisions of this Lease and provided that any such
assignment, sale, transfer, pledge, hypothecation or encumbrance does not have
a material adverse affect on LESSEE's obligations hereunder or adversely affect
the registration of the Aircraft or the quiet enjoyment of the LESSEE therein
pursuant to this Lease. To effect or facilitate any such assignment, sale,
transfer, pledge, hypothecation or encumbrance, LESSEE agrees to provide LESSOR
or LESSOR's designee or assignee with such agreements, consents, conveyances or
documents as may be reasonably requested by LESSOR. The agreements,
representations, warranties, covenants, obligations and liabilities contained
herein, including, but not limited to, all obligations to pay Rent and
indemnify LESSOR, are made for the benefit of LESSOR, any security assignee of
LESSOR and their respective successors and assigns, notwithstanding the
possibility that any such Person was not originally a party to this Lease or
may, at the time such enforcement is sought, not be a party to this Lease.

        (B) In the case of any Alienation or assignment by LESSOR pursuant to
the provisions of Section 20, LESSEE shall execute and deliver to LESSOR
promptly upon request of LESSOR, any consents or agreements required for the
perfection of such assignment provided that such consent or other documents
does not affect LESSEE's rights under Subsection 21(G) below.

                                   SECTION 21

                                 MISCELLANEOUS

        (A) SEVERABILITY, AMENDMENT AND CONSTRUCTION. Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render

<PAGE>

                                                                              56

unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged, or terminated orally, but only
by an instrument in writing expressed to be a supplement to this Lease, signed
by an officer of the party against which the enforcement of the change, waiver,
discharge or termination is sought. This Lease shall constitute an agreement of
lease for the Base Term of the Lease, and nothing herein shall be construed as
conveying to LESSEE any right, title or interest in the Aircraft, the Airframe,
any Engine or Part except as a LESSEE only, for such Base Term. The headings in
this Lease are for convenience of reference only and shall not define or limit
any of the terms or provisions hereof. Unless the context otherwise requires,
all references in this Lease to designated Sections or other subdivisions
hereof are to such designated Sections or subdivisions; and the words "herein",
"hereof", "hereto", "hereunder", and other words of similar import refer to
this instrument as a whole and not to any particular Section or subdivision. In
construing any provision of this Lease, no account shall be taken as to the
party who drafted same and no presumption shall arise or result therefrom.

        (B) GOVERNING LAW. This Lease shall in all respects be governed by, and
construed in accordance with, the Laws of the State of Hawaii with respect to
contracts made and to be entirely performed in such State by residents thereof.

        (C) ARBITRATION. Any controversy or claim between LESSOR and LESSEE,
arising out of or relating to this Lease shall, at the request of either LESSOR
or LESSEE, be decided by binding arbitration conducted in the State of Hawaii
without a judge or jury, under the auspices of the American Arbitration
Association or Dispute Prevention and Resolution, Inc. in accordance with
Chapter 658 of the Hawaii Revised Statutes and the respective and applicable
rules of the aforementioned organizations. The arbitrator will apply any
applicable statute of limitations and will determine any controversy concerning
whether an issue is arbitrable. Judgments upon the arbitration award may be
entered in any court having jurisdiction. The prevailing (winning) party will
be entitled to recover its reasonable attorney's fees and costs as determined
by the arbitrator. This agreement to arbitrate shall not limit or restrict the
right, if any, of any party to exercise before, during or following any
arbitration proceeding, with respect to any claim or controversy, self help
remedies such as setoff, to foreclose a mortgage or lien or other security
interest in any real or personal property collateral judicially or by power of
sale, or to obtain provisional or ancillary remedies such as injunctive relief
from a court having jurisdiction. Either party may seek those remedies without
waiving the right to submit the controversy or claim in question to
arbitration.

        (D) NOTICE. Except as otherwise specified herein, all notices,
requests, demands, consents or other communications to, upon or by the
respective parties hereto shall be in the English language and in writing, sent
by international recognized express courier or telefax, and shall be deemed to
have been duly given or made when received by the party if sent by telefax or
when received

<PAGE>

                                                                              57

by the party, if sent by express courier, addressed to the party to which such
notice, request, demand or other communication is required or permitted to be
given or made hereunder, at the LESSEE'S Address or LESSOR'S Address, as the
case may be, or at such other address of which such Person shall have notified
in writing the party giving such notice.

        (E) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If LESSEE fails to make any
payment of Supplemental Rent or fails to perform or comply with any covenant,
agreement or obligation contained herein, LESSOR shall have the right, but not
the obligation, to make such payment or perform or comply with such agreement,
covenant or obligation, and the amount of such payment and the amount of the
reasonable expenses of LESSOR incurred in connection with such payment or the
performance thereof or compliance therewith, together with interest thereon at
the Overdue Rate, shall be deemed Supplemental Rent, payable by LESSEE upon
demand. The taking of any such action by LESSOR pursuant to this Subsection
21(E) shall not constitute a waiver or release of any obligation of LESSEE
under the Lease, nor a waiver of any Default or Event of Default which may
arise out of LESSEE's nonperformance of such obligation, nor an election or
waiver by LESSOR of any remedy or right available to LESSOR under or in
relation to this Lease.

        (F) COUNTERPARTS. This Lease may be executed simultaneously in one or
more counterparts, all of which together shall constitute one and the same
Lease. To the extent that this Lease constitutes chattel paper in any
jurisdiction, no security interest herein may be created through the transfer
of possession of any counterpart other than the counterpart marked "Original."
Other than the counterpart of this Lease marked "Original," all other original
executed counterparts of this Lease shall be marked "Duplicate Original."

        (G) QUIET ENJOYMENT. LESSOR covenants that if, and as long as, no Event
of Default hereunder has occurred and is continuing, LESSEE shall quietly enjoy
the Aircraft without interference by LESSOR or by any Person claiming by,
through or under LESSOR, or by any assignee of LESSOR, and neither LESSOR nor
any Person claiming by, through or under LESSOR, or any assignee of LESSOR
will, as long as no Event of Default hereunder has occurred and is continuing,
take any action which adversely affects the registration of the Aircraft.

        (H) BROKERS. LESSOR and LESSEE each agree that there has been no third
party as broker or finder involved in the introduction of LESSOR and LESSEE
with respect to this Lease or the subject matter or negotiation hereof and each
party hereby indemnifies and agrees to hold harmless the other party from
liability for fees, commissions or other claims made upon such other party due
to such claims arising through it.

        (I) STORAGE OF AIRCRAFT. Upon the expiration or termination of this
Lease, provided that the final maintenance check prior to return is
accomplished at LESSEE's Honolulu maintenance base or the return location is
Honolulu, LESSEE shall

<PAGE>

                                                                              58

provide storage facilities for the Aircraft at a location where LESSEE has
storage facilities for a period not to exceed sixty (60) days (the "Storage
Period"). During the Storage Period, LESSOR shall bear the risk of loss of the
Aircraft and shall pay maintenance, insurance and other costs (except for the
cost of the storage facilities provided by LESSEE) with respect to the
Aircraft. Upon the expiration of the Storage Period, LESSEE shall cooperate
with LESSOR by flying the Aircraft to the Return Location.

        (J) EXPENSES. Unless otherwise specifically provided for to the
contrary, LESSOR and LESSEE shall each bear their own expenses in connection
with this transaction, including, but not limited to the fees and expenses of
counsel. Notwithstanding the foregoing, LESSOR and LESSEE shall each be
responsible for one-half of the fees and expenses of FAA counsel.

                                   SECTION 22

                              SUBLEASE; ASSIGNMENT

        (A) LESSEE may sublease the Aircraft to any Air Carrier provided that
(i) such Air Carrier at the time of such subleasing is solvent and is not in
receivership or subject to the jurisdiction of any bankruptcy court, (ii) that
LESSOR has consented to such subleasing, such consent not to be unreasonably
withheld, and (iii) that LESSOR's title in and to the Aircraft and this Lease
remain fully perfected and protected and LESSOR receives satisfactory legal
opinions with respect thereto. LESSEE shall be responsible for all reasonable
costs and expenses incurred by LESSOR in connection with any subleasing of the
Aircraft, including, but not limited to, the reasonable fees and expenses of
counsel to LESSOR.

        (B) Any sublease consented to by LESSOR shall contain, among other
things, the following terms and conditions:

            (1)  That such sublease is subject to and subordinate to this Lease;

            (2) The sublease shall not relieve the LESSEE of its obligations
under this Lease and the LESSEE shall continue to be primarily liable
hereunder;

            (3) The terms of such sublease shall be no less favorable to the
lessor thereunder than the terms of this Lease; and

            (4) The rights of the lessor in any Sublease (including, but not
limited to security deposits and maintenance reserves payable thereunder) shall
be assigned to LESSOR.

        (C) All of LESSEE's obligations hereunder may be performed by any
approved sublessee, provided however that the LESSEE shall not be released from
its obligations hereunder.

<PAGE>

                                                                              59

        (D) Nothing set forth in this Section 22 shall constitute, or be deemed
to constitute, a consent by LESSOR to the assignment by LESSEE, in whole or in
part, of this Lease or the rights and obligations of LESSEE thereunder. Any
assignment or purported assignment, in whole or in part of this Lease or the
rights and obligations of LESSEE hereunder shall be null and void and of no
force and effect unless the prior written consent of LESSOR to such assignment
had been obtained.

                                   SECTION 23

                                 EXCUSABLE DELAY

        LESSOR or LESSEE shall not be responsible for, nor be deemed to be in
default under this Lease on account of any delay in delivery of the Aircraft
or commencement of this Lease due to any of the following causes:

            (a) acts of God; war, war-like operations, insurrections or riots;
fires, floods, explosions, earthquakes or serious accidents; epidemics or
quarantine restrictions; any act of government, governmental priorities,
allocation regulations or orders affecting materials, facilities or completed
aircraft; strikes or labor troubles causing cessation, slowdown or interruption
of work; or inability after due and timely diligence to procure materials,
accessories or equipment prior to delivery (including, without limitation, the
Aircraft);

            (b) damage to the Aircraft which can reasonably be repaired,
provided Lufthansa or its agent will promptly perform such repair work;

            (c) Lufthansa's delay in delivery of the Aircraft to LESSOR for
whatever reason, including, but not limited to, delay caused by an aircraft
manufacturer's failure to deliver a replacement aircraft on time; or

            (d) correction of discrepancies evidenced during the Delivery
Check, ground inspection or demonstration flight of the Aircraft, provided
Lufthansa is promptly and diligently correcting same.

        Should an excusable delay continue beyond November 26, 1996, LESSOR and
LESSEE shall each have the right to terminate this Lease, without liability or
further obligation to the other; provided, however, that any time after the
sixtieth day if a rescheduled Delivery Date has been established and the Lease
has not theretofore been terminated, neither LESSOR nor LESSEE shall have any
right to terminate the Lease during the fifteen (15) day period preceding the
rescheduled Delivery Date.

<PAGE>

                                                                              60

                                   SECTION 24

                                ENTIRE AGREEMENT

        This Lease (including all Exhibits hereto) embodies the entire
agreement and understanding between LESSOR and LESSEE relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and neither of the parties hereto shall be bound by or charged with any
oral or written agreements, representations, warranties, statements, promises
or understandings not specifically set forth herein. This Lease may not be
changed and no right granted or obligation imposed hereunder may be waived
orally, but only by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.

<PAGE>

                                                                              61

       IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this lease to be executed by their duly authorized
officers as of the day and year first above written.

LESSOR:                                LESSEE:

BANK OF HAWAII                         ALOHA AIRLINES, INC.

By:     /s/ Gabriel S. H. Lee          By:
    -------------------------------        ---------------------------------
         Gabriel S. H. Lee

Title:     Vice President              Title:
       ----------------------------           ------------------------------

                                       By:
                                            --------------------------------

                                       Title:
                                               -----------------------------

<PAGE>

                                                                              61

        IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this lease to be executed by their duly authorized
officers as of the day and year first above written.

LESSOR:                                LESSEE:

BANK OF HAWAII                         ALOHA AIRLINES, INC.

By:                                    By:           /s/ [Illegible]
    --------------------------------       ---------------------------------

                                                      VICE PRESIDENT
Title:                                 Title:     PLANNING & DEVELOPMENT
       -----------------------------          ------------------------------

                                       By:           /s/ [Illegible]
                                           ---------------------------------

                                              STAFF VICE PRESIDENT - FINANCE
                                       Title:          & CONTROLLER
                                              ------------------------------

<PAGE>

                                                                             62

                                 EXHIBIT "A"                      (Page 1 of 2)

                          AIRCRAFT SPECIFICATIONS

Model: Boeing 737-230                          Max. Taxi Wt. 120,000 lbs.
Serial No. 23155                               Max. Gross T.O. Wt. 119,500 lbs.
Line No.                                       Max. Landing Wt. 103,000 lbs.
Reg. No. N821AL                                Max. Zero Fuel Wt. 95,000 lbs.
Date of Mfgr. December, 1984
                                               Optrs. Empty Wt. 68,000 lbs.
                                               Payload 27,000 lbs.

                               AIRFRAME STATUS

Time as of                                         Maintenance Program
Total Hours
Total Cycles
Time Since Overhaul
Time Since Last C Ck                              "D" Check -
Time to Next Overhaul                             "C" Check -

                                ENGINE STATUS

<TABLE>
<CAPTION>
Model #                       Serial #            REMAINING            Limiter
-------                       --------            ---------            -------
<S>                           <C>                 <C>                  <C>
#1. Pratt & Whitney           687334              hrs/cyc
          JT8D-15
#2. Pratt & Whitney           708328              hrs/cyc
          JT8D-15
APU
</TABLE>

                        LANDING GEAR - TIME REMAINING

<TABLE>
<S>                    <C>                <C>                      <C>
R/H MLG                hrs                Nose Gear                hrs
L/H MLG                hrs                L/G TBO                  hrs
</TABLE>

                          GENERAL DATA AND COMMENTS

<TABLE>
<S>                    <C>              <C>                           <C>
Fuel Capacity/lbs      34,469 lbs       FAR Part 36 Status            Stg 3
                                        Interior Configuration        103YC
                                                                      4 Galleys
                                                                      3 Lavs
                                                                      1 Closet
</TABLE>

<PAGE>

                                                                             63

                                 EXHIBIT "A"                      (Page 2 of 2)

                             AVIONICS INVENTORY

<PAGE>

                                                                             64

                                 EXHIBIT "B"                      (Page 1 of 2)

                           AIRCRAFT DOCUMENTATION

On the Effective Date, LESSOR shall deliver to LESSEE the Aircraft
Documentation listed below. All reports and computer documentation produced by
Lufthansa shall be certified by Lufthansa or Lufthansa Technik.

    A. The following manuals shall be delivered with the Aircraft. Each manual
shall be current and include all temporary revisions. Each manual shall be in
the English language.

         1.  FAA-Approved Airplane Flight Manual.

         2. Weight and Balance Control and Cargo Loading Manual and Supplements
(load and trim sheet). Include last weigh paperwork and delivery equipment list
with previous operator running W & B computation sheets.

         3.  Operations Manual and Quick Reference Handbook. Including Cabin
Safety/F/A Manual (PAX A/C).

         4.  Structural Repair Manual.

         5.  Aircraft/Engine/APU Maintenance Manual.

         6.  Boeing Component Overhaul Manuals, including Galley Manuals
(CMM, IPC, OHM).

        7.   Aircraft/Engine/APU Illustrated Parts Catalog (I.P.C.) (Operator
Customized)

        8. Wiring Diagram Manual including the following:

           a.  Equipment List.
           b.  Standard Practices (Chapter 20).
           c.  Charts and Graphs (Chapter 91).
           d.  Hook Up Charts.
           e.  Splice List.
           f.  Ground List.
           g.  Terminal List.

        9.  Engine and APU Overhaul Manuals.

        10. Current and revised Lufthansa Maintenance Schedule and (COSL)
component, operating and storage limits manual.

<PAGE>

                                                                             65

    B.  Airworthiness Directives Documentation: The following data will be
provided on the Effective Date. LESSOR shall provide to LESSEE all records
associated with A.D. compliance.

         1. A single, complete and current A.D. status list of the airframe,
appliances, Engine and APU Airworthiness Directive applicable to the Aircraft,
appliances, Engine and APU. This list shall be consistent with the preliminary
AD status reports received during the initial inspection. The list shall be in
English, typed, certified and signed by authorized quality assurance
representative of Lufthansa.

         2. LESSOR will provide legible copies of the completion documentation
that accomplish each AD, such documents shall be in English and in reasonably
sufficient detail to show the method of compliance. If the AD is a repetitive
inspection documentation, the last accomplishment is sufficient. If the
original completion documents are not available, LESSOR shall provide at a
minimum a copy of the job card or engineering order that accomplished the AD
plus a certification letter signed by Lufthansa's airworthiness department
stating that the AD in question was accomplished at a certain time and cycles,
date and reference all pertinent support documentation (ie. engineering order,
alternate means of compliance, etc.).

             However, any AD that was complied with by an alternate means of
compliance must have all original documentation and necessary air authority
approvals.

         3. Exemptions or deviations granted by the FAA (or equivalent) to
Lufthansa on A.D. compliance, including copy of exemption request.

    C.  Engineering Documentation

         1. LESSOR shall provide a single, current list, in the English
language (including the ADA list referenced in b. below) of engineering
documentation covering the aircraft as listed below:

                  a. Service Bulletin status based on the Boeing provided
summary of all Boeing service bulletins to the aircraft and consistent with the
"reference only" status report provided during the initial inspection.

                  b. List of all Lufthansa initiated on-aircraft modifications
consistent with the ADA list covering all Spec 100 ATA chapters. A current
copy, in English, of all engineering orders listed on the ADA list shall be
provided with appropriate certification stamp on the ADA list.

                  c.  Major repairs list.

                  d.  Supplemental Type Certificate list.

<PAGE>

                                                                             66

         2. Data package covering all non-manufacturer/non-FAA-approved
repairs or alterations, including the submittal to the LBA for an approval,
if applicable.

     D.  Additional Documentation

         1. Daily airframe time and cycle utilization report.

         2. Master Minimum Equipment List and Configuration Deviation List.

         3. Set of cockpit drawings (full scale preferably).

         4. Quarterly Reliability Reports for one (1) year.

         5. Location map of emergency equipment, with description.

         6. Interior configuration drawings.

         7. LBA Export Certificate of Airworthiness.

         8. Evidence of de-registration.

         9. Passenger/Cargo Equipment List (seats, galleys, lavs,
entertainment, etc.).

         10. Complete paperwork for last "D" check overhaul and last "A", "B",
and/or "C" check inspections.

         11. Compass card and F.D.R. calibration documentation.

         12. Copies of Aircraft registration and Certificate of Airworthiness.

         13. All Life records (Lufthansa - Lebenslaufkarte) for the assemblies
and rotable parts installed during the last overhaul for each nose, left hand
and right hand main landing gears.

     E.  Individual Aircraft and Engine Records:

         1. Letter of Declaration for each major aircraft/engine accident or
major incident which shall include complete documentation reports, if any.

         2. Major structural damage reports, if any.

         3. Engine trend monitoring data (1 year minimum provided the engine
was operated with Lufthansa) for each engine installed on the aircraft.

         4. Copies of logbook entries for the last twelve (12) months of
operation (at delivery).

         5. List of open items, watch items, deferred items.

<PAGE>

                                                                             67

         6. Serviceable/Overhaul tags for all life limited parts, hard time
components listed in the rotable components list. The LESSOR and LESSEE agree
that all serviceable overhaul tags for OC (on condition)/CM (condition
monitored) parts listed in the rotable components list for the last 12 months
as at delivery shall be provided to LESSEE by LESSOR on a case by case basis
(up to a maximum of one (1) year after aircraft delivery).

         7. Listing of Aircraft, Engine and APU components status by P/N -
S/N - Description Position TBO - TSI - TSO - TSN, Total Time, next Due Time,
including interpretation keys. (Rotable Component List).

         8. Engine and APU Logbooks or equivalent reports or documentation.

         9. Aircraft and Engine time status at delivery with Serial No. - total
time/total cycles - and times of the last letter check inspection.

         10. Engine time report and engine on log which shall include ASB 6038
status for each engine.

         11. All Engine and APU records, for the last heavy maintenance shop
visit including back to birth history for each engine life limited part.
Exceptions will be acceptable for parts introduced to Lufthansa before 1993
when back to birth history records was not mandatory; however, LESSOR shall use
its reasonable efforts to assist LESSEE in obtaining full traceability on these
parts, if any.

         12. Manufacturer's delivery documents for Engines.

         13. Boeing Electrical Load Analysis documents and data.

         14. Last power plant test cell run documents for Engines and APU.

         15. Documents for boroscope inspection prior to delivery for current
installation for engines (as stated in the Agreement).

         16. Letter certifying that at the time of delivery of the aircraft the
aircraft is a non-SSID candidate aircraft.

         17. Operator's Corrosion Control Program. (see
Maintenance Schedule)

         18. Aircraft Readiness Log (manufacturer's).

         19. Copies of all applicable Master Changes
(M.C.) performed on each aircraft.

         20. LBA approvals, Lufthansa certification reports for major
modifications, alterations and repairs which are not covered by manufacturers
service bulletins. For minor modifications not covered by manufacturers service
bulletins, Lufthansa shall provide

<PAGE>

                                                                             68

the requested substantiation work. (i.e. certification reports to the extent
required by the LBA).

        21. Fire blocking status for all seats, interior fabrics/materials,
including burn test documentation and certification. In accordance with the LBA
for all items introduced by Lufthansa.

        22. Current Aging Aircraft and CPCP Status Report.

        23. Current list outlining all waiver items/components not approvable
by the FAA.

         24. Any historical records applicable to the aircraft, engines or APU
that may be available at reasonable effort and within reasonable time.

        25. List detailing Lufthansa component shop history for all components
on the rotable components list on a case by case basis (up to a maximum of one
(1) year after aircraft delivery).

<PAGE>

                                                                             69

                                 EXHIBIT "C"                       (Page 1 of 2)

                          CERTIFICATE OF ACCEPTANCE

        This Certificate of Acceptance is delivered on and as of the date set
forth below by ALOHA AIRLINES, INC. (hereinafter referred to as "LESSEE") to
BANK OF HAWAII, (hereinafter REFERRED to as "LESSOR") pursuant to that Aircraft
Lease Agreement dated as of September _, 1996 between LESSOR and LESSEE
(hereinafter referred to as the "Agreement"):

        A.  DETAILS OF ACCEPTANCE

            LESSEE hereby indicates and confirms to LESSOR, its successors
and assigns, that the LESSEE has at o'clock _.M., on this     day of
________, 1996, at __________, accepted the following in accordance with the
provisions of the Agreement:

            1.  (a) Boeing Model: 737-230

                (b) Manufacturer's Serial No.: 23155

                (c) U.S. Registration Number: N821AL

<TABLE>
<CAPTION>
               Manufacturer and     Manufacturer's     Hours         Cycles
Engine No.     Model Number         Serial Number      Remaining     Remaining
---------      ----------------     --------------     ---------     ---------
<S>            <C>                  <C>                <C>           <C>
   (1)         Pratt & Whitney      687334
               JT8D-15
   (2)         Pratt & Whitney      708328
               JT8D-15
</TABLE>

Each of the above-described Engines having 750 or more rated takeoff horsepower
or the equivalent thereof.

AIRFRAME

          Total Time:          hrs.
          Total Cycles:        Cycles

          Time Remaining to "C" Check:        hrs.
          Time Remaining to "D" Check:        hrs.

<PAGE>

                                                                             70

                                 EXHIBIT "C"                      (Page 2 of 2)

    B.   CONFIRMATION OF UNDERTAKINGS

            LESSEE confirms that the above described Aircraft and Engines have
been examined by its duly appointed and authorized representative(s), that such
Aircraft and Engines conform to the information set forth above, that there
have been fixed to the Aircraft the markings required by the Agreement (or that
such markings shall be affixed to the Aircraft within fifteen (15) days of the
date hereof). LESSEE confirms and acknowledges that the date set forth above
constitutes the Effective Date, as such term is defined in the Agreement, and
that LESSEE's execution and delivery of this Certificate represents LESSEE's
acceptance of the above described Aircraft and Engines for all purposes of the
Agreement.

        IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to
be executed in its name, by its duly authorized officer(s) or
representative(s), pursuant to due corporate authority, all as of the date
written in Section A above.

LESSEE: ALOHA AIRLINES, INC.

By: ___________________________________

Title: ________________________________

Date: _________________________________

<PAGE>

                                                                             71

                                 EXHIBIT "D"

                             LEASE SUPPLEMENT NO.

LEASE SUPPLEMENT NO.__, dated _______________, 1996, between ALOHA AIRLINES,
INC., a Hawaiian corporation ("LESSEE") and BANK OF HAWAII ("LESSOR").

        LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of September ____ , 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements, each substantially in the form hereof, for the
purpose of leasing the Aircraft under the Lease Agreement as and when delivered
to the LESSEE in accordance with the terms thereof.

        *The Lease Agreement relates to the aircraft and engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.

        **The Lease Agreement relates to the Aircraft and engines described
below, and a counterpart of the Lease Agreement, attached to and made a part
of Lease Supplement No. 1 dated _______________ to the Lease Agreement, has
been recorded by the FAA on _______________, 199_ as one document and
assigned Conveyance No. __________.

        NOW THEREFORE, in consideration of the premises and other good,
valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
follows:

---------------
*This language for Lease Supplement No. 1

**This language for other Lease Supplements.

<PAGE>

                                                                             72

1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered
Aircraft"), which Delivered Aircraft as of the date hereof consists of the
following:

          (i) One Boeing Model 737-230 Airframe, bearing U.S. registration
number N_____; Manufacturer's serial no._____; and

          (ii) Two Pratt & Whitney Model JT8D-9A engines, bearing
manufacturer's serial nos. _____ and _____, respectively, (each of which
engines has 750 or more rated takeoff horsepower or the equivalent thereof).

2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on _______________, 2004.

4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.

5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.

6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

<PAGE>

                                                                             73

        IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.

                                       LESSOR

                                       BANK OF HAWAII

                                       By: ___________________________________

                                       Title: ________________________________

                                       By: ___________________________________

                                       Title: ________________________________

                                       LESSEE

                                       ALOHA AIRLINES, INC.

                                       By: ___________________________________

                                       Title: ________________________________

                                       By: ___________________________________

                                       Title: ________________________________

<PAGE>

                                                                             74

                                 EXHIBIT "E"

                     APPOINTMENT AS ATTORNEY-IN-FACT

        Pursuant to the terms of Subsection 19 of the Lease (as hereinafter
defined), ALOHA AIRLINES, INC. ("LESSEE") hereby irrevocably appoints BANK OF
HAWAII ("LESSOR") as its true and lawful attorney-in-fact, to act in all
respects, do such acts and take such actions as LESSEE could do or authorize
itself under the Lease with respect to the use, operation, maintenance,
possession, registration, de-registration and lease termination of the Boeing
737-230ADV Aircraft, Serial Number _____, U.S. Registration No. N_____ (the
"Aircraft"), which LESSOR has leased to LESSEE by Aircraft Lease Agreement
dated as of September __, 1996 (the "Lease"). The appointment is made as part
of and in consideration of the leasing of the Aircraft to LESSEE by LESSOR
and shall remain in full force and effect until the earlier to occur of (i)
the date on which all obligations of LESSEE under the Lease shall be fully
discharged or satisfied, or (ii) __________, 2007.

Executed this _____ day of September, 1996.

                                       ALOHA AIRLINES, INC.

                                       By: ___________________________________

                                       Title: ________________________________

                                       By: ___________________________________

                                       Title: ________________________________

                                       Attested by:

                                       _______________________________________
(PLACE CORPORATE                       Secretary
SEAL HERE)

<PAGE>

                                                                             75

STATE OF                         )
                                 ) ss.:
COUNTY OF                        )

On the _____ day of _______________, 199__, before me personally came
____________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _______________; that he is the
____________________ of ________________, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.

                                       _______________________________________
                                       Notary Public

[Seal]

<PAGE>

                                                                             76

                                 EXHIBIT "F"

On the Effective Date for the Aircraft, LESSOR shall deliver and LESSEE shall
accept the Aircraft in an "as is, where is and with all faults" condition
other than the following conditions to which the Aircraft shall conform:

             (i) be clean to the standards of Lufthansa;

             (ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the German Airworthiness Authority
("LBA");

             (iii) comply with all airworthiness directives issued by the LBA
and FAA prior to the Effective Date of the Aircraft which requires compliance
on or before the Effective Date;

             (iv) have a valid airworthiness certificate for export, certifying
compliance with the airworthiness requirements of the Federal Republic of
Germany, issued by the LBA prior to the delivery of the Aircraft;

             (v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their intended
use;

             (vi) be in a configuration as normally flown by Lufthansa in
scheduled airline revenue service with regard to the fixed installed equipment;

             (vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSOR will use its reasonable
efforts to deliver the Aircraft equipment without Lufthansa's special markings;

             (viii) have accomplished all maintenance items except items
permitted to be deferred in accordance with Lufthansa's procedure for deferred
items until the next IL2 or D2 check;

             (ix) neutral livery with all of Lufthansa's special exterior
markings removed or painted over;

             (x) have installed two Pratt & Whitney JT8D-15 engines. LESSOR
shall deliver each engine with not less than 2,500 engine cycles of remaining
life until the next scheduled engine removal. Each Engine to be delivered
hereunder shall be subject to LESSEE's reasonable approval;

             (xi) have undergone a borescope inspection on the engines (at
LESSEE's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the manufacturer's
maintenance manual for the engine, same shall be corrected at LESSOR's cost and
expense or

<PAGE>

                                                                             77

LESSOR may provide a substitute engine which shall meet the delivery conditions
for an engine set forth herein;

             (xii) have undergone a power assurance run with LESSEE's
representatives present to ensure performance of the engines based on the Pratt
& Whitney maintenance manual;

             (xiii) have one (1) shipset of Nordam high gross weight hushkits
installed;

             (xiv) have performed a demonstration flight of the airframe in
accordance with Lufthansa's procedures with up to two representatives of LESSEE
on board the Aircraft during such flight. Any discrepancies in the airframe
found during such demonstration flight which are outside the limits set forth
in Lufthansa's maintenance program found during such demonstration flight shall
be corrected accordingly;

             (xv) be  certified  for a maximum  taxi gross weight of
120,000lbs.;

             (xvi)   have    reconfigured    the   cockpit switches into the
Boeing standard;

             (xvii)  have installed an APU in serviceable condition;

             (xviii)  have all gauges  converted  from the metric system to
the imperial system; and

             (xix) except with respect to the engines, landing gear and APU,
have installed hard time components with an average of fifty percent (50%)
minimum time of remaining life as defined under Lufthansa's LBA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program.

<PAGE>

                                                                             78

                                 EXHIBIT "G"

                            LEASE IDENTIFICATION

OWNER:           BANK OF HAWAII
LESSEE:          ALOHA AIRLINES, INC.

<PAGE>

                                                                             79

                                 EXHIBIT "H"

                              RETURN CONDITIONS

        A. The Aircraft will be redelivered in accordance with Section 17 of
the Lease and shall be in the following condition:

             (i)  be  clean  to  the  standards  of  major
international airlines;

             (ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the Federal Aviation Administration
("FAA");

             (iii) comply with all airworthiness directives issued by the FAA
prior to the Return Occasion of the Aircraft which requires compliance on or
before the originally scheduled Return Occasion;

             (iv) have a valid U.S. Standard Airworthiness Certificate or a
valid Airworthiness Certificate for Export, as LESSOR shall elect, certifying
compliance with the airworthiness requirements of the United States, issued by
the FAA prior to the return of the Aircraft;

             (v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their
intended use;

             (vi)  be  in  the  same  configuration  as at delivery with
regard to the fixed installed equipment;

             (vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSEE will use its
reasonable efforts to deliver the Aircraft equipment without LESSEE's special
markings;

             (viii) have accomplished all maintenance items (including, but not
limited to having fully accomplished all required corrosion prevention
controls, treatments, repairs and inspections in accordance with LESSEE's FAA
approved CPCP program) except items permitted to be deferred in accordance with
LESSEE's procedure for deferred items until the next D check;

             (ix) The Airframe shall be returned fresh from a B check performed
in accordance with LESSEE's Maintenance Program. Further, the Airframe shall
have an equal or greater amount of time remaining as when delivered to the next
scheduled D check, but with respect to the D check shall in all events have not
less than 3,000 flight hours remaining (as determined under LESSEE's
maintenance program) to the next scheduled D check. In the event that the
Aircraft has more or less time remaining to the next D check than it had
remaining on the Effective Date, D Check Compensation shall be paid in
accordance with the following formula and paid by the

<PAGE>

                                                                             80

relevant party in relation to any difference. If the D Check Compensation, as
calculated below, is a positive number, then, so long as no Default or Event of
Default has occurred and is continuing, LESSOR will pay to LESSEE such D Check
Compensation. If the D Check Compensation, as calculated below is a negative
number, then LESSEE will pay to LESSOR such D Check Compensation.

                  (a) D CHECK COMPENSATION. The "D Check Compensation" shall
be calculated as follows:

                      [Al-A2/B] x C

                      "A1" is the  total  number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Return Occasion.

                      "A2"  is  the   total   number   of Flight
Hours/Cycles (whichever is applicable and the more limiting factor) remaining
on the Aircraft until the next scheduled D check in accordance with LESSEE's
FAA approved maintenance program as of the Effective Date.

                      "B" is the  total  number  of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) between scheduled D
checks in accordance with LESSEE's FAA approved maintenance program.

                      "C"  is  the  cost  for  the  next D check of the
Aircraft in accordance with LESSEE's FAA approved maintenance program as
mutually agreed to by LESSOR and LESSEE (in the event that after a reasonable
period of time LESSOR and LESSEE cannot reach a mutual agreement on the cost
for the next D check, such cost will be established by taking the average of
the price quotes submitted by two (2) reputable FAA approved Airframe
overhaul facilities, one selected by LESSEE and the other selected by LESSOR).

Notwithstanding the foregoing, for the purposes of the calculation of D Check
compensation, "A1" shall not exceed 15,000 Flight Hours.

             (x) neutral livery with all of LESSEE's special exterior markings
removed or painted over;

             (xi) have installed two Pratt & Whitney JT8D-9A engines. LESSEE
shall use its reasonable efforts to deliver each engine with not less than
5,000 engine cycles of remaining life until the next scheduled engine removal,
but in no event shall any engine be delivered with less than 3,000 cycles
remaining. In the event that any Engine has more or less time remaining to the
next scheduled overhaul or hot section inspection (as determined in accordance
with LESSEE's FAA approved maintenance program) than 5,000 cycles, Engine
Adjustment Compensation for each such Engine shall be paid in accordance with
the following formula and paid by the relevant party in relation to any
difference. If any Engine is

<PAGE>

                                                                             81

returned with greater than 5,000 Cycles to the next scheduled overhaul or hot
section inspection, then LESSOR shall pay Engine Adjustment Compensation to
LESSEE on account of such Engine. if any Engine is returned with less than
5,000 Cycles to the next scheduled overhaul or hot section inspection, then
LESSEE shall pay Engine Adjustment Compensation to LESSOR on account of such
Engine.

                      [A/B] x C

                      "A"  is  the  average  cost  for  an engine overhaul or
hot section inspection, as mutually agreed to by LESSOR and LESSEE (in the
event that after a reasonable period of time LESSOR and LESSEE cannot reach a
mutual agreement on the cost for the engine overhaul or hot section
inspection, such cost will be established by taking the average of the price
quotes submitted by two (2) reputable FAA approved engine overhaul
facilities, one selected by LESSEE and the other selected by LESSOR).

                      "B" is 7,000

                      "C" is the  difference  between  the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is the
most limiting factor) on the Engine as of the Effective Date as determined
under the Engine Manufacturer's maintenance manual and the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is most
limiting factor) on the Engine as of the Return Occasion as determined under
LESSEE's FAA approved maintenance program.

Notwithstanding the foregoing, LESSOR shall have no obligation to compensate
LESSEE for any time to the next scheduled engine overhaul or hot section
inspection in excess of 7,000 Cycles.

             (xii) have undergone a borescope inspection on the engines (at
LESSOR's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the manufacturer's
maintenance manual for the engine, same shall be corrected at LESSEE's cost and
expense or LESSEE may provide a substitute engine which shall meet the return
conditions for an engine set forth herein;

             (xiii) have undergone a power assurance run with LESSOR's
representatives present to ensure performance of the engines based on the Pratt
& Whitney maintenance manual;

             (xiv) have performed a demonstration flight of the Aircraft in
accordance with LESSEE's procedures with up to two representatives of LESSOR on
board the Aircraft during such flight. Any discrepancies in the Aircraft found
during such demonstration flight which are outside the limits set forth in
LESSEE's maintenance program found during such demonstration flight shall be
corrected accordingly;

             (xv) be certified for a maximum taxi gross weight of 120,000lbs.;

             (xvi) have installed an APU in serviceable

<PAGE>

                                                                             82

condition;

             (xvii) have all gauges converted from the imperial system to the
metric system upon LESSOR's request;

             (xviii) except with respect to the engines, landing gear and APU,
have installed hard time components with an average of fifty percent (50%)
minimum time of remaining life as defined under LESSEE's FAA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program; and

             (xix) in the event that during the Base Term the Aircraft was
hushkitted to meet Stage III noise regulations (subsequent to the removal of
the Hushkits and return of same to LESSOR as contemplated by Section 8 (D) of
the Lease), LESSEE shall return the Aircraft with such hushkits so installed so
as to be compliance with such regulations (except in the case where the
hushkitting of the Aircraft was accomplished in the last twelve months of the
Base Term and LESSEE has elected not to extend the term of the Lease but has
instead elected to retain title to the hushkits).

<PAGE>

                                                             DUPLICATE ORIGINAL

                            LEASE SUPPLEMENT NO. 1

                                  dated as of

                              September 27, 1996

                                   between

                               BANK OF HAWAII,

                                                             LESSOR

                                    and

                            ALOHA AIRLINES, INC.,

                                                             LESSEE
<PAGE>

                           LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated September 27 1996, between ALOHA
AIRLINES, INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a Hawaii
banking corporation ("LESSOR").

     LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of September 27, 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from
time to time of Lease Supplements, each substantially in the form hereof, for
the purpose of leasing the Aircraft under the Lease Agreement as and when
delivered to the LESSEE in accordance with the terms thereof.

     The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.

     NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:

1.   LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230. aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:

     (i)  One Boeing Model 737-230 Airframe, bearing U.S. registration
number N821AL; Manufacturer's serial no. 23155; and

    (ii)  Two Pratt & Whitney Model JT8D-15 engines, bearing manufacturer's
serial nos. 687334 and 708328, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).

2.   The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

3.   The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on Sept. 26, 2004.

4.   LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.

5.   LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
Engine installed thereon have been accepted by LESSEE for all purposes hereof
and of the Lease Agreement, as being in the condition that such Delivered
Aircraft and Engines are required to be in pursuant to the terms of the Lease
Agreement.

6.   All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.

                                  LESSOR

                                  BANK OF HAWAII

                                  By:    /s/ Gabriel S. H. Lee
                                      ----------------------------------------
                                         Gabriel S. H. Lee
                                  Title: Vice President
                                        --------------------------------------

                                  LESSEE

                                  ALOHA AIRLINES, INC.

                                  By: ________________________________________

                                  Title: _____________________________________

                                  By: ________________________________________

                                  Title: _____________________________________
<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.

                                  LESSOR

                                  BANK OF HAWAII

                                  By: ________________________________________

                                  Title: _____________________________________

                                  LESSEE

                                  ALOHA AIRLINES, INC.

                                  By:    /s/ [ILLEGIBLE]
                                      ----------------------------------------
                                  Title: VICE PRESIDENT PLANNING & DEVELOPMENT
                                         -------------------------------------

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

                                  Title: STAFF VICE PRESIDENT - FINANCE
                                                 & CONTROLLER
                                         -------------------------------------
<PAGE>

                          CERTIFICATE OF ACCEPTANCE

     This Certificate of Acceptance is delivered on and as of the date set
forth below by ALOHA AIRLINES, INC. (hereinafter referred to as "LESSEE,) to
BANK OF HAWAII, (hereinafter referred to as "LESSOR") pursuant to that
Aircraft Lease Agreement dated as of September 27, 1996 between LESSOR and
LESSEE (hereinafter referred to as the "Agreement"):

     A.   DETAILS OF ACCEPTANCE

          LESSEE hereby indicates and confirms to LESSOR, its successors and
assigns, that the LESSEE has at 9:28 o'clock A.M., CDT on this 27th day of
Sept., 1996, at Berlin, Germany, accepted the following in accordance with the
provisions of the Agreement:

          1.  (a)  Boeing Model: 737-230

              (b)  Manufacturer's Serial No.: 23155

              (c)  U.S. Registration Number: N821AL

<Table>
<Caption>
             Manufacturer and   Manufacturer's   Hours       Cycles
Engine No.     Model Number     Serial Number    Remaining   Remaining
----------   ----------------   --------------   ---------   ---------
<S>          <C>                <C>              <C>         <C>
(1)         Pratt & Whitney     687334           9430.49     6461
            JT8D-15

(2)         Pratt & Whitney     708328           2707.49     3316
            JT8D-15
</Table>

Each of the above-described Engines having 750 or more rated take-off
horsepower or the equivalent thereof.

<Table>
<Caption>

Airframe
--------
<S>        <C>            <C>            <C>
           Total Time:    hrs. 26,494.21
           Total Cycles:  Cycles 24,373

           Time Remaining to "C" Check:  April 25, 1997
           Time Remaining to "D" Check:  Sept. 30, 2001
</Table>
<PAGE>

B.   CONFIRMATION OF UNDERTAKINGS

     LESSEE confirms that the above described Aircraft and Engines have been
     examined by its duly appointed and authorized representative(s), that
     such Aircraft and Engines conform to the information set forth above,
     that there have been fixed to the Aircraft the markings required by the
     Agreement (or that such markings shall be affixed to the Aircraft within
     fifteen (15) days of the date hereof). LESSEE confirms and acknowledges
     that the date set forth above constitutes the Effective Date, as such
     term is defined in the Agreement, and that LESSEE's execution and
     delivery of this Certificate represents LESSEE's acceptance of the above
     described Aircraft and Engines for all purposes of the Agreement.

IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s), or
representative(s), pursuant to due corporate authority, all as of the date
written in Section A above.

LESSEE: ALOHA AIRLINES, INC.

By /s/ James M. King
   ------------------------------------------
   Its VICE PRESIDENT PLANNING & DEVELOPMENT

By /s/ [ILLEGIBLE]
   ------------------------------------------
   Its STAFF VICE PRESIDENT - FINANCE
               & CONTROLLER

                                      2

<PAGE>

                                                                        ORIGINAL

                             LEASE SUPPLEMENT NO. 1

                                   dated as of
                               September 27, 1996

                                     between

                                 BANK OF HAWAII,

                                                                          LESSOR

                                       and

                              ALOHA AIRLINES, INC.,

                                                                          LESSEE

<PAGE>

                             LEASE SUPPLEMENT NO. 1
                             ----------------------

     LEASE SUPPLEMENT NO. 1, dated September 27, 1996, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a Hawaii banking
corporation ("LESSOR").

     LESSOR and LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of September 27, 1996 (herein called the "Lease Agreement"
and the defined terms therein being hereinafter used with the same meaning). The
Lease Agreement provides for the execution and delivery from time to time of
Lease Supplements, each substantially in the form hereof, for the purpose of
leasing the Aircraft under the Lease Agreement as and when delivered to the
LESSEE in accordance with the terms thereof.

     The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document.

     NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:

1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:

     (i) One Boeing Model 737-230ADV Airframe, bearing U.S. registration number
N821AL; Manufacturer's serial no.23155; and

     (ii) Two Pratt & Whitney Model JT8D-15 engines, bearing manufacturer's
serial nos.687334 and 708328, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).

2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

3. The Base Term for the Delivered Aircraft shall commence on the Effective Date
and shall end on September 27, 2004.

4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft throughout
the Base Term (and any extension thereof as provided in the Lease Agreement) in
accordance with the terms of the Lease Agreement.

5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.

6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.

                                        LESSOR

                                        BANK OF HAWAII

                                        By: /s/ GABRIEL S. H. LEE
                                                -------------------------------
                                                GABRIEL S. H. LEE
                                                -------------------------------
                                        Title:  VICE PRESIDENT
                                                -------------------------------
                                        By: /s/ JANIS OKAMOTO
                                                -------------------------------
                                                JANIS OKAMOTO
                                                -------------------------------
                                        Title:  AUTHORIZED SIGNATURE
                                                -------------------------------

                                        LESSEE

                                        ALOHA AIRLINES, INC.

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

<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.

                                        LESSOR

                                        BANK OF HAWAII

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

                                        LESSEE

                                        ALOHA AIRLINES, INC.

                                        By: /s/ JAMES M. KING
                                                -------------------------------
                                        Title:  VICE PRESIDENT PLANNING &
                                                -------------------------------
                                                DEVELOPMENT
                                                -------------------------------
                                        By: /s/ [ILLEGIBLE]
                                                -------------------------------
                                        Title:  STAFF VICE PRESIDENT - FINANCE
                                                -------------------------------
                                                & CONTROLLER
                                                -------------------------------

<PAGE>

                  ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT
                  ---------------------------------------------

     THIS ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT ("Assignment"), dated
as of December 26, 1996 is between BANK OF HAWAII ("Lessor"), ALOHA AIRLINES,
INC., a Hawaii Corporation ("Assignor") and ALOHA AIRLINES, INC., a Delaware
corporation ("Assignee").

                                    RECITALS
                                    --------

     WHEREAS, Lessor and Assignor entered into that certain Aircraft Lease
Agreement dated as of September 27, 1996, as it may be supplemented or amended
from time to time (the "Lease"), pursuant to which Assignor leased from Lessor
one (1) Boeing model 737-230ADV aircraft bearing manufacturer's serial number
23155 and registration mark N821AL (the "Aircraft");

     WHEREAS, effective December 26, 1996, Assignor merged with Assignee, and
Assignee emerged as the surviving entity and the successor in interest to
Lessee.

                                    AGREEMENT
                                    ---------

     NOW, THEREFORE, in consideration of these presents and for other valuable
consideration, the parties agree as follows.

     1. CERTAIN DEFINED TERMS. Unless otherwise defined herein or the context
otherwise requires, all capitalized terms used in this Assignment shall have the
respective meanings assigned to them in the Lease.

     2. ASSIGNMENT. As of December 26, 1996 (the "Effective Date"), the Assignor
hereby sells, assigns, transfers and conveys to Assignee all of the Assignor's
right, title and interest in and to the Lease, as if Assignee were the original
party to the Lease.

     3. ASSUMPTION BY ASSIGNEE. Assignee hereby accepts the foregoing sale,
assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
and, as of the Effective Date, agrees to assume and to be bound by all the terms
of, and to undertake all of the obligations of the Assignor contained in, the
Lease, including without limitation, all such obligations existing at or prior
to, or attributable to acts or events occurring prior to the Effective Date.

     4. LESSOR AND LENDER CONSENT.

        (a) Pursuant to Section 22(D) of the Lease, Lessor acknowledges and
consents to the foregoing sale,

<PAGE>

assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
under this Assignment, and acknowledge the rights and obligations of the
Assignee described in this Assignment.

        (b) Lessor further acknowledges and agrees that from and after the
Effective Date Assignee shall be deemed the "Lessee" for all purposes of the
Lease and each reference in the Lease to the Assignor as "Lessee" shall be
deemed after the Effective Date for all purposes to refer to the Assignee and
that, from and after the Effective Date Lessor will perform its obligations
under the Lease, in all respects as if Assignee were the original party to the
Lease as "Lessee" thereunder.

     5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE. Assignee
represents and warrants as follows:

        (a) Assignee is a corporation duly organized in existing in good
standing under the laws of the state of Delaware and has the corporate power and
authority to carry on its business as presently conducted and to perform its
obligations under this Assignment.

        (b) Assignee is not a Governmental Entity or government owned or
controlled and neither Assignee or its properties is immune from the
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) nor does it have the defense of sovereign immunity or similar
defense available to it in any legal action or proceeding.

        (c) Assignee is a citizen of the United States (as defined in 40102 of
Title 49 of the United States Code) holding an air carrier operating certificate
issued by the Secretary of Transportation of the United States pursuant to
chapter 447 of Title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo.

        (d) This Assignment has been duly authorized by all necessary corporate
action on the part of Assignee, does not require any approval of the
stockholders of Assignee (or if such approval is required, such approval has
been obtained), and neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby nor compliance by Assignee
with any of the terms and provisions hereof will contravene any Law applicable
to Assignee or result in any breach of, or constitute any default under, or
result in the creation of, any lien, charge or encumbrance upon any property of
Assignee under any indenture, mortgage, chattel mortgage, deed of trust,

<PAGE>

conditional sales contract, bank loan or credit agreement, corporate charter or
by-law, or other agreement or instrument to which Assignee is a party or by
which Assignee or its properties or assets may be bound or affected.

        (e) Assignee has received or has complied with every necessary consent,
approval, order, or authorization of, or registration with, or the giving of
prior notice to, any Governmental Entity having jurisdiction with respect to the
use and operation of the Aircraft and the execution and delivery of this
Assignment of the validity and enforceability hereof.

        (f) This Assignment has been duly entered into and delivered by Assignee
and constitutes a valid, legal and binding obligation of Assignee, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, moratorium or other similar Laws and by general
principles of equity, whether considered in a proceeding at Law or in equity.

     6. GOVERNING LAW. This Assignment shall governed by the Laws of the State
of Hawaii.

<PAGE>

     IN WITNESS WHEREOF, the undersigned parties have caused this Assignment,
Assumption, Amendment and Consent to be duly executed and delivered by their
duly authorized officers as of the date first written above.

ASSIGNOR:                                    ALOHA AIRLINES, INC., a Hawaii
                                             Corporation

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

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

ASSIGNEE:                                    ALOHA AIRLINES, INC., a
                                             Delaware Corporation

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

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

LESSOR:                                      BANK OF HAWAII

                                             By: /s/ MANUEL T. VALBUENA
                                                     ---------------------------
                                             Name:   MANUEL T. VALBUENA
                                                     ---------------------------
                                             Title:  VICE PRESIDENT
                                                     ---------------------------

                                             By: /s/ JANIS OKAMOTO
                                                     ---------------------------
                                             Name:   JANIS OKAMOTO
                                                     ---------------------------
                                             Title:  AUTHORIZED SIGNATURE
                                                     ---------------------------

<PAGE>

                                                          RECORDED

                                              Federal Aviation Administration

                                              Date  4-28-97        Time  4:05
                                                   ---------            ------

                                              Conveyance Number  T054014
                                                               ------------

                             LEASE SUPPLEMENT NO. 2
                             ----------------------

     LEASE SUPPLEMENT NO. 2, dated 4-25, 1997, between ALOHA AIRLINES, INC., a
Delaware corporation ("LESSEE") and BANK OF HAWAII, a banking corporation formed
under the laws of the State of Hawaii ("LESSOR").

     LESSOR and LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of September 27, 1996 (herein called the "Lease Agreement").
The defined terms in the Lease Agreement will hereinafter used with the same
meaning. The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements.

     The Lease Agreement relates to the aircraft and engines described therein,
and a counterpart of the Lease Agreement, attached to and made a part of Lease
Supplement No. 1 dated September 27, 1996 to the Lease Agreement, has been
recorded by the FAA on October 1, 1996 as one document and assigned Conveyance
No. 2A270153.

     NOW, THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:

1.   LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
     LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, as
     of the date hereof, the following described engines (the "Replacement
     Engines"), which consist of the following:

          Two Pratt & Whitney Model JT8D-9A engines, bearing manufacturer's
          serial numbers 666775 and 649358, respectively, (each of which engine
          has 750 or more rated takeoff horsepower or the equivalent thereof).

2.   LESSEE hereby confirms to LESSOR that the Replacement Engines have been
     accepted by LESSEE for all purposes hereof and of the Lease Agreement, as
     being in the condition that such Replacement Engines are required to be in
     pursuant to the terms of the Lease Agreement. Each of the Replacement
     Engines shall for all purposes hereof and of the Lease Agreement be deemed
     to be an "Engine" as defined in the Lease Agreement.

3.   All of the terms and provisions of the Lease Agreement are hereby
     incorporated by reference in this Lease Supplement to the same extent as if
     fully set forth herein.

4.   This Lease Supplement No. 2 shall be effective as of the date hereof.

<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.

                                        LESSOR:

                                        BANK OF HAWAII

                                        By /s/ CURTIS W. CHINN
                                               --------------------------------
                                                   CURTIS W. CHINN
                                               Its Senior Vice President

                                        By /s/ MARY E. SELLERS
                                               --------------------------------
                                                   MARY E. SELLERS
                                               Its Vice President

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

                                        By
                                               --------------------------------
                                               BRENDA F. CUTWRIGHT
                                               Its Senior Vice President
                                               Finance & Planning and CFO

                                        By
                                               --------------------------------
                                               JAMES M. KING
                                               Its Vice President Planning &
                                               Development

                                        2

<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.

                                        LESSOR:

                                        BANK OF HAWAII

                                        By
                                               --------------------------------
                                               Its

                                         By
                                               --------------------------------
                                               Its

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

                                        By /s/ BRENDA F. CUTWRIGHT
                                               --------------------------------
                                               BRENDA F. CUTWRIGHT
                                               Its Senior Vice President
                                               Finance & Planning and CFO

                                        By /s/ JAMES M. KING
                                               --------------------------------
                                               JAMES M. KING
                                               Its Vice President Planning &
                                               Development

                                        2

<PAGE>

                            ENGINE CHANGE AGREEMENT

     ENGINE CHANGE AGREEMENT, dated April 25, 1997 (the "Agreement"), between
Aloha Airlines, Inc. (the "Lessee") and Bank of Hawaii (the "Lessor").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, the Lessee and Lessor are parties to that certain Aircraft Lease
Agreement, dated as of September 27, 1996 (the "Lease");

     WHEREAS, Section 8(D) of the Lease provides that the two Pratt & Whitney
model JT8D-15 engines (the "Original Engines") described in Exhibit "A" to the
Lease and installed on the Aircraft (capitalized terms used herein and not
described herein shall have the meanings ascribed thereto in the Lease) on the
Effective Date will be removed from the Aircraft and replaced by two Pratt &
Whitney model JT8D-9A engines within six (6) months of the Effective Date;

     WHEREAS, Jetz Ventures Inc. (the "Seller"), has heretofore made available
to the Lessee two Pratt & Whitney model JT8D-9A engines bearing manufacturer's
serial numbers 666775 and 649358 (the "Swapped Engines") which are owned by
Aerothrust Corporation; and

     WHEREAS, the Original Engines have been removed from the Aircraft by or
with the consent and cooperation of the Lessee and the Swapped Engines are now
installed on the Aircraft;

     NOW, THEREFORE, in consideration of these premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lessee and the Lessor agree as follows:

     SECTION 1. CONDITION OF ENGINES. The Lessee hereby represents, warrants and
agrees with the Lessor that

     (a) prior to the date of this Agreement, the Lessee has had continuous
     actual or constructive possession of the Swapped Engines, has inspected and
     approved each of the Swapped Engines for acceptance pursuant to the Lease,
     and has caused the Swapped Engines to be installed on the Aircraft at its
     cost and expense,

     (b) the Swapped Engines satisfy in full the requirements of Section 8(D) of
     the Lease for the -9A's,

     (c) the Lessee unconditionally waives all delays in the delivery of the
     Swapped Engines and that the replacement of the Original Engines by the
     Swapped Engines constitutes

<PAGE>

     the satisfaction in full of all of the Lessor's obligations under Section
     8(D) of the Lease regarding such replacement,

     (d) from and after the date of this Agreement, each of the Swapped Engines
     shall constitute an Engine for all purposes of the Lease,

     (e) notwithstanding that on the date of this Agreement any of the Swapped
     Engines is not operable, is unavailable to the Lessee for use or is under
     maintenance, the Lessee waives, release and discharges any and all claims
     that any of the Swapped Engines does not satisfy the requirements of
     Section 8(D) of the Lease and is not an Engine which is subject in all
     respects to the Lease,

     (f) the Lessee will promptly on the date of this Agreement pay, remove, and
     discharge any and all Liens from each Swapped Engine (other than Permitted
     Liens),

     (g) in the event that, on the date of this Agreement, any Swapped Engine is
     in a condition that would constitute an Event of Loss if such Swapped
     Engine were heretofore subject to the Lease, such Swapped Engine shall
     constitute an Engine for which an Event of Loss has occurred and which was
     not then installed on the Aircraft, and the Lessee shall comply with the
     provisions of Section 12(B) of the Lease,

     (h) the Lease remains and will continue in full force and effect, and

     (i) the Lessor's sale of the Original Engines and the purchase of the
     Swapped Engines shall each constitute transactions arising out of the
     Lease, and the Lessor shall be entitled to the benefits of Section 11(A) of
     the Lease.

     SECTION 2. AMENDMENTS. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by the Lessor and the
Lessee, and no waiver of any provision of this Agreement, nor consent to any
departure by the Lessee therefrom, shall be effective unless it is in writing
and signed by the Lessor, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

     SECTION 3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.

     SECTION 4. DESCRIPTIVE HEADINGS. The descriptive headings of the various
provisions of this Agreement are inserted

<PAGE>

for convenience of reference only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.

     SECTION 5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Hawaii.

     SECTION 6. TIME OF THE ESSENCE. Time is of the essence in the observance
and performance by Lessee of its obligations under this Agreement.

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

                                        ALOHA AIRLINES, INC.

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

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

                                        BANK OF HAWAII

                                        By: /s/ CURTIS W. CHINN
                                                -------------------------------
                                        Title:  Senior Vice President
                                                -------------------------------
                                                Curtis W. Chinn
                                                -------------------------------

                                        By: /s/ MARY E. SELLERS
                                                -------------------------------
                                        Title:  Vice President
                                                -------------------------------
                                                Mary E. Sellers
                                                -------------------------------

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 1N  DATE: 5-30-96

       0 0 0 0 0 0 0 0 9 5 6
                                      0 6 0 0 7 6 9 1
   CERTIFIED COPY
TO BE RECORDED BY FAA                         [Illegible stamp]

                                          '96 MAY 21 AM 8 18
                                              [Illegible]

                            PARTIAL RELEASE
                                   OF
                        AIRCRAFT LEASE AGREEMENT
                                  AND
                          ASSIGNMENT OF LEASE

     THIS PARTIAL RELEASE OF AIRCRAFT LEASE AGREEMENT AND ASSIGNMENT OF LEASE
("Release"), dated as of March 13, 1996 by and among BJET, INC., a Delaware
corporation ("Lessor"), ALOHA AIRLINES, INC., an Hawaiian corporation
("Lessee") and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender").

                         W I T N E S S E T H :

     WHEREAS, Lessee and Lessor are parties to a certain Aircraft Lease
Agreement dated as of October 23, 1995 (the "Lease") pursuant to which Lessee
has leased from Lessor, among other things, two (2) Pratt & Whitney model
number JT8D-17A jet aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, identified by
manufacturer's serial numbers P7094618 and 709418, respectively
(collectively, the "Engines"); and

     WHEREAS, the rights of Lessor under the Lease have been collaterally
assigned to Lender pursuant to an Assignment of Lease dated as of October 23,
1995 between Lessor and Lender (the "Assignment"); and

     WHEREAS, the Lease and the Assignment have been recorded as one
instrument in the civil aircraft registry maintained by the Federal Aviation
Administration of the United States of America (the "FAA") on December 4,
1995 as Conveyance Number YY013352; and

     WHEREAS, Lessor and Lessee wish to release the Engines from the
provisions of the Lease, and Lessor and Lender wish to release the Engines
from the provisions of the Assignment,

     NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessee, Lessor and Lender hereby agree as follows:

                                   SEE RECORDED
                                   CONVEYANCE
                              NUMBER    YY013352
                                      ------------
                              FICHE # 8  PAGE #  24-249
                                     ---        --------

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 1N  DATE: 5-30-96

       0 0 0 0 0 0 0 0 9 5 7

     1.   RELEASE OF ENGINES FROM TERMS OF LEASE. Lessor and Lessee hereby
release the Engines from the terms of the Lease.

     2.   RELEASE OF ENGINES FROM TERMS OF ASSIGNMENT. Lessor and Lessee
hereby release the Engines from the terms of the Assignment.

     3.   EFFECTIVENESS. This Release shall be effective upon, and not
before, its due execution by Lessor, Lessee and Lender and its presentation
to and filing with the FAA for recordation in the civil aircraft registry
maintained by the FAA.

                                   -2-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 1N  DATE: 5-30-96

       0 0 0 0 0 0 0 0 9 5 8

     IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.

                             "Lessor"
                             BJET, INC., a Delaware corporation

                             BY: /s/ Nigel Minion
                                 -------------------------------
                             ITS: PRESIDENT
                                 -------------------------------

                             "Lessee"
                             ALOHA AIRLINES, INC., a Hawaiian corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             "Lender"
                             FINOVA CAPITAL CORPORATION, a Delaware
                             corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                                  -3-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 1N  DATE: 5-30-96

       0 0 0 0 0 0 0 0 9 5 9

     IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.

                             "Lessor"
                             BJET, INC., a Delaware corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             "Lessee"
                             ALOHA AIRLINES, INC., a Hawaiian corporation

                             BY: /s/ Brenda F. Cutwright
                                 -------------------------------
                             ITS: SR. VICE PRESIDENT FINANCE &
                                        PLANNING AND CFO
                                 -------------------------------

                             BY: /s/ Owen Sikura
                                 -------------------------------
                             ITS: STAFF VICE PRESIDENT - FINANCE
                                          & CONTROLLER
                                 -------------------------------

                             "Lender"
                             FINOVA CAPITAL CORPORATION, a Delaware
                             corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                                  -3-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 1N  DATE: 5-30-96

       0 0 0 0 0 0 0 0 9 6 0

     IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.

                             "Lessor"
                             BJET, INC., a Delaware corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             "Lessee"
                             ALOHA AIRLINES, INC., a Hawaiian corporation

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             BY:
                                 -------------------------------
                             ITS:
                                 -------------------------------

                             "Lender"
                             FINOVA CAPITAL CORPORATION, a Delaware
                             corporation

                             BY: /s/ Sandra K. McDonough
                                 -------------------------------
                             ITS: Vice-President
                                 -------------------------------

                                  -3-
<PAGE>

                                                         RECORDED
                                             Federal Aviation Administration

                                            Date   4-28-97      Time    4:03
                                                 --------------      ----------
                                             Conveyance Number       TO54013
                                                              -----------------

                              PARTIAL TERMINATION

          The undersigned hereby certify that the Aircraft Lease Agreement
described in the attached Appendix has terminated with respect to the Pratt &
Whitney model JT8D-15 aircraft engines with manufacturer's serial numbers
687334 and 708328, respectively, and further certify that said aircraft
engines are no longer subject to the terms thereof.

          Dated this  25th  day of  April , 1997.
                     ------        -------

LESSOR:                                   LESSEE:

BANK OF HAWAII                            ALOHA AIRLINES, INC.

By      /s/ Curtis W. Chinn               By
    --------------------------                --------------------------
          Curtis W. Chinn                         BRENDA F. CUTWRIGHT
    Its Senior Vice President                 Its Senior Vice President
                                              Finance & Planning and CFO

By      /s/ Mary E. Sellers               By
    --------------------------                --------------------------
          Mary E. Sellers                           JAMES M. KING
    Its   Vice President                      Its Vice President Planning
                                              & Development

<PAGE>

                              PARTIAL TERMINATION

          The undersigned hereby certify that the Aircraft Lease Agreement
described in the attached Appendix has terminated with respect to the Pratt &
Whitney model JT8D-15 aircraft engines with manufacturer's serial numbers
687334 and 708328, respectively, and further certify that said aircraft
engines are no longer subject to the terms thereof.

          Dated this  25th  day of  April , 1997.
                     ------        -------

LESSOR:                                   LESSEE:

BANK OF HAWAII                            ALOHA AIRLINES, INC.

By                                        By   /s/ Brenda F. Cutwright
    --------------------------                --------------------------
                                                  BRENDA F. CUTWRIGHT
    Its                                       Its Senior Vice President
                                              Finance & Planning and CFO

By                                        By      /s/ James M. King
    --------------------------                --------------------------
                                                    JAMES M. KING
    Its                                       Its Vice President Planning
                                              & Development

<PAGE>

                                    APPENDIX

Aircraft Lease Agreement dated as of September 27, 1996, by and between Bank
of  Hawaii, as lessor, and Aloha Airlines, Inc., as lessee, as supplemented
by and to which was attached Lease Supplement No. 1 dated September 27,
1996, as recorded by the Federal Aviation Administration on October 1,
1996, as Conveyance No. 2A270153.

<PAGE>

[ALOHA AIRLINES LOGO]
                                                          P.O. Box 30028
                                                          Honolulu, Hawaii 96820
April 25         , 1997
-----------------

Bank of Hawaii
111 S. King Street
Honolulu, Hawaii 96813

Re:     Aircraft Lease Agreement dated as of September 27,
        1996, as supplemented ("Lease"), between Bank of
        Hawaii ("Lessor") and Aloha Airlines, Inc. ("Lessee")
        relating to that certain Boeing 737-230ADV aircraft,
        bearing manufacturer's serial number 23155 and Federal
        Aviation Administration registration number N821AL.

Gentlemen:

This confirms our agreement that notwithstanding the execution,
delivery and filing of that certain  Partial Lease  Termination
dated as of April 25, 1997, between Aloha Airlines, Inc., as
Lessee, and Bank of Hawaii, as Lessor, the hushkits relating to
the two (2)  Pratt & Whitney  JT8D-15  Model  Engines, bearing
manufacturer's serial numbers 687334 and 708328, respectively,
have not been  redelivered  to Lessor and remain subject to the
Lease.

Very truly yours,

ALOHA AIRLINES, INC.

By /s/ Brenda F. Cutwright
   ---------------------------------
   BRENDA F. CUTWRIGHT
   Its Senior Vice President Finance
   & Planning and CFO

By /s/ James M. King
   ---------------------------------
   JAMES M. KING
   Its Vice President Planning &
   Development

AGREED:

BANK OF HAWAII

By /s/ Curtis W. Chinn
   ---------------------------------
       Curtis W. Chinn
   Its Senior Vice President

By /s/ Mary E. Sellers
   ---------------------------------
       Mary E. Sellers
   Its Vice President

<PAGE>

                                                         RECEIVED
                                             Federal Aviation Administration

                                            Date   9-4-98      Time   12:27 am
                                                 --------------      ----------
                                             Conveyance Number   JJ27940
                                                              -----------------
                                            By      [ILLEGIBLE]
                                               ---------------------

                  FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT

     THIS FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT dated as of July 1, 1998,
between ALOHA AIRLINES, INC., a corporation formed under the laws of the State
of Delaware ("LESSEE") and BANK OF HAWAII, a banking corporation formed under
the laws of the State of Hawaii ("LESSOR").

                                    RECITALS

     WHEREAS, LESSOR AND LESSEE have heretofore entered into that certain
Aircraft Lease Agreement dated as of September 27, 1996, to which were attached
Lease Supplement No. 1 dated as of September 27, 1996 and Certificate of
Acceptance dated as of September 27, 1996, filed together and recorded by the
Federal Aviation Administration (the "FAA") on October 1, 1996 as Conveyance
Number 2A270153, and further supplemented by Lease Supplement No. 2 dated as of
April 25, 1997 recorded by the FAA on April 28, 1997 as Conveyance Number
T054014 (herein collectively called the "Lease Agreement" and the defined terms
therein being hereinafter used with the same meaning); and

     WHEREAS, the Lease Agreement relates to one (1) The Boeing Company 737-230
model airframe, manufacturer's serial number 23155, bearing U.S. Registration
Number N821AL, together with two (2) Pratt & Whitney JT8D-9A model engines,
manufacturer's serial numbers 666775 and 649358; and

     WHEREAS, LESSOR AND LESSEE desire to amend the Lease Agreement in the
respects, and only in the respects, hereinafter set forth:

     NOW, THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:

1.   The definition of "Cash Flow" as set forth in Section 1 of the Lease
     Agreement shall be amended and restated in its entirety as follows:

     ""CASH FLOW" shall mean, with respect to Airgroup, the sum of (a) the net
     income of the Consolidated Group (excluding non-recurring gains and
     losses), PLUS (b) the sum of the following, to the extent deducted in
     determining net income: (i) depreciation and amortization allowances, (ii)
     interest expense (including Payments in Kind and imputed interest on
     Capital Leases), and (iii) deferred taxes, LESS (c) the change in the
     excess of non-cash current assets over current liabilities (other than
     those pertaining to unearned transportation revenue and payment of
     principal, interest or taxes) calculated on a rolling four quarters basis
     and computed at the end of each Quarter."

<PAGE>

2.   Section 1 shall be amended by the addition of the following definition of
     "Consolidated Group":

     ""CONSOLIDATED GROUP" shall mean Airgroup, Lessee and Aloha IslandAir,
     Inc., a Delaware corporation."

3.   The definition of "Debt Service" as set forth in Section 1 of the Lease
     Agreement shall be amended and restated in its entirety as follows:

     ""DEBT SERVICE" shall mean, with respect to Airgroup, the sum of regularly
     scheduled principal payments, interest payments and payments under Capital
     Leases made by the Consolidated Group, and dividends declared and payable
     by Airgroup, all calculated on a rolling four quarters basis and computed
     at the end of each Quarter."

4.   Section 1 shall be amended by the addition of the following definition of
     "Payments in Kind":

     ""PAYMENTS IN KIND" shall mean the issuance of additional subordinated
     debentures by Airgroup in lieu of interest."

5.   Section 1 shall be amended by the addition of the following definition of
     "Quarter":

     ""QUARTER" shall mean any one of the following three calendar month periods
     in any calendar year: April 1 to and including June 30; July 1 to and
     including September 30; October 1 to and including December 31; and January
     1 to and including March 31."

6.   All of the terms and provisions of the Lease Agreement are hereby
     incorporated by reference in this First Amendment to Lease Agreement to the
     same extent as if fully set forth herein.

7.   This First Amendment to Lease Agreement may be simultaneously executed in
     several counterparts, each of which shall be deemed to be an original, and
     all such counterparts together shall constitute but one and the same
     instrument.

8.   This First Amendment to Lease Agreement shall be effective as of July 1,
     1998.

                                        2

<PAGE>

     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this First Amendment to
Lease Agreement to be duly executed as of the day and year first above written.

                                             LESSOR:

                                             BANK OF HAWAII

                                             By:    /s/ Curtis W. Chinn
                                                    -----------------------
                                             Title: Curtis W. Chinn
                                                    Senior Vice President

                                             By:    /s/ Joseph T. Donalson
                                                    -----------------------
                                             Title: Joseph T. Donalson
                                                    Senior Vice President

                                             LESSEE:

                                             ALOHA AIRLINES, INC.

                                             By:    /s/ Brenda F. Cutwright
                                                    -----------------------
                                             Title: Sr. Vice President
                                                    Finance & Planning
                                                    and CFO

                                             By:    /s/ James M. King
                                                    -----------------------
                                             Title: Vice President
                                                    Planning & Development

                                      3

<PAGE>

[ ALOHA AIRLINES LOGO ]

                                                          P.O. Box 30028
                                                          Honolulu, Hawaii 96820

  April 25,   1997
-------------

Bank of Hawaii
111 S. King Street
Honolulu, Hawaii 96813

Re:  Aircraft Lease Agreement dated as of September 27,
     1996, as supplemented ("Lease"), between Bank of
     Hawaii ("Lessor") and Aloha Airlines, Inc. ("Lessee")
     relating to that certain Boeing 737-230ADV aircraft,
     bearing manufacturer's serial number 23155 and Federal
     Aviation Administration registration number N821AL.

Gentlemen:

This confirms our agreement that notwithstanding the execution,
delivery and filing of that certain Partial Lease Termination
dated as of April 25, 1997, between Aloha Airlines, Inc., as
Lessee, and Bank of Hawaii, as Lessor, the hushkits relating to
the two (2) Pratt & Whitney JT8D-15 Model Engines, bearing
manufacturer's serial numbers 687334 and 708328, respectively,
have not been redelivered to Lessor and remain subject to the
Lease.

Very truly yours,

ALOHA AIRLINES, INC.

By: /s/ Brenda F. Cutwright
    -----------------------
    BRENDA F. CUTWRIGHT
    Its Senior Vice President Finance
    & Planning and CFO

By: /s/ James M. King
    -----------------------
    JAMES M. KING
    Its Vice President Planning &
    Development

AGREED:

BANK OF HAWAII

By: /s/ Curtis W. Chinn
    -----------------------
        Curtis W. Chinn
    Its Senior Vice President

By: /s/ Mary E. Sellers
    -----------------------
        Mary E. Sellers
    Its Vice President

<PAGE>

                                                         RECEIVED
                                             Federal Aviation Administration

                                            Date   4-28-97      Time    4:03
                                                 --------------      ----------
                                             Conveyance Number      T054013
                                                              -----------------

                               PARTIAL TERMINATION

     The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the Pratt & Whitney
model JT8D-15 aircraft engines with manufacturer's serial numbers 687334 and
708328, respectively, and further certify that said aircraft engines are no
longer subject to the terms thereof.

     Dated this  25th  day of  April  , 1997.
                ------        -------

LESSOR:                                  LESSEE:

BANK OF HAWAII                           ALOHA AIRLINES, INC.

By  /s/ Curtis W. Chinn                  By
   -----------------------                   -----------------------
        Curtis W. Chinn                      BRENDA F. CUTWRIGHT
    Its Senior Vice President                Its Senior Vice President
                                             Finance & Planning and CFO

By  /s/ Mary E. Sellers                  By
    -----------------------                  -----------------------
        Mary E. Sellers                      JAMES M. KING
    Its Vice President                       Its Vice President Planning
                                             & Development

<PAGE>

                               PARTIAL TERMINATION

     The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the Pratt & Whitney
model JT8D-15 aircraft engines with manufacturer's serial numbers 687334 and
708328, respectively, and further certify that said aircraft engines are no
longer subject to the terms thereof.

     Dated this  25th  day of  April  , 1997.
                ------        -------

LESSOR:                                      LESSEE:

BANK OF HAWAII                               ALOHA AIRLINES, INC.

By                                           By: /s/ Brenda F. Cutwright
    -----------------------                  -----------------------
                                             BRENDA F. CUTWRIGHT
    Its                                      Its Senior Vice President
                                             Finance & Planning and CFO

By                                           By: /s/ James M. King
    -----------------------                  -----------------------
                                             JAMES M. KING
    Its                                      Its Vice President Planning
                                             & Development

<PAGE>

                                    APPENDIX

Aircraft Lease Agreement dated as of September 27, 1996, by and between Bank of
Hawaii, as lessor, and Aloha Airlines, Inc., as lessee, as supplemented by and
to which was attached Lease Supplement No. 1 dated September 27, 1996, as
recorded by the Federal Aviation Administration on October 1, 1996, as
Conveyance No. 2A270153.

<PAGE>

                  ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE

                                    [N821AL]

     This ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE (the "Amendment"), dated
August 23, 2001, among Bank of Hawaii, a Hawaiian corporation ("Assignor"),
Wells Fargo Bank Northwest, National Association, a national banking association
organized and existing under the laws of the United States of America, not in
its individual capacity but solely as owner trustee under the Trust Agreement
("Assignee") and Aloha Airlines, Inc., a Delaware corporation ("Lessee"), amends
the Lease Agreements between the Assignor as lessor and Lessee described in
ATTACHMENT 2 hereto (the "Leases"). Capitalized terms used in this document and
not defined herein will have the meanings ascribed in the Leases.

1.   RECITALS.

     A. Assignor and Lessee are parties to the Leases whereby Assignor leases to
Lessee one Boeing 737-230 airframe, together with the Pratt & Whitney aircraft
engines installed thereon, all as described on ATTACHMENT 1 hereto and together
with the components, parts and equipment installed thereon (the "Aircraft").

     B. The Leases are described and have been filed with the Federal Aviation
Administration ("FAN") as set forth on ATTACHMENT 2 hereto.

     C. Assignor desires to assign all of its rights, titles and interests in
and to the Leases to Assignee and to have the Assignee assume Assignor's
obligations under each Lease. Assignee desires to accept such assignment and
assume such obligations.

     D. The parties hereto wish to amend the Leases to reflect such assignment
to Assignee.

     NOW THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

2.   ASSIGNMENT AND ASSUMPTION.

     Effective from and after the date hereof, Assignor hereby assigns,
transfers and sets over unto Assignee, all of Assignor's rights, titles and
interests in and to, and delegates to Assignee all of Assignor's obligations
under, the Leases, and Assignee hereby accepts such assignment and assumes such
obligations so delegated relating to the period existing after the date hereof.
EXCEPT AS IS SPECIFICALLY SET FORTH HEREIN, AND IN ANY OTHER WRITING EXECUTED BY
THE ASSIGNOR AND THE ASSIGNEE, ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER CONCERNING THE AIRCRAFT,
INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY OR CONDITION OF THE
AIRCRAFT, OR ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE OPERATION OR

                                     Page 1

<PAGE>

PERFORMANCE OF THE AIRCRAFT OR PATENT INFRINGEMENT OR THE LIKE. THE AIRCRAFT AND
ANY INTERESTS THEREIN ARE BEING TRANSFERRED ON A STRICT "AS IS, WHERE IS, WITH
ALL FAULTS" BASIS.

3.   AMENDMENTS TO LEASES.

     Effective from and after the date hereof, each Lease is hereby amended as
follows:

(a)  The term "Lessor" shall mean Assignee.

(b)  All rent payable by Lessee to Lessor under the Leases shall be paid to the
     following account which is designated by the Assignee as the account for
     payment of rent as provided in the Leases

                 Bank of Hawaii
                 ABA No. 121301028
                 For further credit to:   Bank of Hawaii
                                          Equipment Leasing Division #248
                                          GL#9248-540626 (Deferred Payment Order
                                          Account)
                 Advise James Ouchi at (808) 537-8642
                 ref: Sale of Aloha Aircraft

or as Lessor may otherwise direct in writing, by wire transfer of immediately
available funds with sufficient information to identify the sources and
application of such funds no later than 2:00 p.m. Central Time on the due date
for such payment.

     (c) Section 8(C) of the Lease as to the Aircraft described on ATTACHMENT 2
is amended to delete the entitlement of the Lessee to remove the avionics black
boxes installed by the Lessee with respect to the TCAS and windshear detection
systems.

4.   LEASE PROVISIONS NOT MODIFIED HEREIN.

     Except as specifically set forth in this Amendment, all terms and
provisions of the Lease remain unamended and unmodified and in full force and
effect except that all references in the Leases to "this Lease," "hereof,"
"hereby" and the like shall mean the Leases as amended hereby.

5.   OBLIGATIONS OF LESSOR AND ASSIGNEE.

     Assignee shall not have any obligation or liability under the Leases by
reason of, or arising out of, Assignor's performance of, or failure to perform,
any of its obligations under the Leases arising, or relating to the period,
prior to the date and time of Closing, i.e., August 23, 2001 at 1:11 p.m.
Central Time, and Assignor shall not have any obligation or liability under the
Leases by reason of, or arising out of, Assignee's performance of, or failure to
perform, any of its obligations under the Leases arising, or relating to the
period, from and after the Closing.

6.   ACKNOWLEDGMENTS.

                                     Page 2

<PAGE>

     (a) Lessee acknowledges and consents to the assignment of the Leases to the
Assignee.

     (b) For the benefit of the Assignee and any lender to whom the Assignee
grants a security interest in the lessor's interest in the Leases, Lessee
represents and warrants as follows:

         (i) The Lessee is the current lessee under the Leases and there are no
sublessees or assignees of the Lessee's rights under the Lease.

         (ii) Rent under the Leases is payable monthly, in advance or arrears,
on the rent payment dates all as specified in ATTACHMENT 3. NO installment of
rent due under the Leases has been paid in advance of its specified due date;

         (iii) no event of default under any of the Leases has occurred and is
continuing and no loss nor event of loss nor event which, with the giving of
notice or passage of time or both would constitute an event of loss has occurred
and is continuing under any of the Leases;

         (iv) the agreements described on ATTACHMENT 2 constitute the entire
lease agreement among Lessor and Lessee with respect to the Aircraft and, except
as described on ATTACHMENT 2, none of such agreements has been amended,
supplemented or modified nor has any provision of any thereof been waived by any
party thereto and each is in full force and effect;

         (v) The Lessee's "Airgroup" currently meets the "Credit Standards" as
those terms are defined in Section 5(D) of the Lease as to the Aircraft
described on ATTACHMENT 2;

         (vi) Lessee has not placed or permitted to be placed any lien on the
Aircraft other than Lessor's liens permitted to be placed by the Lessor upon the
Aircraft or the Leases by the terms the Leases; and

         (vii) The Lessee has no knowledge of any adverse claim to the Rents (as
defined in the Lease) or the Aircraft, other than the rights of the Lessee or
Assignee or any lender granted a security interest in the Leases by the
Assignee.

7.   GOVERNING LAW.

     The parties intend that this Amendment shall be governed by and construed
in accordance with the laws of the State of Hawaii, without reference to rules
governing conflicts of laws.

8.   COUNTERPARTS.

     This Amendment may be executed in multiple counterparts, which when any,
but not necessarily the same, counterpart is executed by all of the parties will
constitute the binding agreement of each.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

                                     Page 3

<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.

                                BANK OF HAWAII, a Hawaii corporation

                                By:              /s/ Ken D. Oishi
                                    -------------------------------------------
                                Printed Name:        KEN D. OISHI
                                              ---------------------------------
                                Title:               VICE PRESIDENT
                                       ----------------------------------------

                                By:              /s/ William G. Homan
                                    -------------------------------------------
                                Printed Name:        WILLIAM G. HOMAN
                                              ---------------------------------
                                Title:               VICE PRESIDENT
                                       ----------------------------------------

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

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

                                ALOHA AIRLINES, INC., a Delaware corporation

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

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

                                     Page 5

<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.

                                BANK OF HAWAII, a Hawaii corporation

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

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

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

                                By:              /s/ Michael D. Hoggan
                                    -------------------------------------------
                                Printed Name:        MICHAEL D. HOGGAN
                                              ---------------------------------
                                Title:               ASSISTANT VICE PRESIDENT
                                       ----------------------------------------

                                ALOHA AIRLINES, INC., a Delaware corporation

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

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

                                     Page 5

<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.

                                BANK OF HAWAII, a Hawaii corporation

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

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

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

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

                                ALOHA AIRLINES, INC., a Delaware corporation

                                By:              /s/ Brenda F. Cutwright
                                    -------------------------------------------
                                Printed Name:        Brenda F. Cutwright
                                              ---------------------------------
                                Title:         Executive Vice President & CFO
                                       ----------------------------------------

                                By:              /s/ James M. King
                                    -------------------------------------------
                                Printed Name:        James M. King
                                              ---------------------------------
                                Title:       Sr. Vice President Planning &
                                       ----------------------------------------
                                             Business Development

                                     Page 4
<PAGE>

                                 ATTACHMENT 1 TO
                  ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE

                             DESCRIPTION OF AIRCRAFT
                                    [N821AL]
<Table>
<Caption>
<S>                               <C>
AIRCRAFT TYPE:                    Boeing 737-230
AIRCRAFT REGISTRATION MARK:       N821AL
MODEL NUMBER:                     Boeing 737-230
SERIAL NUMBER:                    23155
</Table>

TOGETHER WITH THE FOLLOWING PRATT AND WHITNEY ENGINES:

<Table>
<Caption>
        Engine                    Engine
        Model No.                 Serial No.
        --------                  ----------
        <S>                       <C>
        JT8D-9A                   666775
        JT8D-9A                   649358
</Table>

                                     Page 5

<PAGE>

                                 ATTACHMENT 2 TO
                     ASSIGNMENT, ASSUMPTION AND AMENDMENT OF
                                      LEASE

                         DESCRIPTION OF AIRCRAFT LEASES
                                    [N821AL]

LEASE AS TO THE AIRCRAFT

-    Aircraft Lease Agreement dated as of September 27, 1996, between Aloha
     Airlines, Inc., as lessee (the "Lessee") and Bank of Hawaii, as lessor (the
     "Lessor"), as supplemented by Lease Supplement No. 1 dated as of September
     27, 1996 and Certificate of Acceptance dated as of September 27, 1996,
     covering, INTER ALIA, one Boeing model 737-230 airframe, manufacturer's
     serial number 23155, FAA registration number N821AL, together with two (2)
     Pratt & Whitney model JTBD-15 aircraft engines, manufacturer's serial
     numbers 687334 and 708328, filed together and recorded by the Federal
     Aviation Administration (the "FAA") on October 1, 1996 as Conveyance No.
     2A270153.

-    Partially terminated by Partial Termination dated as of April 25, 1997
     covering, INTER ALIA, two (2) Pratt & Whitney model JT8D-15 aircraft
     engines, manufacturer's serial numbers 687334 and 708328.

-    Supplemented by Lease Supplement No. 2 dated as of April 25, 1997 and
     Certificate of Acceptance dated as of April 25, 1997, and Certificate of
     Acceptance dated as of April 25, 1997, covering, INTER ALIA, one Boeing
     model 737-230 airframe, manufacturers serial number 23155, FAA registration
     number N821AL, together with two (2) Pratt & Whitney model JT8D-9A aircraft
     engines, manufacturer's serial numbers 666775 and 649358, filed together
     and recorded by the Federal Aviation Administration (the "FAA") on April
     28, 1997 as Conveyance No. T054014.

-    Amended by First Amendment to Aircraft Lease Agreement dated as of July 1,
     1998.

                                     Page 6

<PAGE>

                                 ATTACHMENT 3 TO
                     ASSIGNMENT, ASSUMPTION AND AMENDMENT OF
                                      LEASE

                                SCHEDULE OF RENTS
                                     N821AL

<Table>
<Caption>
     Aircraft Lease
       (N821AL)
------------------------
<S>          <C>
08/27/01     132,000.00
09/27/01     132,000.00
10/27/01     132,000.00
11/27/01     132,000.00
12/27/01     132,000.00
01/27/02     132,000.00
02/27/02     132,000.00
03/27/02     132,000.00
04/27/02     132,000.00
05/27/02     132,000.00
06/27/02     132,000.00
07/27/02     132,000.00
08/27/02     132,000.00
09/27/02     132,000.00
10/27/02     132,000.00
11/27/02     132,000.00
12/27/02     132,000.00
01127/03     132,000.00
02/27/03     132,000.00
03/27/03     132,000.00
04/27/03     132,000.00
05/27/03     132,000.00
06/27/03     132,000.00
07/27/03     132,000.00
08/27/03     132,000.00
09/27/03     132,000.00
10/27/03     132,000.00
11/27/03     132,000.00
12/27/03     132,000.00
01/27/04     132,000.00
02/27/04     132,000.00
03/27/04     132,000.00
04/27/04     132,000.00
05/27/04     132,000.00
06/27/04     132,000.00
07/27/04     132,000.00
08/27/04     132,000.00
</Table>

                                     Page 7

<PAGE>

                                     Page 8

<PAGE>

                      AMENDMENT TO AIRCRAFT LEASE AGREEMENT
                                    [N821AL]

           This Amendment to the Aircraft Lease Agreement dated as of September
  27, 1996 between Bank of Hawaii ("B of H") as lessor and Aloha Airlines, Inc.
  ("Aloha") as lessee is executed among Wells Fargo Bank Northwest National
  Association, not in its individual capacity but solely as owner trustee (the
  "Trustee") under an Equipment Trust Agreement dated as of August 23, 2001,
  for the benefit of BCI 2001-4, LLC, a Delaware limited liability company
  ("BCI"), B of H and Aloha as of this 31st day of October, 2001.

   1.      RECITALS

           1.1 On or about September 27, 1996, B of H as lessor and Aloha as
  lessee entered into an Aircraft Lease Agreement and Lease Supplement No. 1 to
  such Lease Agreement regarding a Boeing model 737-230 aircraft having Federal
  Aviation Administration No. N821AL and manufacturer's serial number 23155.
  That Aircraft Lease Agreement, as amended and supplemented to date, is
  described in EXHIBIT A attached hereto, and is referred to as the "Lease" in
  this Amendment. All capitalized terms not otherwise defined in this Amendment
  will have the meanings ascribed in the Lease.

           1.2 The rights of B of H as lessor under the Lease have been assigned
  to the Trustee for the benefit of BCI.

           1.3 The parties to the Lease wish to amend the Lease as set forth
  herein.

           Accordingly, the parties to this Amendment agree as follows:

  2.       AMENDMENT TO LEASE

           The Agreed Value of the Aircraft for insurance purposes set forth in
 Section 1 to the Lease is amended by the Trust and the Lessee from $12,000,000
 to $7,500,000.00.

 3.        CONSENT

           B of H, as lender, and BCI consent to amendment of the Lease as
specified herein.

 4.        EFFECT OF AMENDMENT

           As amended heretofore and hereby, the Lease will remain in full force
  and effect. In the case of any conflict between this Amendment and the Lease,
  the terms of this Amendment will control.

 5.        FILING WITH THE FAA

           Because this Amendment affects financial terms of the Lease only,
  this Amendment is not to be filed with the Federal Aviation Administration.

                                     Page 1

<PAGE>

 5.        FILING WITH THE FAA

           Because this Amendment affects financial terms of the Lease only,
  this Amendment is not to be filed with the Federal Aviation Administration.

           Executed as of this 31st day of October, 2001.

                                   BANK OF HAWAII, a Hawaii corporation

                                   By: /s/ Ken D. Oishi
                                       --------------------------------
                                   Printed Name: Ken D. Oishi
                                   Title: Vice President

                                   By: /s/ Joseph T. Donaldson
                                       --------------------------------
                                   Printed Name: Joseph T. Donaldson
                                   Title: Senior Vice President

                                   WELLS FARGO BANK NORTHWEST,
                                   NATIONAL ASSOCIATION, not in its individual
                                   capacity but solely as Owner Trustee under
                                   that certain Equipment Trust Agreement
                                   [N821AL & N823AL] dated as of August 23,2001

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   BCI 2001-4, LLC, a Delaware limited liability
                                   company
                                   By: BCI Aircraft Leasing, Inc, an Illinois
                                       corporation, its manager

                                   By: __________________________________
                                   Printed Name: Brian N. Hollnagel
                                   Title: President

                                      Page 2

<PAGE>

     Executed as of this 31st day of October, 2001.

                                   BANK OF HAWAII, a Hawaii corporation

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   WELLS FARGO BANK NORTHWEST, NATIONAL
                                   ASSOCIATION, not in its individual capacity
                                   but solely as Owner Trustee under that
                                   certain Equipment Trust Agreement [N821AL &
                                   N823AL] dated as of August ___, 2001

                                   By: /s/ Michael D. Hoggan
                                       ----------------------------------
                                   Printed Name: Michael D. Hoggan
                                                 ------------------------
                                   Title: Assistant Vice President
                                          -------------------------------

                                   BCI 2001-4, LLC, a Delaware limited
                                   liability company

                                   By: BCI Aircraft Leasing, Inc., an Illinois
                                       corporation, its manager

                                   By: __________________________________
                                   Printed Name: Brian N. Hollnagel
                                   Title: President

                                     Page 2

<PAGE>

           Executed as of this 31st day of October, 2001.

                                   BANK OF HAWAII, a Hawaii corporation

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   WELLS FARGO BANK NORTHWEST, NATIONAL
                                   ASSOCIATION, not in its individual capacity
                                   but solely as Owner Trustee under that
                                   certain Equipment Trust Agreement [N821AL &
                                   N823AL] dated as of August ___, 2001

                                   By: __________________________________
                                   Printed Name: ________________________
                                   Title: _______________________________

                                   BC1 2001-4, LLC, a Delaware limited liability
                                   company
                                   By: BCI Aircraft Leasing, Inc., an Illinois
                                   corporation, its manager

                                   By: /s/ Brian N. Hollnagel
                                       ----------------------------------
                                   Printed Name: Brian N. Hollnagel
                                   Title: President

                                     Page 2

<PAGE>

                                   ALOHA AIRLINES, INC., a Delaware corporation

                                   By: /s/ Brenda F. Cutwright
                                       ----------------------------------
                                   Printed Name: BRENDA F. CUTWRIGHT
                                                 ------------------------
                                   Title:        EXECUTIVE VICE PRESIDENT & CFO
                                          -------------------------------

                                   By: /s/ James M. King
                                       ----------------------------------
                                   Printed Name:  JAMES M. KING
                                                 ------------------------
                                   Title: SENIOR VICE PRESIDENT PLANNING
                                          AND BUSINESS DEVELOPMENT
                                          -------------------------------

                                     Page 3

<PAGE>

                                    EXHIBIT A
                           Description of N821AL Lease

     LEASE AS TO THE AIRCRAFT

     -    Aircraft Lease Agreement dated as of September 27, 1996, between Aloha
          Airlines, Inc., as lessee (the "Lessee") and Bank of Hawaii, as
          borrower (the "Borrower"), as supplemented by Lease Supplement No. 1
          dated as of September 27, 1996 and Certificate of Acceptance dated as
          of September 27, 1996, covering, INTER ALIA, one Boeing model 737-230
          airframe, manufacturer's serial number 23155, FAA registration number
          N821AL, together with two (2) Pratt & Whitney model JT8D-15 aircraft
          engines, manufacturer's serial numbers 687334 and 708328

     -    Partially terminated by Partial Termination dated as of April 25, 1997
          covering, INTER ALIA, two (2) Pratt & Whitney model JT8D-15 aircraft
          engines, manufacturer's serial numbers 687334 and 708328.

     -    Supplemented by Lease Supplement No. 2 dated as of April 25, 1997 and
          Certificate of Acceptance dated as of April 25, 1997, covering, INTER
          ALIA, one Boeing model 737-230 airframe, manufacturer's serial number
          23155, FAA registration number N821AL, together with two (2) Pratt &
          Whitney model JT8D-9A aircraft engines, manufacturer's serial numbers
          666775 and 649358

     -    Amended by First Amendment to Aircraft Lease Agreement dated as of
          July 1, 1998

     -    Amended by Assignment, Assumption and Amendment of Lease dated as of
          August 23, 2001

                                     Page 1<PAGE>
                                                                   EXHIBIT 10.50

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

                            DATED: JANUARY 15, 1997

                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                    - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                        --------------------------------
                               LEASE AGREEMENT 802
                                 - relating to -
                            Boeing 737-2S5C Aircraft
                         Manufacturers Serial No: 22148
                          U.S. Registration Mark N802AL
                        --------------------------------

                        FELTMAN, KARESH, MAJOR & FARBMAN,
                          Limited Liability Partnership
                               Carnegie Hall Tower
                              152 West 57th Street
                            New York, New York 10019

                                                          RECORDED

                                              Federal Aviation Administration

                                              Date  1-27-97      Time  4:10 PM
                                                   ---------           -------

                                              Conveyance Number  TT008434
                                                               ------------

                                              By /s/       [Illegible]
                                                      --------------------

<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
1.     DEFINITIONS and INTERPRETATION ................................................................1
       1.1   Definitions .............................................................................1
       1.2   Interpretation .........................................................................13

2.     REPRESENTATIONS and WARRANTIES................................................................14
       2.1   Lessee's Representations and Warranties ................................................14
       2.2   Lessee's Further Representations and Warranties ........................................15
       2.3   Repetition .............................................................................16
       2.4   Lessor's Representations and Warranties ................................................17
       2.5   Repetition .............................................................................18

3.     CONDITIONS PRECEDENT..........................................................................18
       3.1   Lessor's Documentary Conditions Precedent ..............................................18
       3.2   Lessor's Other Conditions Precedent ....................................................19
       3.3   Lessor's Waiver ........................................................................19
       3.4   Lessee's Conditions Precedent ..........................................................20
       3.5   Lessee's Waiver ........................................................................20

4.     COMMENCEMENT..................................................................................20
       4.1   Leasing.................................................................................20
       4.2   Delivery................................................................................21
       4.3   Acceptance and Risk.....................................................................21

5.     PAYMENTS......................................................................................21
       5.1   Security Deposit; Letter of Credit .....................................................21
       5.2   Rental Periods .........................................................................23
       5.3   Basic Rent .............................................................................23
       5.4   Payments ...............................................................................24
       5.5   Gross-up ...............................................................................24
       5.6   Taxation ...............................................................................24
       5.7   Information ............................................................................25
       5.8   Taxation of Indemnity Payments .........................................................25
       5.9   Default Interest .......................................................................26
       5.10  Contest ................................................................................26
       5.11  Absolute ...............................................................................27

6.     MANUFACTURER'S WARRANTIES.....................................................................28
</Table>

                                      -i-
<PAGE>

                               TABLE OF CONTENTS
                                   continued
<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       6.1   Assignment .............................................................................28
       6.2   Proceeds ...............................................................................29
       6.3   Parts ..................................................................................29
       6.4   Agreement ..............................................................................29

7.     LESSOR'S COVENANTS and DISCLAIMERS............................................................30
       7.1   Quiet Enjoyment ........................................................................30
       7.2   Maintenance Contribution ...............................................................30
       7.3   Registration and Filings ...............................................................31
       7.4   Agreed Maintenance Performers ..........................................................31
       7.5   Exclusion ..............................................................................31
       7.6   Lessee's Waiver ........................................................................32
       7.7   Lessee's Confirmation ..................................................................32

8.     LESSEE'S COVENANTS............................................................................32
       8.1   Duration ...............................................................................32
       8.2   Information ............................................................................32
       8.3   Lawful and Safe Operation ..............................................................34
       8.4   Taxes and Other Charges ................................................................36
       8.5   Sub-Leasing ............................................................................36
       8.6   Inspection .............................................................................37
       8.7   Protection of Title ....................................................................37
       8.8   General ................................................................................38
       8.9   Records ................................................................................39
       8.10  Registration and Filings ...............................................................39
       8.11  Maintenance and Repair .................................................................40
       8.12  Removal of Engines and Parts ...........................................................41
       8.13  Installation of Engines and Parts ......................................................42
       8.14  Non-Installed Engines and Parts ........................................................44
       8.15  Pooling of Engines and Parts ...........................................................45
       8.16  Equipment Changes ......................................................................45
       8.17  Title to Engines and Parts .............................................................46
       8.18  Third Parties ..........................................................................46

9.     INSURANCE.....................................................................................46
       9.1   Insurances..............................................................................46
</Table>

                                     -ii-

<PAGE>

                               TABLE OF CONTENTS
                                   continued

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       9.2   Requirements ...........................................................................47
       9.3   Insurance Covenants ....................................................................47
       9.4   Failure to Insure ......................................................................48
       9.5   Continuing Indemnity ...................................................................49
       9.6   Application of Insurance Proceeds ......................................................49

10.    INDEMNITY.....................................................................................50
       10.1  General.................................................................................50
       10.2  Mitigation..............................................................................51
       10.3  Duration................................................................................52

11.    EVENTS OF LOSS................................................................................52
       11.1  Total Loss..............................................................................52
       11.2  Requisition.............................................................................53

12.    RETURN OF AIRCRAFT............................................................................54
       12.1  Redelivery .............................................................................54
       12.2  Final Checks ...........................................................................54
       12.3  Final Inspection .......................................................................55
       12.4  Non-Compliance .........................................................................56
       12.5  Export Documentation ...................................................................56
       12.6  Acknowledgment .........................................................................57
       12.7  Maintenance Program ....................................................................57
       12.8  Storage ................................................................................57

13.    DEFAULT.......................................................................................58
       13.1  Events..................................................................................58
       13.2  Rights..................................................................................62
       13.3  Export..................................................................................62
       13.4  Default Payments........................................................................63

14.    ASSIGNMENT and TRANSFER ......................................................................64
       14.1  No assignment by Lessee ................................................................64
       14.2  Lessor Assignment ......................................................................64
       14.3  Grants of Security Interests ...........................................................66
       14.4  Sale and Leaseback by Lessor ...........................................................68
</Table>

                                    -iii-

<PAGE>

                               TABLE OF CONTENTS
                                   continued

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       14.5  Further Acknowledgments ................................................................68
       14.6  Certain Protections for Lessee's Benefit ...............................................68

15.    MISCELLANEOUS.................................................................................69
       15.1  Waivers, Remedies Cumulative............................................................69
       15.2  Delegation .............................................................................69
       15.3  Appropriation ..........................................................................69
       15.4  Currency Indemnity .....................................................................69
       15.5  Payment by the Lessor ..................................................................70
       15.6  Severability ...........................................................................70
       15.7  Remedy .................................................................................70
       15.8  Expenses ...............................................................................70
       15.9  Time of Essence ........................................................................71
       15.10 Notices ................................................................................71
       15.11 Law and Jurisdiction ...................................................................72
       15.12 Sole and Entire Agreement ..............................................................73
       15.13 Indemnities ............................................................................73
       15.14 Counterparts ...........................................................................73
       15.15 Confidentiality ........................................................................74

SCHEDULES

       1. Aircraft Specification                                                                     76
       2. Certificate of Acceptance 802                                                              80
       3. Operating Condition at Redelivery                                                          84
       4. Insurance Requirements                                                                     89
       5. Form of Legal Opinion                                                                      94
       6. Form of Letter of Credit                                                                   95
       7. Form of Semi-Annual Status Report                                                          96
</Table>

                                     -iv-

<PAGE>

THIS LEASE AGREEMENT is made the 15th day of January, 1997

BETWEEN:

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

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

WHEREAS:

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

(B)     Pursuant to a Purchase Option Agreement 802, dated as of September 26,
        1996, between Lessee, as seller, and Lessor, as buyer (the "Purchase
        Agreement"), Lessor has exercised its option to purchase the Aircraft
        from Lessee, and Lessor has agreed to lease the Aircraft to the Lessee
        with effect from the purchase of the Aircraft upon and subject to the
        covenants, terms and conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.      DEFINITIONS AND INTERPRETATION

1.1     DEFINITIONS

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

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

        AFFILIATE               in relation to any person, any other person
                                controlled directly or indirectly by that
                                person, any other person that controls directly
                                or indirectly that person or any other person
                                under common control with that person. For this
                                purpose "control" of any entity or person

                                     - 1 -
<PAGE>

                                means ownership of a majority of the voting
                                power of the entity or person.

AGREED MAINTENANCE PERFORMER    the Lessee or any other reputable maintenance
                                organization that is (i) experienced in
                                maintaining aircraft and/or engines of the same
                                type as the Aircraft and the Engines, (ii) duly
                                certificated by the FAA under FAR Part 145, and
                                (iii) not objected to by Lessor pursuant to
                                Clause 7.4.

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

AGREED VALUE                    $6,000,000.

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

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

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

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

APPRAISAL PROCEDURE             shall mean, with respect to any amount to be
                                determined, the amount mutually agreed by Lessor

                                     - 2 -
<PAGE>

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

ASSIGNMENT                      any present or future assignment by the Lessor
                                in favor of the Lender of the Lessor's rights
                                under this Agreement as security for its
                                obligations to the Lender.

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

BASIC RENT                      all amounts payable pursuant to Clause 5.3.

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

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

CYCLE                           one take-off and landing of an airframe.

DAMAGE NOTIFICATION THRESHOLD   $500,000.

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

                                     - 3 -
<PAGE>

                                combination of the foregoing would constitute an
                                Event of Default.

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

DELIVERY DATE                   the date on which Delivery takes place.

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

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

ENGINE                          whether or not installed on the Aircraft:

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

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

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

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

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

EVENT OF DEFAULT                an event specified in Clause 13.1.

                                     - 4 -
<PAGE>

EXPIRY DATE                     the day preceding the fifth anniversary of the
                                date of the Purchase Agreement or if earlier the
                                date on which:

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

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

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

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

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

FINANCIAL INDEBTEDNESS          any indebtedness in respect of:

                                (a) moneys borrowed;

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

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

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

                                     - 5 -
<PAGE>

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

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

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

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

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

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

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

INDEMNITEES                     each of the Lender and the Lessor, including
                                any of their respective successors and
                                assigns, shareholders, Affiliates, partners,
                                contractors, directors, officers, servants,
                                agents and employees.

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

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

                                     - 6 -
<PAGE>

LENDER                          FINOVA Capital Corporation, a Delaware
                                corporation, and any other person or
                                persons that may from time to time refinance
                                the Aircraft for the Lessor and/or for whose
                                benefit a security interest in respect of the
                                Aircraft and/or this Agreement is granted by
                                the Lessor.

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

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

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

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

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

                                (b) Taxes imposed on the income, profits or
                                    gains of the Lessor and/or the Lender by any
                                    Federal Government Entity in the United
                                    States of America or by any Government
                                    Entity of the States of Delaware and/or
                                    Connecticut or by any Government Entity
                                    in any other jurisdiction Where the
                                    Lessor and/or the Lender is liable for

                                     - 7 -
<PAGE>

                                    such Taxes but only to the extent that such
                                    liability has or would have arisen in the
                                    absence of the transactions contemplated by
                                    this Agreement;

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

                                (d) Taxes imposed as a direct result of the
                                    sale or other disposition of the
                                    Aircraft, unless such sale or disposition
                                    occurs as a consequence of an Event of
                                    Default;

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

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

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

                                     - 8 -
<PAGE>

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

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

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

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

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

MINIMUM LIABILITY COVERAGE      $300,000,000 on each occurrence.

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

                                     - 9 -
<PAGE>

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

PART                            whether or not installed on the Aircraft:

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

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

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

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

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

                                (c) any Lessor Lien;

                                but only if, in the case of (a) and (b):
                                (i) adequate reserves have been provided by
                                the Lessee for the payment of the Taxes
                                or obligations in accordance with
                                generally accounting principles and
                                practices in the relevant jurisdiction;
                                and (ii) such proceedings, or the
                                continued existence of the Lien, do not
                                give rise to any, reasonable likelihood
                                of the sale, forfeiture or

                                     - 10 -
<PAGE>

                                other loss of the Aircraft or any interest
                                therein or of criminal liability on the
                                Lessor or any Lender.

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

RENT                            collectively, all Basic Rent and all
                                Supplemental Rent.

RENTAL PERIOD                   each period ascertained in accordance with
                                Clause 5.2.

RENT DATE                       the Delivery Date and the 26th day of each
                                calendar month during the Term.

SECURITY DEPOSIT                the amount of $227,000.

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

STATE OF INCORPORATION          State of Delaware.

STATE OF REGISTRATION           United States of America.

SUBSIDIARY                      (a) in relation to any reference to accounts,
                                    any company wholly or partially owned by
                                    Parent, including the Lessee, whose
                                    accounts are consolidated with the
                                    accounts of the Parent in accordance with
                                    accounting principles generally accepted
                                    under accounting standards of the State
                                    of Incorporation; and

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

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

                                      -11-

<PAGE>

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

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

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

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

TOTAL LOSS                      with respect to the Airframe:

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

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

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

                                     -12-

<PAGE>

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

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

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

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

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

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

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

1.2     INTERPRETATION

                                     -13-

<PAGE>

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

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

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

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

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

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

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

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

2.       REPRESENTATIONS AND WARRANTIES

2.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

         The Lessee represents and warrants to the Lessor as follows:

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

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

         (c)  LEGAL VALIDITY: This Agreement constitutes the Lessee's legal,
              valid and binding obligation.

                                     -14-

<PAGE>

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

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

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

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

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

         (f)  NO IMMUNITY:

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

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

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

              (i)   have been prepared in accordance with accounting principles
                    and practices generally accepted and consistently applied in
                    the State of Registration; and

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

2.2     LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES

        The Lessee further represents and warrants to the Lessor that:

                                     -15-

<PAGE>

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

     (b)  REGISTRATION:

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

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

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

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

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

2.3  REPETITION

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

                                     -16-
<PAGE>

     warranties contained in Clause 2.1 will be deemed to be repeated by the
     Lessee on each Rent Date as if made with reference to the facts and
     circumstances then existing.

2.4  LESSOR'S REPRESENTATIONS AND WARRANTIES

     The Lessor represents and warrants to the Lessee that:

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

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

     (c)  LEGAL VALIDITY: This Agreement constitutes the Lessor's legal,
          valid and binding obligation.

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

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

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

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

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

     (f)  NO IMMUNITY:

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

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

                                     -17-
<PAGE>

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

2.5  REPETITION

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

3.   CONDITIONS PRECEDENT

3.1  LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT

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

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

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

     (c)  OPINION: an opinion, in the form set out in Schedule 5, in respect
          of the Lessee's obligations under this Agreement issued by
          independent legal counsel acceptable to the Lessor in the State of
          Incorporation;

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

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

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

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

                                     -18-
<PAGE>

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

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

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

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

3.2  LESSOR'S OTHER CONDITIONS PRECEDENT

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

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

     (b)  that all payments due to the Lessor under this Agreement on or
          before Delivery, including the first payment of Basic Rent, shall
          have been received by the Lessor;

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

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

3.3  LESSOR'S WAIVER

     The conditions specified in Clauses 3.1 and 3.2(a) and (b) are for the
     sole benefit of the Lessor and the Lender and may be waived or deferred
     in whole or in part and with or without conditions by the Lessor. If any
     of those conditions are not satisfied on or before Delivery and the
     Lessor (in its absolute discretion) nonetheless agrees to deliver the
     Aircraft to the

                                     -19-
<PAGE>

     Lessee, the Lessee will ensure that those conditions (other than the
     representation set forth in Clause 2.2(c) being correct on the Delivery
     Date) are fulfilled within one month after the Delivery Date and the
     Lessor may treat as an Event of Default the failure of the Lessee to do
     so.

3.4  LESSEE'S CONDITIONS PRECEDENT

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

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

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

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

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

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

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

3.5  LESSEE'S WAIVER

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

4.   COMMENCEMENT

4.1  LEASING

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

                                     -20-
<PAGE>

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

4.2  DELIVERY

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

4.3  ACCEPTANCE AND RISK

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

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

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

5.   PAYMENTS

5.1  SECURITY DEPOSIT: LETTER OF CREDIT

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

          (i)   If an Event of Default occurs and for as long as it
                continues, the Lessor may (but shall not be obligated to)
                apply all or any portion of the Security Deposit in or
                towards satisfaction of any sums due and payable to the
                Lessor under this Agreement or to compensate the Lessor for
                any sums which it may, in its

                                      -21-
<PAGE>

                discretion, advance or expend as a result of any such Event
                of Default. Notwithstanding any such use or application by
                the Lessor, the Lessee shall remain in default under this
                Agreement until the full amount owed by the Lessee, including
                interest accrued thereon pursuant to Clause 5.9, shall have
                been paid to the Lessor. If the Lessor so uses or applies all
                or any portion of the Security Deposit, the Lessee shall
                immediately, on demand of the Lessor, replenish the Security
                Deposit in an amount equal to the amount so used or applied
                within five Business Days after Lessor's demand therefor.

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

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

     (b)  LETTER OF CREDIT: the Lessee shall be entitled, instead of paying
          the Security Deposit in cash in accordance with sub-clause (a)
          above, to provide the Lessor with the Letter of Credit. In the
          event that the Lessee elects to provide the Letter of Credit, the
          following provisions shall apply:

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

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

                                     -22-
<PAGE>

                an amount equal to the amount so used or applied, or shall
                pay to the Lessor an amount in cash equal to the amount so
                used or applied to be held pursuant to Clause 5.1(a).

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

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

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

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

5.2  RENTAL PERIODS

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

5.3  BASIC RENT

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

     (b)  AMOUNT: The Basic Rent payable in respect of each Rental Period
          will be as follows:

          (i)   The Basic Rent payable in respect of the first Rental Period
                will be the product of $113,500 multiplied by a fraction (1)
                the numerator of which is the number of days from and
                including the Delivery Date to but excluding the next
                succeeding Rent Date and (2) the denominator of which is the
                number of days in the calendar month immediately preceding
                the calendar month in which such next succeeding Rent Date
                occurs.

          (ii)  The Basic Rent payable in respect of each subsequent Rental
                Period will be the amount of $113,500.

                                       -23-
<PAGE>

5.4  PAYMENTS

     (a)  All payments of Rent by the Lessee to the Lessor under this
          Agreement will be made for value on the due date, for the full
          amount due, in Dollars and in same day funds, settled through the
          New York Clearing House System or such other funds as may for the
          time being be customary for the settlement in New York City of
          payments in Dollars by telegraphic transfer to the account of the
          Lender at Citibank, N.A., New York, New York, ABA No. 021000089,
          Account No. 00067512, reference "Aloha Airlines/N802AL-N804AL".

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

5.5  GROSS-UP

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

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

     (c)  If the Lessee is compelled by law to make payment to the Lessor
          under or in connection with this Agreement subject to any Tax and
          the Lessor does not actually receive for its own benefit on the due
          date a net amount equal to the full amount provided for under this
          Agreement (other than Lessor Taxes that Lessee is compelled by law
          to deduct or withhold), the Lessee will pay all necessary
          additional amounts to ensure receipt by the Lessor of the full
          amount (other than Lessor Taxes that Lessee is compelled by law to
          deduct or withhold) so provided for.

5.6  TAXATION

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

                                      -24-
<PAGE>

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

5.7  INFORMATION

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

5.8  TAXATION OF INDEMNITY PAYMENTS

                                    -25-
<PAGE>

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

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

5.9  DEFAULT INTEREST

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

5.10 CONTEST

     If written claim is made against Lessor or Lender for or with respect to
     any Taxes (other than Lessor Taxes), Lessor shall, and shall cause
     Lender to, promptly notify the Lessee. If reasonably requested by the
     Lessee in writing within 30 days after such notification, Lessor shall
     or shall cause Lender to, upon receipt of indemnity satisfactory to
     Lessor or Lender, as the case may be, and at the expense of the Lessee
     (including all costs, expenses, losses, legal and accountants' fees and
     disbursements, penalties and interest), in good faith contest or to the
     extent permissible by law allow Lessee to contest in Lessee's, the
     Lessor's or the Lender's

                                    -26-
<PAGE>

     name, the validity, applicability or amount of such Taxes by either (i)
     resisting payment thereof if practicable and permitted by applicable
     law, or (ii) if payment is made, using reasonable efforts to obtain a
     refund thereof in appropriate administrative and judicial proceedings,
     and in the contest of any such claim by Lessor or Lender, Lessor shall,
     and shall cause Lender to, apprise the Lessee of all material
     developments with respect to such contest, shall forward copies of all
     material submissions made in such contest and shall materially comply in
     good faith with any reasonable request concerning the conduct of any
     such contest; provided, however, the Lessor or the Lender (as the case
     may be) will not be obliged to take any such action:

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

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

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

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

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

5.11 ABSOLUTE

                                     -27-
<PAGE>

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

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

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

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

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

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

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

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

6.   MANUFACTURER'S WARRANTIES

6.1  ASSIGNMENT

     Notwithstanding this Agreement and subject to the rights of the Lender
     pursuant to the Assignment, the Lessor will remain entitled to the
     benefit of each warranty, express or implied, and any unexpired customer
     and/or product support given or provided in respect of the Aircraft, any
     Engine or Part by any manufacturer, vendor, maintenance performer,
     subcontractor or supplier. Unless an Event of Default shall have
     occurred and be continuing, the Lessor hereby authorizes the Lessee to
     pursue any claim thereunder in relation to defects affecting the
     Aircraft, any Engine or Part and the Lessee agrees diligently to pursue
     any such

                                     -28-
<PAGE>

     claim which arises at its own cost. The Lessee will notify the Lessor
     promptly upon becoming aware of any such claim. The Lessor will provide
     such assistance to the Lessee in making a claim under any such
     warranties or customer and/or product support as the Lessee may
     reasonably request, and, if requested by the Lessee and at the Lessee's
     expense, will pursue a claim in its own name where the relevant
     manufacturer, vendor, maintenance performer, subcontractor or supplier
     has refused to acknowledge the Lessee's right to pursue that claim.

6.2  PROCEEDS

     Unless an Event of Default shall have occurred and be continuing, all
     proceeds of any such claim as is referred to in Clause 6.1 and which
     exceed $100,000 will be paid direct to the Lender, but if and to the
     extent that such claim relates:

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

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

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

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

6.3  PARTS

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

6.4  AGREEMENT

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

                                   -29-
<PAGE>

     (a)  pay the proceeds of any claim thereunder that exceed $100,000 to
          the Lender to be applied pursuant to Clause 6.2 and, pending such
          payment, will hold the claim and the proceeds on trust for the
          Lender; and

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

7.   LESSOR'S COVENANTS AND DISCLAIMERS

7.1  QUIET ENJOYMENT

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

7.2  MAINTENANCE CONTRIBUTION

     (a)  Provided no Default has occurred and is continuing, upon the
          performance by Lessee of "Qualifying Work" (as hereinafter defined)
          relating to any airworthiness directive, the Lessor will pay to the
          Lessee, by way of contribution to the cost of maintenance of the
          Aircraft, an amount equal to the product of (a) the amount by which
          the Actual Cost of the Qualifying Work for such airworthiness
          directive exceeds $225,000, multiplied by (b) a fraction the
          numerator of which is 60 minus the number of months (rounded to the
          nearest whole number of months) from the date of the completion of
          such Qualifying Work until the scheduled Expiry Date and the
          denominator is 60.

     (b)  "Qualifying Work" means maintenance work performed on the Aircraft
          solely in order to comply fully with airworthiness directives
          issued by the Aviation Authority (whether or not such airworthiness
          directives were issued before or after the Delivery Date) on a
          terminating action basis, and excluding work performed for any
          other purpose, such as compliance with airworthiness directives by
          means of repetitive inspections, recording compliance work in the
          Aircraft Documents and all other maintenance work.

     (c)  The Lessor will be obligated to pay any amount specified in Clause
          7.2(a) within 14 days after submission by the Lessee to the Lessor
          of an invoice and supporting documentation reasonably satisfactory
          to the Lessor evidencing the performance of Qualifying Work for an
          airworthiness directive.

                                       -30-
<PAGE>

7.3  REGISTRATION AND FILINGS

     The Lessor shall, at the Lessor's cost:

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

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

7.4  AGREED MAINTENANCE PERFORMERS

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

7.5  EXCLUSION

     THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS WITH ALL FAULTS"
     AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN
     THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR
     HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY CONDITIONS,
     WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE
     AIRCRAFT, INCLUDING BUT NOT LIMITED TO:

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

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

                                     -31-
<PAGE>

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

7.6  LESSEE'S WAIVER

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

7.7  LESSEE'S CONFIRMATION

     LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.5
     AND 7.6 AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN
     CALCULATED NOTWITHSTANDING ITS PROVISIONS.

8.   LESSEE'S COVENANTS

8.1  DURATION

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

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

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

8.2  INFORMATION

     The Lessee shall:

     (a)  furnish to the Lessor, with a copy to the Lender:

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

                                    -32-
<PAGE>

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

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

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

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

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

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

                                    -33-
<PAGE>

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

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

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

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

     (f)  promptly notify the Lessor of

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

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

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

8.3  LAWFUL AND SAFE OPERATION

     The Lessee shall:

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

                                    -34-
<PAGE>

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

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

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

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

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

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

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

          (iv)  any illegal item or substance;

     (f)  not utilize the Aircraft for purposes of training, qualifying or
          re-confirming the status of cockpit personnel except for the
          benefit of the Lessee's cockpit personnel, and then only if the use
          of the Aircraft for such purpose is not disproportionate to the use
          for such purpose of other aircraft of the same type operated by the
          Lessee;

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

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

                                    -35-

<PAGE>

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

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

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

8.4  TAXES AND OTHER CHARGES

     The Lessee will promptly pay:

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

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

     except to the extent that such payment is being  contested in good faith
     by appropriate  proceedings in accordance with Clause 5.10.

8.5  SUB-LEASING

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

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

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

                                     -36-

<PAGE>

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

8.6  INSPECTION

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

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

     (c)  The Lessor shall:

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

          (ii)  so long as no Default has occurred and is continuing, not
                exercise such right other than on reasonable notice and so as
                not to disrupt unreasonably the maintenance or operation of the
                Aircraft.

8.7  PROTECTION OF TITLE

     The Lessee shall:

    (a)   not do or knowingly permit to be done or omit or knowingly permit
          to be omitted to be done any act or thing which might reasonably be
          expected to jeopardize the respective rights, title and interest of
          the Lender as mortgagee of the Aircraft and assignee of this
          Agreement or the Lessor as owner of the Aircraft and lessor under
          this Agreement or the validity, enforceability or priority of the
          Mortgage and the Assignment;

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

     (c)  not at any time:

          (i)   represent or hold out the Lessor or the Lender as carrying goods
                or passengers on the Aircraft or as being in any way connected
                or associated with any operation or

                                     -37-

<PAGE>

                carriage (whether for hire or reward or gratuitously) which may
                be undertaken by the Lessee; or

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

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

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

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

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

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

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

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

8.8  GENERAL

     The Lessee will:

     (a)  not make any substantial change in the nature of the business in
          which it is engaged if such change, in the reasonable opinion of
          the Lessor, might reasonably be expected to

                                     -38-

<PAGE>

          have a material adverse effect on the Lessee's performance of its
          obligations under this Agreement;

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

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

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

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

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

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

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

8.9  RECORDS

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

                                     -39-

<PAGE>

8.10 REGISTRATION AND FILINGS

     The Lessee shall:

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

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

8.11 MAINTENANCE AND REPAIR

     The Lessee shall:

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

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

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

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

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

     (f)  comply with all alert service bulletins issued by any manufacturer
          of the Aircraft, Engines or Parts, and comply (including scheduling
          complying work and then performing such work on schedule) with all
          other service bulletins issued by any such

                                     -40-

<PAGE>

          manufacturer if and to the extent that the Lessee brings or
          schedules to bring in compliance at least one-half of the
          applicable aircraft it operates (excluding for purposes of such
          calculation aircraft acquired from unrelated third parties that
          already comply with such other service bulletins);

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

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

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

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

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

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

8.12 REMOVAL OF ENGINES AND PARTS

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

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

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

                                     -41-

<PAGE>

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

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

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

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

          and then in each case only if it is reinstalled or replaced by an
          engine or part complying with Clause 8.13(a) as soon as practicable
          and in any event no later than the Expiry Date.

8.13 INSTALLATION OF ENGINES AND PARTS

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

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

          (ii)  in the case of a part, it is in as good operating condition,
                is of the same interchangeable modification status as the
                replaced Part and has attached to it a current "serviceable
                tag" issued by the manufacturer or supplier indicating that
                the part is new, serviceable or overhauled, and the Lessee
                shall retain all such tags;

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

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

                                     -42-

<PAGE>

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

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

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

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

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

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

          (ii)  the secured party, lessor or conditional vendor, as the case
                may be, of such Lessee Installed Part has confirmed and
                acknowledged in writing (which such confirmation and
                acknowledgment may be contained in the lease, conditional
                sale agreement or security agreement) to the Lessor and the
                Lender, in form and substance satisfactory to the Lessor,
                that it will recognize the respective rights, title and
                interest of the Lessor and the Lender in and to the Aircraft
                (including its Engines and Parts) and that it will not seek
                to exercise any rights whatever in relation thereto; and

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

     (d)  The Lessor agrees, for the benefit of the Lessee and any mortgagee or
          holder of any other Security Interest in any engine (other than an
          Engine) or Lessee Installed Part

                                     -43-

<PAGE>

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

8.14 NON-INSTALLED ENGINES AND PARTS

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

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

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

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

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

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

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

          (2)   the lessor under such lease, the seller under such
                conditional sale agreement or the secured party of such
                Security Interest, as the case may be, has confirmed and
                acknowledged in writing (which such confirmation and
                acknowledgment may be contained in the lease, conditional
                sale agreement or document creating the Security Interest) to
                the Lessor and the Lender, in form and substance satisfactory

                                     -44-

<PAGE>

                to the Lessor, that it will recognize the respective rights,
                title and interest of the Lessor and the Lender to and in
                that Engine or Part and that it will not seek to exercise any
                rights whatever in relation thereto.

8.15 POOLING OF ENGINES AND PARTS

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

     (a)  the other parties to which are reputable, solvent commercial air
          carriers or the manufacturers or suppliers of the Engine or Part
          (or other reputable, solvent organizations whose business includes
          the administration of and participation in such pooling agreements
          or arrangements); and

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

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

8.16 EQUIPMENT CHANGES

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

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

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

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

                                     -45-

<PAGE>

8.17 TITLE TO ENGINES AND PARTS

     (a)  Title to all engines and parts  installed on the Aircraft,  whether
          by way of replacement as the result of an Equipment  Change or
          otherwise  (except those  installed  pursuant to Clause  8.13(b) or
          Clause 8.15) will on installation,  without  further  act,  vest in
          the  Lessor  subject to this  Agreement  free and clear of all
          Security  Interests.  The Lessee will at its own  expense  take all
          such steps and  execute,  and procure the execution  of, all such
          instruments  that are  necessary to ensure that title so passes to
          the Lessor and is subject to the Security  Interest created by the
          Mortgage  according to all applicable laws. At any time when
          requested  by the  Lessor,  the  Lessee  will  provide  evidence
          to  the  Lessor's  reasonable  satisfaction (including  the
          provision,  if  required,  to the  Lessor of one of more legal
          opinions)  that title has so passed to the Lessor and is subject to
          the Security Interest created by the Mortgage.

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

     (c)  Except as referred to in Clause 8.16(b), any Engine or Part at any
          time removed from the Aircraft will remain the property of the
          Lessor until a replacement has been made in accordance with this
          Agreement and until title to that replacement has passed, according
          to applicable laws, to the Lessor subject to this Agreement free of
          all Security Interests, whereupon title to the Engine or Part will,
          provided no Default has occurred and is continuing, pass to the
          Lessee free of Lessor Liens.

8.18 THIRD PARTIES

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

9.   INSURANCE

9.1  INSURANCES

     The Lessee will maintain in full force and effect during the Term
     insurances in respect of the Aircraft in form and substance reasonably
     satisfactory to the Lessor (the "INSURANCES") through such brokers and
     with such insurers and having such deductibles and being subject to such
     exclusions as are usual and customary in the worldwide aviation
     insurance marketplace for air carriers operating similar equipment who
     are similarly situated with Lessee. The Insurances will be effected
     either on a direct basis with insurers of recognized standing who
     normally participate in aviation insurances in the leading international
     insurance markets and led by reputable underwriters approved by the
     Lessor and the Lender,

                                     -46-

<PAGE>

     such approval not to be unreasonably withheld. The Lessor acknowledges
     and confirms that the current deductibles and exclusions, together with
     the existing brokers and insurers, in respect of the insurances
     maintained by Lessee on the date of the Purchase Agreement are
     acceptable to it and the Lender.

9.2  REQUIREMENTS

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

9.3  INSURANCE COVENANTS

     The Lessee shall:

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

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

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

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

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

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

                                     -47-

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

9.4  FAILURE TO INSURE

                                     -48-

<PAGE>

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

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

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

9.5  CONTINUING INDEMNITY

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

9.6  APPLICATION OF INSURANCE PROCEEDS

     As between the Lessor and the Lessee:

     (a)  All insurance payments, up to the Agreed Value, received as the
          result of a Total Loss occurring during the Term will be paid to
          the Lender.

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

                                     -49-

<PAGE>

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

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

10.  INDEMNITY

10.1 GENERAL

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

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

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

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

     but excluding any Claim to the extent that:

          (1)  it arises directly as a result of the wilful misconduct or gross
               negligence of an Indemnitee;

                                     -50-

<PAGE>

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

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

           4)  it represents a Tax or loss of tax benefits (the Lessee's
               liabilities for which, to the extent thereof, are set out in
               Clauses 5.5, 5.6 and 5.8);

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

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

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

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

10.2 MITIGATION

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

                                     -51-

<PAGE>

          (such approval not to be unreasonably withheld) and any action
          taken by the Lessee shall be on a full indemnity basis in respect
          of the Lessor and such other Indemnitee.

     (b)  Any sums paid by the Lessee to the Lessor or any Indemnitee in
          respect of any Claim pursuant to Clause 10.1 shall be paid subject
          to the condition that, in the event that the Lessor or such
          Indemnitee is subsequently reimbursed in respect of that Claim by
          any other person, the Lessor or such Indemnitee shall, provided no
          Default shall have occurred and be continuing, promptly pay to the
          Lessee an amount equal to the sum paid to it by the Lessee,
          including any interest on such amount to the extent attributable
          thereto and received by the Lessor or such Indemnitee, less any Tax
          payable by the Lessor or such Indemnitee in respect of such
          reimbursement.

10.3 DURATION

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

11.  EVENTS OF LOSS

11.1 TOTAL LOSS

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

     (b)  POST-DELIVERY:  If a Total Loss occurs after Delivery,  the Lessee
          will pay the Agreed Value to the Lender no later than 60 days after
          the Total Loss Date (the  "SETTLEMENT  DATE") unless the Aircraft
          is restored to the Lessor or the Lessee within that period (or, in
          the case of a Total Loss coming  within  paragraph (c) of the
          definition of Total Loss and involving the loss of the Lessor's
          title to the Aircraft,  if both the Aircraft and the  Lessor's
          title  thereto are restored to the Lessor or, in the case of the
          Aircraft,  to the Lessee and the Lender's  rights under the
          Mortgage are fully  restored).  The receipt by the Lender of the
          insurance proceeds  in respect of the Total Loss on or prior to the
          Settlement  Date shall  discharge  the Lessee from its  obligation
          to pay the  Agreed  Value to the Lessor  pursuant  to this
          sub-clause (b),  provided  such proceeds are not less than the
          Agreed Value.  In the event that the insurance  proceeds are paid
          initially to the Lessee  and not to the  Lender,  they may be
          retained  by the  Lessee if the Lessee  shall have paid the Agreed
          Value to the Lender,  otherwise  the Lessee  shall pay the Agreed
          Value to the Lender not later than the next Business Day  following
          receipt by the Lessee of such  proceeds.  In the event that the
          Lessee pays the Agreed Value to the Lessor in accordance  with this
          sub-clause (b), the Lessor shall promptly assign to the

                                     -52-

<PAGE>

          Lessee its rights under the Insurances to receive the insurance
          proceeds in respect of the Total Loss to the extent that such
          proceeds shall not have been paid to the Lessee. Subject to the
          rights of any insurers or other third parties, upon irrevocable
          payment in full to the Lessor of that amount and all other amounts
          that may be or become payable to the Lessor under this Agreement,
          the Lessor shall:

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

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

     (c)  ENGINE LOSS:  Upon the occurrence of an Engine Loss  (including,
          for the avoidance of doubt,  at a time when the Engine is not
          installed on the Airframe) in  circumstances  in which there has
          not also occurred a Total Loss,  the Lessee shall give the Lessor
          and the Lender  written  notice  promptly upon becoming  aware of
          the same and shall (unless the Lessor has received the insurance
          proceeds relating to such Engine Loss),  within 60 days after the
          Engine Loss Date,  convey or cause to be conveyed to the Lessor,
          as  replacement  for such Engine,  title to a replacement  engine
          that is in the same or better  operating  condition,  has the same
          or greater  value and  utility  as the lost  Engine  and that
          complies  with the  conditions  set out in Clause 8.13(a).  The
          Lessee shall,  at the time of such  conveyance,  comply in all
          respects with Clause  8.17(a) so that the  replacement  engine
          becomes an Engine,  whereupon the leasing of the replaced Engine
          the subject of the Engine Loss shall  cease and title to such
          replaced  Engine  shall  (subject  to any  salvage  rights of
          insurers) vest in the Lessee  pursuant to Clause  8.17(c),  free of
          Lessor Liens. If the Lessor or the Lender subsequently  receives
          any insurance  proceeds  relating to such Engine Loss, the Lessor
          shall promptly remit such  proceeds  or cause such  proceeds to be
          remitted  to the  Lessee.  No Engine Loss with  respect to any
          Engine  that is replaced  in  accordance  with the  provisions  of
          this Clause 11.1 (c) shall  result in any increase or decrease in
          Basic Rent or the Agreed Value.

11.2 REQUISITION

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

                                     -53-

<PAGE>

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

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

12.  RETURN OF AIRCRAFT

12.1 REDELIVERY

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

12.2 FINAL CHECKS

     Immediately prior to return of the Aircraft, Lessee shall perform the
     following:

     (a)  Lessee shall  perform (or have  performed  by an Agreed
          Maintenance  Performer)  a full and complete  zonal, systems and
          structural check ("C" or its equivalent),  including the
          corresponding  lower checks ("A" and "B" or equivalent) and any
          other  maintenance and  inspections  tasks that are a part thereof,
          all in accordance with the Agreed  Maintenance  Program.  At
          return,  the  Airframe  will have zero Flight Hours since such "C"
          check,  except for the acceptance flights and the ferry flight to
          the Redelivery  Location.  Lessee will also weigh the Aircraft.
          Any  discrepancies  revealed during such inspection will be
          corrected in accordance with Manufacturer's  maintenance  and
          repair manuals or FAA-approved  data.  Lessee shall also perform
          during such check, to the

                                     -54-

<PAGE>

          extent it is able, any other work reasonably required by Lessor
          (and not otherwise required under this Agreement) so long as such
          work does not prevent Lessee from returning the Aircraft on the
          Expiry Date, and Lessor shall reimburse Lessee for such work at
          Lessee's preferred customer rates.

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

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

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

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

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

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

12.3 FINAL INSPECTION

     (a)  During the 15 days prior to redelivery of the Aircraft, the Lessee
          will make the Aircraft available to the Lessor and the Lender for
          inspection ("FINAL INSPECTION") in order to verify that the
          condition of the Aircraft complies with this Agreement. The Final
          Inspection will be long enough to permit the Lessor and the Lender
          to inspect, at their

                                     -55-

<PAGE>

          own cost, the Aircraft Documents, the Aircraft and uninstalled
          Parts and the Engines. The Lessor and the Lender shall attend and
          conduct the Final Inspection diligently and, without limiting their
          right to conduct the full Final Inspection permitted by this
          Agreement, will cooperate with the Lessee in order to complete the
          Final Inspection as soon as reasonably practical.

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

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

12.4 NON-COMPLIANCE

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

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

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

     During any extension of the Term pursuant to sub-clause (a), this
     Agreement will remain in full force and effect, including the obligation
     to pay Basic Rent (which Lessee shall pay on a PER DIEM basis weekly in
     advance); provided, however, that Lessee shall not operate, or permit
     others to operate, the Aircraft after the Expiry Date except for
     acceptance flights pursuant to Clause 12.2 and a ferry flight to the
     Redelivery Location.

12.5 EXPORT DOCUMENTATION

     Upon redelivery and upon request by the Lessor, the Lessee shall (a)
     provide to the Lessor all documents necessary to export the Aircraft
     from the State of Registration (including a valid and subsisting export
     licence for the Aircraft), and (b) provide any documents

                                 -56-
<PAGE>

     requested by the Lessor in connection with, and otherwise cooperate
     with, the deregistration of the Aircraft by the Aviation Authority,
     including causing the Aviation Authority to issue an Export Certificate
     of Airworthiness to a country specified by the Lessor.

12.6 ACKNOWLEDGMENT

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

12.7 MAINTENANCE PROGRAM

     (a)  During the 20 day period preceding the scheduled Expiry Date and
          upon the Lessor's request, the Lessee will provide the Lessor or
          its agent reasonable access to the Agreed Maintenance Program and
          the Aircraft Documents in order to facilitate the Aircraft's
          integration into any subsequent operator's fleet. The Lessor agrees
          that it will not disclose the contents of the Agreed Maintenance
          Program to any person or entity except to the extent necessary to
          monitor the Lessee's compliance with this Agreement and/or to
          bridge the maintenance program for the Aircraft from the Agreed
          Maintenance Program to another program after the Expiry Date.

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

12.8 STORAGE

     If the Lessor so requests, and subject to the availability of the
     requisite space, the Lessee shall park and store the Aircraft at a
     secure storage area, which may be at the Redelivery Location or at any
     other suitable facility of the Lessee selected by the Lessee, wherever
     located (the "STORAGE LOCATION"), on behalf of the Lessor for a period
     not exceeding 30 days from the Expiry Date. During that period the
     Aircraft shall be at the Lessee's risk (save as to any loss or damage
     caused by the Lessor's wilful misconduct or gross negligence), and the
     Lessee shall maintain and store the Aircraft in accordance with the
     respective manufacturer's maintenance planning document and shall insure
     the Aircraft in accordance with a "ground risk only" policy usual and
     customary in the worldwide aviation insurance marketplace. All storage,
     maintenance and insurance costs shall be borne by the Lessee. If the
     Lessor so requests, and subject to the availability of the requisite
     space, the Lessee shall continue to park and store the Aircraft at the
     Storage Location on behalf of the Lessor for a further period not
     exceeding 60 days. During that further period the Aircraft shall be at
     the Lessor's risk (save as to any loss or damage caused by the Lessee's
     wilful misconduct or

                                  -57-
<PAGE>

     gross negligence), but the Lessee shall continue to maintain, store and
     insure the Aircraft in accordance with this Clause 12.8. All reasonable
     storage, maintenance and insurance costs incurred by the Lessee
     (excluding any profit element accruing to the Lessee) during such
     further period shall be reimbursed by the Lessor promptly upon
     presentation of supporting invoices and/or receipts.

13.  DEFAULT

13.1 EVENTS

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

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

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

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

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

     (e)  CROSS DEFAULT:

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

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

                                   -58-
<PAGE>

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

          provided always, in any such case, it shall not constitute an Event
          of Default under this Agreement:

          (1)   if the relevant Financial Indebtedness constitutes
                non-recourse borrowing or financing; or

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

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

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

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

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

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

                                    -59-
<PAGE>

     (g) INSOLVENCY:

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

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

     (h) BANKRUPTCY AND SIMILAR PROCEEDINGS

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

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

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

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

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

         (vi)   any step (including petition, proposal or convening a
                meeting) is taken with a view to a composition, assignment or
                arrangement with any creditors of, or the reorganization,
                rehabilitation, administration, liquidation, or dissolution
                of, the

                                   -60-
<PAGE>

                Lessee  or any of  its  Affiliates  or  any  other
                insolvency  proceedings  involving  the  Lessee  or any of
                its Affiliates; or

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

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

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

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

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

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

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

                                        -61-
<PAGE>

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

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

13.2 RIGHTS

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

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

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

     (c)  either:

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

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

13.3 EXPORT

                                    -62-
<PAGE>

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

13.4 DEFAULT PAYMENTS

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

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

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

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

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

                                  -63-
<PAGE>

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

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

14.  ASSIGNMENT AND TRANSFER

14.1 NO ASSIGNMENT BY LESSEE

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

14.2 LESSOR ASSIGNMENT

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

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

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

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

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

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

                                  -64-
<PAGE>

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

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

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

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

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

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

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

          (iii) deliver to Lessor and to such Transferee a certificate,
                signed by a duly authorized officer or Lessee, dated the date
                of such transfer, to the effect that no Event of

                                    -65-
<PAGE>

                Default has occurred and is continuing or, if one is then
                continuing, describing such Event of Default;

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

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

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

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

14.3 GRANTS OF SECURITY INTERESTS

     The Lessor shall be entitled at any time after Delivery to grant a
     security interest in the Aircraft or its right, title and interest in
     this Agreement (each, an "ADDITIONAL MORTGAGE") in favor of any person
     (each, an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage may be a
     successor mortgage to the Security Interest granted to the Lender, or
     may be in addition to the Lender's Security Interest and previous
     Additional Mortgages and with a priority senior, equal or subordinate to
     the Lender's Security Interest and previous Additional Mortgages as the
     Lender and previous Additional Mortgagees may permit. In the case of any
     such grant by Lessor of an Additional Mortgage to an Additional
     Mortgagee in all or any portion of Lessor's rights, title and interest
     in and to the Aircraft and this Agreement, Lessee shall promptly, at the
     specific written request of Lessor and with Lessor paying all of
     Lessee's out-of-pocket costs and expenses:

                                     -66-
<PAGE>

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

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

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

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

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

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

                                     -67-
<PAGE>

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

14.4 SALE AND LEASEBACK BY LESSOR

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

14.5 FURTHER ACKNOWLEDGMENTS

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

14.6 CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT

     The rights of Lessee under this Agreement shall be superior to the
     rights of any Additional Mortgagee or Head Lessor, and the Lessor shall
     require each Additional Mortgagee and Head Lessor to agree in writing
     with the Lessee that such Additional Mortgagee's and Head Lessor's
     rights in and to the Aircraft shall be subject to the terms of this
     Agreement, including to the Lessee's rights to the quiet use, possession
     and enjoyment provisions contained in this Agreement. Except as
     expressly set forth in this Agreement, no Additional Mortgage or Head
     Lease shall increase the responsibilities, obligations or liabilities of
     the Lessee or deprive the Lessee of any of its rights or privileges
     under this Agreement. The Lessor's obligations to perform the terms and
     conditions of this Lease shall remain in full force and effect
     notwithstanding the creation of any Additional Mortgage or Head Lease.

                                  -68-
<PAGE>

     Lessor shall not create any Additional Mortgage or enter into any Head
     Lease that violates the terms of this Clause 14.6.

15.  MISCELLANEOUS

15.1 WAIVERS, REMEDIES CUMULATIVE

     The rights of either party under this Agreement:

     (a)  may be exercised as often as necessary;

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

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

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

15.2 DELEGATION

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

15.3 APPROPRIATION

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

15.4 CURRENCY INDEMNITY

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

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

          (ii)  if the amount received by the Lessor, when converted into the
                contractual currency (at the market rate at which the Lessor
                is able on the relevant date to

                                  -69-
<PAGE>

                purchase the contractual currency in New York City with that
                other currency) is less than the amount owed in the
                contractual currency, the Lessee will, forthwith on demand,
                pay to the Lessor an amount in the contractual currency equal
                to the deficit; and

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

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

15.5 PAYMENT BY THE LESSOR

     The Lessor will not be obliged to pay any amounts to the Lessee under
     this Agreement so long as any sums which are then due from the Lessee
     under this Agreement remain unpaid and any such amounts which would
     otherwise be due will fall due only if and when the Lessee has paid all
     such sums.

15.6 SEVERABILITY

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

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

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

15.7 REMEDY

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

15.8 EXPENSES

     (a)  The Lessor and the Lessee shall each bear their respective expenses
          (including legal, professional and out-of-pocket expenses) incurred
          or payable in connection with the

                                   -70-
<PAGE>

     (c)  Service Bulletins complied with during Month:

4.   AIRCRAFT DAMAGE OR ENGINE CHANGES:

     Details of any repairs carried out to the Aircraft beyond SRM limits and
     Engine changes, giving reasons for repair or change:

5.   UPCOMING MAINTENANCE CHECKS

     (a)  Maintenance Checks (C segment and above) scheduled or expected to
          be performed on the Airframe during the next 12 months:

     (b)  Scheduled shop visits or heavy maintenance visits scheduled or
          expected to  be performed on the Engines during the next 12 months:

     (c)  Overhauls, or replacements scheduled or expected to be performed on
          the APU or Landing Gear during the next 12 months:

Date: ___________________,_____               CERTIFIED FOR AND ON BEHALF OF
                                              ALOHA AIRLINES, INC.

                                              By: __________________________
                                              Name:
                                              Title:
<PAGE>

                     CERTIFICATE OF ACCEPTANCE 802

     This Certificate of Acceptance 802 is delivered on the date set forth in
     paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
     Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 802,
     dated January 15, 1997, between the Lessor and the Lessee (the
     "AGREEMENT"). Capitalized terms used but not defined in this Certificate
     of Acceptance 802 shall have the meaning given to such terms in the
     Agreement.

1.   DETAILS OF ACCEPTANCE

     The Lessee hereby confirms to the Lessor that the Lessee has at 8:40
     a.m. H.S.T. on this 15th day of January, 1997, over International Water,
     accepted the following, in accordance with the provisions of the
     Agreement and the Annex:

     (a)  Airframe: Boeing 737-2S5C airframe, Manufacturer's Serial No. 22148
          and FAA Registration No. N802AL;

     (b)  Engines: two Pratt & Whitney JT8D-9A Engines, bearing
          Manufacturer's Serial Nos. P656093B and P665630B, each having 750
          or more rated take-off horsepower;

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

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

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

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

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

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

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

<PAGE>

     IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
     Acceptance 802 on the date shown at the beginning of this Agreement.

                                 SIGNED ON behalf of
                                 ACG ACQUISITION VIII LLC

                                 By: /s/ R. Stephen Hannahs
                                     --------------------------
                                 Name:   R. Stephen Hannahs
                                 Title:  Manager

                                 SIGNED ON behalf of
                                 ALOHA AIRLINES, INC.

                                 By: /s/ Brenda F. Cutwright
                                     --------------------------
                                 Name:   Brenda F. Cutwright
                                 Title:  Sr. Vice President Finance &
                                         Planning and CFO

                                 By: /s/ Owen Sekimura
                                     --------------------------
                                 Name:   Owen Sekimura
                                 Title:  Staff Vice President - Finance
                                         & Controller
<PAGE>

                      COLLATERAL ASSIGNMENT OF LEASE
                                 (N802AL)

     THIS COLLATERAL ASSIGNMENT OF LEASE (hereinafter referred to as the
"Agreement"), dated as of January 15, 1997 by and between ACG ACQUISITION
VIII, LLC, a Delaware limited liability company ("Lessor"), and FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender"),

                          W I T N E S S E T H :

     WHEREAS, there is in effect a certain Aircraft Lease Agreement dated as
of January 15, 1997 between Lessor and Aloha Airlines, Inc., an Hawaiian
corporation ("Lessee"), which will be filed for recording with the Federal
Aviation together herewith (the "Lease"), pursuant to which Lessor has leased
to Lessee, among other things, one Boeing 737-200 Advanced Aircraft and two
Pratt & Whitney model JT8D-9A jet aircraft engines installed thereon, as more
particularly described in EXHIBIT A attached hereto (the "Flight Equipment");
and

     WHEREAS, Lessor has obtained or will obtain financing from Lender in
order to finance the acquisition by Lessor of the Flight Equipment; and

     WHEREAS, in order to secure the performance by Lessor of its obligations
under that certain Secured Loan Agreement dated as of September 26, 1996
between Lessor, as borrower, and Lender, as lender (the "Loan Agreement") as
the same may hereafter be amended, restated or otherwise modified, and the
other Loan Documents (as defined in the Loan Agreement), Lessor has agreed
to, among other things, assign to Lender all of Lessor's right, title and
interest (but none of its obligations) in and to the Lease, including, but
not limited to, all amounts payable by Lessee to Lessor under the Lease,

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lender hereby agree
as follows:

     1.   DEFINITIONS AND CONSTRUCTION.

     1.1  DEFINITIONS. In this Agreement terms and expressions defined in the
foregoing recitals shall have effect as therein defined, and the following
terms and expressions shall have the meanings ascribed to such terms below.

     "AIRCRAFT" shall mean, collectively, the Airframe and the Engines.

     "AIRFRAME" shall mean the airframe described in EXHIBIT A hereto, any
and all equipment furnished by Lessee and incorporated therein in accordance
with the terms of the Lease, and any and all parts (except Engines) relating
thereto.

<PAGE>

     "ASSIGNED PROPERTY" shall mean, collectively, the Lease and the
Earnings.

     "BUSINESS DAY" shall mean a day on which  national  banks are open for
business  in  Phoenix, Arizona.

     "AGREEMENT" SHALL mean this agreement as from time to time amended and
supplemented in accordance with the terms hereof.

     "CLOSING DATE" shall mean the date on which the Lessor acquires title to
the Aircraft.

     "DEFAULT" shall mean an event which, with the passage of time, or giving
of notice, or both, would constitute an Event of Default.

     "EARNINGS" shall mean all moneys whatsoever from time to time due or
payable to Lessor arising out of the use or operation of the Aircraft
including (but without limiting the generality of the foregoing) all rental
payments, insurance proceeds, security deposits, maintenance reserves and
other monies due to Lessor under the Lease or any other document relating
thereto, including compensation payable to Lessor in the event the Aircraft
is requisitioned for hire, damages for breach of any contract for the
employment of the Aircraft or any documents relating thereto, any amounts
payable in consideration of the termination or variation of any lease or
charter or other such contract and any other earnings whatsoever due or to
become due to Lessor and any proceeds of the foregoing, but excluding in all
cases Excluded Amounts.

     "ENGINES" shall mean, collectively, each of the engines (having 750 or
more rated take off horsepower or the equivalent thereof) described in
EXHIBIT A attached hereto and installed on the Airframe at the time the
Airframe was delivered to Lessee pursuant to the Original Lease, whether or
not from time to time hereafter installed on the Airframe or installed on
other aircraft, (ii) any Replacement Engine, and (ii) any and all parts,
accessories and accessions to any of the foregoing.

     "EVENT OF DEFAULT" shall mean the occurrence of any of the events which
are listed in the Loan Agreement or any of the other Loan Documents and which
are referred to therein as constituting an "Event of Default."

     "EVENT OF LOSS" shall mean, with respect to any item of the Flight
Equipment or any part thereof (a) the actual, constructive, compromised,
arranged or agreed total loss thereof; (b) the destruction or damage beyond
repair of such Flight Equipment or part thereof, or such Flight Equipment or
part thereof being rendered or becoming permanently unfit for normal use for
any reason whatever; (c) the requisition for title, confiscation, restraint,
detention, forfeiture or any compulsory acquisition or seizure or requisition
for hire of such Flight Equipment or part thereof (other than a requisition
for hire for a temporary period not

                                     -2-

<PAGE>

exceeding one hundred and eighty (180) days) by or under the order of any
Government (whether civil, military or DE FACTO) or public or local authority;
or (d) the high-jacking, theft or disappearance, resulting in loss of
possession by Lessor or Lessee for a period of thirty (30) consecutive days
or longer, of such Flight Equipment or part thereof

     "EXCLUDED AMOUNTS" SHALL mean (a) proceeds of public liability insurance
in respect of the Flight Equipment payable as a result of insurance claims
made, or losses suffered, by Lessor, any affiliate of Lessor or any director,
officer, employee, representative or agent of Lessor or any such affiliate to
the extent that such insurance claims made, or losses suffered, do not apply
to Lender, as assignee of Lessor, or to the Flight Equipment, (b) proceeds of
insurance which is maintained with respect to the Flight Equipment by Lessor
or any such affiliate and which insurance is not required under the Loan
Documents, (c) any interest paid or payable on any amounts described in
clauses (a) or (b) of this definition, and (d) the proceeds from the
enforcement of the payment of any amount described in clauses (a) through (c)
of this definition.

     "FEDERAL AVIATION ACT" SHALL mean the Federal Aviation Act of 1958, as
amended, and the rules and regulations promulgated thereunder, as in effect
on the date of this Agreement, and as modified or amended hereafter or any
successor or substituted legislation at the time in effect and applicable.

     "FAA" shall mean the Federal Aviation Administration provided for in the
Department of Transportation Act of 1966, as in effect on the date of this
Agreement and as modified or amended hereafter, or any successor or
substituted governmental authority at the time having jurisdiction over the
Flight Equipment.

     "GOVERNMENT" shall mean any governmental body, or a political
subdivision thereof.

     "Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
option, security interest or lease (including any conditional sale agreement,
equipment trust agreement, or other title retention agreement) or right or
claim of any person, whether voluntary or involuntary in nature.

     "REPLACEMENT ENGINE" shall mean an engine on the Aircraft on the date of
return of the Aircraft to Lessor pursuant to the Lease, or an engine
replacing an Engine in the event of an Event of Loss with respect to such
Engine, which engine shall be (a) the same model, or an improved model, as
the Engine originally leased hereunder and (b) suitable for installation and
use on the Airframe without materially impairing the value or utility of the
Airframe and having a time to overhaul, time to next shop visit, time to hot
section, modification status, value, condition and utility at least equal to
the Engine it replaces (assuming the Engine so replaced had the time to
overhaul, time to next shop visit, time to hot section, modification status,
value, condition and utility required by the terms hereof

                                     -3-

<PAGE>

immediately prior to being replaced) and which is free of all encumbrances
other than Permitted Liens.

     "SECURED OBLIGATIONS" shall mean the obligations under and as defined in
the Loan Agreement.

     "TAXES" shall mean all present and future taxes whatever, and value added
levies, imposts, duties or charges of any nature wherever imposed, including,
without limitation, value added taxes or similar taxes and any franchise,
transfer, sales, use, business, occupation, excise, personal property, real
property, stamp or other tax imposed by any national or local taxing or
fiscal authority or agency, together with any penalties, additions to tax,
fines or interest thereon.

     1.2  TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All terms used herein
which are defined in the Arizona Uniform Commercial Code (the "Code") shall
have the meanings ascribed to such terms in the Code unless the context in
which such terms are used herein indicates otherwise.

     1.3  TERMS DEFINED IN LOAN AGREEMENT. All capitalized terms used in this
Agreement which are defined in the Loan Agreement shall, unless otherwise
defined herein, have the respective meanings ascribed to such terms in the
Loan Agreement, the applicable provisions of which Loan Agreement are
incorporated herein.

     2.   ASSIGNMENT.

     To secure the payment and performance by Lessor of the Secured
Obligations, Lessor hereby assigns, transfers, conveys and sets over to
Lender, and grants to Lender a security interest in (a) all of Lessor's
right, title and interest in, to and under the Lease (but none of its
obligations thereunder), including, without limitation, the right to collect
all rental payments, income, proceeds (including, but not limited to,
insurance proceeds), awards, revenues and other sums payable by Lessee to
Lessor pursuant to the Lease, (b) all of Lessor's rights under section 1110
of the Bankruptcy Code of the United States or any subsequently enacted
statutes of similar import, with respect to the Flight Equipment, (c) all
right, title and interest of Lessor to collect, hold and apply all security
deposits, maintenance reserves and similar amounts, as provided pursuant to
the terms of the Lease, and (d) all rights of Lessor to enforce Lessor's
rights and remedies under the Lease. Lender agrees that it shall not exercise
any rights of Lender to enforce Lessor's rights and remedies under the Lease
unless and until an Event of Default (as hereinafter defined) has occurred.

     3.   NOTICE OF ASSIGNMENT.

     On or prior to the Closing Date, Lessor shall have delivered to Lessee a
Notice of Assignment of Lease in the form set out in EXHIBIT B attached
hereto and made a part hereof, and Lessor and Lessee shall each have executed
such Notice of

                                     -4-

<PAGE>

Assignment of Lease and returned same to Lender. In the event that the
Aircraft is subject to any sublease by Lessee, Lessor shall, prior to such
sublease becoming effective, have delivered to the sublessee under such
sublease a Notice of Assignment of Lease in substantially the form set out in
EXHIBIT B attached hereto and made a part hereof, and Lessor and such
sublessee shall each have executed such Notice of Assignment of Lease and
returned same to Lender.

     4.   APPLICATION OF EARNINGS.

     The Earnings shall be applied and credited in favor of Lessor in
accordance with the repayment provisions of the Loan Agreement.

     5.   UNDERTAKINGS.

     Lessor hereby covenants and agrees with Lender as follows:

     5.1  DURATION. The undertakings and obligations of Lessor under this
Agreement shall continue in full force and effect from and after the date
hereof and until the payment and performance in full of the Secured
Obligations.

     5.2  PERFORMANCE OF OBLIGATIONS. Lessor shall:

     (a)  perform its obligations under the Lease and each other agreement
made between Lessor and Lessee in respect of the Aircraft and will not
without the prior written consent of Lender rescind, cancel or otherwise
terminate the Lease or any of such other agreements other than as permitted
by the Loan Agreement;

     (b)  promptly notify Lender (i) of any default of which it has knowledge
by Lessor, Lessee or any other Permitted Lessee under the Lease or any other
agreement made in respect of the Aircraft, and (ii) of the Lease or such
other agreement being frustrated or the performance thereof becoming
impossible or substantially different from that contemplated originally by
the parties thereto;

     (c)  institute and maintain all such proceedings as may be necessary to
preserve or protect this Agreement as a valid grant of a security interest in
Lessor's rights in the Assigned Property and each other agreement made in
respect of the Aircraft;

     (d)  not, without the prior written consent of Lender, take or omit to
take any action the taking or omission of which might result in any material
adverse alteration of any of the Lease or any other agreement made in respect
of the Aircraft;

     (e)  not, without the prior written consent of Lender, agree to any
variation, modification or amendment in the terms of the Lease or any other
agreement made in respect of the Aircraft, or release any party thereto from
any of its obligations thereunder, or waive any breach of the obligations of
such party, or

                                     -5-

<PAGE>

consent to any such act or omission of any such party as would otherwise
constitute such breach;

     (f)  not permit any sublease by Lessee of its interest in the Aircraft,
except as expressly permitted under the terms of the Lease as in effect on
the Closing Date;

     (g)  provide written notice to Lender of any sublease or purported
sublease of the Aircraft by Lessee, designating the name and address of such
sublessee and such other information as Lender may reasonably request; and

     (h)  cause counterpart No. 1 of the Lease to be delivered to Lender on
the Closing Date.

     6.   EXERCISE OF REMEDIES.

     6.1  REMEDIES. Following the occurrence and continuation of an Event of
Default under the Loan Agreement and at all times thereafter, Lender shall be
entitled:

     (a)  to exercise any and all rights of Lessor under or in connection
with the Lease or otherwise in respect of the Assigned Property, including
without limitation, any and all rights of Lessor to demand or otherwise
require payment of any amount under, or performance of, any provision of the
Lease;

     (b)  on 10 days' prior written notice to Lessor of any public sale or the
date after which any private sale may occur, to sell to any person all or any
part of Lessor's right, title and interest in and to the Assigned Property
upon such terms as Lender shall determine;

     (c)  collect, receive or compromise and give a good discharge for any
and all monies and claims for monies due and to become due in respect of or
under the Lease; and

     (d)  otherwise put into force and effect all rights, powers and remedies
available to it, at law or otherwise, as assignee of, and holder of a
security interest in, the Assigned Property.

     6.2  NO LIABILITY FOR EXERCISE. To the extent permitted by applicable
law Lender may exercise its power of sale hereunder in such a way as it in
its absolute discretion may determine and, to the extent permitted by
applicable law, Lessor hereby agrees that Lender shall not in any
circumstances be answerable for any loss occasioned by any such sale or
resulting from any postponement thereof; PROVIDED, HOWEVER, that nothing in
this Section 6.2 shall be deemed to release Lender from its obligations and
liabilities arising from Lender's gross negligence or wilful misconduct.

                                    -6-

<PAGE>

     6.3  NO LIABILITY AS ASSIGNEE. To the extent permitted by applicable law
Lender shall not be liable as assignee in respect of the Assigned Property to
account or be liable for any loss upon the realization thereof or for any
neglect or default of any nature whatsoever in connection therewith for which
an assignee of the Assigned Property may otherwise be liable as such;
PROVIDED, HOWEVER, that nothing in this Section 6.3 shall be deemed to
release Lender from its obligations and liabilities arising from Lender's
gross negligence or wilful misconduct.

     6.4  LENDER'S AUTHORITY. Upon any sale by Lender of Lessor's right, title
and interest in and to the Assigned Property, or any part thereof, the
purchaser shall not be bound to see or inquire whether the power of sale of
Lender has arisen, the sale shall be deemed for all purposes hereof to be
within the power of Lender and the receipt of Lender for the purchase money
shall effectively discharge the purchaser who shall not be concerned with the
manner of application of the proceeds of sale or be in any way answerable
therefore.

     7.   POWER OF ATTORNEY.

     Lessor hereby irrevocably appoints and constitutes Lender as its true
and lawful attorney-in-fact with full power (in the name of and on behalf of
Lessor or otherwise) following the occurrence and continuation of an Event of
Default, to demand, compound and give acquittance for any monies or claims
for monies due or to become due, to endorse any check or other instrument or
order in connection therewith and to file any claims or take any action or
institute any proceedings which may seem to Lender to be necessary or
advisable and otherwise to do any and all things which Lessor itself could do
in relation to the Assigned Property. The exercise of such power by Lender
shall not put any person dealing with Lender on inquiry as to whether any
such event has happened nor shall any person be in any way affected by notice
that no such event has happened and the exercise by Lender of such power
shall be conclusive evidence of its right to exercise it.

     8.   LIABILITY UNAFFECTED BY ASSIGNMENT.

     Lessor agrees, to the extent permitted by law, that, notwithstanding the
assignment to Lender of, and the grant to Lender of a security interest in,
the Assigned Property (a) Lender shall not be obliged to make any inquiries
as to the nature or sufficiency of any payment received by Lender under the
Assigned Property or to make any claim or take any other action to collect
any moneys or to enforce any rights and benefits assigned to Lender or to
which Lender may at any time be entitled thereunder, and (b) Lessor shall
remain liable to perform all the obligations of Lessor under the Lease and
Lender shall be under no obligation of any kind whatsoever in respect
thereof, and Lender shall have no liability whatsoever in the event of any
failure by Lessor to perform its obligations thereunder; PROVIDED, that Lender
shall remain obligated to hold and retain any and all Maintenance Reserve
Collateral, and to remit same to Borrower and/or Lessee, in accordance with
the terms of the Loan Agreement applicable thereto.

                                    -7-

<PAGE>

     9.   CONTINUING SECURITY.

     This Agreement and the assignment and security interest granted herein
shall continue in full force and effect until performance in full of the
Secured Obligations.

     10.  FURTHER ASSURANCES.

     Lessor undertakes that it will, from time to time on being required to
do so by Lender, at the cost and expense of Lessor, do, and cause to be done,
all such further acts and/or execute or procure the execution of all such
further documents in a form satisfactory to Lender as Lender may reasonably
consider necessary for giving full effect to this Agreement or securing to
Lender the fun benefit of the rights, powers and remedies conferred upon
Lender in this Agreement.

     11.  FEES AND EXPENSES.

     Lessor shall upon Lender's demand, pay to or reimburse Lender for all
out-of-pocket expenses of Lender incurred in connection enforcement of this
Agreement and the transactions contemplated hereby (including, without
limitation, all expert witness and legal fees and disbursements of Lender's
counsel, including special FAA counsel), and in connection with any actual or
proposed amendments hereof and in connection with the preservation and/or
enforcement of any Lender's rights and interest in the Assigned Property and
in any rights granted to Lender hereunder.

     12.  NOTICES.

     Every notice or demand under this Agreement shall be (a) in writing and
may be given or made by registered mail, return receipt requested or by
internationally recognized overnight courier service, (b) deemed to have been
received in the case of an internationally recognized overnight courier
service or registered mail, upon acknowledgment of receipt or as of the date
on which receipt of such notice delivered by overnight courier or registered
mail is refused or such courier or the U.S. Postal Service advises that such
letter is not deliverable at the address designated in this Section, and (c)
sent, in the case of overnight courier or registered mail, to Lender or to
Lessor, as applicable, at the following addresses, or to such other address
as Lessor or Lender may designate for itself by notice to the other
conforming to the requirements for notice set forth in this Section:

                                     -8-

<PAGE>

     If to Lessor:                        ACG Acquisition Corp. VIII
                                          c/o Aviation Capital Group
                                          3 Stamford Landing
                                          46 Southfield Avenue
                                          Stamford, Connecticut 06902
                                          Attention: Vice President and
                                                     General Counsel

                             and

     If to Lender:                        FINOVA Capital Corporation
                                          1850 North Central Avenue
                                          Phoenix, Arizona 85004
                                          Attention: Vice President-Law
                                                     Transportation Finance

                             and

                                          FINOVA Capital Corporation
                                          1850 North Central Avenue
                                          Phoenix, Arizona 85004
                                          Attention: Vice President-Operations
                                                      Management
                                                      Transportation Finance

A copy of all notices sent to Lender shall be sent to Herriot, Coti & Sugrue,
3200 North Central Avenue, Suite 1910, Phoenix, Arizona 85012, Attention:
Mark R. Herriot, Esq., telefax number 602/222-9725.

     13.  ENTIRE AGREEMENT; AMENDMENTS.

     This Agreement (including all Exhibits hereto) embodies the entire
agreement and understanding between Lessor and Lender relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and none of the parties hereto shall be bound by or charged with any
oral or written agreements, representations, warranties, statements, promises
or understandings not specifically set forth herein or therein. This
Agreement may not be changed and no right granted or obligation imposed
hereunder may be waived, except pursuant to an instrument in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.

     14.  GOVERNING LAW. JURISDICTION AND VENUE.

     (A) THE OBLIGATIONS OF LESSOR HEREUNDER ARE TO BE PERFORMED IN, AND THIS
AGREEMENT IS EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE

<PAGE>

OF ARIZONA, AND BY EXECUTION HEREOF LESSOR, AND BY ACCEPTANCE HEREOF LENDER,
EACH AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA SHALL GOVERN
THIS AGREEMENT NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER JURISDICTIONS
WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED
HEREBY.

     (B)  LESSOR AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY LESSOR
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA
COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT
SUCH COURT HAS JURISDICTION. LESSOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER
IN ANY OF SUCH COURTS, AND HEREBY AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO LESSOR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT
PURSUANT TO THE FURTHER PROVISIONS OF THIS AGREEMENT. LESSOR WAIVES ANY CLAIM
THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR
AN IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR
LESSOR SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND LESSOR HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.

     15.  WAIVER OF JURY.

     LESSOR AND LENDER IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT.

     16.  ASSIGNMENT, SUCCESSORS AND ASSIGNS.

     Lender may assign or obtain participations with other Lenders in regard
to its rights hereunder and under the Note and any other Loan Document and in
respect of the Loan, PROVIDED only that no such assignment or participation
shall impose any greater obligation on Lessor than set forth herein or
therein. Lessor shall not assign any rights under this Agreement nor shall
any of Lessor's duties hereunder be assigned or delegable without the prior
written consent of Lender. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other than the
parties hereto and their permitted

                                     -10-

<PAGE>

successors in interest and permitted assigns, any rights or remedies under or
by reason of this Agreement unless expressly herein stated to the contrary.
All covenants, representations, warranties and agreements of the parties
contained herein shall, subject to the provisions of the preceding sentence,
be binding upon and inure to the benefit of their respective successors and
permitted assigns.

     17.  CAPTIONS AND SECTION HEADINGS: CONSTRUCTION.

     Captions and paragraph headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it. This
Agreement and all documents executed in connection herewith shall be
construed without regard to the identity of the party which prepared the
same, and no presumption shall arise as a result thereof

     18.  SEVERABILITY.

     In the event that any one or more of the provisions of this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.

     19.  TIME OF THE ESSENCE.

     Time is of the essence with respect to all of the payment and
performance obligations of Lessor hereunder. Time is of the essence with
respect to all of the performance obligations of Lender hereunder.

     20.  COUNTERPARTS.

     This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and, when taken together, all of which
shall constitute one and the same Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                    -11-

<PAGE>

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

                                  LENDER:
                                  FINOVA CAPITAL CORPORATION

                                  BY:              [ILLEGIBLE]
                                       -------------------------------------
                                  ITS:         GROUP VICE-PRESIDENT
                                       -------------------------------------

                                  LESSOR:
                                  ACG ACQUISITION VIII LLC, a Delaware limited
                                  liability company

                                  BY: -------------------------------------
                                  ITS: ------------------------------------

                                      collateral assignment lease 802

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed by their duty OFFICERS AS OF THE DAY and Year first above
written.

                                  LENDER:
                                  FINOVA CAPITAL CORPORATION

                                  BY: -------------------------------------
                                  ITS: ------------------------------------

                                  LESSOR:
                                  ACG ACQUISITION VIII LLC, a Delaware limited
                                  liability company

                                  BY:              [ILLEGIBLE]
                                       -------------------------------------
                                  ITS:               MANAGER
                                       -------------------------------------

<PAGE>

                                      EXHIBIT A

                                         TO

                                ASSIGNMENT OF LEASE
______________________________________________________________________________

                      DESCRIPTION OF AIRFRAME AND ENGINES
______________________________________________________________________________

     The "Flight Equipment" as described in the foregoing Assignment of
Lease shall consist of the following:

          (a)  One (1) Airframe, identified as follows:

               Manufacturer:                      Boeing
               FAA Registration Number:           N802AL
               Manufacturer's Model Number:       737-2S5C
               Manufacturer's Serial Number:      22148

               together with all parts,  equipment and  accessories  thereto
               belonging,  by whomsoever  manufactured,  now owned by ACG
               Acquisition  Corp.  VIII or  hereinafter  acquired  by ACG
               Acquisition  Corp.  VIII  and  installed  in or appurtenant to
               said airframe; and

          (b)  Two (2) Pratt & Whitney JT8D-9A jet aircraft engines,
               identified by manufacturer's serial numbers P656093 and
               P665630, each such engine having 750 or more rated take-off
               horsepower or the equivalent thereof, together with all parts,
               equipment and accessories thereto belonging, by whomsoever
               manufactured, now owned by ACG Acquisition Corp. VIII or
               hereinafter acquired by ACG Acquisition Corp. VIII and
               installed in or appurtenant to any one or more of said engines.

<PAGE>

                                   EXHIBIT B

                         NOTICE OF ASSIGNMENT OF LEASE
                                   (N802AL)

         THIS NOTICE OF ASSIGNMENT OF LEASE ("Agreement"), dated as of
_______________________________, 199__ by  and  among  FINOVA  CAPITAL
CORPORATION,  a  Delaware  corporation ("FINOVA"), ALOHA AIRLINES, INC., an
Hawaii corporation ("Lessee"), and ACG ACQUISITION VIII LLC, a Delaware
limited liability company ("Lessor"),

                                  WITNESSETH:

         WHEREAS, pursuant to that certain Lease Agreement 802 dated as of
even date herewith between Lessor and Lessee (the "Lease"), Lessor has agreed
to lease to Lessee one (1) Boeing 737-2S5C aircraft, together with two (2)
Pratt & Whitney JT8D-9A engines associated therewith, all as more
particularly described in ANNEX I attached hereto (the "Flight Equipment");
and

         WHEREAS, Lessor has obtained or will obtain financing from FINOVA in
order to FINANCE the acquisition by Lessor of the Flight Equipment; and

         WHEREAS, in order to secure the performance by Lessor of its
"Obligations" to Lender, as defined in that certain Secured Loan Agreement
dated as of September 26, 1996 between Lessor and FINOVA (the "Loan
Agreement") as the same may hereafter be amended, restated or otherwise
modified, and the other "Loan Documents" (as defined in the Loan Agreement),
Lessor has granted to FINOVA a security interest in, all of Lessor's right,
title and interest (but none of its obligations) in and to the Lease,
including, but not limited to, all amounts payable by Lessee to Lessor under
the Lease, pursuant to that certain Collateral Assignment of Lease dated as
of even dare herewith between Lessor and FINOVA (the "Assignment of Lease"),

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, FINOVA, Lessor and Lessee hereby
agree as follows:

         1.    ACKNOWLEDGMENT OF LESSEE. Lessee hereby acknowledges and
consents to the assignment, pursuant to the Assignment of Lease, of Lessor's
rights under the Lease to FINOVA, and agrees that such assignment shall not
constitute a default under, or breach of, the Lease.

         2.    PAYMENTS UNDER LEASE. Until FINOVA otherwise directs in
writing, Lessee shall pay to FINOVA, as the same shall become due under the
Lease, all amounts from time to time payable by Lessee under the Lease,
including, without

<PAGE>

limitation, all "Basic Rent" and all "Supplemental Rent" as each such term is
defined in the Lease, which are from time to time payable by Lessee to Lessor
under the Lease. All amounts payable by Lessee shall be paid to the account
at Citibank, N.A., described below;

          BANK:                         Citibank, N.A.
                                        New York, New York,
          ACCOUNT OF:                   FINOVA Capital Corporation
          ACCOUNT NO.:                  000675126
          ABA NO.:                      021000089
          REFERENCE:                    Aloha Airlines/N802AL-N804AL

All such payments shall be made to the appropriate account by wire transfer
of same day funds.

         3.    REPRESENTATIONS. WARRANTIES AND COVENANTS OF LESSEE. Lessee
hereby represents and warrants to FINOVA, and covenants with FINOVA, as
follows:

         (a)   (i) A true, complete and correct copy of the Lease is attached
hereto as ANNEX II, (ii) the Lease is the entire agreement of lease with
respect to the Flight Equipment and the Lease has not been amended, modified
or supplemented, (iii) the "Delivery Date" under the Lease has occurred (or
will occur upon the effectiveness hereof), the Lease is in full force and
effect and Lessee's obligation to pay rent under the Lease has commenced in
accordance with the terms thereof, (iv) there is no event which has occurred
which constitutes or with the giving of notice or passage of time or both
would constitute a default by either parry under the Lease, and (v) there has
been no prepayment of any rent or other sums payable under the Lease;

         (h)   In the event that FINOVA, or any successor to the interest of
FINOVA in the Lease, shall succeed to the rights of Lessor under the Lease by
reason of FINOVA's (or such successor's) exercise of its rights and remedies
with respect to the Lease (FINOVA and such successors, as applicable, being
included within the meaning of the term "Lessor" hereunder), the Lease shall
continue in full force and effect, and Lessee shall perform its obligations
under the Lease for the benefit of FINOVA or such other successor, as
applicable, PROVIDED, however, that nothing herein contained shall impose any
greater or different obligation upon Lessee than SET FORTH IN the Lease;

         (c)   Lessee acknowledges that FINOVA has not made any
representations or warranties of any kind, nature or description in respect
of the Flight Equipment and that FINOVA has not assumed any of Lessor's
duties or obligations under the Lease and Lessee shall continue to look
solely to lessor for the performance and

                                      -2-

<PAGE>

fulfillment of the terms, covenants and conditions on Lessor's part to be
performed under the Lease;

         (d)   In the event of any default by Lessor under the Lease or any
provision thereof, Lessee agrees that, notwithstanding any provision of the
Lease to the contrary, Lessee shall take no action to effect a termination of
the Lease by reason of such default without fast giving FINOVA at least
thirty (30) days' written notice of such default and such proposed
termination, which thirty day period shall commence on the date of receipt
by FINOVA of such notice, during which thirty day period, FINOVA may cure
such default;

         (e)   Lessee shall not amend, or execute any document purporting to
amend, the Lease in any manner without the prior written consent of FINOVA.
With respect to any proposed amendment of the Lease which would (i) reduce
the remaining term of the Lease, (ii) reduce the Basic Rent payable by Lessee
thereunder, (iii) reduce the insurance coverage under the Lease or the
deductible amounts with respect to such insurance, (iv) permit the Flight
Equipment to be registered under the laws of any jurisdiction other than the
United States of America, (v) expand the rights of Lessee to transfer rights
to possession, custody, control or operation of the Flight Equipment, (vi)
reduce Lessee's obligations with respect to the maintenance, storage, repair
or reinstallation of the Flight Equipment or (vii) reduce Lessee's
obligations with respect to the condition of the Flight Equipment upon
termination or expiration of the Lease, FINOVA shall have the right to
provide or withhold such consent in its discretion. With respect to any
proposed amendment of the Lease which is not described in the preceding
sentence, FINOVA Shall not unreasonably withhold its consent to such
amendment;

         (f)   Each notice provided by Lessee to Lessor under the Lease,
shall be simultaneously forwarded to FINOVA by Lessee;

         (g)   FINOVA shall have the right to inspect the Flight Equipment
and the "Aircraft Documents" (as defined in the Lease) in accordance with the
provisions of Section 8.6 of the Lease, as fully and effectually as if each
reference to "Lessor" in such Section were a reference to FINOVA. Such right
of FINOVA to inspect the Flight Equipment AND the Aircraft Documents is
without derogation of the right of Lessor to inspect the Flight Equipment and
the Aircraft Documents in accordance with Section 8.6 of the Lease; and

         (h)   Until all of the "Obligations" are fully paid and discharged by
Borrower, Lessee shall submit to FINOVA, within thirty (30) days following
the receipt by Lessee of FINOVA's written request therefor (which requests
shall not be made more

                                     -3-

<PAGE>

frequently than once in each calendar quarter), an Aircraft Utilization and
Status Report in the form attached hereto as ANNEX III

         4.    NOTICES. All notices (a) to be directed to FINOVA pursuant
hereto shall be directed to FINOVA at the following address, or at such other
address as FINOVA shall specify to Lessee by notice provided in accordance
with this Section:

                              FINOVA Capital Corporation
                              1850 North Central Avenue
                              Phoenix, Arizona 85077 USA
                              Attention: Vice President-Law
                    and
                              FINOVA Capital Corporation
                              1850 North Central Avenue
                              Phoenix, Arizona 85077 USA
                              Attention: Vice President-
                                         Operations Management

and (b) to be directed to Lessee pursuant hereto shall be directed to Lessee
at the following address, or at such other address as Lessee shall specify to
FINOVA by notice provided in accordance with this Section:

                              Aloha Airlines, Inc.
                              371 Aokea Street
                              Honolulu, Hawaii 96819 USA
                              Attention: Chief Financial Officer

         5.    QUIET ENJOYMENT BY LESSEE. BY acceptance  hereof,  FINOVA
agrees that,  provided that no "Event of Default" (as defined in the Lease)
shall have occurred and be continuing, none of FINOVA or any person claiming
by, through or on account of FINOVA will interfere with the quiet use,
possession and enjoyment of the Flight Equipment by Lessee.

         6.    AGREEMENTS OF FINOVA AND LESSEE. FINOVA and Lessee agree as
follows: (a) wherever in the Lease rights are granted to the "Lender," FINOVA
shall be entitled directly to exercise such rights in accordance with the
terms of the Lease and without relying on its rights as a third party
beneficiary; and (b) wherever in the Lease the consent of Lessor is required
but is provided nor to be unreasonably withheld by the Lessor, if the Lessor
requires the consent of FINOVA in such matter, such consent shall not be
unreasonably withheld.

                                      -4-

<PAGE>

         7.    GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL
BE DEEMED TO HAVE BEEN NEGOTIATED AND MADE IN, AND SHALL BE GOVERNED AND
INTERPRETED UNDER THE LAWS OF, THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
APPLICABLE TO AGREEMENTS THEREOF TO BE WHOLLY PERFORMED THEREIN.

         8.    VALIDITY OF AGREEMENT NOT IMPAIRED. Lessee acknowledges and
agrees that FINOVA or its assigns, without affecting the validity of this
Agreement or the rights and obligations of the parties hereunder, may extend
the time of payment of the indebtedness of Lessor to FINOVA, or modify the
terms of such indebtedness or take or release any collateral securing such
indebtedness, Without the consent of or notice to Lessee.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                      -5-

<PAGE>

         IN WITNESS WHEREOF, Lessee and FINOVA have executed this Agreement
as of the date first above written.

                                   ALOHA AIRLINES, INC., Hawaii corporation

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   FINOVA CAPITAL CORPORATION, a Delaware
                                   corporation

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   BY:______________________________________
                                   ITS:_____________________________________

                    ACKNOWLEDGMENT AND AGREEMENT OF LESSOR

         THE UNDERSIGNED ACG ACQUISITION VIII LLC, a Delaware limited
liability company, the "Lessor" referred to in the foregoing Notice of
Assignment of Lease, hereby acknowledges the terms thereof and agrees that
(a) to the extent the terms of such Notice of Assignment of Lease are
applicable to Lessor, Lessor SHALL be bound thereby, and (b) Lessor shall not
take any action inconsistent with the provisions of such Notice of Assignment
of Lease.

         IN WITNESS WHEREOF, Lessor has hereunto set its hand.

                                   ACG ACQUISITION VIII LLC, Delaware limited
                                   liability company

                                   BY:______________________________________
                                   ITS:_____________________________________

<PAGE>

                                   ANNEX I

                                     TO

                       NOTICE OF ASSIGNMENT OF LEASE

     The "Flight Equipment" as described in the foregoing Notice of
Assignment of Lease shall consist of the following:

          (a)  One (1) Airframe, identified as follows:

               Manufacturer:                      The Boeing Company
               FAA Registration Number:           N802AL
               Manufacturer's Model Number:       737-2S5C
               Manufacturer's Serial Number:      22148

          together with all parts, equipment and accessories thereto
          belonging, by whomsoever manufactured, now owned by ACG Acquisition
          VIII LLC or hereinafter acquired by ACG Acquisition VIII LLC, and
          installed in or appurtenant to said airframe; and

          (b)  Two (2) Pratt & Whitney JT8D-9A jet AIRCRAFT engines,
          identified by manufacturer's serial numbers P656093 and P665630,
          each such engine having 750 or more rated take-off horsepower or
          the equivalent thereof, together with all parts, equipment and
          accessories thereto belonging, by whomsoever manufactured, now
          owned by ACG Acquisition VIII LLC or hereinafter acquired by ACG
          Acquisition VIII LLC and installed in or appurtenant to any one or
          more of said engines.

<PAGE>

                                   ANNEX II

                                      TO

                         NOTICE OF ASSIGNMENT OF LEASE

______________________________________________________________________________

                                      LEASE
______________________________________________________________________________

<PAGE>

                                  ANNEX III

                                     TO

                       NOTICE OF ASSIGNMENT OF LEASE
______________________________________________________________________________

              FORM OF AIRCRAFT UTILIZATION AND STATUS REPORT
______________________________________________________________________________

<PAGE>

          negotiation, preparation and execution of this Agreement, and shall
          share equally the fees and expenses of special FAA counsel in
          connection with the transactions contemplated by this Agreement.

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

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

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

15.9 TIME OF ESSENCE

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

15.10 NOTICES

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

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

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

                                     -71-

<PAGE>

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

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

          with a copy to the Lender at:      1850 North Central Avenue
                                             Phoenix, Arizona 85077
                                             Attention: Vice President-Law--
                                                  Transportation Finance
                                             Telefax No.: 602-207-7551

                                                        -and-

                                             1850 North Central Avenue
                                             Phoenix, Arizona 85077
                                             Attention: Vice President-
                                                  Operations Management--
                                                  Transportation Finance
                                             Telefax No.: 602-207-7551

          (ii) if to the Lessee, to it at:   371 Aokea Street
                                             Honolulu, Hawaii 96819
                                             Attention: Senior Vice President,
                                                  Finance and Planning, and
                                                  Chief Financial Officer
                                             Telefax No.: 1-808-833-3100

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

15.11 LAW AND JURISDICTION

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

                                     -72-

<PAGE>

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

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

     (d)  Without prejudice to any other mode of service, each of the Lessor
          and the Lessee consents to the service of process relating to any
          proceedings involving, directly or indirectly, any matter arising
          out of or relating to this Agreement by U.S. Postal Service
          registered mail (prepaid, return receipt requested) of a copy of
          the process to the Lessee's address identified in Clause 15.1 0(b).

15.12 SOLE AND ENTIRE AGREEMENT

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

15.13 INDEMNITIES

     All rights expressed to be granted to each Indemnitee under this
     Agreement (other than the Lender) are given to the Lessor as agent for
     and on behalf of that Indemnitee.

15.14 COUNTERPARTS

                                     -73-

<PAGE>

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

15.15 CONFIDENTIALITY

     Neither the Lessor nor the Lessee shall, without the other's prior
     written consent, communicate or disclose the terms of this Agreement or
     any information or documents furnished pursuant to this Agreement
     (except to the extent that the same are within the public domain) to any
     third party (other than the Lender, any prospective Transferee, any
     material investor in the Parent or creditor in Lessee, Additional
     Mortgagees or Head Lessors, the respective external legal advisers,
     auditors, insurance brokers or underwriters of Lessor, Lessee and such
     parties, and the Airframe and Engine manufacturers); provided however
     that disclosure will be permitted, to the extent required:

     (a)  pursuant to an order of any court of competent jurisdiction; or

     (b)  pursuant to any procedure for discovery of documents in any
          proceedings before any such court; or

     (c)  pursuant to any law or regulation having the force of law; or

     (d)  pursuant to a lawful requirement of any authority with whose
          requirements the disclosing party is legally obliged to comply; or

     (e) in order to perfect any assignment of any assignable warranties.

                       [SIGNATURE PAGE FOLLOWS]

                                     -74-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 802 on
the date shown at the beginning of this Agreement.

                                   SIGNED on behalf of
                                   ACG ACQUISITION VIII LLC

                                   By: /s/ R. Stephen Hannahs
                                       -------------------------------
                                   Name: R. Stephen Hannahs
                                   Title: Manager

                                   SIGNED on behalf of
                                   ALOHA AIRLINES, INC.

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

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

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 802 on
the date shown at the beginning of this Agreement.

                                   SIGNED on behalf of
                                   ACG ACQUISITION VIII LLC

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

                                   SIGNED on behalf of
                                   ALOHA AIRLINES, INC.

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

                                   By: /s/ Owen Sekimura
                                       -------------------------------
                                   Name: Owen Sekimura
                                   Title: STAFF VICE PRESIDENT -
                                          FINANCE & CONTROLLER

<PAGE>

                                 SCHEDULE 1

                                  PART 1

                          AIRCRAFT SPECIFICATIONS

IDENTIFICATION:

<table>

                   <c>
Aircraft Type         B737-2S5C
Registration          N802AL
Serial Number         22148
Date of Manufacture.  5/80

</table>

WEIGHT DATA:

<table>

                                       <c>
Maximum Taxi Weight                       117,500 lbs.
Maximum Takeoff Weight                    117,500 lbs.
Maximum Landing Weight                    105,000 lbs.
Maximum Zero Fuel Weight                   95,000 lbs.
Fuel Capacity                              5168.7 U.S. Gals.

</table>

AIRFRAME AND INTERIOR EQUIPMENT:

<table>

                   <c>             <c>

Galleys               2               Locations: G-1 forward and G-4 aft
Lavatories            2               Locations: 1 forward and 1 aft
Air Stairs            1               Locations: -- forward and 1 aft
Passenger Seats       114             Locations/Types: 6 first class and 108 economy class
Overhead bins         Standard 60" Heath Techna
Cargo Door            Yes

</table>

ENGINES:

<table>

                   <c>             <c>
Position              No.1            No.2
Type                  JT8D-9A         JT8D-9A
Serial No.            P656093B        P665630B

</table>

APU:

<table>

                   <c>
Model:                GTCP 85-129H
Serial No.            PIOQ484

</table>
                           -76-

<PAGE>

LANDING GEAR:

<table>

                   <c>                        <c>                                <c>
Position              Nose                       Left Main                          Right Main
Type                  65-46200-46                65-46100-38                        65-46100-52
Serial No.            129926B                    [MR01124P6001]                     [MR01713P895]

</table>

MAJOR AVIONICS EQUIPMENT:

<table>

                        <c>                      <c>                        <c>
DESCRIPTION                MANUFACTURER             PART NO.                   QUANTITY

</table>
                          -77-

<PAGE>

                                   PART 2

                              AIRCRAFT DOCUMENTS

MANUALS

<table>

                                      <c>                          <c>
DESCRIPTION                              QUANTITY                     MEDIA

Maintenance Manual                         3                          Microfilm
Wiring Diagrams                            3                          Microfilm
Illustrated Parts Catalog                  3                          Microfilm
Systems Schematics                         3                          Microfilm
Weight & Balance Manual                    1                          Hard Copy
Operations Manual                          1                          Hard Copy
Flight Manual                              1                          Hard Copy
Structural Repair Manual                   1                          Microfilm
Rigging Document                           1                          Hard Copy
</table>

TECHNICAL RECORDS

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

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

Engine Shop Visit history including disk sheets

Emergency Equipment Listing including location
Cabin Layout Drawing

                           -78-

<PAGE>

RECORDS FOR:

   Last Compass Swing
   Last Altimeters Calibration
   Last ATC Transponder Calibration

                            -79-

<PAGE>

[1996 AIRCRAFT SPECIFICATION WORKSHEET PROVIDED BY ALOHA TO BE INSERTED HERE.]

                               -80-

<PAGE>

                                SCHEDULE 2

                       CERTIFICATE OF ACCEPTANCE 802

     This Certificate of Acceptance 802 is delivered on the date set forth in
     paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
     Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 802,
     dated January _, 1997, between the Lessor and the Lessee (the
     "AGREEMENT"). Capitalized terms used but not defined in this Certificate
     of Acceptance 802 shall have the meaning given to such terms in the
     Agreement.

1.   DETAILS OF ACCEPTANCE

     The Lessee hereby confirms to the Lessor that the Lessee has at   :
       .m. H.S.T. on this      day of January, 1997, at              ,
     accepted the following, in accordance with the provisions of the
     Agreement and the Annex:

     (a)  Airframe: Boeing 737-2S5C airframe, Manufacturer's Serial No. 22148
          and FAA Registration No. N802AL;

     (b)  Engines: two Pratt & Whitney JT8D-9A Engines, bearing
          Manufacturer's  Serial Nos.     and      , each having 750 or more
          rated take-off horsepower;

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

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

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

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

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

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

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

                         -81-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 802 on the date shown at the beginning of this Agreement.

                                    SIGNED on behalf of
                                    ACG ACQUISITION VIII LLC

                                    By: ________________________________
                                    Name:
                                    Title:

                                    SIGNED on behalf of
                                    ALOHA AIRLINES, INC.

                                    By: ________________________________
                                    Name:
                                    Title:

                                    By: ________________________________
                                    Name:
                                    Title:

                            -82-

<PAGE>

                                                                        ANNEX 1

                        MAINTENANCE STATUS AT DELIVERY

                           DATE:            ,19
AIRFRAME TIME:

     Total Flight Hours     [   ]
     Total Cycles           [   ]

AIRFRAME LIMITS:

     Type of Check:
     Check Interval:
     Time Since Last Check:

ENGINE DATA:

<table>

                                                         <c>                           <c>
     Position                                               No.1                          No.2
     Type                                                   JT8D-9A                       JT8D-9A
     Serial Number                                          [   ]                         [   ]

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

APU:

Type:              [   ]
Serial Number:     [   ]

Total Flight Hours:                                     [   ]
Total Cycles:                                           [   ]
Flight Hours Since Last HSI Inspection:                 [   ]
Cycles Since Last HSI Inspection:                       [   ]
Flight Hours Remaining on Turbine and Compressor LLPs:  [   ]
Cycles Remaining on Turbine and Compressor LLPs:        [   ]

                          -83-

<PAGE>

LANDING GEAR LIMITS:

<table>

                            <c>                          <c>                           <c>
Position:                      Nose                         Left                          Right
Overhaul Interval:
Time Since Overhaul:
Time to Next Overhaul:
</table>

                          -84-

<PAGE>

                                    SCHEDULE 3

                        OPERATING CONDITION AT REDELIVERY

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

1.   GENERAL CONDITION

     The Aircraft will:

     (a)  be clean by United States airline standards;

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

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

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

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

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

                            -85-

<PAGE>

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

     (g)  the Airframe shall have at least 50% of the Flight Hours,  Cycles
          and calendar time (whichever is applicable and,  if more  than one
          are  applicable,  most  limiting)  remaining  until  the next
          block  "D"  check (or equivalent heavy maintenance check) under the
          Agreed Maintenance  Program,  and if the Flight Hours,  Cycles or
          calendar time of the Airframe are less than 50% of the interval
          between "D" checks then the Lessee shall pay to the Lessor an
          amount equal to the product of (i) the number of Flight Hours,
          Cycles or calendar days (whichever is applicable and most
          limiting) by which the Airframe is less than 50% of the interval
          between "D" checks,  multiplied  by (ii) a fraction  (1) the
          numerator  of which is the average cost of a "D" check (including
          routine and non-routine  items) for an airframe similar to the
          Airframe  determined in accordance with the Appraisal  Procedure
          and (2) the  denominator  of which is the number of Flight  Hours,
          Cycles or calendar days (whichever is applicable and most limiting)
          between "D" checks;

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

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

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

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

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

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

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

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

                           -86-

<PAGE>

2.   PARTS

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

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

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

3.   ENGINES

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

     (a)  have not more than 4,000 Flight Hours since the last removal under
          the Agreed Maintenance Program, and if an Engine has more than
          3,500 Flight Hours since the last removal then the Lessee shall pay
          to the Lessor an amount equal to the product of (i) the number of
          Flight Hours since the last removal in excess of 3,500, multiplied
          by (ii) a fraction (1) the numerator of which is the average cost
          of the next scheduled removal and overhaul (including routine and
          non-routine items) for an engine similar to such Engine determined
          in accordance with the Appraisal Procedure and (2) the denominator
          of which is the number of Flight Hours between such scheduled
          removals under the Agreed Maintenance Program;

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

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

4.   FUSELAGE, WINDOWS AND DOORS

     (a)  the fuselage will not contain any dents, corrosion or abrasions
          that exceed the prescribed parameters under the SRM and shall be
          free of scab patches and loose, pulled or missing rivets;

                            -87-

<PAGE>

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

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

5.   WINGS AND EMPENNAGE

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

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

     (c)  wings will be free of fuel leaks.

6.   INTERIOR

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

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

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

7.   COCKPIT

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

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

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

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

8.   CARGO COMPARTMENTS

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

                         -88-

<PAGE>

     (b)  nets will be in good condition; and

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

9.   LANDING GEAR

     (a)  The installed main and nose landing gear components and their
          associated actuators and parts will be cleared of all inspections
          for not less than 12 months, 3,000 Flight Hours or 3,000 Cycles of
          operation (whichever is more limiting).

     (b)  The  installed  main and nose  landing gear will have at least 50%
          of the full  allotment  of Flight  Hours, Cycles or  calendar  time
          (whichever  is most  limiting)  remaining  until the next
          scheduled  removal for inspection or overhaul under the Agreed
          Maintenance  Program,  and if the Flight Hours,  Cycles or calendar
          time of any Landing Gear is less than 50% of the interval between
          scheduled  removals then the Lessee shall pay to the Lessor an
          amount equal to the product of (i) the number of Flight Hours,
          Cycles or calendar days (whichever is most limiting) by which such
          Landing Gear is less than 50% of the interval  between  scheduled
          removals,  multiplied  by (ii) $4.50 in the case of the main
          Landing Gear and $2.50 in the case of the nose Landing Gear.

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

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

10.  APU

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

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

11.  CORROSION

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

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

                         -89-

<PAGE>

                                   SCHEDULE 4

                                     PART 1

                          (INSURANCE REQUIREMENTS)

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

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

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

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

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

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

                           -90-

<PAGE>

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

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

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

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

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

     (b)  include a severability of interest clause;

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

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

4.   All Insurances will:

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

     (b)  provide coverage on a worldwide basis subject to those territorial
          exclusions which are usual and customary for carriers similarly
          situated with Lessee in the case of War Risks and Allied Perils
          coverage which are advised to and approved by Lessor, such approval
          not to be unreasonably withheld;

                                   -91-

<PAGE>

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

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

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

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

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

     (h)  include a services of suit clause.

                               -92-

<PAGE>

                             [LOGO]
                            SEDGWICK

                                            SCHEDULE 4, PART 2

                                                                  No. AQ-T.B.A.

DATE: January __, 1997

     TO:       FINOVA Capital Corporation ("Lender")
               1850 N. Central Avenue
               P.O. Box 2209
               Phoenix, Arizona 85002-2209

               and

               ACG Acquisition VIII LLC ("Owner"/"Lessor")
               Three Stamford Landing
               46 Southfield Avenue
               Stamford, Connecticut 06902

     Re:  Broker's Report
          Lease Agreement N802AL dated as of January __, 1997
          between ACG Acquisition VIII LLC ("Owner"/"Lessor"), FINOVA
          Capital Corporation ("Lender") and Aloha Airlines, Inc. ("Lessee")
          (the "Lease") regarding One (1) B737-MC Aircraft, Registration Number
          N802AL, Serial Number 22148 including two (2) Pratt 7 Whitney
          JT8D-9A engines, Serial Numbers 656093 and 665630 (the "Engines")
          (hereinafter the "Aircraft")

To Whom It May Concern:

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

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

The perils, limits of liability, and insurers relating to the above mentioned
insurance policies are more fully described in the attached Certificate of
Insurance, No. AQ-T.B.A.

<PAGE>

                             [LOGO]
                            SEDGWICK

It is our opinion that only an Insured (i.e., the Named Insured and/or the
Additional Insureds) can breach or violate any warranty, condition or
declaration of the policy.

We undertake to advise you:

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

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

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

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

The above is given subject to:

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

     2.   our lien, if any, on the policies referred to in our Certificate of
          Insurance for premiums due under such policies in respect of the
          Aircraft

     3.   Insurers' right of cancellation on default in payment of premiums

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

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

Sincerely,

Paul H. Yelavich
Director

<PAGE>

                             [LOGO]
                            SEDGWICK

                                            SCHEDULE 4, PART 3

                        CERTIFICATE OF INSURANCE                  No. AQ-T.B.A.

This is to verify to:    FINOVA Capital Corporation ("Lender")
                         1850 N. Central Avenue
                         P.O. Box 2209
                         Phoenix, Arizona 95002-2209

                         and

                         ACG Acquisition VIII LLC ("Owner"/"Lessor")
                         Three Stamford Landing
                         46 Southfield Avenue
                         Stamford, Connecticut 06902

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

NAMED INSURED:           Aloha Airlines, Inc.

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

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

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

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

<PAGE>

                             [LOGO]
                            SEDGWICK

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

GEOGRAPHICAL LIMITS:          Worldwide*

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

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

                         B)   As respects Aircraft Hulls: Agreed Value as
                              stated below. As respects aircraft spares
                              parts: US$60,000,000.00 any one loss/any one
                              location, US$25,000,000.00 any one transit.
                              Subject to an annual aggregate of
                              US$125,000,000.00. Subject to nil deductibles.

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

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

<PAGE>

                             [LOGO]
                            SEDGWICK

AIRCRAFT INSURED:             One (1) B737-2S5C aircraft, Registration
                              Number: N802AL, Manufacturer's Serial Number:
                              22148, Agreed Value: US$6,000,000 inclusive of
                              two (2) Pratt & Whitney JT8D-9A Engines,
                              Manufacturers Serial Numbers 656093 and 665630
                              (the "Engines") while attached to the Aircraft or
                              removed from the Aircraft, but not replaced
                              (hereinafter, the "Aircraft")

* As respects Coverage B - War Risks Aircraft Hull Insurance, the Geographical
Limits of the policy are:

Worldwide but excluding Africa, Columbia, Peru, Iraq, Afghanistan, Former
Republics of the U.S.S.R. and Yugoslavia.

<PAGE>

                                     [LOGO]
                                    SEDGWICK

                                    SECURITY

                         AS RESPECTS COVERAGES A AND C

<Table>
<Caption>
                                                     QUOTA SHARE
                                                    PARTICIPATION                POLICY
INSURERS                                            (PART OF 100%)               NUMBER
--------                                          -----------------              ------
<S>                                               <C>                            <C>

One or More Member Companies
of Associated Aviation Underwriters                      T.B.A.                   T.B.A.

Certain Underwriters at Lloyds, London
through Sedgwick Aviation Limited                        T.B.A.                   T.B.A.

Certain U.K. Insurance Companies and
Others through Sedgwick Aviation Limited                 T.B.A.                   T.B.A.

La Reunion Aerienne through
La Concorde                                              T.B.A.                   T.B.A.

Insurance Company of North America
Navigators Insurance Company through
Somerset Aviation                                        T.B.A.                   T.B.A.

Assurance France Aviation                                T.B.A.                   T.B.A.

Mutual Marine Office                                     T.B.A.                   T.B.A.

American Home Assurance Company
Through AIG Aviation                                     T.B.A.                   T.B-A.

</Table>

                               SEVERAL LIABILITY NOTICE

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

LSW 1001 (insurance)

<PAGE>

                                     [LOGO]
                                    SEDGWICK

                                    SECURITY

                            AS RESPECTS COVERAGES B

<Table>
<Caption>
                                                     QUOTA SHARE
                                                    PARTICIPATION                POLICY
INSURERS                                            (PART OF 100%)               NUMBER
--------                                          -----------------              ------
<S>                                               <C>                            <C>

Certain Underwriters at Lloyds,
London through Sedgwick Aviation
Limited                                                  T.B.A.                   T.B.A.

Certain U.K. Insurance Companies
and Others through Sedgwick Aviation
Limited                                                  T.B.A.                   T.B.A.

Navigators Insurance Company
through Somerset Aviation                                T.B.A.                   T.B.A.

Assurance France Aviation                                T.B.A.                   T.B.A.

La Reunion Aerienne through
La Concorde                                              T.B.A.                   T.B.A.

Mutual Marine Office                                     T.B.A.                   T.B.A.

</Table>

                             SEVERAL LIABILITY NOTICE

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

LSW 1001 (Insurance)

<PAGE>

                             [LOGO]
                            SEDGWICK

                            SPECIAL PROVISIONS

Solely as respects coverages A, B and c and solely as respects Lease
Agreement N802AL dated as of January _, 1997 between ACG Acquisition VIII LLC
("Owner"/"Lessor"), FINOVA Capital Corporation ("Lender") and Aloha
Airlines, Inc, ("Lessee") (the "Lease") regarding the Aircraft subject to
policy terms, conditions, limitations, deductibles, warranties and exclusions
the following provisions apply:

I.   SOLELY AS RESPECTS COVERAGES A AND B:

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

     2.   Hull All Risks insurers and Hull War Risks and Allied Perils
          insurers agree to a 50/50 claims settlement provision per the terms
          of AVS103 (or its equivalent),

     3.   Underwriters are not entitled to replace the Aircraft in the event
          of a Total Loss of the Aircraft.

II.  SOLELY AS RESPECT COVERAGE C

     1.   Lender, Owner/Lessor and their respective successors and assigns
          and their respective shareholders, affiliates, subsidiaries,
          directors, officers, employees, agents and indemnitees are included
          as Additional Insureds ("the Additional Insureds") as their
          respective interests may appear, warranted no operational interest,
          However, no party shall be included as an Additional Insured as
          respects its legal liability as manufacturer, repairer, supplier or
          servicing agent of the Aircraft or any part thereof.

<PAGE>

                             [LOGO]
                            SEDGWICK

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

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

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

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

     1.   Insurers waive their rights to any set-off or counter claim or any
          other deduction, whether by attachment or otherwise, in respect of
          any liability to the Additional Insureds (save in respect of unpaid
          premium in respect of the Aircraft only).

     2.   The Additional Insureds have no responsibility for premiums,
          commissions, assessments or calls (save as is provided for in
          Special Provision III.1).

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

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

<PAGE>

                             [LOGO]
                            SEDGWICK

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

     6.   Insurers note the existence of the Lease and acknowledge ACG
          Acquisition VIII LLC as Owner of the Aircraft.

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

DATE OF ISSUE                          SEDGWICK AVIATION, NORTH AMERICA

__________________________________     _________________________________
                                       AUTHORIZED REPRESENTATIVE

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

                                                          SCHEDULE 5

                        , 1997

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

FINOVA CAPITAL CORPORATION
1850 North Central Avenue
Phoenix, Arizona 85077

Re:  LEASE AGREEMENT 802 dated as of               , 1997 between
     ACG ACQUISITION VIII LLC ("Lessor") and ALOHA AIRLINES, INC.
     ("Lessee") with respect to one (1) The Boeing Company Model
     737-2S5C Aircraft, bearing manufacturer's serial no. 22148
     and U.S. registration no. N802AL, together with two (2)
     Pratt & Whitney Model JT8D-9A engines bearing engine
     manufacturer's serial nos. P656093B and P665630B (the
     "Aircraft").

Gentlemen:

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

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

    1.     Lease Agreement 802 (as described above) dated as of
                      , 1997 by and between Lessor and Lessee
           ("Lease Agreement");

   2.      Acceptance Certificate dated as of                    , 1997
           executed by Lessee ("Acceptance Certificate"); and

   3.      Acknowledgment and Consent dated as of                 , 1997
           relating to Lessor's assignment of Lease Agreement to
           FINOVA Capital Corporation, as Lender ("Acknowledgment").

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

A LAW CORPORATION Suite 850, Davies Pacific Center, 841 Bishop Street,
Honolulu, Hawaii 96813 - (808) 522-5133 - Facsimile: (808) 522-5144

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                    , 1996
Page 2

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

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

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

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

C.       The Operative Documents far constitute valid and binding obligations
         of Lessee, enforceable in accordance with their respective terms,
         (ii) are in

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                   , 1996
Page 3

         full force and effect, and (iii) the provisions of the Operative
         Documents with respect to choice of substantive law to govern the
         interpretation and enforcement of such Operative Documents and
         consent to jurisdiction and choice of forum in connection with such
         interpretation and enforcement are legal, valid and binding;
         however, the state and federal courts in the State of Hawaii may not
         apply the procedural law, including without limitation, law relating
         to remedies or provisional remedies, of a non-forum state, such as,
         without limitation, New York and Arizona;

D.       To our knowledge and without any inquiry except review of a
         certification as to the following provided by Lessee, (i) the
         execution and delivery of and the performance of the provisions of the
         Operative Documents and of the transactions contemplated thereby and
         hereby do not contravene in any material respect any applicable law,
         regulation, decree, order, permit or contractual or other
         restriction now existing and binding on Lessee or on any of the
         properties of Lessee, and (ii) the performance of the provisions of
         the Operative Documents in effect on this date, and of the
         transactions contemplated thereby will not contravene in any
         material respect any applicable law, regulation, decree, order or
         permit currently in effect or contractual or other restriction now
         existing and binding on Lessee or on any of the properties of Lessee;

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

F.       To our knowledge and without inquiry except review of a certification
         as to the following provided by Lessee, Lessee is not in default under
         any agreement to which

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                   , 1996
Page 4

         it is a party or by which it may be bound, nor in default of any kind
         in respect of any financial commitment or obligation (including
         obligations under guarantees) which could have a material adverse
         effect on the ability of Lessee to perform its obligations under the
         Operative Documents nor is there any fact which by giving of notice
         or by lapse of time or otherwise might constitute such default by
         Lessee;

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

H.       To our knowledge and without inquiry except for review of a
         certification as to the following provided by Lessee, Lessee has
         furnished Lessor with consolidated financial statements of Aloha
         Airgroup, Inc., the corporate parent of Lessee, reflecting the
         financial results of Aloha Airgroup, Inc. and its subsidiaries
         (including Lessee) as of               , 199  .

I.       Lessee is (i) a "United States citizen" as that term is used and
         defined in the Federal Aviation Act of 1958, as amended and recodified
         as Title 49 of the United States Code, and (ii) a duly certified
         United States Air Carrier pursuant to the provisions of 14 C.F.R. 121;

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

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

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                 , 1996
Page 5

        constitute an Event of Default or Default under the Operative
        Documents;

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

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

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

0.      In the event that Lessee files a petition for relief under Chapter 11
        of the United States Bankruptcy Code, as amended, or has such a
        petition filed against it, Lessor will be entitled to the rights
        provided to a "lessor" under the provisions of Section 1110(a)(1) of
        Title 11 of the United States Code.

The opinion expressed above is qualified to the extent that:

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

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

3.      In conducting our examination, we have assumed the genuineness of all
        signatures (other than the signatures of Lessee), the correctness of
        all certificates, the authenticity of all documents submitted to us as
        originals, the conformity to

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                 , 1996
Page 6

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

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

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

6.      The opinions given herein are as of the date hereof and we assume no
        obligation to update or supplement such opinions to reflect any facts
        or circumstances which

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                    , 1996
Page 7

        may hereafter come to our attention or any changes in law which may
        hereafter occur.

Very truly you

CHAR SAKAMOTO ISHII & LUM

Elizabeth Ann Ishii
Lana Proctor Banbury

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

A LAW CORPORATION

<PAGE>

                                                                 SCHEDULE: 6

                  IRREVOCABLE STANDBY LETTER OF CREDIT

BENEFICIARY:

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

Gentlemen:

     We hereby establish our Irrevocable Standby Letter of Credit No. S/B ____
in your favor, effective                      , 19   , available by your
draft(s) on Fire Hawaiian Bank, International Banking, Honolulu, Hawaii, at
eight for the account of Aloha Airlines, Inc., P. 0. Box 30028, Honolulu.
Hawaii 96820, up to an aggregate amount of U.S. $227,000 (two hundred twenty
seven thousand United States Dollars), accompanied by:

    A statement purportedly signed by a duly authorized officer Of ACG
    Acquisition VIII LLC certifying that "an 'Event of Default' has occurred
    and is continuing under that certain Lease Agreement 802 by and between
    Aloha Airlines, Inc. and ACG Acquisition VIII LLC.

    Payment of amounts drawn under this Letter of Credit shall be made in full,
without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable
to the Lessor or the Lender by the Lessee have been irrevocable paid in full we
shall not by virtue of this Letter of Credit be subrogated to any of the
Lessor's or the Lender's rights or claim in competition with the Lessor or the
Lender against the Lessee.

    It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year each from the present or each future expiration date unless at least
thirty (30) days prior to any such expiry date we shall notify you in writing
by certified mail at the above address, tot we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us as sight
accompanied by this Letter of Credit and your written certification stating
that "FINOVA Capital Corporation has received a notice of non-renewal from
First Hawaiian Bank to its Letter of Credit No. S/B                  ".

    Partial drawings permitted.

    All drafts must bear the clause "Drawn under Credit No. S/B             of
First Hawaiian Bank, Honolulu, Hawaii dated                   , 19     .

    This Letter cf Credit is transferable only by  Beneficiary. Notice of such
Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, at P.O. Box 32001 Honolulu, Hawaii 96847.

    All bank charges relating to this Letter of Credit are for the account of
applicant.

<PAGE>

    Alternatively, drawings may be sent via fax to our International Banking at
Fax No. (808) 525-5791, originals to follow by mail. Drawings by fax or by
presentment of original documents must be received by First Hawaiian Bank,
International Banking on or before 3:00 P.M. Hawaii Standard Time on _________
19   , the expiration date or any automatically extended date.

    Except as otherwise expressly stated, this Credit is subject to the
"Uniform Customs and Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.

    We hereby engage with you that all drafts drawn under and in compliance
with the terms of this Credit shall be duly honored upon presentation if drawn
on or before                  , 19   , the expiration date, at our
International Banking counters in Honolulu, Hawaii.

                                               Sincerely,

                                               FIRST HAWAIIAN BANK

_________________________________              _______________________________
       Authorized Signature                           Authorized Signature

<PAGE>

                                 SCHEDULE 7

                     FORM OF SEMI-ANNUAL STATUS REPORT

<TABLE>
<CAPTION>

     AIRCRAFT TYPE                 REG. MARK       SERIAL NO.     MONTH ENDING
     -------------                 ---------       ----------     ------------
     <S>                           <C>             <C>            <C>
     Boeing 737-2S5C                 N802AL          22148        ............

</TABLE>

<TABLE>

<S>       <C>                                     <C>               <C>
1.        AIRCRAFT UTILIZATION:
          --------------------

(a)       Airframe Total Flight Hours             ............................

(b)       Airframe Total Cycles                   ............................

(c)       Airframe Flight Hours for Month         ............................

(d)       Airframe Flight Cycles for Month        ............................

2.        POWERPLANT STATUS:                         No.1              No.2
          -----------------                          ----              ----

(a)       Serial Nos. of Delivered Engines        ..........        ..........

(b)       Serial Nos. of Replacement Engines      ..........        ..........
          (if applicable)

(c)       Serial Nos. of Installed Engines        ..........        ..........
          (if different from (a) or (b) above)

(d)       Current Location of Delivered or        ..........        ..........
          Replacement Engines (as applicable)
          (if not installed on Airframe)

(e)       Total Time Since New of Delivered       ..........        ..........
          or Replacement Engines (as applicable)

(f)       Total Cycles Since New of Delivered     ..........        ..........
          or Replacement Engines (as applicable)

<PAGE>

(g)       Total Flight Hours for the Month for     ..........        ..........
          each Delivered or Replacement Engine
          (as applicable)

(h)       Total Cycles for the Month for each      ..........        ..........
          Delivered or Replacement Engine
          (as applicable)

(i)       Serial No. of Delivered APU              ..........

(j)       Serial No. of Replacement APU            ..........
          (if applicable)

(k)       Serial No. of Installed APU              ..........
          (if different from (a) or (b) above)

(1)       Current Location of Delivered or         ..........
          Replacement APU (as applicable)
          (if not installed on Airframe)

(m)       Total Time Since New of Delivered        ..........
          or Replacement APU (as applicable)

(n)       Total Cycles Since New of Delivered      ..........
          or Replacement APU (as applicable)

(o)       Total Hours for the Month for            ..........
          Delivered or Replacement APU
          (as applicable)

(p)       Total Cycles for the Month for           ..........
          Delivered or Replacement APU
          (as applicable)

3.        ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
          -----------------------------------------

(a)       Routine Checks (A and above) performed during Month:

(b)       Airworthiness Directives complied with during Month:

</TABLE>

<PAGE>

                                                      RECORDED
                                          FEDERAL AVIATION ADMINISTRATION
                                          DATE  5-17-01     TIME 8:05 AM
                                               ------------      ---------
                                          CONVEYANCE NUMBER BB34836
                                                            --------------
                                          BY           N. Peck
                                             -----------------------------

                            LEASE AMENDMENT 802 NO. 1

         This Lease Amendment 802 No. 1, dated April 30, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2S5C
aircraft bearing manufacturer's serial number 22148 and U.S. registration mark
N802AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P656093B and P665630B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:

(1)     Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement
        802, dated January 15, 1997 (the "Original Lease Agreement"), between
        Lessor and Lessee, as supplemented by Certificate of Acceptance 802,
        dated January 15, 1997, between Lessor and Lessee (the "Acceptance
        Certificate"). The Original Lease Agreement, as supplemented by the
        Acceptance Certificate, is referred to in this Amendment as the Lease
        Agreement.

(2)     The Original Lease Agreement and the Acceptance Certificate were
        recorded by the FAA and were assigned conveyance numbers by the FAA as
        set forth on the attached Schedule 1.

(3)     Lessor and Lessee wish to amend the Lease Agreement to extend the term
        of the Lease Agreement for one year, to amend the monthly rent during
        the extended term, to grant Lessee a further one-year extension option
        and to make certain other changes as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.      DEFINITIONS.

        Capitalized terms used but not defined in this Amendment shall have the
        meanings ascribed to such terms in the Lease Agreement.

2.      AMENDMENT OF LEASE AGREEMENT.

        The Lease Agreement is amended as follows:

        (a)     The definition of "Expiry Date" in Clause 1. 1 of the Lease
                Agreement is amended and restated in its entirety as follows:

                                     - 1 -
<PAGE>

                        "September 25, 2002 or, if extended pursuant to Clause
                        4.1(b), September 25, 2003 or, if earlier than either of
                        those dates, as applicable, the date on which:

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

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

        (b)     The definition of "Lender" in Clause 1.1 of the Lease Agreement
                is amended to delete the words "FINOVA Capital Corporation, a
                Delaware corporation, and".

        (c)     The definition of "Mortgage" in Clause 1. 1 of the Lease
                Agreement and all references to "Mortgage" in the Lease
                Agreement are deleted.

        (d)     The definition of "Security Deposit" in Clause 1.1 of the Lease
                Agreement is amended and restated in its entirety as follows:
                "the amount of $100,000".

        (e)     Clause 4.1(b) of the Lease Agreement is designated Clause
                4.1(c), and a new Clause 4.1(b) is added to the Lease
                Agreement as follows:

                        (b)     By written notice delivered to Lessor on or
                                before December 26, 2001, Lessee may elect to
                                extend the scheduled "Expiry Date" by one year,
                                to September 25, 2003. Except as set forth in
                                the preceding sentence, there shall be no
                                renewals or extensions of the Term.

        (f)     Clause 5.3(b)(ii) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(ii)   The Basic Rent payable in respect of each
                                subsequent Rental Period will be (1) for Rental
                                Periods ending on or before September 25, 2001,
                                the amount of $110,000, and (2) for Rental
                                Periods beginning on or after September 26,
                                2001, the amount of $80,000."

        (g)     Clause 5.4(a) of the Lease Agreement is amended and restated in
                its entirety as follows:

                        "(a)    All payments of Rent by the Lessee to the Lessor
                                under this Agreement will be made for value on
                                the due date, for the full amount due, in
                                Dollars and in same day funds, settled through
                                the New York Clearing House System or such other
                                funds as may for the time being be customary for
                                the settlement in New York City of payments in
                                Dollars by telegraphic transfer to the account
                                of the Lessor at Chase

                                     - 2 -
<PAGE>

                                Manhattan Bank, N.A., New York, New York, ABA
                                No. 021000021, Account No. 249-500-335-765."

        (h)     The text of the plates required pursuant to Clause 8.7(d) of the
                Lease Agreement is amended and restated in its entirety as
                follows:

                        "This Aircraft/Engine is owned by ACG Acquisition VIII
                        LLC and is leased to Aloha Airlines, Inc. It may not be
                        operated by any other person without the prior written
                        consent of ACG Acquisition VIII LLC."

        (i)     Clause 15.10(b)(i) of the Lease Agreement is amended and
                restated in its entirety as follows:

                        "(i)    if to Lessor, to it at:
                                c/o Aviation Capital Group Corp.
                                800 Newport Center Drive, Suite 425
                                Newport Beach, California 92660-6309
                                Attention: Managing Director
                                Telefax No.: 949-759-5675

                                with a copy to:
                                Aviation Capital Group Corp.
                                2 Stamford Landing, Suite 295
                                46 Southfield Avenue
                                Stamford, Connecticut 06902
                                Attention: Managing Director
                                Telefax No.: 203-967-3287."

        (j)     Clause 1(g) of Schedule 3 of the Lease Agreement is deleted, and
                the text "[Intentionally Omitted]" is substituted in its place.

        (k)     Clause 3(a) of Schedule 3 of the Lease Agreement is amended to
                add the following text after the word "removal" in the first
                line: "(including removal for a hot section inspection)".

        (1)     Clause 2(a) of Schedule 4, Part 1 of the Lease Agreement is
                amended to delete the words "Lender as sole loss payee" in the
                third line and substitute the words "Lessor as sole loss payee".

3.      RATIFICATION.

        Except as amended in Section 2 above, the Lease Agreement remains in
        full force and effect in accordance with its terms.

4.      LESSEE'S REPRESENTATIONS AND WARRANTIES.

                                     - 3 -
<PAGE>

        Lessee represents and warrants to Lessor as follows:

        (a)     After giving effect to this Amendment, (i) each of the
                representations and warranties set forth in Clauses 2.1 and 2.2
                of the Lease Agreement is true and correct in all respects as if
                made on the date of this Amendment, and (ii) no Default or Event
                of Default exists under the Lease Agreement.

        (b)     Lessee has the power to execute, deliver and perform, and has
                taken all necessary corporate action to authorize the execution,
                delivery and performance of, this Amendment and the other
                agreements, instruments and documents to be executed by it in
                connection with this Amendment. No consent or approval of any
                Person, no consent or approval of any mortgagee, no waiver of
                any Lien or light of distraint or other similar right and no
                consent, license, certificate of need, approval, authorization
                or declaration of, or filing with, any governmental authority,
                bureau or agency is or will be required in connection with the
                execution, delivery or performance by Lessee, or in connection
                with the validity or enforcement against Lessee, of this
                Amendment and the other agreements, instruments and documents
                executed in connection with this Amendment, except for the
                filing of this Amendment for recordation with the aircraft
                registry of the FAA.

        (c)     The execution, delivery and performance by Lessee of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessee of any court or governmental
                authority, bureau or agency, domestic or foreign, (iii) conflict
                with or result in a breach of the certificate of incorporation
                or by-laws of Lessee, (iv) create (with or without the giving of
                notice or lapse of time, or both) a default under or breach of
                any agreement, bond, note or indenture to which Lessee is a
                party, by which Lessee is bound or by which any of its
                properties or assets is affected, or (v) result in the
                imposition of any Lien of any nature whatsoever upon any of the
                properties or assets owned by or used in connection with the
                business of Lessee.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessee is a party have been duly executed and delivered by
                Lessee and constitute the valid and legally binding agreements
                of Lessee, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.

                                     - 4 -
<PAGE>

5.      LESSOR'S REPRESENTATIONS AND WARRANTIES.

        Lessor represents and warrants to Lessee as follows:

        (a)     After giving effect to this Amendment, each of the
                representations and warranties set forth in Clause 2.4 of the
                Lease Agreement is true and correct in all respects as if made
                on the date of this Amendment.

        (b)     Lessor has the power to execute, deliver and perform, and has
                taken all necessary limited liability company action to
                authorize the execution, delivery and performance of, this
                Amendment and the other agreements, instruments and documents to
                be executed by it in connection with this Amendment. No consent
                or approval of any Person, no consent or approval of any
                mortgagee, no waiver of any Lien or right of distraint or other
                similar right and no consent, license, certificate of need,
                approval, authorization or declaration of, or filing with, any
                governmental authority, bureau or agency is or will be required
                in connection with the execution, delivery or performance by
                Lessor, or in connection with the validity or enforcement
                against Lessor, of this Amendment and the other agreements,
                instruments and documents executed in connection with this
                Amendment, except for the filing of this Amendment for
                recordation with the aircraft registry of the FAA.

        (c)     The execution, delivery and performance by Lessor of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessor of any court or governmental
                authority, bureau or agency, domestic or foreign, (iii) conflict
                with or result in a breach of the certificate of formation or
                operating agreement of Lessor, (iv) create (with or without the
                giving of notice or lapse of time, or both) a default under or
                breach of any agreement, bond, note or indenture to which Lessor
                is a party, by which Lessor is bound or by which any of its
                properties or assets is affected, or (v) result in the
                imposition of any Lien of any nature whatsoever upon any of the
                properties or assets owned by or used in connection with the
                business of Lessor, except the Lien of the Security Trust
                Agreement.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessor is a party have been duly executed and delivered by
                Lessor and constitute the valid and legally binding agreements
                of Lessor, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the

                                     - 5 -
<PAGE>

                remedy of specific performance and other equitable remedies are
                subject to judicial discretion.

6.      GOVERNING LAW.

        This Amendment shall be governed by and construed in accordance with the
        laws of the State of New York applicable to contracts executed in the
        State of New York by residents of such State and to be performed
        entirely within such State.

7.      SUCCESSORS AND ASSIGNS.

        This Amendment shall be binding upon, inure to the benefit of and be
        enforceable by Lessor, Lessee, and their respective successors,
        transferees and assigns. Neither Lessor nor Lessee shall assign or
        delegate its rights and obligations under this Amendment except in
        accordance with an assignment or delegation of its rights and
        obligations under, and in accordance with the terms of, the Lease
        Agreement, and any other purported assignment or delegation shall be
        null and void AB INITIO.

8.      SEVERABLE PROVISIONS.

        The provisions of this Amendment are severable, and if any section or
        provision shall be held invalid or unenforceable in whole or in part in
        any jurisdiction, then such invalidity or unenforceability shall affect
        only such section, provision or part in such jurisdiction and shall not
        in any manner affect such section, provision or part in any other
        jurisdiction or any other section or provision in this Amendment in any
        jurisdiction.

9.      COUNTERPARTS.

        This Amendment may be executed in one or more counterparts, each of
        which shall be deemed an original but all of which together shall
        constitute one and the same Amendment.

10.     EXPENSES.

        Each of Lessor and Lessee shall bear its own expenses, including the
        legal fees and expenses of its counsel, in connection with the
        negotiation, execution and delivery of this Amendment and all other
        documents executed and delivered in connection with this Agreement, and
        Lessor and Lessee shall share equally the legal fees and expenses,
        including filing fees, incurred by [Lytle, Soule & Curlee], special
        counsel for FAA matters.

11.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY

                                     - 6 -
<PAGE>

11.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDEMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
        SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT
        MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF
        THIS AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
        COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 1 on the date first above written.

                                             ACG ACQUISITION VIII LLC, as Lessor

                                             By:     "R. STEPHEN HANNAHS"
                                                 -------------------------------
                                             Name:  R. STEPHEN HANNAHS
                                             Title: MANAGER

                                             ALOHA AIRLINES, INC., as Lessee

                                             By: "BRENDA F. CUTWRIGHT"
                                                 -------------------------------
                                             Name:  BRENDA F. CUTWRIGHT
                                             Title: EXECUTIVE VICE PRESIDENT AND
                                                    CHIEF FINANCIAL OFFICER

                                             By: "GLENN R. ZANDER"
                                                 -------------------------------
                                                 Name:  Glenn R. Zander
                                                 Title: President & CEO

                                     - 7 -
<PAGE>

                                   Schedule 1
                          to Lease Amendment 802 No. 1

                              Description of Lease

        Lease Agreement 802 dated January 15, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 15, 1997, recorded by the Federal Aviation
Administration on January 27, 1997, as Conveyance No. TT008434.

                                     - 8 -

<PAGE>

                           LEASE AMENDMENT 802 NO. 2

        This Lease Amendment 802 No. 2, dated as of November 9, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2S5C
aircraft bearing manufacturer's serial number 22148 and U.S. registration mark
N802AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P656093B and P665630B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:

(1)     Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement
        802, dated January 15, 1997 (the "Original Lease Agreement"), between
        Lessor and Lessee, as supplemented by Certificate of Acceptance 802,
        dated January 15, 1997, between Lessor and Lessee (the "Acceptance
        Certificate") and as amended by Lease Amendment 802 No. 1, dated April
        30, 2001, between Lessor and Lessee ("Amendment No. 1"). The Original
        Lease Agreement, as supplemented by the Acceptance Certificate and
        amended by Amendment No. 1, is referred to in this Amendment as the
        Lease Agreement.

(2)     The Original Lease Agreement, the Acceptance Certificate and Amendment
        No. 1 were recorded by the FAA and were assigned conveyance numbers by
        the FAA as set forth on the attached Schedule 1.

(3)     Lessor and Lessee wish to amend the Lease Agreement to extend the term
        of the Lease Agreement for approximately three months, to amend the
        monthly rent during the remainder of the term and to make certain other
        changes as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.      DEFINITIONS.

        Capitalized terms used but not defined in this Amendment shall have the
        meanings ascribed to such terms in the Lease Agreement.

2.      AMENDMENT OF LEASE AGREEMENT.

        The Lease Agreement is amended as follows:

                                     - 1 -
<PAGE>

        (a)     The definition of "Agreed Value" in Clause 1.1 of the Lease
                Agreement is amended to read "as set forth in Appendix 1".

        (b)     The definition of "Expiry Date" in Clause 1.1 of the Lease
                Agreement is amended and restated in its entirety as follows:

                        "December 25, 2002 or, if extended pursuant to Clause 4.
                        1(b), December 25, 2003 or, if earlier than either of
                        those dates, as applicable, the date on which:

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

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

        (c)     The definitions of "Letter of Credit" and "Security Deposit" in
                Clause 1.1 of the Lease Agreement are deleted in their entirety,
                and all references in the Lease Agreement to such terms shall
                have no force or effect.

        (d)     Clause 4.1(b) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(b)    By written notice delivered to Lessor on or
                                before June 26, 2002, Lessee may elect to extend
                                the scheduled "Expiry Date" by one year, to
                                December 25, 2003. Except as set forth in the
                                preceding sentence, there shall be no renewals
                                or extensions of the Term."

        (e)     Clause 5.1 of the Lease Agreement is deleted in its entirety.

        (f)     Clause 5.3(b)(ii) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(ii)   The Basic Rent payable in respect of each
                                subsequent Rental Period will be the Basic Rent
                                Amount, as set forth in Appendix 1."

        (g)     The Lease Agreement is amended to add Appendix 1 in the form
                attached to this Amendment as Schedule 2.

3.      APPLICATION OF LETTER OF CREDIT.

        Lessor is holding the Letter of Credit (as defined in the Lease
        Agreement, without giving effect to Section 2(c) above). Lessor and
        Lessee agree that Lessor shall be entitled to present

                                     - 2 -
<PAGE>

        the Letter of Credit to the issuing bank, and that the resulting
        proceeds paid to Lessor shall constitute payment in full for the Basic
        Rent due for the Rental Periods beginning on or after September 26, 2001
        and ending on or before December 25, 2001 under the Lease Agreement, as
        amended by this Amendment. Lessee further agrees (a) notwithstanding the
        effect of this Amendment, Lessor may represent to the bank issuing the
        Letter of Credit that an Event of Default has occurred and may make such
        other statements and representations as are necessary for drawing the
        full amount under the Letter of Credit, and (b) Lessee shall take all
        such actions and grant to Lessor and the issuing bank all such waivers
        of the provisions of the Lease Agreement and the Letter of Credit as are
        necessary for Lessor to draw the full amount under the Letter of Credit.

4.      RATIFICATION.

        Except as amended in Section 2 above, the Lease Agreement remains in
        full force and effect in accordance with its terms.

5.      LESSEE'S REPRESENTATIONS AND WARRANTIES.

        Lessee represents and warrants to Lessor as follows:

        (a)     After giving effect to this Amendment, (i) each of the
                representations and warranties set forth in Clauses 2.1 and 2.2
                of the Lease Agreement is true and correct in all respects as if
                made on the date of this Amendment, and (ii) no Default or Event
                of Default exists under the Lease Agreement.

        (b)     Lessee has the power to execute, deliver and perform, and has
                taken all necessary corporate action to authorize the execution,
                delivery and performance of, this Amendment and the other
                agreements, instruments and documents to be executed by it in
                connection with this Amendment. No consent or approval of any
                Person, no consent or approval of any mortgagee, no waiver of
                any Lien or right of distraint or other similar right and no
                consent, license, certificate of need, approval, authorization
                or declaration of, or filing with, any governmental authority,
                bureau or agency is or will be required in connection with the
                execution, delivery or performance by Lessee, or in connection
                with the validity or enforcement against Lessee, of this
                Amendment and the other agreements, instruments and documents
                executed in connection with this Amendment, except for the
                filing of this Amendment for recordation with the aircraft
                registry of the FAA.

        (c)     The execution, delivery and performance by Lessee of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessee of any

                                     - 3 -
<PAGE>

                court or governmental authority, bureau or agency, domestic or
                foreign, (iii) conflict with or result in a breach of the
                certificate of incorporation or by-laws of Lessee, (iv) create
                (with or without the giving of notice or lapse of time, or both)
                a default under or breach of any agreement, bond, note or
                indenture to which Lessee is a party, by which Lessee is bound
                or by which any of its properties or assets is affected, or (v)
                result in the imposition of any Lien of any nature whatsoever
                upon any of the properties or assets owned by or used in
                connection with the business of Lessee.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessee is a party have been duly executed and delivered by
                Lessee and constitute the valid and legally binding agreements
                of Lessee, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.

6.      LESSOR'S REPRESENTATIONS AND WARRANTIES.

        Lessor represents and warrants to Lessee as follows:

        (a)     After giving effect to this Amendment, each of the
                representations and warranties set forth in Clause 2.4 of the
                Lease Agreement is true and correct in all respects as if made
                on the date of this Amendment.

        (b)     Lessor has the power to execute, deliver and perform, and has
                taken all necessary limited liability company action to
                authorize the execution, delivery and performance of, this
                Amendment and the other agreements, instruments and documents to
                be executed by it in connection with this Amendment. No consent
                or approval of any Person, no consent or approval of any
                mortgagee, no waiver of any Lien or right of distraint or other
                similar right and no consent, license, certificate of need,
                approval, authorization or declaration of, or filing with, any
                governmental authority, bureau or agency is or will be required
                in connection with the execution, delivery or performance by
                Lessor, or in connection with the validity or enforcement
                against Lessor, of this Amendment and the other agreements,
                instruments and documents executed in connection with this
                Amendment, except for the filing of this Amendment for
                recordation with the aircraft registry of the FAA.

        (c)     The execution, delivery and performance by Lessor of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance,

                                     - 4 -
<PAGE>

                resolution, decree or other similar document or instrument
                binding on Lessor of any court or governmental authority, bureau
                or agency, domestic or foreign, (iii) conflict with or result in
                a breach of the certificate of formation or operating agreement
                of Lessor, (iv) create (with or without the giving of notice or
                lapse of time, or both) a default under or breach of any
                agreement, bond, note or indenture to which Lessor is a party,
                by which Lessor is bound or by which any of its properties or
                assets is affected, or (v) result in the imposition of any Lien
                of any nature whatsoever upon any of the properties or assets
                owned by or used in connection with the business of Lessor,
                except the Lien of the Security Trust Agreement.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessor is a party have been duly executed and delivered by
                Lessor and constitute the valid and legally binding agreements
                of Lessor, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.

7.      GOVERNING LAW.

        This Amendment shall be governed by and construed in accordance with the
        laws of the State of New York applicable to contracts executed in the
        State of New York by residents of such State and to be performed
        entirely within such State.

8.      SUCCESSORS AND ASSIGNS.

        This Amendment shall be binding upon, inure to the benefit of and be
        enforceable by Lessor, Lessee, and their respective successors,
        transferees and assigns. Neither Lessor nor Lessee shall assign or
        delegate its rights and obligations under this Amendment except in
        accordance with an assignment or delegation of its rights and
        obligations under, and in accordance with the terms of, the Lease
        Agreement, and any other purported assignment or delegation shall be
        null and void AB INITIO.

9.      SEVERABLE PROVISIONS.

        The provisions of this Amendment are severable, and if any section or
        provision shall be held invalid or unenforceable in whole or in part in
        any jurisdiction, then such invalidity or unenforceability shall affect
        only such section, provision or part in such jurisdiction and shall not
        in any manner affect such section, provision or part in any other
        jurisdiction or any other section or provision in this Amendment in any
        jurisdiction.

                                     - 5 -
<PAGE>

10.     COUNTERPARTS.

        This Amendment may be executed in one or more counterparts, each of
        which shall be deemed an original but all of which together shall
        constitute one and the same Amendment.

11.     EXPENSES.

        Each of Lessor and Lessee shall bear its own expenses, including the
        legal fees and expenses of its counsel, in connection with the
        negotiation, execution and delivery of this Amendment and all other
        documents executed and delivered in connection with this Agreement, and
        Lessor and Lessee shall share equally the legal fees and expenses,
        including filing fees, incurred by Lytle, Soule & Curlee, special
        counsel for FAA matters.

12.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
        SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT
        MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF
        THIS AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
        COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

                                     - 6 -
<PAGE>

        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
802 No. 2 as of the date first above written.

                                             ACG ACQUISITION VIII LLC, as Lessor

                                             By: "BENJAMIN L. JUNG"
                                                --------------------------------
                                             Name: Benjamin L. Jung
                                             Title: Manager

                                             ALOHA AIRLINES, INC., as Lessee

                                             By: _______________________________
                                             Name:
                                             Title:

                                             By: _______________________________
                                             Name:
                                             Title:

                                     - 7 -
<PAGE>

        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
802 No. 2 as of the date first above written.

                                          ACG ACQUISITION VIII LLC, as Lessor

                                          By:
                                              ----------------------------------
                                          Name: Benjamin L. Jung
                                          Title: Manager

                                          ALOHA AIRLINES, INC., as Lessee

                                          By: "BRENDA F. CUTWRIGHT"
                                              ----------------------------------
                                          Name: BRENDA F. CUTWRIGHT
                                          Title: EXECUTIVE VICE PRESIDENT & CFO

                                          By: "JAMES M. KING"
                                              ----------------------------------
                                          Name: JAMES M. KING
                                          Title: SENIOR VICE PRESIDENT PLANNING
                                                 AND BUSINESS DEVELOPMENT

                                     - 7 -
<PAGE>

                                   Schedule 1
                          to Lease Amendment 802 No. 2

                              Description of Lease

        Lease Agreement 802, dated January 15, 1997, between ACG Acquisition
VIII LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by
Certificate of Acceptance 804 dated January 15, 1997, recorded by the Federal
Aviation Administration on January 27, 1997, as Conveyance No. TT008434.

        Lease  Amendment  802 No.  1, dated April  30, 2001,
between  ACG  Acquisition  VIII LLC as  lessor  and  Aloha
Airlines,   Inc.  as  lessee,   recorded  by  the  Federal
Aviation  Administration on May 17, 2001 as Conveyance No.
BB34836.

                                     - 8 -
<PAGE>

                                   Schedule 2
                          to Lease Amendment 802 No. 2

        [INTENTIONALLY OMITTED AS CONTAINING CONFIDENTIAL INFORMATION]1

                       APPENDIX 1 TO LEASE AGREEEMENT 802

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall have the following respective meanings in this Agreement:

AGREED VALUE            $5,000,000

BASIC RENT AMOUNT       means (1) for Rental Periods ending on or before
                        September 25, 2001, the amount of $110,000, (2) for
                        Rental Periods beginning on or after September 26, 2001
                        and ending on or before December 25, 2001, the amount of
                        $33,333.33, and (3) for Rental Periods beginning on or
                        after December 26, 2001, the amount of $90,000.

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1 For inclusion on FAA filed copies of this Amendment in lieu of the following
information.

                                     - 9 -

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