Document:

AMENDMENT NO. 1 TO
                         SPARE PARTS SECURITY AGREEMENT

     AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Spare Parts
Security Agreement, dated as of December 6, 2002 (the "SECURITY AGREEMENT"),
between WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Security
Agent (the "SECURITY AGENT"), and CONTINENTAL AIRLINES, INC., a Delaware
corporation (the "COMPANY"). Certain terms used herein have the defined meanings
referred to in Section 1 hereof.

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

     WHEREAS, the Company is a certificated air carrier under Section 44705 of
title 49 of the United States Code; and

     WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company and
the Security Agent entered into the Security Agreement to secure, among other
things, the Company's obligations with respect to such Securities, and the
Security Agreement was recorded by the Federal Aviation Administration on
January 9, 2003 and was assigned Conveyance No. J001986; and

     WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Subordinated Notes due 2007 pursuant to the Indenture, the Company
has requested that the Security Agreement be amended to secure, among other
things, the Company's obligations with respect to such Subordinated Securities;
and

     WHEREAS, the Original Indenture, as amended and restated to provide for the
issuance of such Subordinated Securities, provides for the issuance of
$300,000,000 aggregate principal amount of the Notes; and

     WHEREAS, the Controlling Party has given its written consent to this
Amendment and the Company has obtained Ratings Confirmation with respect to the
issuance of such Subordinated Securities.

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

     SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in the Security Agreement, as amended by this
Amendment, have such respective defined meanings.

     SECTION 2. AMENDMENTS. Effective as of the date hereof, the Security
Agreement is hereby amended as follows:

<PAGE>

     Section 2.1 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in (a) the first sentence of Section 2.01, (b) Section 4.05, (c)
Section 6.01(e), (d) Section 6.03, (e) Section 6.04, (f) Section 7.03, (g)
Section 9.02, and (h) the second "Whereas" clause of Exhibit A, is deleted and
replaced with "Notes". The reference to "any one Security" in the third
paragraph of Section 2.01 (which paragraph begins with "TO HAVE AND TO HOLD") is
deleted and replaced with "any one Note".

     Section 2.2 RELEASE OF CASH COLLATERAL. Section 7.03(b) is amended and
restated to read in its entirety as follows:

          "(b) If the Collateral Ratio is less than the Maximum Collateral
     Ratio, the Subordinated Collateral Ratio is less than the Maximum
     Subordinated Collateral Ratio, the Rotable Ratio is greater than the
     Minimum Rotable Ratio and the Subordinated Rotable Ratio is greater than
     the Minimum Subordinated Rotable Ratio, in each case as most recently
     determined pursuant to Article 2 or Section 3.1 of the Collateral
     Maintenance Agreement, and the Security Agent held any Cash Collateral as
     of the Valuation Date for such Collateral Ratio, Subordinated Collateral
     Ratio, Rotable Ratio and Subordinated Rotable Ratio (or subsequent date as
     of which such ratio was recalculated pursuant to Section 3.1 of the
     Collateral Maintenance Agreement), upon written request of the Company the
     Security Agent shall pay to the Company an amount of the Cash Collateral
     such that the Collateral Ratio would not be greater than the Maximum
     Collateral Ratio, the Subordinated Collateral Ratio would not be greater
     than the Maximum Subordinated Collateral Ratio, the Rotable Ratio would not
     be less than the Minimum Rotable Ratio and the Subordinated Rotable Ratio
     would not be less than the Minimum Subordinated Rotable Ratio, giving
     effect to such payment (but otherwise using the information used as of such
     most recent determination date to determine such ratio)."

     Section 2.3 SECURITY AGENT. Article 8 is amended and restated to read in
its entirety as follows:

                                   "ARTICLE 8

                                 SECURITY AGENT

          SECTION 8.01 SECURITY AGENT. The Security Agent has been appointed
     pursuant to the Indenture as Security Agent hereunder. The Security Agent
     shall be obligated, and shall have the right, hereunder to make demands, to
     give notices, to exercise or refrain from exercising any rights, and to
     take or refrain from taking action (including, without limitation, the
     release of Spare Parts Collateral) solely in accordance with this Security
     Agreement and the Indenture. The Security Agent agrees to and shall have
     the benefit of all provisions of the Indenture and the other Operative
     Documents stated therein to be applicable to the Security Agent.

          SECTION 8.02 REPLACEMENT OF SECURITY AGENT. (a) The Security Agent may
     resign by so notifying the Company, the Trustee (if other than the Security
     Agent), the Liquidity Provider and the Controlling Party in writing. The

<PAGE>

     Controlling Party may remove the Security Agent by so notifying the
     Security Agent in writing and may appoint a successor Security Agent with
     the Company's consent, which consent shall not be unreasonably refused or
     delayed. The Company may remove the Security Agent if:

               (i) the Security Agent fails to comply with Section 8.02(e);

               (ii) the Security Agent is adjudged a bankrupt or an insolvent;

               (iii) a receiver or other public officer takes charge of the
          Security Agent or its property;

               (iv) the Security Agent becomes incapable of acting; or

               (v) no Default or Event of Default has occurred and is continuing
          and the Company determines in good faith to remove the Security Agent.

          (b) If the Security Agent resigns or is removed or if a vacancy exists
     in the office of Security Agent for any reason, the Company shall promptly
     appoint a successor Security Agent. Within one year after the successor
     Security Agent takes office, the Controlling Party may appoint a successor
     Security Agent to replace the successor Security Agent appointed by the
     Company.

          (c) A successor Security Agent shall deliver a written acceptance of
     its appointment to the retiring Security Agent and to the Company.
     Immediately after that, the resignation or removal of the retiring Security
     Agent shall become effective, and the successor Security Agent shall
     succeed to and become vested with all the rights, powers and duties of the
     Security Agent under this Agreement. After any retiring Security Agent's
     resignation or removal, the provisions of this Security Agreement shall
     inure to its benefit as to any actions taken or omitted to be taken by it
     under this Security Agreement while it was Security Agent.

          (d) No resignation or removal of the Security Agent and no appointment
     of a successor Security Agent, pursuant to this Section, shall become
     effective until the acceptance of appointment by the successor Security
     Agent under this Section. If a successor Security Agent does not take
     office within sixty (60) days after the retiring Security Agent resigns or
     is removed, the retiring Security Agent, the Company, the Liquidity
     Provider, the Controlling Party or Holders of at least 10% in principal
     amount of any series of Notes Outstanding may petition any court of
     competent jurisdiction for the appointment of a successor Security Agent.

          (e) The Security Agent shall have a combined capital and surplus of at
     least $50,000,000, as set forth in its most recent, published annual report
     of condition. The Security Agent shall satisfy and comply with any
     applicable requirements of the TIA."

     Section 2.4 DEFINITIONS APPENDIX. Appendix I to the Security Agreement is
amended by deleting existing Appendix I and substituting therefor new Appendix I
attached as Appendix I hereto.

<PAGE>

     Section 2.5 EXHIBITS. Exhibit A to the Security Agreement is amended by
inserting in the second parenthetical of the first "Whereas" clause before "the
Security Agreement" the following: "as amended by Amendment No. 1 to Spare Parts
Security Agreement,".

     SECTION 3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Trustee, the Liquidity Provider, the Policy Provider and the
Security Agent as follows:

     Section 3.1 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and has the corporate power and authority to conduct the business in
which it is currently engaged and to own or hold under lease its properties and
to enter into and perform its obligations under the Subordinated Documents. The
Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction in which the nature and extent of the business
conducted by it, or the ownership of its properties, requires such
qualification, except where the failure to be so qualified would not give rise
to a Material Adverse Change to the Company.

     Section 3.2 CORPORATE AUTHORIZATION. The Company has taken, or caused to be
taken, all necessary corporate action (including, without limitation, the
obtaining of any consent or approval of stockholders required by its Certificate
of Incorporation or By-Laws) to authorize the execution and delivery of each of
the Subordinated Documents, and the performance of its obligations thereunder.

     Section 3.3 NO VIOLATION. The execution and delivery by the Company of the
Subordinated Documents, the performance by the Company of its obligations
thereunder and the consummation by the Company on the Subordinated Closing Date
of the transactions contemplated thereby, do not and will not (a) violate any
provision of the Certificate of Incorporation or By-Laws of the Company, (b)
violate any Law applicable to or binding on the Company or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to the Company), or result in the creation
of any Lien (other than as permitted under the Security Agreement) upon the
Pledged Spare Parts under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other material agreement,
instrument or document to which the Company is a party or by which the Company
or any of its properties is bound.

     Section 3.4 APPROVALS. The execution and delivery by the Company of the
Subordinated Documents, the performance by the Company of its obligations
thereunder and the consummation by the Company on the Subordinated Closing Date
of the transactions contemplated thereby do not and will not require the consent
or approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any debt of the Company and (b)
any Government Entity, other than the filing of (x) the FAA Filed Documents
(with the FAA) and the Financing Statements (and continuation statements
periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.

     Section 3.5 VALID AND BINDING AGREEMENTS. The Subordinated Documents have
been duly authorized, executed and delivered by the Company and, assuming the

<PAGE>

due authorization, execution and delivery thereof by the other party or parties
thereto, constitute the legal, valid and binding obligations of the Company and
are enforceable against the Company in accordance with the respective terms
thereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.

     Section 3.6 REGISTRATION AND RECORDATION. Except for (a) the filing for
recordation (and recordation) of the FAA Filed Documents with the FAA, (b) the
filing of the Financing Statements (and continuation statements relating thereto
at periodic intervals), and (c) the deposit of the Initial Cash Collateral with,
and the holding and investment of the Initial Cash Collateral by, the Security
Agent in accordance with Article 7 of the Security Agreement, no further action,
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the Security Agent's security interest in the Pledged
Spare Parts, the Warranties, the Spare Parts Documents and the Initial Cash
Collateral as against the Company and any other Person, in each case, in any
applicable jurisdictions in the United States.

     Section 3.7 THE COMPANY'S LOCATION. The Company's location (as such term is
used in Section 9-307 of the UCC) is Delaware. The full and correct legal name
and mailing address of the Company are correctly set forth in Section 9.05 of
the Security Agreement.

     Section 3.8 COMPLIANCE WITH LAWS. (a) The Company is a Citizen of the
United States and a U.S. Air Carrier.

     (b) The Company holds all licenses, permits and franchises from the
appropriate Government Entities necessary to authorize the Company to lawfully
engage in air transportation and to carry on scheduled commercial passenger
service as currently conducted, except where the failure to so hold any such
license, permit or franchise would not give rise to a Material Adverse Change to
the Company.

     (c) The Company is not an "investment company" or a company controlled by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

     Section 3.9 BROKER'S FEES. No Person acting on behalf of the Company is or
will be entitled to any broker's fee, commission or finder's fee in connection
with the transactions pursuant to the Subordinated Documents on the Subordinated
Closing Date, other than the fees and expenses payable by the Company in
connection with the sale of the Subordinated Securities.

     Section 3.10 SECTION 1110. The Security Agent is entitled to the benefits
of Section 1110 (as currently in effect) with respect to the right to take
possession of the Pledged Spare Parts and to enforce any of its other rights or
remedies as provided in the Security Agreement in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Company is a debtor.

     SECTION 4. CONSTRUCTION. All references in the Security Agreement to the
"Security Agreement" shall be deemed to refer to the Security Agreement as

<PAGE>

amended by this Amendment, and the parties hereto confirm their respective
obligations thereunder. The Security Agreement is hereby ratified by the parties
hereto and shall remain in all respects unchanged (except as expressly provided
in this Amendment) and in full force and effect.

     SECTION 5. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.

     SECTION 6. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

                       [Remainder of this page is blank.]

<PAGE>

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

                                       CONTINENTAL AIRLINES, INC.

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

                                       WILMINGTON TRUST COMPANY, as
                                       Security Agent

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

<PAGE>

                                   Appendix I

                              DEFINITIONS APPENDIX

SECTION 1. DEFINED TERMS.

     "ACCELERATION" means, with respect to the amounts payable in respect of the
Notes issued under the  Indenture,  such amounts  becoming  immediately  due and
payable  pursuant to Section 7.2 of the Indenture.  "ACCELERATE",  "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.

     "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.

     "ADDITIONAL  PARTS" is  defined  in  Section  3.1(a)(i)  of the  Collateral
Maintenance Agreement.

     "ADDITIONAL  ROTABLES" is defined in Section  3.1(b)(i)  of the  Collateral
Maintenance Agreement.

     "ADVANCE" means any Advance as defined in the Liquidity Facility.

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

     "AGENT"  means any  Registrar,  Paying Agent or  co-Registrar  or co-Paying
Agent.

     "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.

     "AIRCRAFT" means any contrivance  invented,  used, or designed to navigate,
or fly in, the air.

     "AMENDMENT NO. 1 TO COLLATERAL  MAINTENANCE  AGREEMENT" means Amendment No.
1, dated as of the  Subordinated  Issuance Date, to the  Collateral  Maintenance
Agreement.

     "AMENDMENT  NO. 1 TO REFERENCE  AGENCY  AGREEMENT"  means  Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.

     "AMENDMENT NO. 1 TO SECURITY  AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.

     "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral,  taking at least the following actions: (i)
reviewing the Parts Inventory Report

<PAGE>

prepared as of the applicable  Valuation  Date;  (ii) reviewing the  Independent
Appraiser's  internal  value database for values  applicable to Qualified  Spare
Parts included in the Spare Parts Collateral;  (iii) developing a representative
sampling of a reasonable number of the different  Qualified Spare Parts included
in Spare  Parts  Collateral  for which a market  check will be  conducted;  (iv)
checking other sources, such as manufacturers,  other airlines,  U.S. government
procurement  data and airline  parts  pooling  price lists,  for current  market
prices of the sample parts  referred to in clause  (iii);  (v)  establishing  an
assumed ratio of Serviceable  Parts to Unserviceable  Parts as of the applicable
Valuation  Date  based  upon  information   provided  by  the  Company  and  the
Independent  Appraiser's  limited  physical review of the Spare Parts Collateral
referred to in the following  clause (vi);  (vi) visiting at least two locations
selected by the Independent  Appraiser where the Pledged Spare Parts are kept by
the Company  (neither of which was  visited for  purposes of the last  appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement,  whichever was
most recent),  PROVIDED that at least one such location  shall be one of the top
three  locations at which the Company keeps the largest  number of Pledged Spare
Parts, to conduct a limited physical  inspection of the Spare Parts  Collateral;
(vii) conducting a limited review of the inventory  reporting system  applicable
to the Pledged  Spare Parts,  including  checking  information  reported in such
system against  information  determined through physical  inspection pursuant to
the  preceding  clause  (vi) and (viii)  reviewing a sampling of the Spare Parts
Documents (including tear-down reports).

     "ANNUAL  VALUATION  DATE"  is  defined  in  Section  2.1 of the  Collateral
Maintenance Agreement.

     "APPLIANCE"  means  an  instrument,   equipment,   apparatus,  a  part,  an
appurtenance,  or an accessory  used,  capable of being used,  or intended to be
used,  in operating or  controlling  Aircraft in flight,  including a parachute,
communication  equipment,  and  another  mechanism  installed  in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.

     "APPLICABLE MARGIN" means 0.90%.

     "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.

     "APPRAISAL  COMPLIANCE  REPORT" means,  as of any date, a report  providing
information   relating  to  the  calculation  of  the  Collateral   Ratio,   the
Subordinated  Collateral  Ratio,  Rotable Ratio and Subordinated  Rotable Ratio,
which  shall be  substantially  in the  form of  Appendix  II to the  Collateral
Maintenance Agreement.

     "APPRAISED  VALUE" means,  with respect to any Collateral,  the Fair Market
Value of such Collateral as most recently  determined pursuant to (i) the report
attached  as  Appendix  II to the  Offering  Memo  or  (ii)  Article  2 and,  if
applicable, Section 3.1 of the Collateral Maintenance Agreement.

     "AVAILABLE AMOUNT" means, as of any date, the Maximum Available  Commitment
(as defined in the Liquidity Facility) on such date.

     "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.

     "BANKRUPTCY  CODE"  means the  United  States  Bankruptcy  Code,  11 U.S.C.
Section 101 ET SEQ.

<PAGE>

     "BOARD OF  DIRECTORS"  means the Board of  Directors  of the Company or any
committee  of such board  duly  authorized  to act in respect of any  particular
matter.

     "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth  below;  PROVIDED,  HOWEVER,  that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below,  is equal to or less than zero or (y) on or in respect of any  Applicable
Date that is an Interest  Payment Date (or, if such an Interest  Payment Date is
not a Business Day, the next succeeding Business Day)

     Break Amount = Z-Y

     Where:

     X = with  respect to any  applicable  Interest  Period,  the sum of (i) the
         amount of the outstanding principal amount of such Note as of the first
         day of the then applicable  Interest Period plus (ii) interest  payable
         thereon during such entire Interest Period at then effective LIBOR.

     Y = X, discounted to present value from the last day of the then applicable
         Interest Period to the Applicable  Date,  using then effective LIBOR as
         the discount rate.

     Z = X, discounted to present value from the last day of the then applicable
         Interest  Period  to the  Applicable  Date,  using a rate  equal to the
         applicable London interbank offered rate for a period commencing on the
         Applicable  Date and  ending  on the  last  day of the then  applicable
         Interest  Period,  determined by the Reference Agent as of two Business
         Days prior to the Applicable Date as the discount rate.

     "BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank  Eurodollar  market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston,  Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with  respect to draws under any Policy,  the city and state in which the
office of the Policy  Provider at which notices,  presentations,  transmissions,
deliveries and  communications  are to be made under the Policy is located,  and
that,  solely with  respect to draws  under the  Liquidity  Facility,  also is a
"Business Day" as defined in the Liquidity Facility.

     "CAPPED INTEREST RATE" means a rate per annum equal to 12%.

     "CASH COLLATERAL" means cash and/or Investment  Securities  deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.

     "CASH COLLATERAL  ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if

<PAGE>

it shall so qualify,  into which all amounts drawn under the Liquidity  Facility
pursuant  to  Section  3.5(c),  3.5(d)  or  3.5(i)  of the  Indenture  shall  be
deposited.

     "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).

     "CLEARING  AGENCY" means an organization  registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.

     "CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.

     "CLOSING DATE" means the Issuance Date.

     "CODE" means the Internal Revenue Code of 1986, as amended.

     "COLLATERAL"  means the Spare Parts  Collateral and all other collateral in
which the Collateral  Agent has a security  interest  pursuant to the Collateral
Agreements.

     "COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.

     "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.

     "COLLATERAL   MAINTENANCE   AGREEMENT"  means  the  Collateral  Maintenance
Agreement,  dated as of the  Issuance  Date,  between the Company and the Policy
Provider.

     "COLLATERAL  RATIO" shall mean a percentage  determined by dividing (i) the
aggregate  principal amount of all Securities  Outstanding  minus the sum of the
Cash  Collateral  held by the Collateral  Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral),  as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance  Agreement,  as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.

     "COLLECTION  ACCOUNT" means the Eligible Deposit Account established by the
Trustee  pursuant to Section 8.13 of the Indenture  which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.

     "COMPANY"  means the party named as such in the Indenture or any obligor on
the Notes until a successor replaces it pursuant to the Indenture and thereafter
means the successor.

     "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.

     "CONTINENTAL  BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.

     "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents  that would have been shown on the balance sheet of Continental  and

<PAGE>

its  consolidated  subsidiaries  prepared  in  accordance  with  GAAP  as of any
Valuation  Date,  plus (b) the amount of marketable  securities  that would have
been  reflected on such balance  sheet which had, as of such  Valuation  Date, a
maturity  of less than one year and which,  but for their  maturity,  would have
qualified to be reflected on such balance sheet as cash equivalents.

     "CONTROLLING  PARTY" means the Person  entitled to act as such  pursuant to
the terms of Section 3.8 of the Indenture.

     "CORPORATE  TRUST  OFFICE" when used with respect to the Trustee  means the
office  of the  Trustee  at which at any  particular  time its  corporate  trust
business  is  administered  and  which,  at the  Closing  Date,  is  located  at
Wilmington  Trust  Company,  as Trustee,  Rodney  Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.

     "DEBT BALANCE" means 110% of the principal amount of the Outstanding Notes.

     "DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period for the Securities,  to 2.32% and, in the case of any subsequent Interest
Period,  LIBOR for such Interest Period, as determined pursuant to the Reference
Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event
no Registration  Event (as defined in the Registration  Rights Agreement) occurs
on or prior to the  210th day after the  Closing  Date,  the Debt Rate  shall be
increased by an additional  margin equal to 0.50% per annum,  from and including
such  210th  day to and  excluding  the  earlier  of (i) the date on which  such
Registration  Event  occurs  and (ii) the date on which  there  ceases to be any
Registrable Securities (as defined in the Registration Rights Agreement)); or if
the  Shelf  Registration  Statement  (as  defined  in  the  Registration  Rights
Agreement) (if it is filed),  after being declared  effective by the SEC, ceases
to be  effective at any time during the period  specified by Section  2(b)(B) of
the  Registration  Rights  Agreement  for  more  than 60  days,  whether  or not
consecutive,  during any 12-month period, the Debt Rate shall be increased by an
additional  margin equal to 0.50% per annum from and  including  the 61st day of
the applicable  12-month period such Shelf  Registration  Statement ceases to be
effective to and  excluding the date on which the Shelf  Registration  Statement
again  becomes  effective  (or, if earlier,  the end of the period  specified by
Section  2(b)(B)  of the  Registration  Rights  Agreement),  PROVIDED  that  the
additional margin added to the Debt Rate pursuant to the preceding proviso shall
never  exceed  0.50% at any time,  PROVIDED  FURTHER  that,  if a default in the
payment of interest on the  Securities  occurs and is continuing on any Interest
Payment Date,  then the Debt Rate  applicable  to the Interest  Period ending on
such Interest  Payment Date shall not exceed the Capped  Interest  Rate,  except
that for  purposes  of any  payment  made by the  Company  intended to cure such
default, this proviso shall not apply.

     "DEFAULT"  means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.

     "DEFINITIONS  APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.

     "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.

     "DEFINITIVE  SUBORDINATED  SECURITIES" is defined in Section 2A.1(e) of the
Indenture.

<PAGE>

     "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged  Spare Parts may be maintained by or
on behalf of the Company,  which  initially  shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional  locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.

     "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

     "DISTRIBUTION  DATE"  means (i) each  Scheduled  Payment  Date  (and,  if a
Payment  required to be paid to the Trustee for  distribution  on such Scheduled
Payment Date has not been so paid by 12:30 p.m.,  New York time,  in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time,  except for a
defaulted  payment  of  interest  that is not paid  within  five days  after the
Scheduled  Payment Date therefor),  (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the  Non-Performance  Payment Date, (iv)
the Final Legal  Maturity  Date, (v) the Election  Distribution  Date,  (vi) the
Policy Election  Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section  3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider  pursuant to Section 3.6(d) of the
Indenture  and not for purposes of any other payment or  distribution  under the
Indenture, the date established for such payment in accordance with the Policy.

     "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.

     "DOWNGRADE  EVENT" has the meaning  assigned to such term in Section 3.5(c)
of the Indenture.

     "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.

     "DRAWING"  means an Interest  Drawing,  a Final  Drawing,  a  Non-Extension
Drawing or a Downgrade Drawing, as the case may be.

     "DTC" means The Depository Trust Company, its nominees and their respective
successors.

     "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.

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

<PAGE>

right of recoupment),  and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.

     "ELIGIBLE  DEPOSIT  ACCOUNT" means either (a) a segregated  account with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  organized  under the laws of the United
States of America or any one of the states  thereof or the  District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository  institution has a long-term  unsecured debt rating or issuer
credit  rating,  as the  case  may  be,  from  Moody's  of at  least  A-3 or its
equivalent.  An Eligible  Deposit  Account may be maintained  with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution;  provided
that such  Liquidity  Provider  shall have  waived  all  rights of  set-off  and
counterclaim with respect to such account.

     "ELIGIBLE  INSTITUTION"  means (a) the  Security  Agent or (b) a depository
institution  organized under the laws of the United States of America or any one
of the states  thereof or the  District  of  Columbia  (or any U.S.  branch of a
foreign  bank),  which has a long-term  unsecured  debt rating or issuer  credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.

     "ELIGIBLE   INVESTMENTS"  means  (a)  investments  in  obligations  of,  or
guaranteed  by,  the U.S.  Government  having  maturities  no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any  corporation  incorporated  under the laws of the United  States of
America or any state thereof with a short-term  unsecured  debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having  maturities no later than 90 days  following the
date of  such  investment  or (c)  investments  in  negotiable  certificates  of
deposit, time deposits,  banker's acceptances,  commercial paper or other direct
obligations of, or obligations  guaranteed by,  commercial banks organized under
the laws of the United  States or of any political  subdivision  thereof (or any
U.S.  branch of a foreign  bank)  with a  short-term  unsecured  debt  rating by
Moody's of at least P-1 and a  short-term  issuer  credit  rating by  Standard &
Poor's of at least A-1,  having  maturities no later than 90 days  following the
date of such investment;  PROVIDED,  HOWEVER,  that (x) all Eligible Investments
that are bank  obligations  shall be  denominated in U.S.  dollars;  and (y) the
aggregate  amount  of  Eligible  Investments  at any  one  time  that  are  bank
obligations  issued by any one bank shall not be in excess of 5% of such  bank's
capital surplus;  PROVIDED FURTHER that any investment of the types described in
clauses (a),  (b) and (c) above may be made  through a  repurchase  agreement in
commercially  reasonable  form  with  a  bank  or  other  financial  institution
qualifying as an Eligible  Institution  so long as such  investment is held by a
third party  custodian  also  qualifying  as an Eligible  Institution;  PROVIDED
FURTHER,  HOWEVER,  that in the  case of any  Eligible  Investment  issued  by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code.  Notwithstanding  the
foregoing,  no  investment  of the types  described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates,  and no investment
in the  obligations  of any one  bank in  excess  of  $10,000,000,  shall  be an
Eligible  Investment  unless written  approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.

<PAGE>

     "ENGINE"  means an  engine  used,  or  intended  to be used,  to  propel an
Aircraft, including a part, appurtenance,  and accessory of the Engine, except a
Propeller.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time

     "EUROCLEAR"  means Euroclear Bank  S.A./N.V.,  as operator of the Euroclear
System.

     "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

     "EVENT OF LOSS" means (i) the loss of any of the Pledged  Spare Parts or of
the use thereof due to destruction,  damage beyond repair or rendition of any of
the  Pledged  Spare  Parts  permanently  unfit  for  normal  use for any  reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged  Spare  Parts  which  results in the receipt of
insurance  proceeds  with respect to such Pledged Spare Parts on the basis of an
actual  or  constructive  loss;  or (iii) the loss of  possession  of any of the
Pledged Spare Parts by the Company for ninety (90)  consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.

     "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as amended from
time to time.

     "EXCHANGE  FLOATING  RATE  SECURED  NOTES DUE 2007" is  defined  in Section
2.1(a) of the Indenture.

     "EXCHANGE FLOATING RATE SECURED  SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

     "EXCHANGE  OFFER"  means (i) with respect to the  Securities,  the exchange
offer  which  may be made  pursuant  to the  Registration  Rights  Agreement  to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated  Securities,  the exchange  offer which may be made pursuant to the
Subordinated   Security   Registration  Rights  Agreement  to  exchange  Initial
Subordinated Securities for Exchange Subordinated Securities.

     "EXCHANGE  OFFER  REGISTRATION  STATEMENT"  means (i) with  respect  to the
Securities, the registration statement that, pursuant to the Registration Rights
Agreement,  is filed by the Company with the SEC with respect to the exchange of
Initial Securities for Exchange Securities and (ii) with respect to Subordinated
Securities,  the  registration  statement  that,  pursuant  to the  Subordinated
Security  Registration  Rights  Agreement,  is filed by the Company with the SEC
with respect to the  exchange of Initial  Subordinated  Securities  for Exchange
Subordinated Securities.

     "EXCHANGE  SECURITIES"  means the securities  substantially  in the form of
Exhibit  A to the  Indenture  issued  in  exchange  for the  Initial  Securities
pursuant to the Registration Rights Agreement and authenticated  pursuant to the
Indenture.

     "EXCHANGE  SUBORDINATED  SECURITIES" means the securities  substantially in
the form of  Exhibit D to the  Indenture  issued  in  exchange  for the  Initial
Subordinated Securities pursuant to the

<PAGE>

Subordinated Security  Registration Rights Agreement and authenticated  pursuant
to the Indenture.

     "EXCLUDED  PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.

     "EXPENDABLES" means Qualified Spare Parts other than Rotables.

     "EXPENSES" means any and all  liabilities,  obligations,  losses,  damages,
settlements,   penalties,   claims,   actions,   suits,   costs,   expenses  and
disbursements (including, without limitation,  reasonable fees and disbursements
of legal counsel,  accountants,  appraisers,  inspectors or other professionals,
and costs of investigation).

     "FAA"  means the  Federal  Aviation  Administration  or similar  regulatory
authority established to replace it.

     "FAA FILED DOCUMENTS"  means the Security  Agreement and Amendment No. 1 to
Security Agreement.

     "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider  thereunder,  presently located at 1585 Broadway,  New
York, New York 10036, or such other office as such Liquidity  Provider from time
to time  shall  notify  the  Trustee  as its  "Facility  Office"  under any such
Liquidity  Facility;  provided that such Liquidity Provider shall not change its
Facility Office to another  Facility Office outside the United States of America
except in accordance  with  Sections  3.01,  3.02 or 3.03 of any such  Liquidity
Facility.

     "FAIR MARKET VALUE" means, with respect to any Collateral,  its fair market
value  determined  on the basis of a  hypothetical  sale  negotiated in an arm's
length free market  transaction  between a willing and able seller and a willing
and able  buyer,  neither  of whom is  under  undue  pressure  to  complete  the
transaction,  under then current market conditions,  provided that cash shall be
valued at its Dollar amount.

     "FEDERAL   AVIATION  ACT"  means  Title  49  of  the  United  States  Code,
"Transportation",  as amended from time to time, or any similar  legislation  of
the United States enacted in substitution or replacement thereof.

     "FEE  LETTERS"  means,  collectively,  (i) the Fee  Letter  dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial  Liquidity  Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.

     "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.

     "FINAL LEGAL MATURITY DATE" means December 6, 2009.

     "FINAL ORDER" has the meaning assigned to such term in the Policy.

     "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.

<PAGE>

     "FINANCING  STATEMENTS"  means,  collectively,  UCC-1 financing  statements
covering  the Spare Parts  Collateral,  by the Company,  as debtor,  showing the
Security  Agent as secured  party,  for filing in Delaware,  Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the  opinions  and  pronouncements  of the  Accounting  Principles  Board of the
American  Institute  of  Certified  Public  Accountants,   (ii)  statements  and
pronouncements  of the Financial  Accounting  Standards Board,  (iii) such other
statements  by such other  entity as  approved by a  significant  segment of the
accounting  profession  and (iv) the rules and  regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic  reports required to be filed pursuant to Section 13 of the Exchange
Act,  including  opinions and  pronouncements in staff accounting  bulletins and
similar written statements from the accounting staff of the SEC.

     "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.

     "GLOBAL  EXCHANGE  SUBORDINATED  SECURITY" is defined in Section 2A.1(f) of
the Indenture.

     "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.

     "GLOBAL  SUBORDINATED  SECURITIES"  is defined  in  Section  2A.1(d) of the
Indenture.

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

     "HOLDER"  or  "NOTEHOLDER"  means  the  Person  in  whose  name a  Note  is
registered on the Registrar's books.

     "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or  additional  trustee or  security  agent  appointed  pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.

     "INDENTURE"  means the Amended and  Restated  Indenture  dated as of May 9,
2003,  among the Company,  the Trustee,  the  Liquidity  Provider and the Policy
Provider under which the Notes are issued.

     "INDENTURE  DISCHARGE  DATE"  means  the  date  of the  termination  of the
effectiveness  of the  Indenture  pursuant to Section  9.1(a)  thereof  (without
giving effect to Section 9.1(b) thereof).

     "INDENTURE TRUSTEE" means the Trustee.

<PAGE>

     "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes  appraising  Aircraft and assets
related to the operation and  maintenance of Aircraft from time to time and (ii)
who does not have any  material  financial  interest  in the  Company and is not
connected  with the Company or any of its  Affiliates  as an officer,  director,
employee, promoter, underwriter, partner or person performing similar functions.

     "INDEPENDENT  APPRAISER'S  CERTIFICATE"  means a  certificate  signed by an
Independent  Appraiser  and  attached  as Appendix  II to the  Offering  Memo or
delivered  thereafter  pursuant  to Article 2 or Section  3.1 of the  Collateral
Maintenance Agreement.

     "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.

     "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.

     "INITIAL FLOATING RATE SECURED  SUBORDINATED  NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

     "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.

     "INITIAL SECURITIES" mean the securities issued and authenticated  pursuant
to the Indenture and substantially in the form of Exhibit A thereto,  other than
the Exchange Securities.

     "INITIAL   SUBORDINATED   SECURITIES"   means  the  securities  issued  and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.

     "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited  investor"  within the meaning set forth in Rule 501(a)(1),  (2),
(3) or (7) of Regulation D under the Securities Act.

     "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.

     "INTEREST  PAYMENT DATE" means March 6, June 6,  September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the  Securities  and  June  6,  2003  in the  case  of the  Subordinated
Securities),  PROVIDED  that if any such  day is not a  Business  Day,  then the
relevant Interest Payment Date shall be the next succeeding Business Day.

     "INTEREST  PERIOD" means (i) in the case of the first Interest Period,  the
period  commencing  on (and  including)  the  Closing  Date  (in the case of the
Securities) or the  Subordinated  Closing Date (in the case of the  Subordinated
Securities)  and  ending on (but  excluding)  the first  Interest  Payment  Date
following such date and (ii) in the case of each subsequent Interest Period, the
period  commencing on (and including) the last day of the immediately  preceding
Interest Period, and ending on (but excluding) the next Interest Payment Date.

<PAGE>

     "INVESTMENT  EARNINGS" means investment earnings on funds on deposit in the
Trust  Accounts net of losses and  investment  expenses of the Trustee in making
such investments.

     "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof;  (b) any
obligation  which is a direct  obligation  of or  guaranteed by any state of the
U.S. or any subdivision  thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's;  (c)
any commercial  paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment  instrument relying
upon the credit and  backing of any bank or trust  company  which is a member of
the Federal Reserve System and which has a combined capital  (including  capital
reserves  to the extent not  included in  capital)  and  surplus  and  undivided
profits of not less than  $250,000,000  (including the Collateral  Agent and its
Affiliates if such  requirements  as to Federal  Reserve  System  membership and
combined  capital and surplus and undivided  profits are satisfied),  including,
without  limitation,  certificates of deposit,  time and other  interest-bearing
deposits,   bankers'   acceptances,   commercial   paper,   loan  and   mortgage
participation   certificates  and  documented   discount  notes  accompanied  by
irrevocable  letters  of  credit  and  money  market  fund  investing  solely in
securities  backed by the full  faith and credit of the  United  States;  or (e)
repurchase agreements collateralized by any of the foregoing.

     "ISSUANCE  DATE"  means  the  date  of  initial  issuance  of  the  Initial
Securities.

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

     "LIBOR" has the meaning specified in the Reference Agency Agreement.

     "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.

     "LIEN" means any mortgage,  pledge, lease, security interest,  encumbrance,
lien or charge of any kind affecting title to or any interest in property.

     "LIQUIDITY  EVENT OF DEFAULT" has the meaning  assigned to such term in the
Liquidity Facility.

     "LIQUIDITY  EXPENSES"  means all Liquidity  Obligations  other than (i) the
principal  amount of any  Drawings  under the  Liquidity  Facility  and (ii) any
interest accrued on any Liquidity Obligations.

     "LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit  Agreement  pursuant
hereto, the Replacement  Liquidity  Facility  therefor,  if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.

<PAGE>

     "LIQUIDITY  GUARANTEE" means the Guarantee Agreement,  dated as of the date
of the  Original  Indenture,  providing  for  the  guarantee  by  the  Liquidity
Guarantor of the  obligations  of the  Liquidity  Provider  under the  Liquidity
Facility.

     "LIQUIDITY GUARANTOR" means Morgan Stanley.

     "LIQUIDITY  OBLIGATIONS"  means  all  principal,  interest,  fees and other
amounts owing to the Liquidity  Provider under the Liquidity Facility or the Fee
Letter.

     "LIQUIDITY  PROVIDER" means Morgan Stanley Capital Services Inc.,  together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any  Liquidity  Facility  pursuant to Section  3.5(e) of the
Indenture.

     "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.

     "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "MATERIAL  ADVERSE  CHANGE" means,  with respect to any person,  any event,
condition or circumstance  that  materially and adversely  affects such person's
business  or  consolidated  financial  condition,  or its  ability to observe or
perform  its  obligations,   liabilities  and  agreements  under  the  Operative
Documents.

     "MAXIMUM COLLATERAL RATIO" means 45%.

     "MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.

     "MINIMUM ROTABLE RATIO" means 150%.

     "MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.

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

     "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "MSCS" has the meaning specified in the first paragraph of the Indenture.

     "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.

     "NONAPPRAISAL  COMPLIANCE  REPORT"  means a  report  providing  information
relating  to  compliance  by the  Company  with  Section  3.2 of the  Collateral
Maintenance Agreement,  which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.

     "NON-CONTROLLING  PARTY"  means,  at any  time,  the  Securityholders,  the
Subordinated  Securityholders,  the Liquidity  Provider and the Policy Provider,
excluding whichever is the Controlling Party at such time.

     "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

     "NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.

<PAGE>

     "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.

     "NON-PERFORMANCE  PAYMENT  DATE"  is  defined  in  Section  3.6(c)  of  the
Indenture.

     "NON-PERFORMING"  means,  with respect to any Security,  a Payment  Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy  proceeding  under the Bankruptcy Code in which the
Company is a debtor,  any Payment Default  existing at the  commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy  Code or as may apply for the cure of such Payment  Default under
Section   1110(a)(2)(B)  of  the  Bankruptcy  Code)  shall  not  be  taken  into
consideration until the expiration of the applicable period.

     "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.

     "NON-U.S.  PERSON" means any Person other than a U.S. person, as defined in
Regulation S.

     "NOTES" means the Securities and the Subordinated Securities.

     "NOTEHOLDER" means any holder of one or more Notes.

     "NOTICE OF AVOIDED  PAYMENT"  has the meaning  assigned to such term in the
Policy.

     "NOTICE FOR PAYMENT"  means a Notice of  Nonpayment as such term is defined
in the Policy.

     "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.

     "OFFERING MEMO" means the Offering  Memorandum,  dated December 2, 2002, of
the Company relating to the offering of the Securities.

     "OFFICER"  means  the  Chairman  of the  Board,  the  President,  any  Vice
President  of any  grade,  the  Chief  Financial  Officer,  the  Treasurer,  any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.

     "OFFICERS'   CERTIFICATE"  means  a  certificate  signed  by  two  Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.

     "OPERATIVE DOCUMENTS" means the Indenture,  the Collateral Agreements,  the
Collateral Maintenance Agreement and the Reference Agency Agreement.

     "OPINION OF COUNSEL"  means a written  opinion from the General  Counsel of
the  Company,  legal  counsel to the  Company or another  legal  counsel  who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the  Indenture.  The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days  following  receipt) of, or its action on,

<PAGE>

an opinion of counsel not  specifically  referred  to above shall be  sufficient
evidence that such counsel is acceptable to the Trustee.

     "OUTSTANDING" or  "OUTSTANDING"  when used with respect to Notes or a Note,
means all Notes  theretofore  authenticated  and delivered  under the Indenture,
except:

          (a) Notes  theretofore  canceled  by the Trustee or  delivered  to the
Trustee for cancellation;

          (b) Notes, or portions thereof,  for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee in trust
for the Holders of such Notes,  PROVIDED that, if such Notes are to be redeemed,
notice of such  redemption  has been duly given  pursuant  to the  Indenture  or
provision therefor satisfactory to the Trustee has been made;

          (c) Notes for which payment has been deposited with the Trustee or any
Paying  Agent in trust  pursuant  to Article 9 of the  Indenture  (except to the
extent provided therein); and

          (d) Notes  which have been paid,  or for which  other Notes shall have
been  authenticated  and delivered in lieu thereof or in  substitution  therefor
pursuant  to  the  terms  of  Section  2.12  of  the  Indenture,   unless  proof
satisfactory  to the Trustee is  presented  that any such Notes are held by bona
fide purchasers in whose hands the Notes are valid obligations of the Company.

     A Note does not cease to be  Outstanding  because the Company or one of its
Affiliates holds the Note;  PROVIDED,  HOWEVER,  that in determining whether the
Holders of the requisite  aggregate  principal amount of Notes  Outstanding have
given any request, demand,  authorization,  direction, notice, consent or waiver
under  the  Indenture  or any  other  Operative  Document,  Section  2.13 of the
Indenture shall be applicable.

     "ORIGINAL  INDENTURE"  has  the  meaning  set  forth  in  the  introductory
paragraph of the Indenture.

     "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.

     "OVERDUE  SCHEDULED  PAYMENT" means any Payment of accrued  interest on any
Notes which is not in fact  received by the Trustee  (whether  from the Company,
the Liquidity Provider, the Policy Provider or otherwise) on or within five days
after the Scheduled  Payment Date relating thereto and which is not subsequently
paid in connection with the redemption or final maturity of a Note.

     "PARTS  INVENTORY  REPORT" means,  as of any date, a list  identifying  the
Pledged  Spare Parts by  manufacturer's  part number and brief  description  and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.

     "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.

<PAGE>

     "PAYMENT"  means (i) any payment of principal of,  interest on, or Premium,
if any, or Break  Amount,  if any,  with  respect to the Notes from the Company,
(ii) any  payment of  interest  on the  Securities  with funds  drawn  under the
Liquidity  Facility  or from a Cash  Collateral  Account or (iii) any payment of
interest on or principal  of  Securities  with funds drawn under the Policy,  or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.

     "PAYMENT  DEFAULT"  means a Default  referred  to in Section  7.1(a) of the
Indenture.

     "PAYMENT  DUE RATE"  means  (a) the Debt Rate plus 2% or, if less,  (b) the
maximum rate permitted by applicable law.

     "PERMITTED  DAYS" is defined in Section 2.1 of the  Collateral  Maintenance
Agreement.

     "PERMITTED  LESSEE"  has the  meaning  provided  in  Section  3.6(b) of the
Collateral Maintenance Agreement.

     "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents;  (b) Liens  attributable  to Security  Agent (both in its capacity as
Security Agent and in its individual  capacity);  (c) the rights of others under
agreements or  arrangements  to the extent  expressly  permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement;  (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being  contested in good faith by appropriate  proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged  Spare Parts or the  interest of Security  Agent  therein or
impair  the  Lien of the  Security  Agreement;  (e)  materialmen's,  mechanics',
workers',  repairers',  employees'  or other like Liens  arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for  more  than 60 days or is  being  contested  in good  faith  by  appropriate
proceedings,  so long as such  Liens and such  proceedings  do not  involve  any
material risk of the sale,  forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award  against the Company,  so long as
such  judgment  shall,  within  60 days  after  the  entry  thereof,  have  been
discharged or vacated,  or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result,  or
any such  judgment or award does not  involve,  any  material  risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security  Agent
therein or any impairment of the Lien of the Security  Agreement;  (g) any other
Lien  with  respect  to which the  Company  shall  have  provided  a bond,  cash
collateral  or other  security  adequate in the  reasonable  opinion of Security
Agent.

     "PERSON" means any individual, corporation,  partnership, limited liability
company,  joint  venture,  association,  joint-stock  company,  trust,  trustee,
unincorporated  organization,  government or any agency or political subdivision
thereof or any other entity.

     "PLEDGED  SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.

<PAGE>

     "POLICY"  means MBIA Insurance  Corporation  Financial  Guaranty  Insurance
Policy No. 39753,  issued as of the Closing Date,  as amended,  supplemented  or
otherwise modified from time to time in accordance with its respective terms.

     "POLICY  ACCOUNT"  means the Eligible  Deposit  Account  established by the
Trustee  pursuant to Section  8.13(a) of the  Indenture  which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.

     "POLICY DRAWING" means any payment of a claim under the Policy.

     "POLICY  ELECTION  DISTRIBUTION  DATE" is defined in Section  3.6(c) of the
Indenture.

     "POLICY  EXPENSES"  means all  amounts  (including  amounts  in  respect of
premiums,  fees,  expenses or indemnities)  due to the Policy Provider under the
Policy Provider  Agreement other than (i) any Policy Drawing,  (ii) any interest
accrued on any  Policy  Provider  Obligations,  and (iii)  reimbursement  of and
interest on the Liquidity  Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider;  provided that if, at the time
of  determination,  a Policy Provider Default exists,  Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.

     "POLICY FEE LETTER"  means the fee  letter,  dated as of the Closing  Date,
from the Policy Provider to the Company and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.

     "POLICY  PROVIDER" means MBIA Insurance  Corporation,  a New York insurance
company, and its successors and permitted assigns.

     "POLICY  PROVIDER  AGREEMENT"  means the Insurance and Indemnity  Agreement
dated as of the  Closing  Date,  among the  Trustee,  the Company and the Policy
Provider,  as amended,  supplemented or otherwise  modified from time to time in
accordance with its terms.

     "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events:  (a) the  Policy  Provider  fails to make a payment  required  under the
Policy in accordance with its terms and such failure remains  unremedied for two
Business Days  following  the delivery of Written  Notice of such failure to the
Policy  Provider or (b) the Policy  Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy,  rehabilitation,  liquidation or reorganization, (ii)
makes a general  assignment  for the  benefit of its  creditors  or (iii) has an
order for relief  entered  against it under any federal or state law relating to
insolvency,  bankruptcy,  rehabilitation,  liquidation or reorganization that is
final and nonappealable,  or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material  portion of
its  property  or (ii)  authorizing  the taking of  possession  by a  custodian,
trustee,  agent or receiver of the Policy  Provider (or taking of  possession of
all or any material portion of the Policy Provider's property).

     "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.

<PAGE>

     "POLICY  PROVIDER  INTEREST  OBLIGATIONS"  means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity  Facility in an amount equal to the amount of interest that would have
accrued on such  Interest  Drawing  if such  Interest  Drawing  had been made in
accordance with Section  2.02(e) of the Liquidity  Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.

     "POLICY PROVIDER  OBLIGATIONS"  means all  reimbursement and other amounts,
including,  without limitation, fees and indemnities (to the extent not included
in Policy  Expenses),  due to the  Policy  Provider  under the  Policy  Provider
Agreement  but shall not include  any  interest  on Policy  Drawings  other than
Policy Provider Interest Obligations.

     "PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture,  the following  percentage of the principal  amount of such Note:
(a) with respect to a Security,  (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second  anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such  second  anniversary  and before the third  anniversary  of the
Issuance Date,  0.5%; and (b) with respect to a  Subordinated  Security,  (i) if
redeemed before the second anniversary of the Subordinated  Issuance Date, 3.0%;
(ii) if  redeemed  on or after  such  second  anniversary  and  before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after  such  third  anniversary  and  before  the  fourth   anniversary  of  the
Subordinated  Issuance Date, 1.0%;  PROVIDED that no Premium shall be payable in
connection  with a  redemption  made  by the  Company  to  satisfy  the  Maximum
Collateral Ratio, Maximum  Subordinated  Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.

     "PRIOR FUNDS" means, on any  Distribution  Date, any Drawing paid under the
Liquidity  Facility on such  Distribution  Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.

     "PROCEEDS   DEFICIENCY  DRAWING"  is  defined  in  Section  3.6(b)  of  the
Indenture.

     "PROPELLER" includes a part, appurtenance, and accessory of a propeller.

     "PROVIDER  INCUMBENCY  CERTIFICATE"  is defined  in  Section  3.7(b) of the
Indenture.

     "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

     "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.

     "QIB" means a qualified institutional buyer as defined in Rule 144A.

     "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.

     "RATING AGENCIES" means,  collectively,  at any time, and with respect to a
Series of Notes, each nationally  recognized rating agency which shall have been

<PAGE>

requested  by the  Company to rate such  Series of Notes and which shall then be
rating such Series of Notes.  The initial Rating Agency will be Moody's,  in the
case of the  Securities,  and Moody's and Standard & Poor's,  in the case of the
Subordinated Securities.

     "RATINGS  CONFIRMATION"  means,  with respect to any action  proposed to be
taken, a written  confirmation  from each of the Rating Agencies with respect to
the  applicable  Series of Notes  that  such  action  would not  result in (i) a
reduction of the rating for such Series of Notes below the then  current  rating
for such  Series  of Notes  (such  rating,  in the  case of the  Securities,  as
determined  without  regard to the Policy) or (ii) a withdrawal or suspension of
the rating of such Series of Notes.

     "RECORD  DATE"  means the  fifteenth  (15th) day  preceding  any  Scheduled
Interest Payment Date, whether or not a Business Day.

     "REDEMPTION DATE", when used with respect to any Note to be redeemed, means
the date fixed for such  redemption  by or  pursuant to the  Indenture  and such
Note.

     "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.

     "REGISTER" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRATION  RIGHTS  AGREEMENT" means the  Registration  Rights Agreement
dated as of  December  6, 2002,  by and  between  the  Company  and the  Initial
Purchaser.

     "REGULATION S" means Regulation S under the Securities Act.

     "REGULATION S DEFINITIVE  SECURITIES"  is defined in Section  2.1(e) of the
Indenture.

     "REGULATION  S DEFINITIVE  SUBORDINATED  SECURITIES"  is defined in Section
2A.1(e) of the Indenture.

     "REGULATION  S  GLOBAL  SECURITY"  is  defined  in  Section  2.1(d)  of the
Indenture.

     "REGULATION S GLOBAL  SUBORDINATED  SECURITY" is defined in Section 2A.1(d)
of the Indenture.

     "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.

     "REPLACEMENT  LIQUIDITY  FACILITY"  means an irrevocable  revolving  credit
agreement (or agreements) in  substantially  the form of the replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating  Agencies with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before  downgrading of such ratings,  if any, as a result of the
downgrading  of the  Liquidity  Provider),  and be  consented  to by the  Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face

<PAGE>

amount (or in an aggregate face amount) equal to the amount of interest  payable
on the Securities  (at the Capped  Interest Rate, and without regard to expected
future  principal  payments) on the eight Interest  Payment Dates  following the
date of replacement  of such Liquidity  Facility (or if such date is an Interest
Payment Date,  on such day and the seven  Interest  Payment Dates  following the
date of  replacement  of such  Liquidity  Facility)  and  issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be,  issued by  Moody's  and  Standard  & Poor's  which are equal to or
higher  than  the  Threshold  Rating.  Without  limitation  of the  form  that a
Replacement  Liquidity  Facility  otherwise  may have  pursuant to the preceding
sentence, a Replacement  Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement  Liquidity Facility provides for a Non-Extension  Drawing as
contemplated by Section 3.5(d) of the Indenture.

     "REQUEST" means a written request for the action therein  specified  signed
on behalf of the Company by any  Officer  and  delivered  to the  Trustee.  Each
Request shall be  accompanied  by an Officers'  Certificate if and to the extent
required by Section 12.4 of the Indenture.

     "REQUIRED  AMOUNT" means,  for any day, the sum of the aggregate  amount of
interest,  calculated at the Capped  Interest Rate, that would be payable on the
Securities on each of the eight successive  Interest  Payment Dates  immediately
following such day or, if such day is an Interest  Payment Date, on such day and
the succeeding  seven Interest  Payment  Dates,  in each case  calculated on the
basis of the  outstanding  principal  amount of the  Securities on such date and
without regard to expected future payments of principal on the Securities.

     "REQUIRED  HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.

     "REQUIRED SUBORDINATED HOLDERS" means from time to time the holders of more
than 50% in aggregate unpaid  principal  amount of the  Subordinated  Securities
then Outstanding.

     "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the  corporate  trust  administration  department  of the  Trustee  or any other
officer  customarily  performing  functions  similar to those  performed  by the
Persons who at the time shall be such  officers or to whom any  corporate  trust
matter is referred  because of his or her  knowledge of and  familiarity  with a
particular subject, (ii) with respect to the Liquidity Provider,  any authorized
officer  of the  Liquidity  Provider,  and  (iii)  with  respect  to the  Policy
Provider, any authorized officer of the Policy Provider.

     "RESTRICTED  DEFINITIVE  SECURITIES"  is defined  in Section  2.1(e) of the
Indenture.

     "RESTRICTED  DEFINITIVE  SUBORDINATED  SECURITIES"  is  defined  in Section
2A.1(e) of the Indenture.

     "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.

     "RESTRICTED GLOBAL SUBORDINATED  SECURITY" is defined in Section 2A.1(c) of
the Indenture.

     "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.

<PAGE>

     "RESTRICTED  PERIOD"  is defined in  Section  2.1(d) of the  Indenture  for
purposes  of  the  Securities  and  in  Section  2A.1(d)  for  purposes  of  the
Subordinated Securities.

     "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.

     "RESTRICTED  SUBORDINATED  SECURITIES"  are defined in Section  2A.2 of the
Indenture.

     "ROTABLE"  means a  Qualified  Spare  Part that  wears over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight equipment to which it relates.

     "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market  Value of the  Rotables,  as set  forth in the  most  recent  Independent
Appraiser's  Certificate  delivered by the Company  pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities  Outstanding  minus the sum of the Cash Collateral held
by the Collateral Agent.

     "RULE 144A" means Rule 144A under the Securities Act.

     "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.

     "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable  thereto,  (ii) with respect to any payment
of defaulted  interest,  the payment date established  pursuant to Section 2.16,
(iii) with respect to amounts due on the  redemption of any Note, the Redemption
Date  applicable  thereto,  and (iv) with  respect to the final  maturity of the
Notes, December 6, 2007.

     "SEC" means the  Securities  and  Exchange  Commission  and any  government
agency succeeding to its functions.

     "SECTION 1110" means Section 1110 of the Bankruptcy Code.

     "SECTION 1110 PERIOD" means the continuous  period of (i) 60 days specified
in Section  1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period,  if any,  commencing  with the trustee or  debtor-in-possession  in such
proceeding agreeing,  with court approval,  to perform its obligations under the
Operative  Documents  within  such 60 days (or  longer  period  as  agreed)  and
continuing  until such time as such  trustee or  debtor-in-possession  ceases to
fully perform its obligations  thereunder with the result that the period during
which the Collateral Agent is prohibited from  repossessing the collateral under
any Collateral Agreement comes to an end.

     "SECURITIES" means the Initial Securities and the Exchange Securities.

     "SECURITIES  ACT" means the Securities Act of 1933, as amended from time to
time.

<PAGE>

     "SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance  with the  provisions of the Security  Agreement and thereafter
means the successor.

     "SECURITY  AGREEMENT" means the Spare Parts Security  Agreement dated as of
the Issuance Date between the Company and the Security Agent.

     "SECURITYHOLDER" means any holder of one or more Securities.

     "SEMIANNUAL  METHODOLOGY" means the Annual  Methodology,  excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.

     "SEMIANNUAL  VALUATION  DATE" is defined in Section  2.2 of the  Collateral
Maintenance Agreement.

     "SERIES"  means each of the  Securities  and the  Subordinated  Securities,
considered as a separate class.

     "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation  in,  installation on,  attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.

     "SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be  required to be filed by the  Company  with the SEC  pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement,  and (ii) with respect to Subordinated Securities,
the  Subordinated  Securities  Registration  Rights  Agreement,  other  than  an
Exchange Offer Registration Statement.

     "SPARE  PART"  means an  accessory,  appurtenance,  or part of an  Aircraft
(except an Engine or  Propeller),  Engine  (except a Propeller),  Propeller,  or
Appliance,  that is to be  installed  at a later  time in an  Aircraft,  Engine,
Propeller or Appliance.

     "SPARE PARTS  COLLATERAL" has the meaning  specified in Section 2.01 of the
Security Agreement.

     "SPARE  PARTS  DOCUMENTS"  has the  meaning  set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.

     "SPECIAL  DEFAULT"  means a Payment  Default  or a  Continental  Bankruptcy
Event.

     "SPECIAL  RECORD  DATE" has the  meaning  provided  in Section  2.10 of the
Indenture.

     "SPECIAL  VALUATION  DATE" is  defined  in  Section  2.4 of the  Collateral
Maintenance Agreement.

     "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.

<PAGE>

     "STATED  AMOUNT" means the Maximum  Commitment (as defined in the Liquidity
Facility).

     "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.

     "SUBORDINATED APPLICABLE MARGIN" means 7.50%.

     "SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.

     "SUBORDINATED  COLLATERAL  RATIO"  shall mean a  percentage  determined  by
dividing (i) the aggregate  principal amount of all Notes  Outstanding minus the
sum of the Cash Collateral held by the Collateral  Agent by (ii) the Fair Market
Value of all  Collateral  (excluding any Cash  Collateral),  as set forth in the
most  recent  Independent  Appraiser's  Certificate  delivered  by  the  Company
pursuant to Article 2 of the Collateral Maintenance  Agreement,  as supplemented
pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable.

     "SUBORDINATED  DEBT RATE" means a rate per annum equal,  in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency  Agreement,  plus the  Subordinated  Applicable
Margin,  PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated  Security  Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated  Closing Date, the  Subordinated  Debt Rate
shall be increased by an  additional  margin equal to 0.50% per annum,  from and
including  such 210th day to and  excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable  Securities (as defined in the  Subordinated  Security  Registration
Rights  Agreement));  or if the Shelf Registration  Statement (as defined in the
Subordinated  Security  Registration  Rights Agreement) (if it is filed),  after
being declared  effective by the SEC,  ceases to be effective at any time during
the  period   specified  by  Section  2(b)(B)  of  the   Subordinated   Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period,  the Subordinated Debt Rate shall be increased by an
additional  margin equal to 0.50% per annum from and  including  the 61st day of
the applicable  12-month period such Shelf  Registration  Statement ceases to be
effective to and  excluding the date on which the Shelf  Registration  Statement
again  becomes  effective  (or, if earlier,  the end of the period  specified by
Section 2(b)(B) of the Subordinated  Security  Registration  Rights  Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.

     "SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance  Agreement,  Amendment  No.  1 to  Reference  Agency  Agreement  and
Amendment No. 1 to Security Agreement.

     "SUBORDINATED  ISSUANCE  DATE"  means the date of initial  issuance  of the
Initial Subordinated Securities.

     "SUBORDINATED  PAYMENT DUE RATE" means (a) the Subordinated  Debt Rate plus
2% or, if less, (b) the maximum rate permitted by applicable law.

<PAGE>

     "SUBORDINATED ROTABLE RATIO" shall mean a percentage determined by dividing
(i) the Fair  Market  Value of the  Rotables,  as set  forth in the most  recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance  Agreement,  as supplemented pursuant to Section
3.1  of the  Collateral  Maintenance  Agreement,  if  applicable,  by  (ii)  the
aggregate  principal amount of all Notes  Outstanding  minus the sum of the Cash
Collateral held by the Collateral Agent.

     "SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.

     "SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum,  dated
May 2,  2003  of  the  Company  relating  to the  offering  of the  Subordinated
Securities.

     "SUBORDINATED  SECURITY  PROVISIONS"  is  defined  in  Section  4.1  of the
Collateral Maintenance Agreement.

     "SUBORDINATED  SECURITY PURCHASE  AGREEMENT" means the Purchase  Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.

     "SUBORDINATED   SECURITY   REGISTRATION   RIGHTS   AGREEMENT"   means   the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.

     "SUBORDINATED  SECURITYHOLDER" means any holder of one or more Subordinated
Securities.

     "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.

     "SUPPLEMENTAL  SECURITY  AGREEMENT"  means  a  supplement  to the  Security
Agreement substantially in the form of Exhibit A to the Security Agreement.

     "SUPPORT  DOCUMENTS" means the Liquidity  Facility,  the Policy, the Policy
Provider Agreement and the Fee Letters.

     "TAX" and "TAXES" mean any and all taxes,  fees, levies,  duties,  tariffs,
imposts,  and other  charges of any kind  (together  with any and all  interest,
penalties,  loss, damage,  liability,  expense,  additions to tax and additional
amounts or costs incurred or imposed with respect  thereto) imposed or otherwise
assessed  by the United  States of  America  or by any  state,  local or foreign
government  (or any  subdivision or agency  thereof) or other taxing  authority,
including,  without  limitation:  taxes or other  charges on or with  respect to
income, franchises,  windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment  compensation,  or net worth and  similar  charges;  taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added,  taxes on goods and  services,  gains taxes,  license,  registration  and
documentation fees, customs duties, tariffs, and similar charges.

     "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.

     "THRESHOLD AMOUNT" means $2,000,000.

<PAGE>

     "THRESHOLD  RATING" means the  short-term  unsecured  debt rating of P-1 by
Moody's  and A-1 by  Standard  & Poor's;  PROVIDED  that so long as the  initial
Liquidity Provider is the Liquidity  Provider,  the Threshold Rating shall apply
to the Liquidity Guarantor.

     "TIA"  means  the  Trust  Indenture  Act  of  1939  (15  U.S.  Code  ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is  amended  after such date,  "TIA"  means,  to the extent
required by any such amendment, the TIA as so amended.

     "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.

     "TRUST OFFICER" means any officer in the corporate trust  department of the
Trustee,  or any other officer or assistant  officer of the Trustee  assigned by
the Trustee to administer its corporate trust matters.

     "TRUSTEE"  means the party named as such in the Indenture until a successor
replaces it in accordance  with the  provisions of the Indenture and  thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.

     "TRUSTEE  INCUMBENCY  CERTIFICATE"  is  defined  in  Section  3.7(a) of the
Indenture.

     "TRUSTEE   PROVISIONS"   is  defined  in  Section  4.1  of  the  Collateral
Maintenance Agreement.

     "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.

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

     "UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.

     "UNSERVICEABLE  PARTS" means Pledged  Spare Parts that are not  Serviceable
Parts.

     "U.S." or "UNITED STATES" means the United States of America.

     "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating  certificate  issued pursuant
to chapter  447 of title 49 of the United  States Code for  aircraft  capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.

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

     "U.S.  GOVERNMENT  OBLIGATIONS"  means direct  obligations (or certificates
representing an ownership  interest in such obligations) of the United States of
America  (including  any agency or  instrumentality  thereof) for the payment of
which the full faith and credit of the United  States of America is pledged  and
which are not callable at the option of the issuer thereof.

     "U.S.  PERSON"  means any Person  described in Section  7701(a)(30)  of the
Code.

<PAGE>

     "VALUATION  DATES" is defined in Section 2.4 of the Collateral  Maintenance
Agreement.

     "WARRANTIES"  is  defined in clause  (2) of  Section  2.01 of the  Security
Agreement.

     "WRITTEN  NOTICE" means,  from the Trustee,  the Liquidity  Provider or the
Policy Provider, a written instrument executed by the Designated  Representative
of such Person.  An invoice  delivered  by the  Liquidity  Provider  pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing  procedures
shall constitute Written Notice under such Section.

     "WTC" has the meaning specified in the first paragraph of the Indenture.

SECTION 2. RULES OF CONSTRUCTION.  Unless the context  otherwise  requires,  the
following  rules of  construction  shall apply for all purposes of the Operative
Documents  (including  this appendix) and of such  agreements as may incorporate
this appendix by reference.

          (a) In each Operative Document, unless otherwise expressly provided, a
reference to:

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

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

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

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

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

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

<PAGE>

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

          (b) Each  exhibit,  annex,  appendix  and  schedule to each  Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.

          (c) Unless otherwise  defined or specified in any Operative  Document,
all   accounting   terms  therein   shall  be  construed   and  all   accounting
determinations thereunder shall be made in accordance with GAAP.

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

          (e) For  purposes  of each  Operative  Document,  the  occurrence  and
continuance of a Default or Event of Default referred to in Section 7.1(d),  (e)
or (f) of the Indenture  shall not be deemed to prohibit the Company from taking
any action or exercising any right that is  conditioned  on no Special  Default,
Default or Event of Default  having  occurred and be  continuing if such Special
Default,   Default  or  Event  of  Default   consists  of  the   institution  of
reorganization  proceedings  with respect to the Company under Chapter 11 of the
Bankruptcy  Code and the  trustee or  debtor-in-possession  in such  proceedings
shall have agreed to perform its obligations under the Operative  Documents with
the approval of the  applicable  court and  thereafter  shall have  continued to
perform such obligations in accordance with Section 1110.AMENDMENT NO. 1 TO
                           REFERENCE AGENCY AGREEMENT

     AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Reference
Agency Agreement, dated as of December 6, 2002 (the "REFERENCE AGENCY
AGREEMENT"), among CONTINENTAL AIRLINES, INC., a Delaware corporation (the
"COMPANY"), WILMINGTON TRUST COMPANY, a Delaware banking corporation ("WTC"), as
Trustee under the Indenture referred to below, and WTC, as reference agent under
the Reference Agency Agreement (the "REFERENCE AGENT"). Certain terms used
herein have the defined meanings referred to in Section 1 hereof.

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

     WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company, the
Trustee and the Reference Agent entered into the Reference Agency Agreement to
provide, among other things, for the determination of the Debt Rate with respect
to such Securities; and

     WHEREAS, concurrently with the execution and delivery of this Amendment,
the Company is entering into the Amended and Restated Indenture, dated as of the
date hereof (the "INDENTURE"), with WTC, as Trustee, Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider, providing for the issuance of Company's Floating Rate Secured
Subordinated Notes due 2007 (the "SUBORDINATED SECURITIES"); and

     WHEREAS, in connection with the issuance and sale of the Subordinated
Securities pursuant to the Indenture, the Company has requested that the
Reference Agency Agreement be amended to provide, among other things, for the
determination of the Subordinated Debt Rate with respect to such Subordinated
Securities; and

     WHEREAS, the Company and the Initial Purchaser have entered into the
Subordinated Security Purchase Agreement, which provides for the issuance of the
Subordinated Securities; and

     WHEREAS, the Indenture provides that the Notes to be issued thereunder bear
interest at a rate per annum based on LIBOR, as determined pursuant to the
Reference Agency Agreement.

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

     SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in or pursuant to the Reference Agency Agreement,
as amended by this Amendment, have such respective defined meanings.

<PAGE>

     SECTION 2. AMENDMENTS. Effective as of the date hereof, the Reference
Agency Agreement is hereby amended as follows:

     Section 2.1 PREAMBLE. The following in the second "Whereas" clause shall be
deleted: "(the "INDENTURE")".

     Section 2.2 DEFINITIONS. Section 1 is amended as follows:

     (a) The first sentence is amended to delete "Indenture" and replace it with
the following: "Amended and Restated Indenture, dated as of May 9, 2003 (the
"INDENTURE"), among the Company, WTC, as Trustee, Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider".

     (b) The definition of "Interest Payment Date" is amended and restated to
read in its entirety as follows:

          "'INTEREST PAYMENT DATE' means March 6, June 6, September 6 and
     December 6 of each year so long as any Note is outstanding (commencing on
     March 6, 2003 in the case of the Securities and June 6, 2003 in the case of
     the Subordinated Securities), PROVIDED that if any such day is not a
     Business Day, then the relevant Interest Payment Date shall be the next
     succeeding Business Day."

     (c) Clause (i) of the definition of "Interest Period" is amended and
restated to read in its entirety as follows:

          "(i) in the case of the first Interest Period for the Securities, the
     period commencing on (and including) the Closing Date or, in the case of
     the first Interest Period for the Subordinated Securities, the period
     commencing on (and including) the Subordinated Closing Date, and ending on
     (but excluding) the first Interest Payment Date following such date and".

     Section 2.3 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in Section 3, Section 7, Section 8 and Section 9, is deleted and
replaced with "Notes".

     Section 2.4 DUTIES OF REFERENCE AGENT.

     (a) The first sentence of Section 6(b) prior to clause (i) thereof is
amended and restated to read in its entirety as follows:

          "(b) For the purpose of calculating the Debt Rate payable on the
     Securities or the Subordinated Debt Rate payable on the Subordinated
     Securities, "LIBOR" for each Interest Period that commences after (x) in
     the case of the Securities, the Closing Date (it being understood that the
     Debt Rate for the Interest Period commencing on the Closing Date shall be
     determined pursuant to the Purchase Agreement) or (y) in the case of the
     Subordinated Securities, the Subordinated Closing Date (it being understood
     that the Subordinated Debt Rate for the Interest Period commencing on the
     Subordinated Closing Date shall be determined pursuant to the Subordinated
     Security Purchase Agreement), shall mean the rate determined in accordance
     with the following provisions:".

<PAGE>

     (b) Section 6(c) is amended and restated to read in its entirety as
follows:

          "(c) As soon as practicable after 11:00 a.m. (London time) on each
     Interest Rate Determination Date, the Reference Agent will calculate the
     Debt Rate and the Subordinated Debt Rate for such Interest Period, which
     shall be applicable to the Securities and the Subordinated Securities,
     respectively. The Reference Agent's determination of LIBOR, the Debt Rate
     and the Subordinated Debt Rate (in the absence of negligence, willful
     default, bad faith or manifest error) shall be conclusive and binding upon
     all parties."

     (c) Section 6(d) is amended to insert after "the Debt Rate" the following:
", the Subordinated Debt Rate".

     Section 2.5 MISCELLANEOUS. Section 13(a) is amended to delete the phrase
"or the Debt Rate" and to replace it with ", the Debt Rate or the Subordinated
Debt Rate".

     SECTION 3. CONSTRUCTION. All references in the Reference Agency Agreement
to the "Agreement" shall be deemed to refer to the Reference Agency Agreement as
amended by this Amendment, and the parties hereto confirm their respective
obligations thereunder. The Reference Agency Agreement is hereby ratified by the
parties hereto and shall remain in all respects unchanged (except as expressly
provided in this Amendment) and in full force and effect.

     SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.

     SECTION 5. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

                       [Remainder of this page is blank.]

<PAGE>

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

                                       CONTINENTAL AIRLINES, INC.

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

                                       WILMINGTON TRUST COMPANY, as
                                       Reference Agent

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

                                       WILMINGTON TRUST COMPANY, as
                                       Trustee

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

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