-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VtjdII+YWGxY05oMWYZ3YwRrcsk0wvPlz5fFhbchsfgvndrZp76cXoK02x8Efde5 +uVXdvMXGi5eKVelj9RJ2A== 0000921929-02-000027.txt : 20021119 0000921929-02-000027.hdr.sgml : 20021119 20021119104501 ACCESSION NUMBER: 0000921929-02-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRONTIER AIRLINES INC /CO/ CENTRAL INDEX KEY: 0000921929 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 841256945 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12805 FILM NUMBER: 02832294 BUSINESS ADDRESS: STREET 1: 7001 TOWER ROAD CITY: DENVER STATE: CO ZIP: 80249 BUSINESS PHONE: 7203744200 MAIL ADDRESS: STREET 1: 7001 TOWER ROAD CITY: DENVER STATE: CO ZIP: 80249 10-Q 1 f910q93002.htm FRONTIER 10Q 9/30/02 Frontier Airlines, Inc 10q 
                                               FORM 10-Q

                                    SECURITIES AND EXCHANGE COMMISSION
                                          Washington, D.C.  20549


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the quarterly period ended September 30, 2002.


[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
         OF 1934


Commission file number:  0-24126



                                          FRONTIER AIRLINES, INC.
                               (Exact name of registrant as specified in its charter)

                       Colorado                                           84-1256945
(State or other jurisdiction of incorporated or organization)  (I.R.S. Employer Identification No.)


            7001 Tower Rd., Denver, CO                                      80249
     (Address of principal executive offices)                            (Zip Code)


Issuer's telephone number including area code:  (720) 374-4200


Indicate  by check mark  whether  the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90  days.  Yes  X No


The number of shares of the  Company's  Common Stock  outstanding  as of November 8, 2002 was
29,647,050.







                                             TABLE OF CONTENTS

                                      PART I. FINANCIAL INFORMATION


                                                                                           Page
Item 1.  Financial Information

         Financial Statements                                                                1

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                               5

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                         19

Item 4.  Controls and Procedures                                                            20


                                      PART II. OTHER INFORMATION


Item 4.  Submission of Matters to a Vote of Security Holders                                21

Item 6.  Exhibits and Reports on Form 8-K                                                   21







                                        PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FRONTIER AIRLINES, INC.
Balance Sheets
(Unaudited)
                                                                        September 30,              March 31,
                                                                           2002                      2002   

Assets
Current assets:
    Cash and cash equivalents                                           $ 42,565,746            $ 87,555,189
    Short-term investments                                                 2,000,000               2,000,000
    Restricted investments                                                18,946,000              11,574,000
    Receivables, net of allowance for doubtful accounts
      of $352,000 and $155,000 at September 30, 2002
      and March 31, 2002, respectively                                    24,779,983              28,536,313
    Income taxes receivable                                                9,112,976               6,855,544
    Maintenance deposits                                                  37,304,251              36,046,157
    Prepaid expenses and other assets                                      9,332,657              11,013,602
    Inventories                                                            7,294,278               6,604,378
    Deferred tax assets                                                    2,199,684               1,788,078
    Deferred lease and other expenses                                        127,752                  74,952
            Total current assets                                         153,663,327             192,048,213
Security, maintenance and other
deposits                                                                  25,312,920              20,932,709
Aircraft pre-delivery payments                                            54,071,186              44,658,899
Property and equipment, net                                              233,685,626             142,861,771
Deferred lease and other expenses                                          1,406,388                 523,134
Restricted investments                                                    13,310,833              12,660,210
                                                                        $481,450,280            $413,684,936
                                                                     =======================================
Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                    $ 21,744,064            $ 23,185,266
    Air traffic liability                                                 57,990,178              61,090,705
    Accrued maintenance expense                                           41,548,425              37,527,906
    Other accrued expenses                                                18,955,695              22,060,082
    Deferred stabilization act
compensation                                                                 835,381               4,835,381
    Current portion of long-term debt                                      7,065,704               3,225,651
    Current portion of obligations under capital leases                      137,230                 138,604
            Total current liabilities                                    148,276,677             152,063,595
Long-term debt                                                           133,649,527              66,832,018
Accrued maintenance expense                                               17,614,980              15,796,330
Deferred tax liability                                                    11,804,862               6,716,815
Deferred lease and other expenses                                          5,303,643               3,077,326
Obligations under capital leases, excluding current
portion                                                                        -                      65,559
            Total liabilities                                            316,649,689             244,551,643

Stockholders' equity:
    Preferred stock, no par value, authorized 1,000,000
        shares; none issued                                                    -                        -
    Common stock, no par value, stated value of $.001
        per share, authorized 100,000,000 shares;
        29,647,050 and 29,421,331 shares issued and
        outstanding at September 30, 2002 and March 31, 2002,
        respectively                                                          29,647                  29,421
    Additional paid-in capital                                            87,044,694              85,867,487
    Unearned ESOP shares                                                    (706,557)             (2,119,670)
    Retained earnings                                                     78,432,807              85,356,055
                                                                         164,800,591             169,133,293
                                                                         481,450,280             413,684,936
                                                                     =======================================
See accompanying notes to financial statements.



FRONTIER AIRLINES, INC.
Statements of Operations
(Unaudited)
                                         Three Months Ended                                Six Months Ended
                                September 30,           September 30,            September 30,           September 30,
                                    2002                     2001                    2002                     2001    
Revenues:

 Passenger                   $ 116,709,640           $ 113,743,975           $ 226,001,522            $ 234,471,814

    Cargo                           1,366,251               1,572,891               2,946,187                3,538,464

    Other                           1,278,633                 689,345               2,219,222                1,312,290

        Total revenues            119,354,524             116,006,211             231,166,931              239,322,568

Operating expenses:

    Flight operations              59,568,910              50,959,339             114,048,305              100,695,793

    Aircraft and traffic servicing 21,274,015              17,954,683              40,623,124               35,800,653

    Maintenance                    18,942,128              20,016,709              36,099,490               38,363,899

    Promotion and sales            13,505,113              16,386,217              28,224,421               32,910,980

    General and administrative      6,574,920               5,974,368              12,696,791               13,208,920

    Depreciation and amortization   4,133,227               2,744,541               7,931,639                5,066,409


        Total operating expense  123,998,313             114,035,857             239,623,770              226,046,654


        Operating income (loss    (4,643,789)              1,970,354             (8,456,839)               13,275,914

Nonoperating income (expense):

    Interest income                   487,798               1,116,222               1,194,760                2,646,980

    Interest expense               (1,895,668)               (673,552)             (3,154,979)                (926,426)

    Stabilization act compensation      -                   8,802,235                  -                     8,802,235

    Other, net                       (286,772)               (147,125)               (438,322)                (196,808)

        Total nonoperating income
        (expense) net              (1,694,642)              9,097,780              (2,398,541)              10,325,981


 Income (loss) before income
    tax expense                    (6,338,431)             11,068,134             (10,855,380)              23,601,895


Income tax (benefit) expense       (2,350,755)              3,789,551              (3,932,132)               8,583,715


Net income (loss)                $ (3,987,676)            $ 7,278,583             $(6,923,248)            $ 15,018,180
                                =======================================================================================

Earnings per share:

Basic                      $      (0.13)                  $0.26             $     (0.23)                   $0.53
                                ======================================================================================
      Diluted                    $      (0.13)                  $0.24             $     (0.23)                   $0.50
                                ======================================================================================

Weighted average shares of
  common stock outstanding

      Basic                        29,632,898              28,360,534              29,583,870               28,324,778
                                ======================================================================================
      Diluted                      29,632,898              29,807,169              29,583,870               29,807,470
                                ======================================================================================

See accompanying notes to financial statements.







FRONTIER AIRLINES, INC.
Statements of Cash Flows
For the Six Months Ended September 30, 2002 and 2001
(Unaudited)

                                                                             2002                    2001   
Cash flows from operating activities:
    Net income (loss)                                                   $ (6,923,248)           $ 15,018,180
    Adjustments to reconcile net income to net cash
        provided (used) by operating activities:
            Employee stock option plan compensation expense                1,413,113               1,108,124
            Depreciation and amortization                                  7,983,936               5,113,021
            Deferred tax expense                                           5,282,898               1,714,264
            Changes in operating assets and liabilities
                Restricted investments                                    (8,434,423)             (3,825,000)
                Receivables                                                3,756,330              15,569,800
                Income taxes receivable                                   (2,257,432)                  -
                Security, maintenance and other deposits                  (4,814,705)             (5,519,404)
                Prepaid expenses and other assets                          1,680,945               1,337,267
                Inventories                                                 (689,900)             (1,527,393)
                Accounts payable                                          (1,441,202)             (7,221,166)
                Air traffic liability                                     (3,100,527)            (12,126,229)
                Other accrued expenses                                    (3,104,387)               (833,766)
                Deferred stabilization act compensation                   (4,000,000)              1,316,239
                Accrued maintenance expense                                5,839,169               5,679,350
                Deferred lease and other expenses                          2,226,317               1,579,592

                  Net cash provided (used) by operating activities        (6,583,116)             17,382,879

Cash flows from investing activities:
    Aircraft lease and purchase deposits, net                            (10,235,887)              4,132,112
    Decrease in restricted investments                                       411,800                 931,800
    Capital expenditures                                                 (98,755,494)           (115,109,871)
                  Net cash used by investing activities                 (108,579,581)           (110,045,959)

Cash flows from financing activities:
    Net proceeds from issuance of common stock                               570,976                 571,109
    Proceeds from long-term borrowings                                    73,200,000              72,000,000
    Payment of financing fees                                               (988,351)                    -
    Principal payments on long-term borrowings                            (2,542,438)               (400,378)
    Principal payments on obligations under capital leases                   (66,933)                (60,731)
                  Net cash provided by financing activities               70,173,254              72,110,000 

                  Net decrease in cash and cash equivalents              (44,989,443)            (20,553,080)

Cash and cash equivalents, beginning of period                            87,555,189             109,251,426

Cash and cash equivalents, end of period                                $ 42,565,746            $ 88,698,346
                                                                     ========================================

See accompanying notes to financial statements.






FRONTIER AIRLINES, INC.
Notes to Financial Statements
September 30, 2002


(1)  Basis of Presentation

     The accompanying  unaudited  financial  statements have been prepared in accordance with
     generally  accepted  accounting  principles for interim  financial  information  and the
     instructions  to Form 10-Q and Regulation S-X.  Accordingly,  they do not include all of
     the information and footnotes required by generally accepted  accounting  principles for
     complete  financial  statements  and should be read in  conjunction  with the  Company's
     Annual  Report on Form  10-K for the year  ended  March  31,  2002.  In the  opinion  of
     management,   all  adjustments   (consisting  only  of  normal  recurring   adjustments)
     considered  necessary  for a fair  presentation  have  been  included.  The  results  of
     operations for the six months ended  September 30, 2002 are not  necessarily  indicative
     of the results that will be realized for the full year.

     Reclassifications

     Certain  reclassifications  have been made to the March 31, 2002  balances to conform to
     the September 30, 2002 presentation.

(2)  Long-term Debt

     In May 2002, the Company  obtained a loan for  $25,200,000  for the purchase of an Airbus
     aircraft.  The loan has a term of 12 years and is  payable  in  quarterly  installments,
     including  interest  payable  in  arrears,   with  a  floating  interest  rate  adjusted
     quarterly  based on LIBOR plus a margin of 1.5%.  The  interest  rate at  September  20,
     2002 was  3.3125%.  The loan  matures in May 2014,  at which  time a balloon  payment of
     $7,560,000  is due. As of  September  30,  2002,  the Company  had  $24,946,000  of debt
     outstanding secured by this aircraft.

     In June 2002,  the Company  obtained a $48,000,000  loan facility for the purchase of two
     Airbus  aircraft,  one of which was  delivered  in June 2002 and the other in July 2002.
     Each  aircraft  loan has a term of 12 years and is  payable in  quarterly  installments,
     including  interest  payable  in  arrears,   with  a  floating  interest  rate  adjusted
     quarterly  based on LIBOR  plus a margin  of 1.7%.  The  interest  rates for each of the
     loans at September  30, 2002 were 3.5288% and 3.575%,  respectively.  The loans  mature
     in June 2014 and July 2014, at which time balloon  payments  totaling  $4,800,000 are due.
     As of September 30, 2002, the Company had $47,288,000 of debt  outstanding  secured by
     these aircraft.

     In April 2002,  the Company  obtained a  $72,000,000  loan  facility  for the purchase of
     three Airbus  aircraft,  one of which was delivered in October 2002.  Each aircraft loan
     will  have a  term  of 12  years  and  will  be  payable  in  semi-annual  installments,
     including  interest,  payable  in  arrears,  with  a  floating  interest  rate  adjusted
     semi-annually  based on LIBOR  plus a margin of 1.25%.  The  loans  are  secured  by the
     aircraft.  At the end of the term,  there is a balloon  payment for each  aircraft  loan
     that  is  not  to  exceed  $7,000,000.   As  of  October  31,  2002,  we  have  borrowed
     $24,000,000  for the  purchase  of the  first  Airbus  aircraft.  The  loan  matures  in
     October 2014, at which time a balloon payment totaling $7,000,000 is due.






Item 2:  Management's Discussion and Analysis of Financial Condition and Results of Operations

This  report  contains  forward-looking  statements  within the meaning of Section 21E of the
Securities  Exchange  Act of 1934 that  describe  the  business  and  prospects  of  Frontier
Airlines,  Inc.  ("Frontier"  or the  "Company")  and the  expectations  of our  Company  and
management.  All  statements,  other than  statements of historical  facts,  included in this
report that address  activities,  events or developments that we expect,  believe,  intend or
anticipate  will or may occur in the future,  are  forward-looking  statements.  When used in
this document,  the words  "estimate,"  "anticipate,"  "project" and similar  expressions are
intended to identify forward-looking  statements.  Forward-looking  statements are inherently
subject to risks and  uncertainties,  many of which  cannot be  predicted  with  accuracy and
some of which might not even be  anticipated.  These  risks and  uncertainties  include,  but
are not limited to: the timing of, and expense  associated  with,  expansion and modification
of our  operations in  accordance  with our business  strategy or in response to  competitive
pressures  or other  factors;  general  economic  factors  and  behavior  of the  fare-paying
public,  including  the  current  economic  slowdown,  which  has  put  significant  downward
pressure  on fares;  increased  federal  scrutiny  of low-fare  carriers  generally  that may
increase  our  operating  costs or  otherwise  adversely  affect  us;  actions  of  competing
airlines,  such as  increasing  capacity  and pricing  actions of United  Airlines  and other
competitors;  the unavailability of, or inability to secure upon acceptable terms,  financing
necessary to purchase  aircraft that we have ordered;  issues  relating to our  transition to
an  Airbus  aircraft  fleet;  uncertainties  regarding  aviation  fuel  price;  uncertainties
regarding  future  terrorist  attacks on the United  States or military  actions  that may be
taken;  and  uncertainties  as to when  and how  fully  consumer  confidence  in the  airline
industry  will be  restored,  if  ever.  Because  our  business,  like  that  of the  airline
industry  generally,  is  characterized  by high fixed  costs  relative  to  revenues,  small
fluctuations  in our yield per RPM or  expense  per ASM can  significantly  affect  operating
results.  See "Risk  Factors"  in our Form 10-K for the year ended March 31, 2002 as they may
be modified by the disclosures contained in this report.


General

       We are a scheduled  passenger  airline  based in Denver,  Colorado.  As of October 31,
2002,  we, in  conjunction  with  Frontier  JetExpress  operated by Mesa Air Group  ("Mesa"),
operate  routes  linking  our Denver hub to 37 cities in 20 states  spanning  the nation from
coast to coast.  We were  organized in February  1994 and we began flight  operations in July
1994 with two leased  Boeing  737-200  jets.  We have since  expanded  our fleet to 28 leased
jets and seven purchased  Airbus aircraft,  including five Boeing 737-200s,  17 larger Boeing
737-300s,  and 12 Airbus A319s.  Beginning in May 2001, we began a fleet  replacement plan by
which we will  replace  our  Boeing  aircraft  with  new  purchased  and  leased  Airbus  jet
aircraft,  a  transition  we expect to  complete  by  approximately  the  second  quarter  of
calendar  year 2006.  During  fiscal year 2002,  we advanced the return of one leased  Boeing
737-300  aircraft  to its owner from  April 2002 to  September  2001,  and two leased  Boeing
737-200  aircraft  from  September  and  November  2004 to November  2002 and  January  2003,
respectively.  At the end of September  2002 we took two Boeing  737-200s out of service with
the return to the lessor  anticipated  in November  2002 pursuant to bringing the aircraft in
compliance  with return  conditions.  We plan to accept delivery of an additional five Airbus
A319s during our fiscal year ending March 31, 2003.  Including the  anticipated  return of an
additional  three Boeing aircraft,  we plan to operate a fleet of three Boeing  737-200s,  16
Boeing  737-300s,  and 17 Airbus A319s,  or a total of 35 aircraft,  by the end of our fiscal
year ending March 31, 2003.

       We currently  use up to 13 gates at our hub,  Denver  International  Airport  ("DIA"),
where we operate  approximately  160 daily system flight  departures  and arrivals.  Prior to
the September 11, 2001 terrorist attacks,  we operated  approximately 126 daily system flight
departures  and  arrivals.  Following  the  terrorist  attacks,  we  reduced  our  service to
approximately  103 daily system  flight  departures  and  arrivals.  The reduced  service was
entirely   reinstated  by  February  2002.  Since  that  time,  we  have  re-established  our
long-term  business  plan of  moderate  capacity  increases  by taking  delivery  of new A319
aircraft.   We  intend  to  continue  to  monitor  passenger  demand  and  other  competitive
factors  and adjust the  number of  flights  we  operate  accordingly.  During the six months
ended  September  30, 2002, we added service to  Indianapolis,  Indiana on May 23, 2002;  and
Boise, Idaho and Tampa,  Florida on June 24, 2002;  Tucson,  Arizona,  San Jose,  California,
Fort Myers,  Florida,  Wichita,  Kansas (operated by Frontier  JetExpress) and Oklahoma City,
Oklahoma and terminated  service to Boston,  Massachusetts and St. Louis,  Missouri (operated
by Frontier  JetExpress)  on October  22,  2002.  We intend to begin our first  international
service  between  Denver and  Cancun,  Mexico on December  20, 2002 and Denver and  Mazatlan,
Mexico on December 21, 2002.

       We  have  filed  an  application  requesting  two  additional  beyond  perimeter  slot
exemptions  at Ronald  Reagan  Washington  National  Airport  (DCA),  that would enable us to
operate an additional  DCA  round-trip  daily  non-stop  flight to our Denver hub. These slot
exemptions  were  abandoned  by  National  Airlines.  Six  other  carriers  also  have  filed
applications  seeking  use  of  the  beyond  perimeter  slot  exemptions.  The  DOT  has  not
indicated  when they plan to issue a decision on the award of the two beyond  perimeter  slot
exemptions.  However,  if our  application  is  successful,  we  would  plan  to add  service
between Denver and DCA approximately 60 days after notification.

       We have also filed an  application  for up to four  slots at John Wayne  International
Airport in Santa Ana,  California (SNA),  which would enable us to operate two daily non-stop
flights  between that airport and our Denver hub.  Orange  County  airport  officials  currently
are obtaining  comments on new service from  interested  carriers,  and Frontier has submitted
a formal  request to add service at SNA.  We are  currently  awaiting a response to that
request,  and anticipate  receiving  a response from SNA officials by December 2002. If our
application is successful,  we plan to add service  between Denver and SNA  approximately 60
days  after notification.


       During the six months  ended  September  30,  2002,  we signed a letter of intent with
LiveTV to bring  DIRECTV  AIRBORNE(TM)satellite  programming  to every  seatback in our Airbus
fleet and in October we signed a purchase and long-term  services  agreement  with LiveTV for
that  system.  We  recently  completed  the  installation  of the LiveTV  system on our first
Airbus  aircraft,  and we plan to have all of our Airbus  aircraft  equipped  with the LiveTV
system by next  spring.  The  installed  systems  will  become  operational  upon  receipt of
regulatory  approval,  which we anticipate to be sometime in the current quarter.  We plan to
offset the usage  costs for the system by  implementing  a $5 per  segment  usage  charge for
access to the system.  We believe the DIRECTV(TM) product represents a  significant  value to
our customers and may encourage more customers to choose Frontier over our competitors.

       In September  2001, we entered into a codeshare  agreement with Mesa.  Under the terms
of the agreement,  we market and sell flights operated by Mesa as Frontier  JetExpress.  This
codeshare began February 17, 2002 with service between Denver and San Jose,  California,  and
with  supplemental  flights  to our  current  service  between  Denver  and  Houston,  Texas.
Frontier  JetExpress  currently  provides  service  to San  Diego,  San  Jose,  Oakland,  and
Ontario,   California,  and  Wichita,  Kansas  using  four  50-passenger  Bombardier  CRJ-200
regional jets.

       Effective  July 9, 2001,  we began a codeshare  agreement  with Great Lakes  Aviation,
Ltd.  ("Great  Lakes") by which Great Lakes provides  daily service to regional  markets from
our Denver hub. The codeshare  agreement  initially  included  Casper,  Cody,  Gillette,  and
Cheyenne,  Wyoming;  Amarillo,  Texas; Santa Fe, New Mexico; and Hayden, Colorado.  Effective
November  15, 2001,  we expanded the  codeshare  agreement to include nine  additional  Great
Lakes cities including Laramie,  Riverton,  Rock Springs,  and Worland,  Wyoming;  Cortez and
Telluride,  Colorado;  Scottsbluff,  Nebraska; and Farmington,  New Mexico and we commenced a
Great Lakes  codeshare to Sheridan,  Wyoming,  on October 31,  2001.  Effective  December 14,
2001, an additional 20 cities were added  including  Page and Phoenix,  Arizona;  Alamosa and
Pueblo,  Colorado;  Dodge City,  Garden  City,  Hays,  and  Liberal,  Kansas;  Dickinson  and
Williston,  North Dakota;  Alliance,  Chadron, Grand Island,  Kearney,  McCook,  Norfolk, and
North Platte,  Nebraska;  Pierre,  South Dakota;  and Moab and Vernal,  Utah. Service between
Denver and Hayden,  Colorado was removed from the codeshare  agreement effective December 13,
2001.

       As a result of the  September  11, 2001  terrorist  attacks on the United  States,  on
September 22, 2001  President Bush signed into law the Air  Transportation  Safety and System
Stabilization  Act (the  "Stabilization  Act"). The  Stabilization  Act includes for all U.S.
airlines  and air cargo  carriers  the  following  key  provisions:  (i) $5  billion  in cash
compensation,  of which $4.5  billion is available to  commercial  passenger  airlines and is
allocated  based on the lesser of each airline's  share of available seat miles during August
2001 or the direct and incremental  losses (including lost revenues)  incurred by the airline
from September 11, 2001 through  December 31, 2001; (ii) subject to certain  conditions,  the
availability of up to $10 billion in federal  government  guarantees of certain loans made to
air  carriers  for  which  credit  is not  reasonably  available  as  determined  by a  newly
established Air Transportation  Stabilization  Board; (iii) the authority of the Secretary of
Transportation  to  reimburse  air  carriers  (which  authority  expires  180 days  after the
enactment of the  Stabilization  Act) for  increases in the cost of war risk  insurance  over
the premium in effect for the period  September  4, 2001 to September  10, 2001;  (iv) at the
discretion of the Secretary of  Transportation,  a $100 million limit on the liability of any
air carrier to third  parties with  respect to acts of terrorism  committed on or to such air
carrier  during the 180 day period  following  enactment  of the  Stabilization  Act; and (v)
the  extension of the due date for the payment by air carriers of certain  payroll and excise
taxes until  November  15, 2001 and January 15,  2002,  respectively.  During the fiscal year
ended March 31,  2002,  we  recognized  $12,703,000  of the federal  grant as a result of the
Stabilization  Act to offset direct and incremental  losses we experienced as a result of the
terrorist  attacks  on  September  11,  2001.  We had  received a total of  $17,538,000;  the
remaining  $4,835,000  represents  amounts  received in excess of estimated  allowable direct
and  incremental  losses  incurred from  September 11, 2001 to December 31, 2001.  During the
six months ended  September 30, 2002, we repaid  $4,000,000  of the excess  amounts  received
and the  remaining  $835,000 is included as a deferred  liability  on our balance  sheet as of
September 30, 2002.  We repaid the  remaining  $835,000 in October  2002.  Our final Form 330
filing is still subject to audit under the Stabilization Act.

Results of Operations

       We  incurred  a net loss of $6,923,000 or 23(cent)per common share for the six months
ended September 30, 2002 as compared to net income of $15,018,000 or 50(cent)per diluted share
for the six months ended September 30, 2001.  We incurred a net loss of $3,988,000 or 13(cent)
per common share for the three months ended  September  30, 2002 as compared to net income of
$7,279,000 or 24(cent)per diluted share for the three months ended September 30, 2001. During
the six months ended  September  30, 2002,  as compared to the prior  comparable  period,  we
experienced  lower average fares as a result of the slowing economy,  competitive  pricing on
discount fares available inside 14 days of travel in our markets and low  introductory  fares
by new  carriers  serving the Denver  market.  Our  average  fare was $108 for the six months
ended  September  30,  2002,  compared to $133 for the six months ended  September  30, 2001.
Additionally,  we believe that passenger  traffic was negatively  impacted by the anniversary
of the terrorist  attacks that occurred on September 11, 2001,  and as a result,  we canceled
42  scheduled  flights on  September  11, 2002 and  experienced  unusually  low load  factors
during  the week of  September  11th.  For the six  months  ended  September  30,  2001,  our
passenger  traffic was severely  adversely  impacted by the events of September 11th. On that
day,  the Federal  Aviation  Administration  ("FAA")  temporarily  suspended  all  commercial
airline  flights as a result of the terrorist  attacks on the United  States.  As a result of
this  suspension,  we  cancelled  407  scheduled  flights  until  we  resumed  operations  on
September  14, 2001.  After we resumed  operations,  we cancelled  303  additional  scheduled
flights through  September 30, 2001 as a result of diminished  consumer  demand.  Due to high
fixed  costs,  we  continued  to incur  substantially  all of our normal  operating  expenses
during  this period and  generated  substantial  operating  losses.  As a result,  during the
three months ended  September 30, 2001, we recognized  $8,802,000,  of the federal cash grant
we received as a result of the  Stabilization  Act.  Excluding the grant we  recognized,  our
net income for the three months ended September 30, 2001 would have been $1,843,000 or 6(cent)
per diluted share.

       During the six months ended  September  30, 2001,  prior to the  terrorist  attacks on
September  11,  2001,  we were  experiencing  the effects of the slowing  economy that caused
lower fares and reduced  business and leisure  travel.  During the six months ended September
30,  2001,  we also  cancelled  approximately  120  flights  as a result of  unusual  weather
conditions the Denver area experienced.

       During the six months ended  September  30, 2001,  we took  delivery of our first five
Airbus  aircraft.  As this was a new  aircraft  type for us, we were  required  by the FAA to
demonstrate  that our crews were  proficient  in flying this type  aircraft  and that we were
capable of properly  maintaining  the  aircraft  and related  maintenance  records  before we
placed  these  aircraft in  scheduled  passenger  service.  This  process took longer than we
originally had anticipated  and, as a result,  we were required to cancel  scheduled  flights
that the first  aircraft  was  scheduled  to  perform.  Because  of this  delay in  receiving
necessary  FAA  approvals,  we  believe  that  our  passenger  revenues  and our cost per ASM
("CASM") were adversely affected during the six months ended September 30, 2001.

       Our CASM for the six months ended September 30, 2002 and 2001 was 8.18(cent)and 9.62
(cent), respectively, a decrease of 1.44(cent)or 15.0%.  CASM excluding fuel for the six months
ended September 30, 2002 and 2001 was 6.86(cent)and  8.13(cent), respectively, a decrease of
1.27(cent)or 15.6%.  Our CASM for the three months ended September 30, 2002 and 2001 was 7.95
(cent)and 9.50(cent), respectively, a decrease of 1.55(cent)or 16.3%.  CASM excluding fuel for
the three months ended September 30,  2002 and 2001 was 6.58(cent)and 8.04(cent),  respectively,
a decrease of 1.46(cent)or 18.2%.  CASM decreased during the six months ended September 30,
2002 as a result of a significantly  reduced  level of Airbus transition expenses, an increase
in the average number of owned aircraft from 1.1 to 4.7, a decrease in the price of fuel,  a
decrease  in the cost per  block  hour on our Boeing fleet  for  rotable  repairs  and engine
overhauls,  a decrease in our  distribution  expenses in relation to the  reduction in the
average fare and a reduction in travel  agency  commissions  as a result of the  elimination
of travel agency commissions  effective  June 1, 2002, the lack of a bonus accrual as a result
of the net loss for the period,  and economies of scale  associated  with the 24.7% increase
in ASMs over the prior  comparable  period.  These reductions were partially offset by an
increase of .10(cent)per ASM as a result of an increase in war risk and hull and liability
insurance premiums after the events of  September  11.  During the six months ended September
30, 2001,  our expenses were impacted by the terrorist attacks and unusual weather conditions
including an unusual spring  blizzard and a hail  storm  that caused  damage  to  five of our
aircraft  during the six months ended September 30, 2001, or  approximately  20% of our fleet.
We incurred short-term lease expenses for substitute  aircraft to minimize the number of flight
cancellations while our  aircraft  were being  repaired,  additional  maintenance  expenses for
the repair of the hail  damage, and  interrupted  trip expenses as a result of the  number of
flight cancellations  related to the  aircraft  out of service for repair.  During  April 2001,
the Denver area also experienced an unusual blizzard, which caused flight cancellations as well
as expenses  associated with deicing our aircraft.  We estimate that the total adverse impact
on our CASM associated with these unusual weather conditions  was .08(cent), or  approximately
$1,893,000.  Additionally,  due to the flight  cancellations  as a result of the September 11
terrorist  attacks  and these  weather  conditions,  our ASMs were less than we had  planned,
which  caused our fixed costs to be spread over fewer ASMs and,  we  believe,  distorted  our
cost per ASM for the period.  During the six months ended  September  30,  2001,  we incurred
approximately  $3,643,000 in transition  expenses associated with the induction of the Airbus
aircraft  that had an  adverse effect on our CASM of  approximately  .16(cent)per ASM.  These
include crew  salaries;  travel,  training and  induction  team  expenses;  and  depreciation
expense.  This  compared to $1,580,000 in Airbus  transition  expenses  during the six months
ended September 30, 2002.

       An airline's  break-even  load factor is the passenger load factor that will result in
operating  revenues  being  equal  to  operating  expenses,  assuming  constant  revenue  per
passenger  mile and expenses.  For the six months ended  September 30, 2002,  our  break-even
load factor was 64.0% compared to our achieved  passenger  load factor of 60.8%.  For the six
months  ended  September  30,  2001,  our  break-even  load factor was 57.8%  compared to our
achieved  passenger  load factor of 64.2%.  Our  break-even  load factor  increased  from the
prior  comparable  period  largely  as a result of a  decrease  in our  average  fare to $108
during  the six months  ended  September  30,  2002 from $133  during  the six  months  ended
September 30, 2001, offset by a decrease  in our CASM to 8.18(cent)for the six  months  ended
September 30, 2002 from 9.62(cent)for the six months ended September 30, 2001.

       Small  fluctuations in our yield per available seat mile ("RASM")  or in our CASM  can
significantly  affect  operating  results  because we, like other  airlines,  have high fixed
costs in relation to revenues.  Airline  operations are highly  sensitive to various factors,
including  the  actions  of  competing  airlines  and  general  economic  factors,  which can
adversely affect our liquidity, cash flows and results of operations.

       As a result of the September 11 terrorist  attacks,  transition  costs associated with
our fleet  replacement  plan  during the three and six months  ended  September  2002 and the
slowing  economy,  we do not believe our results of  operations  for the three and six months
ended  September  30, 2002 are  indicative of future  operating  results or comparable to the
three and six months ended September 30, 2001.







       The following  table  provides  certain of our  financial  and operating  data for the
three month and six month periods ended September 30, 2002 and 2001.

                                         Three Months Ended Sept. 30,            Six Months Ended Sept. 30,
                                         2002                    2001            2002                  2001    
Selected Operating Data:
Passenger revenue (000s) (2)         $    116,710             $   113,744      $  226,002           $   234,472
Revenue passengers carried (000s)             987                     802           1,916                 1,648
Revenue passenger miles(RPMs)(000s)(3)    922,817                 732,531       1,782,421             1,509,295
Available seat miles (ASMs) (000s) (4)  1,559,879               1,200,608       2,929,278             2,349,154
Passenger load factor (5)                   59.2%                   61.0%           60.8%                 64.2%
Break-even load factor (1) (6)              62.8%                   55.1%           64.0%                 57.8%
Block hours (7)                            30,875                  23,769          58,554                46,428
Departures                                 13,583                  10,730          25,767                20,920
Average aircraft stage length                 870                     848             861                   851
Average passenger length of haul              935                     913             930                   916
Average daily fleet block hour
utilization (8)                               9.9                     9.5             9.9                   9.7
Yield per RPM (cents) (9)                   12.57                   15.51           12.64                 15.53
Yield per ASM (cents) (10)                   7.44                    9.46            7.69                  9.98
Total yield per ASM (cents) (11)             7.65                    9.66            7.89                 10.19
Cost per ASM (cents)                         7.95                    9.50            8.18                  9.62
Cost per ASM excluding fuel (cents)          6.58                    8.04            6.86                  8.13
Average fare (12)                    $        109             $       132      $      108           $       133
Average aircraft in fleet                    33.8                    27.3            32.2                  26.2
Aircraft in fleet at end of period           35.0                    29.0            35.0                  29.0
Average age of aircraft at end of period      9.3                    10.1             9.3                  10.1
EBITDAR (000s) (13)                  $     16,873             $    29,496      $   33,638           $    59,389
EBITDAR as a % of revenue                   14.1%                   25.4%           14.6%                 24.8%


(1)  The Stabilization Act compensation of $8,802,000, which occurred during the three
     and six months ended September 30, 2001, has been excluded from the calculation of the
     break-even load factor, cost per ASM and cost per ASM excluding fuel.
(2)  "Passenger revenue" includes revenues for non-revenue passengers, administrative fees,
     and revenue recognized for unused tickets that are greater than one year from issuance
     date.
(3)  "Revenue passenger miles," or RPMs, are determined by multiplying the number of
     fare-paying passengers carried by the distance flown.
(4)  "Available seat miles," or ASMs, are determined by multiplying the number of seats
     available for passengers by the number of miles flown.
(5)  "Passenger load factor" is determined by dividing revenue passenger miles by available
     seat miles.
(6)  "Break-even load factor" is the passenger load factor that will result in operating
     revenues being equal to operating expenses, assuming constant revenue per passenger
     mile and expenses.
(7)  "Block hours" represent the time between aircraft gate departure and aircraft gate
     arrival.
(8)  "Average daily block hour utilization" represents the total block hours divided by the
     number of aircraft days in service, divided by the weighted average of aircraft in our
     fleet during that period.  The number of aircraft includes all aircraft on our operating
     certificate, which includes scheduled aircraft, as well as aircraft out of service for
     maintenance and operation spare aircraft, and excludes aircraft removed permanently
     from revenue service or new aircraft not yet placed in revenue service.
(9)  "Yield per RPM" is determined by dividing passenger revenues (excluding charter
     revenue) by revenue passenger miles.
(10) "Yield per ASM" is determined by dividing passenger revenues (excluding charter
     revenue) by available seat miles.
(11) "Total yield per ASM" is determined by dividing passenger revenues by available seat
     miles.
(12) "Average fare" excludes revenue included in passenger revenue for non-revenue
     passengers, administrative fees, and revenue recognized for unused tickets that are
     greater than one year from issuance date.
(13) "EBITDAR", or "earnings before interest, income taxes, depreciation, amortization and
     aircraft rentals," is a supplemental financial measurement many airline industry
     analysts and we use in the evaluation of our business.  However, EBITDAR should only
     be read in conjunction with all of our financial statements appearing elsewhere
     herein, and should not be construed as an alternative either to operating income (as
     determined in accordance with generally accepted accounting principles) as an
     indicator of our operating performance or to cash flows from operating activities (as
     determined in accordance with generally accepted accounting principles) as a measure
     of liquidity.  Our calculation of EBITDAR may not be comparable to similarly titled
     measures reported by other companies.







       The following  table provides our operating  revenues and expenses  expressed as cents
per total ASMs and as a percentage of total  operating  revenues,  as rounded,  for the three
month and six month periods ended September 30, 2002 and 2001.

                                    Three Months Ended September 30,         Six Months Ended September 30, 
                                      2002                 2001                 2002                2001    
                                 Per        %       Per         %        Per         %       Per         %
                             total      of      total       of       total       of      total       of
                                 ASM    Revenue     ASM     Revenue      ASM     Revenue     ASM     Revenue

Revenues:

    Passenger                    7.48     97.8%     9.47      98.1%      7.72      97.8%     9.98      98.0%
    Cargo                        0.09      1.1%     0.13       1.4%      0.10       1.3%     0.15       1.5%
    Other                        0.08      1.1%     0.06       0.6%      0.08       1.0%     0.06       0.5%
                                                                                                            
Total revenues                   7.65    100.0%     9.66     100.0%      7.89     100.0%    10.19     100.0%
                                 ==============================================================================

Operating expenses:
    Flight operations            3.82     49.9%     4.24      43.9%      3.89      49.3%     4.29      42.1%
    Aircraft and
      traffic servicing          1.36     17.8%     1.50      15.5%      1.39      17.6%     1.52      15.0%
    Maintenance                  1.21     15.9%     1.67      17.3%      1.23      15.6%     1.63      16.0%
    Promotion and sales          0.87     11.3%     1.36      14.1%      0.96      12.2%     1.40      13.8%
    General and
      administrative             0.42      5.5%     0.50       5.1%      0.43       5.5%     0.56       5.5%
    Depreciation and
      amortization               0.26      3.5%     0.23       2.4%      0.27       3.4%     0.22       2.1%
                                                                                                            
Total operating expenses         7.95    103.9%     9.50      98.3%      8.18     103.7%     9.62      94.5%
                                 ==============================================================================


Revenues

       Our  revenues  are  highly  sensitive  to  changes in fare  levels.  Competitive  fare
pricing  policies have a significant  impact on our  revenues.  Because of the  elasticity of
passenger  demand,  we believe  that  increases  in fares may at certain  levels  result in a
decrease in passenger  demand in many markets.  We cannot predict  future fare levels,  which
depend to a substantial  degree on actions of competitors  and the economy.  When sale prices
or other price  changes are  initiated  by  competitors  in our  markets,  we believe that we
must,  in most cases,  match those  competitive  fares in order to maintain our market share.
Passenger revenues are seasonal depending on the markets' locations.

       Our average  fare for the six months  ended  September  30, 2002 and 2001 was $108 and
$133,  respectively,  a decrease of 18.8%.  We believe  that the decrease in the average fare
during  the six  months  ended  September  30,  2002 from the prior  comparable  period was a
result of the slowing  economy,  competitive  pricing on discount fares  available  inside 14
days of travel in our markets and low  introductory  fares by new carriers serving the Denver
market.

       Passenger  Revenues.  Passenger  revenues  totaled  $226,002,000  for the  six  months
ended  September 30, 2002  compared to  $234,472,000  for the six months ended  September 30,
2001,  or a decrease of 3.6%,  on  increased  capacity  of  580,124,000  or 24.7%.  Passenger
revenues  totaled  $116,710,000  for the three months ended  September  30, 2001  compared to
$113,744,000  for the three  months ended  September  30,  2001,  or an increase of 2.6%,  on
increased  capacity  of  359,271,000  or  29.9%.  Passenger  revenues  include  revenues  for
non-revenue  passengers,  administrative  fees,  and revenue  recognized for tickets that are
not used within one year from their issue  dates.  We carried  1,916,000  revenue  passengers
during the six months ended  September 30, 2002  compared to 1,648,000  during the six months
ended  September  30, 2001,  an increase of 16.3%.  We had an average of 32.4 aircraft in our
fleet  during  the six  months  ended  September  30,  2002  compared  to an  average of 26.3
aircraft  during the six months  ended  September  30, 2001,  an increase of 23.2%.  RPMs for
the six months ended  September 30, 2002 were  1,782,421,000  compared to  1,509,295,000  for
the six months ended  September  30, 2001,  an increase of 18.1%.  Our load factor  decreased
to 60.8% for the six months  ended  September  30,  2002 from 64.2% for the prior  comparable
period.  During the six months ended  September  30, 2001,  we  cancelled  approximately  830
flights as a result of the September 11, 2001 terrorist  attacks,  and weather conditions and
weather  related  aircraft  repairs in the Denver area  earlier in the year.  We believe that
this had an adverse effect on our revenue during the period.

       Cargo  revenues,  consisting  of  revenues  from  freight  and mail  service,  totaled
$2,946,000  and   $3,538,000  for  the  six  months  ended   September  30,  2002  and  2001,
respectively,  representing  1.3% and 1.5%,  respectively,  of total  operating  revenues,  a
decrease  of  16.7%.  This  adjunct  to the  passenger  business  is highly  competitive  and
depends  heavily on aircraft  scheduling,  alternate  competitive  means of same day delivery
service and schedule reliability.

       Other revenues,  comprised  principally of interline  handling fees,  liquor sales and
excess  baggage  fees,  and  totaled  $2,219,000  and  $1,312,000,  or 1.0%  and .5% of total
operating  revenues for the six months ended  September 30, 2002 and 2001,  respectively,  an
increase of 69.1%.  Other revenue  increased over the prior comparable  period as a result of
an increase in interline  handling fees primarily due to the Mesa codeshare  agreement and an
increase in ground handling for Mesa and other airlines.


Operating Expenses

       Operating  expenses include those related to flight  operations,  aircraft and traffic
servicing,  maintenance,  promotion and sales,  general and  administrative  and depreciation
and  amortization.  Total operating  expenses were  $239,624,000 and $226,047,000 for the six
months  ended  September  30,  2002 and 2001 and  represented  103.7%  and 94.5% of  revenue,
respectively.  Total  operating  expenses for the three months ended  September  30, 2002 and
2001 were  $123,998,000  and  $114,036,000  and  represented  103.9%  and  98.3% of  revenue,
respectively.  Operating  expenses  increased  as a  percentage  of  revenue  during  the six
months  ended  September  30,  2002 as a result of the 18.8%  decrease  in the  average  fare
during the six months  ended  September  30,  2002 from the six months  ended  September  30,
2001.

       Flight  Operations.  Flight operations  expenses of $114,048,000 and $100,696,000 were
49.3% and 42.1% of total  revenue  for the six  months  ended  September  30,  2002 and 2001,
respectively.  Flight  operations  expenses of  $59,569,000  and  $50,959,000  were 49.9% and
43.9%  of  total   revenue  for  the  three  months  ended   September  30,  2002  and  2001,
respectively.  Flight  operations  expenses  include  all  expenses  related  directly to the
operation of the aircraft  including  fuel,  lease and insurance  expenses,  pilot and flight
attendant  compensation,  in-flight catering,  crew overnight  expenses,  flight dispatch and
flight operations  administrative  expenses.  Included in flight  operations  expenses during
the six months ended September 30, 2002 and 2001 is  approximately  $1,300,000 and $1,743,000
for Airbus training and related travel expenses, respectively.

       Aircraft  fuel  expenses  include both the direct cost of fuel,  including  taxes,  as
well  as  the  cost  of  delivering  fuel  into  the  aircraft.   Aircraft  fuel  expense  of
$38,728,000  for  44,028,000  gallons  used  and  $35,136,000  for  36,894,000  gallons  used
resulted in an average fuel cost of 88.0(cent)and 95.2(cent)per gallon, for the six months ended
September  30, 2002 and 2001,  respectively.  Aircraft  fuel  expense  represented  16.8% and
14.7% of total revenue for the six months ended  September  30, 2002 and 2001,  respectively.
Aircraft  fuel  expense of  $21,332,000  for  23,170,000  gallons  used and  $17,502,000  for
18,687,000 gallons used resulted in an average fuel expense 92.1(cent)and 93.7(cent)per gallon
for the three months ended  September 30, 2002 and 2001, respectively. Aircraft fuel expenses
represented  17.9% and 15.1% of total  revenue for the three months ended  September 30, 2002
and 2001,  respectively.  Fuel prices were  subject to change  weekly as we did not  purchase
supplies  in advance  for  inventory  during  these  periods.  Fuel  consumption  for the six
months  ended  September  30,  2002 and 2001  averaged  752 and 795  gallons  per block hour,
respectively.  Fuel  consumption  for the three  months  ended  September  30,  2002 and 2001
averaged  750 and 786  gallons  per  block  hour,  respectively,  a  decrease  of 4.6%.  Fuel
consumption  decreased from the prior  comparable  periods  because of a decrease in our load
factors,  the more fuel-efficient  Airbus aircraft added to our fleet and a fuel conservation
program implemented in August 2001.

       Aircraft lease expenses totaled  $34,601,000  (15.0% of total revenue) and $32,442,000
(13.6%  of  total   revenue)  for  the  six  months  ended   September  30,  2002  and  2001,
respectively,  an increase of 6.6%.  Aircraft lease expenses  totaled  $17,671,000  (14.8% of
total  revenue)  and  $16,124,000  (13.9%  of  total  revenue)  for the  three  months  ended
September  30, 2002 and 2001,  respectively,  an increase  of 9.6%.  The  increase is largely
due to an increase in the average  number of leased  aircraft to 27.7 from 25.5,  an increase
of 8.6%.  During the six months ended  September  30, 2001,  to minimize the number of flight
cancellations  while our hail-damaged  aircraft were being repaired,  we incurred  short-term
lease expenses of $541,000 for replacement aircraft.

         Aircraft  insurance  expenses totaled $5,166,000 (2.2% of total revenue) for the six
months  ended  September  30,  2002.  Aircraft  insurance  expenses  for the six months ended
September 30, 2001 were $1,845,000 (.8% of total revenue).  Aircraft  insurance expenses were
..29(cent)and .12(cent)per RPM for the six months ended September 30, 2002 and 2001, respectively.
Aircraft  insurance  expenses totaled $2,548,000 (2.1% of total revenue) for the three months
ended September 30, 2002.  Aircraft  insurance  expenses for the three months ended September
30, 2001 were $985,000 (.9% of total revenue). Aircraft insurance expenses were .28(cent)and
..13(cent)per RPM for the three months ended September 30, 2002 and 2001, respectively. Aircraft
insurance  expenses  increased  during the six months ended September 30, 2002 as a result of
the terrorist  attacks on September 11, 2001.  Immediately  following the events of September
11, our aviation war risk  underwriters  issued seven days notice of  cancellation  to us. On
September 24, 2001, these underwriters  reinstated war risk passenger  liability coverage but
limited  third party  bodily  injury and  property  damage to $50 million per  occurrence.  A
special  surcharge of $1.25 per  passenger  carried was  established  as the premium for this
coverage.  At the same time, the FAA provided us  supplemental  third party war risk coverage
from the $50 million limit to $1.6  billion.  The premium for this  supplemental  coverage is
$7.50 per flight  departure and is now set to expire on December 15, 2002,  unless renewed by
Congress.  We do not know  whether the  government  will extend the  coverage, and if it does,
how  long  the  extension  will last.  We expect  that if the  government stops  providing
excess war risk coverage to the airline industry, the premiums charged by aviation  insurers
for this  coverage  will be substantially  higher than the premiums  currently  charged by
the government or the coverage will simply not be available from reputable underwriters.

       Pilot  and  flight  attendant  salaries  before  payroll  taxes and  benefits  totaled
$20,434,000  and  $16,185,000 or 9.0% and 6.9% of passenger  revenue for the six months ended
September  30,  2002 and 2001,  an  increase of 26.3%.  Pilot and flight  attendant  salaries
before  payroll taxes and benefits  totaled  $10,575,000  and  $8,407,000 or 9.1% and 7.4% of
passenger  revenue for the three months  ended  September  30, 2002 and 2001,  an increase of
25.8%.  Pilot  and  flight  attendant  compensation  also  increased  as a result  of a 23.2%
increase in the average  number of aircraft in service,  an increase of 26.1% in block hours,
a general wage increase in flight  attendant and pilot salaries and additional  crew required
to replace those who were attending  training on the Airbus  equipment.  In order to maintain
competitive  pay for pilots,  a revised pilot pay schedule was  negotiated  with the Frontier
Airline Pilots  Association for an approximate  2.5% increase in salaries.  The union members
accepted  this  proposal,  which was made  effective  August 1, 2002. We pay pilot and flight
attendant   salaries  for  training,   consisting  of  approximately  six  and  three  weeks,
respectively,  prior to  scheduled  increases  in service,  which can cause the  compensation
expense  during  such  periods  to  appear  high in  relationship  to the  average  number of
aircraft  in  service.  We expect  these  costs to  continue  to  increase  as we place  more
aircraft into service.

       Aircraft  and  Traffic  Servicing.  Aircraft and traffic servicing  expenses  were
$40,623,000  and  $35,801,000  (an increase of 13.5%) for the six months ended  September 30,
2002 and 2001, respectively,  and represented 17.6% and 15.0% of total revenue.  Aircraft and
traffic  servicing  expenses were  $21,274,000 and $17,955,000 (an increase of 18.5%) for the
three months ended  September  30, 2002 and 2001,  respectively,  and  represented  17.8% and
15.5% of total  revenue.  Aircraft  and  traffic  servicing  expenses  include  all  expenses
incurred at airports  including  landing  fees,  facilities  rental,  station  labor,  ground
handling  expenses  and  interrupted  trip  expenses  associated  with  delayed or  cancelled
flights.  Interrupted  trip  expenses  are amounts  paid to other  airlines  to  reaccomodate
passengers  as well as hotel,  meal and other  incidental  expenses.  During  the six  months
ended  September 30, 2002, our departures  increased to 25,719 from 20,920 for the six months
ended  September  30, 2001,  or 22.9%.  Aircraft and traffic  servicing  expenses were $1,580
per  departure  for the six  months  ended  September  30,  2002 as  compared  to $1,711  per
departure for the six months ended  September 30, 2001, or a decrease of $132 per  departure.
During the three months ended  September 30, 2002,  our  departures  increased to 13,544 from
10,730 or 26.2%.  Aircraft and traffic  servicing  expenses were $1,571 per departure for the
three  months  ended  September  30, 2002 as compared to $1,673 per  departure  for the three
months  ended  September  30,  2001,  or a  decrease  of $102  per  departure.  Aircraft  and
traffic  servicing  expenses during the six ended September 30, 2001 were adversely  impacted
as a result of  expenses  associated  with  deicing  in April  2001 as a result of an unusual
spring  blizzard and an increase in  interrupted  trip  expenses as a result of the number of
flight  cancellations  related  to the  aircraft  out of service  for repair of hail  damage.
Additionally,  due to the  number  of  flight  cancellations  as a result  of  these  weather
conditions as well as the September 11 terrorist  attacks,  we had fewer  departures  than we
had planned,  which we believe distorted  our expenses per  departure for the three and six
months ended September 30, 2001.

       Maintenance.  Maintenance  expenses  of  $36,099,000  and  $38,364,000  were 15.6% and
16.0% of total revenue for the six months ended  September  30, 2002 and 2001,  respectively,
a decrease  of 5.9%.  Maintenance  expenses of  $18,942,000  and  $20,017,000  were 15.9% and
17.3%  of  total   revenue  for  the  three  months  ended   September  30,  2002  and  2001,
respectively,  a decrease of 5.4%.  These  include  all labor,  parts and  supplies  expenses
related to the  maintenance  of the aircraft.  Routine  maintenance is charged to maintenance
expense as incurred  while major engine  overhauls  and heavy  maintenance  check expense are
accrued  monthly  with  variances  from  accruals  recognized  at  the  time  of  the  check.
Maintenance  cost per block hour for the six months  ended  September  30, 2002 and 2001 were
$614 and  $826,  respectively.  Maintenance  cost per  block  hour  decreased  as a result of
decreases on our Boeing fleet for rotable  repairs and engine  overhauls,  and the additional
new  Airbus  aircraft  that are less  costly  to  maintain  than our older  Boeing  aircraft.
During the six months ended  September  30, 2001, we had hail damage to five of our aircraft,
estimated  at  $491,000  ($11 per block  hour).  During the six months  ended  September  30,
2001,  we  incurred  approximately  $881,000  for  Airbus  training  or $19 per  block  hour.
Additionally,  the number of flight  cancellations as a result of these weather conditions as
well as the  September  11  terrorist  attacks  reduced the number of block hours and caused
our fixed costs to be spread over fewer block hours.

       In July 2001, our mechanics  voted to be represented by  International  Brotherhood of
Teamsters.  The first  bargaining  agreement for the mechanics,  which has a 3-year term, was
ratified  and  made  effective  in  July  2002.  The  effect  of  this  agreement   increased
mechanics'  salaries by  approximately  12% over the term of the agreement.  Salary increases
for the first year of the agreement are approximately 5%.

     Promotion and Sales.  Promotion and sales expenses  totaled  $28,224,000 and $32,911,000
and were 12.2% and 13.8% of total  revenue for the six months  ended  September  30, 2002 and
2001,  respectively,  a decrease of 14.3%.  Promotion and sales expenses totaled  $13,505,000
and  $16,386,000  and were  11.3%  and 14.1% of total  revenue  for the  three  months  ended
September 30, 2002 and 2001,  respectively,  a decrease of 17.6%.  These include  advertising
expenses,  telecommunications  expenses,  wages and benefits for  reservationists and as well
as marketing  management and sales  personnel,  credit card fees,  travel agency  commissions
and computer  reservations costs.  During the six months ended September 30, 2002,  promotion
and sales  expenses per passenger  decreased to $14.73  compared to $19.97 for the six months
ended  September 30, 2001.  Promotion and sales expenses per passenger  decreased as a result
of variable  expenses in relation to lower average  fares,  an overall  elimination of travel
agency  commissions  effective  on tickets  sold on or after  June 1, 2002 and a decrease  in
advertising  expenses.  During the six months ended  September  30, 2001,  we incurred  costs
associated  with the start-up and  promotion  of our  frequent  flyer  program as well as the
redesign of our web site.

       General and  Administrative.  General and  administrative  expenses for the six months
ended  September  30, 2002 and 2001  totaled  $12,697,000  and  $13,209,000  and were 5.5% of
total revenue for each of the six months ended September 30, 2002 and 2001,  respectively,  a
decrease of 3.9%.  General and  administrative  expenses for the three months ended September
30,  2002  and  2001  totaled  $6,575,000  and  $5,974,000  and  were  5.5% and 5.2% of total
revenue,  respectively,  an  increase of 10.1%.  During the six months  ended  September  30,
2001,  we accrued  for  employee  performance  bonuses  totaling  $1,559,000  or .7% of total
revenue.  Bonuses are based on  profitability.  As a result of our  pre-tax  loss for the six
months  ended  September  30, 2002,  we did not accrue  bonuses.  General and  administrative
expenses  include the wages and  benefits for several of our  executive  officers and various
other  administrative   personnel  including  legal,   accounting,   information  technology,
aircraft  procurement,  corporate  communications,  training  and human  resources  and other
expenses  associated with these departments.  Employee health benefits,  accrued vacation and
bonus expenses,  general insurance expenses  including  worker's  compensation and write-offs
associated  with credit card and check fraud are also included in general and  administrative
expenses.  We  experienced  increases  in  our  human  resources,  training  and  information
technology  expenses as a result of an  increase in  employees  from  approximately  2,500 in
September 2001 to  approximately  2,950 in September  2002, an increase of 18.0%.  Because of
the increase in personnel,  our health insurance  benefit expenses and an overall increase in
health  insurance  costs,  workers  compensation,  and  accrued  vacation  expense  increased
accordingly.  During the six months ended September 30, 2002, we brought  revenue  accounting
in-house.  We  previously  had  outsourced  this  function.  We have  realized a reduction in
expenses associated with revenue accounting.

       Depreciation and  Amortization.  Depreciation and amortization  expenses of $7,932,000
and  $5,066,000  were  approximately  3.4% and 2.1% of total revenue for the six months ended
September  30, 2002 and 2001,  respectively,  an increase of 56.6%.  These  expenses  include
depreciation  of  aircraft  and  aircraft  components,   office  equipment,   ground  station
equipment  and other fixed assets.  Depreciation  expense  increased  over the prior year due
to an increase in the number of Airbus A319  aircraft  owned from three at September 30, 2001
to six at September 30, 2002.

       Nonoperating  Income (Expense).  Net nonoperating  expense totaled  $2,399,000 for the
six  months  ended  September  30,  2002  compared  to  net   nonoperating   income  totaling
$10,326,000  for the six months  ended  September  30,  2001.  Interest  income  decreased to
$1,195,000  from  $2,647,000  during the six months ended  September  30, 2002 from the prior
period  due a decrease  in  interest  rates and  invested  cash  balances.  Interest  expense
increased  to  $3,155,000  for the six months  ended  September  30, 2002 from  $926,000 as a
result of interest  expense  associated  with owning three  additional  Airbus A319  aircraft
since the prior comparable period.

       During the three months  ended  September  30, 2001,  we  recognized  $8,802,000  of a
federal grant as a result of the Act to offset direct and  incremental  losses we experienced
as a  result  of the  terrorist  attacks  on  September  11,  2001.  We  received  a total of
$10,118,000 in September  2001; of that amount,  $1,316,000  represents  amounts  received in
excess of  allowable  direct and  incremental  losses  incurred  from  September  11, 2001 to
September  30,  2001 and is  included  as a deferred  liability  in our  balance  sheet as of
September 30, 2001.

       Income Tax  Expense.  We accrued an income tax  benefit of  $3,932,000  during the six
months ended  September  30, 2002 at a 36.2%  effective  tax rate,  compared to an income tax
expense  accrual of  $9,024,000  for the six months ended  September  30,  2001,  at a 38.25%
effective  tax  rate,  prior to a  $440,000  credit  that  resulted  from a  revision  of the
effective tax rate for the year ended March 31, 2000 as a result of amended returns filed.


Liquidity and Capital Resources

       Our liquidity depends to a large extent on the number of passengers who fly with us, our
operating and capital expenditures, the fares that we charge, and financing activities.  Also,
we depend on lease or mortgage financing to acquire all of our aircraft, including 20 additional
Airbus  aircraft  as  of October 31, 2002 scheduled  for  delivery by  the end of 2004.  We have
incurred $169,200,000 in debt to finance seven Airbus aircraft we have purchased through October
31,  2002.  We seek to control  our  operating costs, but our airline, like other airlines,  has
many fixed costs that cannot be reduced in the short-term.

       We had cash  and cash  equivalents  and  short-term  investments  of  $44,566,000  and
$89,555,000  at September 30, 2002 and March 31, 2002,  respectively.  At September 30, 2002,
total  current  assets  were  $153,663,000  as  compared  to  $148,277,000  of total  current
liabilities,  resulting in working  capital of $5,386,000.  At March 31, 2002,  total current
assets  were  $192,048,000  as  compared  to  $152,064,000  of  total  current   liabilities,
resulting in working  capital of  $39,984,000.  The decrease in our cash and working  capital
from March 31,  2002 is largely a result of cash used by  investing  activities,  principally
as a result of a net increase in  pre-delivery  payments  totaling  $9,162,000 for additional
aircraft  purchases.  Pre-delivery  payments previously made for purchased aircraft that were
delivered  to us  during  the six  months  ended  September  30,  2002 were  applied  as down
payments toward the mortgage financing of three additional Airbus A319 aircraft.

       Cash used by  operating  activities  for the six months ended  September  30, 2002 was
$6,583,000.  This is  attributable  to the net loss for the period,  increases in  restricted
investments,  receivables,  security,  maintenance and other deposits,  decreases in accounts
payable,  air traffic  liability,  other accrued  expenses,  and deferred  Stabilization  Act
compensation,  offset by a decrease in prepaid expenses and increases in accrued  maintenance
expense  and  deferred  lease  and  other  expenses.  Included  in  cash  used  by  operating
activities is a $4,000,000  repayment of the excess amounts received under the  Stabilization
Act. Cash provided by operating  activities  for the six months ended  September 30, 2001 was
$17,383,000.  This is  attributable  to our net income  for the  period,  decreases  in trade
receivables,  increases in depreciation and amortization,  and accrued  maintenance  expense,
offset by increases in restricted  investments,  security,  maintenance  and other  deposits,
and decreases in accounts  payable,  air traffic  liability and other accrued  expenses.  The
decrease  in other  accrued  expenses  was  offset as a result  of the  deferral  of  payment
permitted  by the  Stabilization  Act of excise and payroll  taxes  totaling  $1,980,000  and
$847,000, respectively, as of September 30, 2001.

       Cash used by  investing  activities  for the six months ended  September  30, 2002 was
$108,580,000.  We used $98,755,000 for the purchase of three  additional  Airbus aircraft and
to purchase rotable aircraft components,  leasehold  improvements and other general equipment
purchases.  Net aircraft lease and purchase  deposits  increased by $10,236,000  this period.
During the six months ended  September 30, 2002, we took delivery of three  purchased  Airbus
aircraft  and  applied  their  respective  pre-delivery  payments  to the  purchase  of those
aircraft.  Cash used by  investing  activities  for the six months ended  September  30, 2001
was  $110,046,000.  Net aircraft  lease and purchase  deposits  decreased  by  $4,132,000  as
pre-delivery  payments  were  applied to the  purchase  of our first three  Airbus  aircraft,
reducing  the amount of  pre-delivery  payments  as of  September  30,  2001.  During the six
months ended  September  30,  2001,  we converted  two purchase  options into firmly  ordered
Airbus A319 aircraft,  and advanced  their delivery dates from the third and fourth  calendar
quarters of 2004 to May and June 2002,  which required  deposits of $9,203,000.  We also used
$115,110,000  for the  purchase of our first three Airbus  aircraft  and to purchase  rotable
aircraft  components  to support the Airbus  fleet,  as well as a spare engine for the Boeing
fleet,  leasehold  improvements for the new reservations  center,  computer  software for the
new maintenance and accounting systems, and other general equipment purchases.

       Cash  provided by financing  activities  for the six months ended  September  30, 2002
and  2001  was  $70,173,000  and  $72,110,000,  respectively.  During  the six  months  ended
September  30, 2002 and 2001,  we borrowed  $73,200,000  and  $72,000,000,  respectively,  to
finance the purchase of Airbus  aircraft,  of which  $2,542,000  and $400,000  were repaid as
principal  payments  during the  respective  periods.  During the six months ended  September
30, 2002 and 2001,  we  received  $571,000  for each of these  periods  from the  exercise of
common stock options.

Contractual Obligations

       The following table summarizes our contractual obligations as of September 30, 2002:

                                   Less than           1-3            4-5          After
                                    1 year            years          years        5 years              Total     

Long-term debt (1              $   7,065,704    $  15,108,946   $  16,905,505 $   101,635,077   $   140,715,231
Capital lease obligations            137,230                                                            137,230
Operating leases (2)              80,210,361      156,937,808     103,427,183     351,647,651       692,223,003
Unconditional purchase
    obligations (3)              206,300,000       97,100,000                                       303,400,000
                                                                                                                 
Total contractual
    cash obligations           $ 293,713,295    $ 269,146,754   $ 120,332,688 $   453,282,728   $ 1,136,475,464
                             ====================================================================================


(1)  In May 2001,  we entered  into a credit  agreement to borrow up to  $72,000,000  for the
     purchase  of  three  Airbus  aircraft  with  a  maximum  borrowing  of  $24,000,000  per
     aircraft.  Each  aircraft  loan has a term of 10 years and is payable  in equal  monthly
     installments,   including  interest,  payable  in  arrears.  The  aircraft  secures  the
     loans.  The credit  agreement  contains  certain events of default,  including events of
     default  for  failure  to make  payments  when due or to comply  with  covenants  in the
     agreement.  As of  September  30,  2002,  we had  $68,480,000  of debt  outstanding  for
     purchase of these three Airbus  aircraft.  Each loan provides for monthly  principal and
     interest  payments ranging from $207,579 to $218,109,  bears interest with rates ranging
     from 6.05% to 6.71%,  averaging 6.43% for the three aircraft  loans,  with maturities in
     May,  August and September 2011, at which time a balloon  payment  totaling  $10,200,000
     is due with respect each aircraft loan.

     In May  2002,  we  obtained  a loan  for  $25,200,000  for  the  purchase  of an  Airbus
     aircraft.  The loan has a term of 12 years and is  payable  in  quarterly  installments,
     including  interest  payable  in  arrears,   with  a  floating  interest  rate  adjusted
     quarterly  based on LIBOR  plus a  margin  of 1.5%.  The  interest rate at September 30,
     2002 was 3.125%.  The loan matures in  May 2014, at which  time a  balloon  payment of
     $7,560,000  is due. As of September  30, 2002,  we had  $24,946,000  of debt outstanding
     secured by this aircraft.

     In June 2002,  we obtained a  $48,000,000  loan  facility for the purchase of two Airbus
     aircraft,  one of which was  delivered  in June 2002 and the other in July 2002.  Each
     aircraft loan has a term of 12 years and is payable in quarterly installments, including
     interest payable in arrears, with a  floating  interest  rate adjusted  quarterly  based
     on LIBOR  plus a margin  of 1.7%.  The interest rates at September 30, 2002  were 3.5288
     and 3.575%.  The loans mature in June 2014 and July  2014,  at which  time  balloon
     payments  totaling  $4,800,000  per aircraft are due. As of September  30, 2002,  we had
     $47,288,000 of debt outstanding secured by these aircraft.

     In April  2002,  we  obtained a  $72,000,000  loan  facility  for the  purchase of three
     Airbus  aircraft,  one of which was delivered in October  2002.  Each aircraft loan will
     have a term of 12 years  and will be  payable  in  semi-annual  installments,  including
     interest,  payable in arrears,  with a floating  interest  rate  adjusted  semi-annually
     based on LIBOR plus a margin of 1.25%.  The loans are  secured by the  aircraft.  At the
     end of the  term,  there is a  balloon  payment  for each  aircraft  loan that is not to
     exceed  $7,000,000.  As of  October  31,  2002,  we have  borrowed  $24,000,000  for the
     purchase  of the first  Airbus  aircraft.  The loan  matures in October  2014,  at which
     time a balloon  payment  totaling  $7,000,000  is due. As of September  30, 2002, we had
     no  borrowings  under this facility and payments  associated  with this facility are not
     included in the table above.

     As of  October  31,  2002,  we have  executed  financing  commitments  for seven  future
     purchases of Airbus A319  aircraft.  We have  $48,000,000  remaining on an existing loan
     facility  for the  purchase  of two of our firm  Airbus A319  aircraft  deliveries.  The
     interest  rate can be set by the  borrower  at  either a fixed or  floating  rate with a
     $7,000,000  balloon  payment due at maturity.  We have an additional  six firm purchased
     Airbus  aircraft  deliveries,  including  one Airbus A319 and five Airbus A318  aircraft
     that currently have no committed long-term financing.

 (2) As of  September  30,  2002,  we leased five Airbus 319 type  aircraft and 24 Boeing 737
     type aircraft under operating  leases with  expiration  dates ranging from 2003 to 2014.
     We expect to return  two  of  the leased Boeing 737  aircraft to the  aircraft lessor in
     November 2002.  Under these leases, we have made cash security deposits or arranged for
     letters of credit representing approximately two months of lease payments per aircraft.
     At September 30, 2002, we had made cash security deposits and had arranged for issuance
     of letters of credit totaling  $5,717,000  and  $6,606,000, respectively.   Accordingly,
     our  restricted  cash  balance  includes $6,606,000  that collateralizes the outstanding
     letters of credit.  Additionally,  we make deposits to cover the cost of major scheduled
     maintenance  overhauls  of  these  aircraft.  These deposits  are based on the number of
     flight  hours flown and/or  flight departures and are not included as an  obligation  in
     the table above.  At September  30, 2002,  we had remaining unused maintenance  deposits
     of  $51,055,000  classified  as an asset on our balance sheet.

     As a complement to our Airbus  purchase  agreement,  in April and May 2000 we signed two
     agreements,  as subsequently  amended,  to lease 16 new Airbus aircraft for a term of 12
     years.  Five of these  aircraft  have been  delivered to us as of September 30, 2002 and
     one of these  aircraft  will not be able to be delivered by the lessor.  As of September
     30, 2002,  we have made cash  security  deposits on the  remaining 10 aircraft we agreed
     to lease and have made cash  security  deposits  and arranged for issuance of letters of
     credit  totaling  $400,000  and  $2,059,000,   respectively,  to  secure  these  leases.
     Accordingly,  our restricted cash balance includes  $2,059,000 that  collateralizes  the
     outstanding letters of credit.

     We also lease  office and hangar  space,  spare  engines  and office  equipment  for our
     headquarters and airport  facilities,  and certain other equipment with expiration dates
     ranging from 2002 to 2014. In addition,  we lease certain  airport gate  facilities on a
     month-to-month  basis.  Amounts  for leases that are on a  month-to-month  basis are not
     included as an obligation in the table above.

     DIA, our primary hub for  operations,  is planning a significant  expansion of Concourse
     A, where our aircraft  gates are  located.  The  expansion  will add as many as 10 gates
     for  full-size  commercial  jet  aircraft  and several  more gates for smaller  regional
     jets.  We have  expressed  preliminary  interest  in  entering  into a  long-term  lease
     arrangement  with the airport  authority  for the use of  additional  aircraft  gates in
     connection  with our  overall  expansion  plans.  The amount we would be  charged  under
     this lease  will  depend on the  ultimate  cost of the  project,  the amount of space to
     which we commit,  the  financing  structure  and  interest  cost and the final method by
     which the  airport  authority  allocates  the  construction  costs  among the  airlines.
     Currently,  construction  on the  concourse  expansion  is  anticipated  to start in the
     spring of 2003 with completion targeted for the late summer or early  fall of 2004.  The
     current  state of the  industry  and  uncertainties  involving  United  Airlines,  DIA's
     dominant carrier may result in delays or changes to the expansion plans.

(3) We have  adopted  a fleet  replacement  plan to phase out our  Boeing  737  aircraft  and
     replace them with a  combination  of Airbus A319 and A318  aircraft.  In March 2000,  we
     entered into an  agreement,  as  subsequently  amended,  to purchase up to 31 new Airbus
     aircraft.  As of October 1, 2002,  we did not exercise  purchase  options as they became
     due on two Airbus aircraft.  We are currently  discussing with Airbus the possibility of
     obtaining  an  extension  on these  options.  Included in the  purchase  commitment  are
     amounts for spare  aircraft  components  to support the  aircraft.  We are not under any
     contractual  obligations  with respect to spare parts.  We have agreed to firm purchases
     of 17 of  these  aircraft,  and  have  options  to  purchase  up  to  an  additional  12
     aircraft.  As of September  30, 2002, we had  taken  delivery of six of these  aircraft.
     Under  the  terms  of  the  purchase  agreement,  we  are  required  to  make  scheduled
     pre-delivery  payments  for these  aircraft.  These  payments  are  non-refundable  with
     certain  exceptions.  As of September  30, 2002,  we had made  pre-delivery  payments on
     future  deliveries  totaling  $54,071,000 to secure these aircraft and option  aircraft.
     We expect to be  operating  32  purchased  and  leased  Airbus  aircraft  by the  fourth
     calendar quarter of 2004.

Commercial Commitments

       As we  enter  new  markets,  increase  the  amount  of  space  leased,  or add  leased
aircraft,  we are often required to provide the lessor with a letter of credit,  bond or cash
security  deposits.  These  generally  approximate  two  months  of  rent  and  fees.  As  of
September 30, 2002, we had outstanding  letters of credit,  bonds, and cash security deposits
totaling  $13,230,000,  $2,622,000,  and  $7,198,000,  respectively.  In order to meet  these
requirements,  we have a credit agreement with a financial  institution for up to $1,500,000,
which  expires  August  31,  2003,  and  another  credit  agreement  with a second  financial
institution for up to $20,000,000,  which expires  November 30, 2002.  These credit lines can
be used solely for the  issuance of standby  letters of credit.  Any amounts  drawn under the
credit agreements are fully  collateralized by certificates of deposit,  which are carried as
restricted  investments  on our  balance  sheet.  As of  September  30,  2002,  we have drawn
$13,230,000  under these credit  agreements for standby letters of credit that  collateralize
certain  leases.  In the event that these  credit  agreements  are not renewed  beyond  their
present  expiration  dates,  the  certificates  of deposit  would be redeemed and paid to the
various  lessors  as cash  security  deposits  in lieu of standby  letters  of  credit.  As a
result there would be no impact on our  liquidity if these  agreements  were not renewed.  In
the event that the surety  companies  determined that issuing bonds on our behalf were a risk
they were no longer willing to underwrite,  we would be required to collateralize  certain of
these lease  obligations  with either cash  security  deposits or standby  letters of credit,
which would decrease our liquidity.

       We use the Airline Reporting  Corporation  ("ARC") to provide reporting and settlement
services for travel  agency sales and other  related  transactions.  In order to maintain the
minimum  bond  (or  irrevocable  letter  of  credit)  coverage  of  $100,000,   ARC  requires
participating  carriers to meet, on a quarterly basis,  certain  financial tests such as, but
not limited to, net profit margin  percentage,  working capital ratio, and percent of debt to
debt plus equity.  As of September 30, 2002, we met these  financial  tests and presently are
only  obligated  to provide the minimum  amount of $100,000 in coverage to ARC. If we were to
fail the  minimum  testing  requirements,  we would  be  required  to  increase  our  bonding
coverage  to four times the weekly  agency  net cash sales  (sales net of refunds  and agency
commissions).  Based on net cash sales  remitted  to us for the week ended  November 1, 2002,
the coverage  would be increased to $4,200,000  if we failed the tests.  If we were unable to
increase the bond amount as a result of our then  financial  condition,  we could be required
to issue a letter of credit  that  would  restrict  cash in an amount  equal to the letter of
credit.

       Our  agreement  with  our  Visa  and  MasterCard  processor  requires  us  to  provide
collateral  for Visa  and  MasterCard  sales  transactions  equal  to 50% of our air  traffic
liability  associated with these  transactions.  As of September 30, 2002, we had established
collateral  for  these  transactions  totaling  $18,946,000.  If we are  unable  to meet  the
collateral  requirements or if it is determined that we have  experienced a material  adverse
change in our  financial  position,  we may be subject to a 100%  holdback  of cash from Visa
and MasterCard  transactions  until the passenger is flown,  or  potentially,  termination of
the contract.


       As part of the  Stabilization  Act, the U.S.  government has provided  excess war risk
coverage  to the airline  industry  with a third party  liability  policy to cover  losses to
persons  other  than  employees  or  passengers   generally  for  renewable  60-day  periods,
currently in effect until  December 15, 2002. The premium for this  supplemental  coverage is
$7.50  per  flight  departure.  We do  not  know  whether  the  government  will  extend  the
coverage, and if it does, how long the extension will last. We expect that if the  government
stops  providing  excess war risk coverage  to the  airline  industry, the  premiums  charged
by  aviation  insurers  for this coverage  will be substantially  higher  than  the  premiums
currently  charged by  the  government  or the  coverage will  simply  not  be available from
reputable underwriters.

       In attempting to maximize the  efficiency of our fleet  replacement  plan, we may from
time to time  endeavor  to return  certain  leased  B737  aircraft  to their  owners on dates
before the currently  scheduled lease  expiration  dates for these aircraft.  We returned one
Boeing  aircraft  during the year ended March 31, 2002.  If we early  return  these  aircraft
from  service  and are unable to  sublease  these  aircraft  to third  parties,  we may incur
additional  expense,  or pay the  lessor all or a portion of the  remaining  lease  payments,
that  could  result in a charge  against  earnings  in the period in which the  agreement  is
entered  into.  We have entered  into an  agreement  to early return two 737-200  aircraft to
the lessor,  for which we  recorded an unusual  charge of  approximately  $3,000,000,  net of
income  taxes,  against  earnings  in our year ended March 31,  2002.  The two  aircraft  are
scheduled to be returned to the lessor in November 2002 and January 2003.

       On November  5, 2002 we  received  conditional  approval  from the Air  Transportation
Stabilization  Board  (ATSB)  for a $63  million  federal  loan  guarantee  of a $70  million
commercial  loan facility.  Completion of this  transaction is subject to satisfaction of the
conditions  imposed  by the ATSB,  including  negotiation  of  additional  fees and  warrants
requested  by  the  ATSB,   obtaining  the  necessary  internal  approvals,   and  completion
of documentation.   There can be  no assurance   that  we  will  be  able  to  complete  this
transaction.  We plan to use the proceeds to enhance our liquidity.

       We have signed a letter of intent with an aircraft  lessor for the  sale/leaseback  of
one of our owned  Airbus  A319  aircraft  and for the  scheduled  delivery  in March  2003 of
another Airbus A319 aircraft.  This  transaction  would  generate  proceeds of  approximately
$11,500,000.  We expect to finalize this  transaction  by December 31, 2002.  There can be no
assurances that the sale/leaseback will occur.

       We have been  assessing  our  liquidity  position  in light of our  aircraft  purchase
commitments and other capital needs, the economy,  our  competition,  the events of September
11,  and  other  uncertainties  surrounding  the  airline  industry.  We  believe  it  may be
appropriate  to enhance our  liquidity,  and have been actively  pursuing  several  financing
alternatives,   including  the  aircraft  financing  and  lease  transactions,  federal  loan
guarantee  and  the  sale/leaseback  transaction  described  above.  We  also  filed  a shelf
registration  with the Securities  and Exchange  Commission in April 2002 that would allow us
to  sell  equity  or  debt  securities  from  time  to  time  as  market  conditions  permit.
Subsequent  to  this  shelf  registration  filing,  our  financial   performance  along  with
bankruptcies  and the threat of bankruptcies of other airlines have significantly  adversely
affected  our  access  to  the  capital  markets.  Although  the  federal loan  guarantee and
sale/leaseback  transaction  will  improve  our  liquidity  if  they are completed,  we will
need to  continue  to  explore  avenues to  sustain  our  liquidity  in the current  economic
and  operating  environment.  We  intend  to  continue  to  pursue  domestic or foreign  bank
financing,  private  debt  financing  and  aircraft  sale/leaseback  and  other transactions
as necessary to support our capital and operating needs.

Critical Accounting Policies

       The  preparation  of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States of America  requires  management  to make  estimates
and  assumptions  that affect the reported  amounts of assets and  liabilities and disclosure
of  contingent  assets  and  liabilities  at the  date of the  financial  statements  and the
reported  amounts of revenues  and  expenses  during the  reporting  period.  Actual  results
could differ from those estimates.

Maintenance

       Routine maintenance and repairs are charged to operations as incurred.

       Under the terms of our  aircraft  lease  agreements,  we are  required to make monthly
maintenance  deposits to the lessor and a liability for accrued  maintenance  is  established
based on  aircraft  usage.  The  deposits  are  applied  against  the cost of major  airframe
maintenance  checks,  landing gear overhaul and engine overhauls.  Deposit balances remaining
at lease  termination  remain with the lessor and any  remaining  liability  for  maintenance
checks is reversed  against the deposit  balance.  Additionally,  a provision is made for the
estimated  costs of scheduled  major  overhauls  required to be performed on leased  aircraft
and  components  under the  provisions  of the  aircraft  lease  agreements  if the  required
monthly  deposit  amounts  are not  adequate  to  cover  the  entire  cost  of the  scheduled
maintenance.  We also accrues for major airframe  maintenance checks,  landing gear overhauls
and engine  overhauls  on our owned  aircraft.  Accrued  maintenance  expense  expected to be
incurred  beyond one year is  classified as long-term.  The amounts  accrued for  maintenance
are based on estimates  of the time  required to complete  the  procedures  and cost of parts
used.  Additional  maintenance  accruals  may be  required  if  these  estimates  prove to be
inadequate.

Revenue Recognition

         Passenger,  cargo,  and other revenues are  recognized  when the  transportation  is
provided  or after the  tickets  expire,  one year  after  date of  issuance,  and are net of
excise taxes,  passenger  facility  charges and security fees.  Revenues that on tickets that
have  been sold but not yet used been  deferred  and  included  in the  accompanying  balance
sheet as air traffic liability.

       Passenger,  cargo,  and other  revenues  are  recognized  when the  transportation  is
provided  or after the  tickets  expire,  one year  after  date of  issuance,  and are net of
excise  taxes,  passenger  facility  charges and  security  fees.  Proceeds  from the sale of
tickets  that have been  deferred  are  included  in the  accompanying  balance  sheet as air
traffic liability.


Item 3:  Quantitative and Qualitative Disclosures About Market Risk

       The risk  inherent  in our  market  risk  sensitive  position  is the  potential  loss
arising  from an adverse  change in the price of fuel as  described  below.  The  sensitivity
analysis  presented does not consider  either the effect that such an adverse change may have
on overall  economic  activity or  additional  action  management  may take to  mitigate  our
exposure  to such a change,  including  the fuel  hedging  program  discussed  below.  Actual
results may differ from the amounts disclosed.

       Our  earnings  are  affected  by changes  in the price and  availability  of  aircraft
fuel.  Market risk is estimated  as a  hypothetical  10 percent  increase in the average cost
per  gallon of fuel for the year  ended  March 31,  2002.  Based on fiscal  year 2002  actual
fuel usage,  such an increase  would have resulted in an increase to aircraft fuel expense of
approximately  $6,482,000  in fiscal  year 2002.  Comparatively,  based on  projected  fiscal
year 2003 fuel usage,  such an increase  would result in an increase to aircraft fuel expense
of  approximately  $7,958,000  in fiscal  year 2003.  The  increase in exposure to fuel price
fluctuations  in fiscal year 2003 is due to the increase of our average  aircraft  fleet size
during  the year ended  March 31,  2002,  projected  increases  to our fleet  during the year
ended March 31, 2003 and related gallons purchased.

       Our  average  cost per  gallon of fuel for the six months  ended  September  30,  2002
decreased  7.6% from the  average  cost for the six months  ended  September  30,  2001.  See
"Management's  Discussion  and Analysis of Financial  Condition  and results of  Operations -
Operating Expenses."

       In November  2002,  our Board of Directors authorized us to implement a  fuel hedging
program  that is  intended  to manage the risk and effect of  fluctuating  jet fuel prices on
our  business.  Our  hedging  program is intended  to offset  increases  in jet fuel costs by
using  derivative  instruments  such as barrels of crude oil or heating oil,  which is highly
correlated  to  the  price  of  jet  fuel  delivered  on  the  East  and  Gulf  coasts.  When
implemented,  we do not expect our  hedging  program to fully  protect us against  increasing
jet fuel costs  because  our  hedging  program  will not cover all of our fuel  volumes.  Our
hedging  program will create  certain cash risks that will be subject to,  including  but not
limited to, the largely  unpredictable  prices of jet fuel, crude oil, and heating oil prices
and  the  effectiveness  of  our  fuel  hedges  and  overall  fuel  hedging   strategy.   The
effectiveness of our fuel hedging program may also be negatively  impacted by a commencement
of hostilities against Iraq and terrorist activity.

       We will be  susceptible  to market risk  associated  with changes in interest rates on
expected  future  long-term debt  obligations  to fund the purchases of our Airbus  aircraft.
Interest  expense on four of our owned  Airbus  A319  aircraft  is subject to  interest  rate
adjustments every three to six months depending upon changes in the applicable LIBOR rate.


Item 4.  Controls and Procedures

       Within  the 90 days  prior  to the  filing  date of this  report,  we  carried  out an
evaluation,  under the supervision and with the  participation  of our management,  including
our Chief Executive Officer and Chief Financial  Officer,  of the effectiveness of the design
and  operation  of our  disclosure  controls  and  procedures  pursuant to Exchange  Act Rule
13a-15.  Based  upon  that  evaluation,  our Chief  Executive  Officer  and  Chief  Financial
Officer  concluded  that our disclosure  controls and  procedures  are effective.  Disclosure
controls  and  procedures  are  controls  and  procedures  that are  designed  to ensure that
information  required to be  disclosed in our reports  filed or submitted  under the Exchange
Act is recorded,  processed,  summarized and completely  and accurately  reported  within the
time periods specified in the Securities and Exchange Commission's rules and forms.

       To our knowledge,  there have been no significant  changes in our internal controls or
in other factors that could  significantly  affect internal  controls  subsequent to the date
we carried out this evaluation.








                                 PART II. OTHER INFORMATION


Item 4:       Submission of Matters to a Vote of Security Holders

       Our annual meeting of shareholders was held on September 5, 2002, at which a quorum
for the transaction of business was present.  One matter was voted upon, as described below.

       Members of the Board of Directors  elected at the meeting  were Samuel D.  Addoms,  D.
Dale Browning,  Paul S. Dempsey, Jeff S. Potter,  William B. McNamara, B. Larae Orullian, and
James B. Upchurch.  The votes cast with respect to each nominee were as follows:

                           24,433,216 "For" Mr. Addoms;                    52,067 "Withheld"
                           24,418,509 "For" Mr. Browning;                  66,773 "Withheld"
                           24,417,892 "For" Mr. Dempsey;                   67,390 "Withheld"
                           24,414,368 "For" Mr. Potter                     70,915 "Withheld"
                           24,416,657 "For" Mr. McNamara;                  68,625 "Withheld"
                           24,436,256 "For" Ms. Orullian;                  49,026 "Withheld"
                           24,407,170 "For" Mr. Upchurch;                  78,113 "Withheld"

Shareholder Proposals

       Shareholders are entitled to submit  proposals on matters  appropriate for shareholder
action  consistent  with  regulations  of the  Securities  and  Exchange  Commission  and our
bylaws.  If a shareholder  wishes to have a proposal  appear in our proxy  statement for next
year's annual  meeting,  under the  regulations of the Securities and Exchange  Commission it
must be received by our Corporate  Secretary at 7001 Tower Road, Denver,  Colorado 80249-7312
on or before March 18, 2003.


Item 6:       Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit
         Numbers


   10.75    Secured Credit Agreement dated as of October 10, 2002 among Frontier Air-
                    lines, Inc., the Lenders listed on the signature page, and Credit Agricole
                    Indosuez,  as Agent.  Portions of this exhibit have been  excluded  from
                    the publicly available document and an order granting confidential treatment
                    of the material has been requested.  (1)

           10.76    Aircraft Mortgage and  Security Agreement dated as of October 10, 2002
                    between  Frontier Airlines, Inc., as Mortgager, and Credit  Agricole
                    Indosuez,  as Agent and Mortgagee.  (1)

           99.1     Certification of President and Chief Executive Officer, Jeff S. Potter.  (1)

           99.2     Certification of Chief Financial Officer, Paul H. Tate.  (1)

           (1)  Filed herewith.


(b)      Reports on Form 8-K

              None.






                                         SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                                     FRONTIER AIRLINES, INC.


Date:  November 12, 2002                             By: /s/ Paul H. Tate                           
                                                     Paul H. Tate, Vice President and
                                                     Chief Financial Officer

Date:  November 12, 2002                             By: /s/ Elissa A. Potucek                      
                                                     Elissa A. Potucek, Vice President, Controller,
                                                     Treasurer and Principal Accounting Officer





                                        Certification


I, Jeff  S. Potter, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Frontier Airlines, Inc.;

2.       Based on my knowledge,  this quarterly  report does not contain any untrue statement
         of a  material  fact  or omit  to  state  a  material  fact  necessary  to make  the
         statements  made, in light of the  circumstances  under which such  statements  were
         made, not misleading with respect to the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial  information
         included in this  quarterly  report,  fairly  present in all  material  respects the
         financial  condition,  results of operations and cash flows of the registrant as of,
         and for, the periods presented in this quarterly report;

4.       The registrant's  other  certifying  officers and I are responsible for establishing
         and  maintaining  disclosure  controls  and  procedures  (as defined in Exchange Act
         Rules 13a-14 and 15d-14) for the registrant and have:

         a.  designed  such  disclosure  controls  and  procedures  to ensure  that  material
              information   relating   to  the   registrant,   including   its   consolidated
              subsidiaries,   is  made  known  to  us  by  others   within  those   entities,
              particularly  during  the  period  in  which  this  quarterly  report  is being
              prepared;

         b.  evaluated  the  effectiveness  of  the  registrant's   disclosure  controls  and
              procedures  as of a date  within  90  days  prior  to the  filing  date of this
              quarterly report (the "Evaluation Date"); and

         c.  presented  in this  quarterly  report our  conclusions  about the  effectiveness
              of the  disclosure  controls and  procedures  based on our evaluation as of the
              Evaluation Date;

5.       The registrant's other certifying  officers and I have disclosed,  based on our most
         recent  evaluation,  to  the  registrant's  auditors  and  the  audit  committee  of
         registrant's board of directors (or persons performing the equivalent function):

         a.  all   significant   deficiencies   in  the  design  or   operation  of  internal
              controls  which  could  adversely  affect the  registrant's  ability to record,
              process,  summarize  and  report  financial  data and have  identified  for the
              registrant's auditors any material weaknesses in internal controls; and

         b.  any  fraud,  whether  or  not  material,   that  involves  management  or  other
              employees who have a significant  role in the registrant's  internal  controls;
              and

     6.  The registrant's  other  certifying  officers and I have indicated in this quarterly
         report  whether or not there were  significant  changes in  internal  controls or in
         other factors that could  significantly  affect internal controls  subsequent to the
         date of our most recent  evaluation,  including any  corrective  actions with regard
         to significant deficiencies and material weaknesses.

Date:   November 12, 2002


                                                       By:    /s/ Jeff  S. Potter                   
                                                        Jeff S. Potter
                                                              President and Chief Executive Officer





                                        Certification


I, Paul Tate, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Frontier Airlines, Inc.;

2.       Based on my knowledge,  this quarterly  report does not contain any untrue statement
         of a  material  fact  or omit  to  state  a  material  fact  necessary  to make  the
         statements  made, in light of the  circumstances  under which such  statements  were
         made, not misleading with respect to the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial  information
         included in this  quarterly  report,  fairly  present in all  material  respects the
         financial  condition,  results of operations and cash flows of the registrant as of,
         and for, the periods presented in this quarterly report;

4.       The registrant's  other  certifying  officers and I are responsible for establishing
         and  maintaining  disclosure  controls  and  procedures  (as defined in Exchange Act
         Rules 13a-14 and 15d-14) for the registrant and have:

         a.  designed  such  disclosure  controls  and  procedures  to ensure  that  material
              information   relating   to  the   registrant,   including   its   consolidated
              subsidiaries,   is  made  known  to  us  by  others   within  those   entities,
              particularly  during  the  period  in  which  this  quarterly  report  is being
              prepared;

         b.  evaluated  the  effectiveness  of  the  registrant's   disclosure  controls  and
              procedures  as of a date  within  90  days  prior  to the  filing  date of this
              quarterly report (the "Evaluation Date"); and

         c.  presented  in this  quarterly  report our  conclusions  about the  effectiveness
              of the  disclosure  controls and  procedures  based on our evaluation as of the
              Evaluation Date;

5.       The registrant's other certifying  officers and I have disclosed,  based on our most
         recent  evaluation,  to  the  registrant's  auditors  and  the  audit  committee  of
         registrant's board of directors (or persons performing the equivalent function):

         a. all  significant  deficiencies  in the design or operation  of internal  controls
              which  could  adversely  affect the  registrant's  ability to record,  process,
              summarize and report  financial data and have  identified for the  registrant's
              auditors any material weaknesses in internal controls; and

         b.  any  fraud,  whether  or  not  material,   that  involves  management  or  other
              employees who have a significant  role in the registrant's  internal  controls;
              and

     6.  The registrant's  other  certifying  officers and I have indicated in this quarterly
         report  whether or not there were  significant  changes in  internal  controls or in
         other factors that could  significantly  affect internal controls  subsequent to the
         date of our most recent  evaluation,  including any  corrective  actions with regard
         to significant deficiencies and material weaknesses.

Date:    November 12, 2002


                                                       By:    /s/ Paul H. Tate                      
                                                           Paul H. Tate
                                                              Chief Financial Officer
EX-99 3 ex99b.htm PAUL'S CONSENT Frontier Airlines, Inc 10q 
                                Exhibit 99.2

                         CERTIFICATION PURSUANT TO
                          18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
               SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the  Quarterly  Report of Frontier  Airlines,  Inc. (the
“Company”)  on Form 10-Q for the period  ending  September 30, 2002 as filed
with  the  Securities  and  Exchange  Commission  on the  date  hereof  (the
“Report”),  I.  Paul  H.  Tate,  Chief  Financial  Officer  of the  Company,
certify,  pursuant to 18 U.S.C.§1350, as adopted  pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:

(1)      The Report fully complies with the requirements of section 12(a) or 15(d) of the
Securities Exchange Act of 1934; and

(2)      The information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company.


/s/ Paul H. Tate
EX-99 4 ex99.htm JEFF'S CONSENT Frontier Airlines, Inc 10q 
                                Exhibit 99.1

                         CERTIFICATION PURSUANT TO
                          18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
               SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the  Quarterly  Report of Frontier  Airlines,  Inc. (the
“Company”)  on Form 10-Q for the period  ending  September 30, 2002 as filed
with  the  Securities  and  Exchange  Commission  on the  date  hereof  (the
“Report”),  I. Jeffery S. Potter,  President and Chief Executive  Officer of
the Company,  certify,  pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, that:

(1)      The Report fully complies with the requirements of section 12(a) or 15(d) of the
Securities Exchange Act of 1934; and

(2)      The information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company.


/s/ Jeffery S. Potter
EX-10 5 n913redact.htm N913FR REDACT Frontier Airlines, Inc 10q 

                                                      $*

                                             SECURED CREDIT AGREEMENT



                                           Dated as of October 10, 2002



                                                       Among



                                              FRONTIER AIRLINES, INC.



                                 THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF,



                                                        and



                                        CREDIT AGRICOLE INDOSUEZ, as Agent



                                                                                       

                                    CREDIT AGRICOLE INDOSUEZ, Lead-Underwriter
                                            DVB BANK AG, Co-Underwriter
                                 BAYERISCHE HYPO- UND VEREINSBANK., Co-Underwriter

                                                                                       



                                           Table of Contents


                                                                                         Page


                                            ARTICLE I

                                         CREDIT FACILITY

SECTION 1.01        COMMITMENT TO LEND.......................................................1
SECTION 1.02        MANNER OF BORROWING......................................................1
SECTION 1.03        INTEREST.................................................................2
SECTION 1.04        REPAYMENT................................................................4
SECTION 1.05        PREPAYMENTS..............................................................4
SECTION 1.06        ETENT OF INTEREST OF LENDER..............................................5
SECTION 1.07        REDUCTION OF COMMITMENTS.................................................5
SECTION 1.08        FEES.....................................................................5
SECTION 1.09        COMPUTATION OF INTEREST AND FEES.........................................5
SECTION 1.10        EVIDENCE OF INDEBTEDNESS.................................................5
SECTION 1.11        PAYMENTS BY THE BORROWER.................................................5
SECTION 1.12        DISTRIBUTION OF PAYMENTS BY THE AGENT....................................6
SECTION 1.13        TAXES....................................................................6
SECTION 1.14        PRO RATA TREATMENT.......................................................9


                                            ARTICLE II

                                        CONDITIONS TO LOANS


SECTION 2.01        CONDITIONS TO AGREEMENT DATE.............................................9
SECTION 2.02        CONDITIONS TO EACH LOAN.................................................10


                                            ARTICLE III

                                CERTAIN REPRESENTATIONS AND WARRANTIES

SECTION 3.01        ORGANIZATION; POWER; QUALIFICATION......................................12
SECTION 3.02        PLACE OF BUSINESS; SUBSIDIARIES.........................................13
SECTION 3.03        AUTHORIZATION; ENFORCEABILITY; REQUIRED CONSENTS; ABSENCE OF CONFLICTS..13
SECTION 3.04        TAXES...................................................................13
SECTION 3.05        LITIGATION..............................................................13
SECTION 3.06        BURDENSOME PROVISIONS...................................................14
SECTION 3.07        NO ADVERSE CHANGE OR EVENT..............................................14
SECTION 3.08        ADDITIONAL ADVERSE FACTS................................................14
SECTION 3.09        INVESTMENT COMPANY ACT..................................................14
SECTION 3.10        TITLE TO AIRCRAFT.......................................................14
SECTION 3.11        MORTGAGE SECURITY INTEREST..............................................14
SECTION 3.12        PARI PASSU STATUS.......................................................14
SECTION 3.13        SECURITIES ACT OF 1933..................................................15
SECTION 3.14        PURCHASE AGREEMENT......................................................15
SECTION 3.15        EVENT OF DEFAULT; EVENT OF LOSS.........................................15
SECTION 3.16        ERISA...................................................................15


                                            ARTICLE IV

                                         CERTAIN COVENANTS

SECTION 4.01        PRESERVATION OF EXISTENCE...............................................15
SECTION 4.02        PAYMENT OF TAXES AND LIABILITIES........................................15
SECTION 4.03        COMPLIANCE WITH APPLICABLE LAWS AND CONTRACTS...........................15
SECTION 4.04        PRESERVATION OF LOAN DOCUMENT ENFORCEABILITY............................16
SECTION 4.05        USE OF PROCEEDS.........................................................16
SECTION 4.06        AIR CARRIER.............................................................16
SECTION 4.07        RECORDING...............................................................16
SECTION 4.08        SECURITY INTEREST.......................................................16
SECTION 4.09        FURTHER ASSURANCES......................................................17
SECTION 4.10        TRANSFER OF AIRCRAFT....................................................17
SECTION 4.11        PLACE OF BUSINESS, ETC..................................................17
SECTION 4.12        LIENS...................................................................17
SECTION 4.13        MERGER OR CONSOLIDATION.................................................17


                                            ARTICLE V

                                          INFORMATION

SECTION 5.01        INFORMATION TO BE FURNISHED.............................................19
SECTION 5.02        ACCURACY OF FINANCIAL STATEMENTS AND INFORMATION........................20


                                            ARTICLE VI

                                             DEFAULT

SECTION 6.01        REMEDIES UPON EVENT OF DEFAULT..........................................20


                                            ARTICLE VII

                               ADDITIONAL CREDIT FACILITY PROVISIONS

SECTION 7.01        ILLEGALITY EVENT........................................................21
SECTION 7.02        REGULATORY CHANGES......................................................21
SECTION 7.03        CAPITAL REQUIREMENTS....................................................21
SECTION 7.04        FUNDING LOSSES; SWAP LOSSES AND GAINS...................................21
SECTION 7.05        CERTAIN DETERMINATIONS..................................................23
SECTION 7.06        CHANGE OF LENDING OFFICE................................................23
SECTION 7.07        LOAN STRUCTURE..........................................................24


                                            ARTICLE VIII

                                              THE AGENT

SECTION 8.01        APPOINTMENT AND POWERS..................................................24
SECTION 8.02        LIMITATION ON AGENT'S LIABILITY.........................................24
SECTION 8.03        DEFAULTS................................................................25
SECTION 8.04        RIGHTS AS A LENDER......................................................25
SECTION 8.05        INDEMNIFICATION.........................................................25
SECTION 8.06        NON-RELIANCE ON AGENT AND OTHER LENDERS.................................26
SECTION 8.07        EXECUTION AND AMENDMENT OF LOAN DOCUMENTS ON BEHALF OF THE LENDERS......26
SECTION 8.08        RESIGNATION OF THE AGENT................................................26

                                            ARTICLE IX

                                          MISCELLANEOUS

SECTION 9.01        NOTICES AND DELIVERIES..................................................27
SECTION 9.02        EXPENSES; INDEMNIFICATION...............................................29
SECTION 9.03        AMOUNTS PAYABLE DUE UPON REQUEST FOR PAYMENT............................32
SECTION 9.04        REMEDIES OF THE ESSENCE.................................................32
SECTION 9.05        RIGHTS CUMULATIVE.......................................................32
SECTION 9.07        SET-OFF.................................................................33
SECTION 9.08        SHARING OF RECOVERIES...................................................33
SECTION 9.09        ASSIGNMENTS AND PARTICIPATIONS..........................................34
SECTION 9.10        GOVERNING LAW...........................................................35
SECTION 9.11        JUDICIAL PROCEEDINGS; WAIVER OF JURY TRIAL..............................35
SECTION 9.12        JUDGMENT CURRENCY.......................................................36
SECTION 9.13        LIMITATION OF LIABILITY.................................................36
SECTION 9.14        SEVERABILITY OF PROVISIONS..............................................37
SECTION 9.15        COUNTERPARTS............................................................37
SECTION 9.16        SURVIVAL OF OBLIGATIONS.................................................37
SECTION 9.17        ENTIRE AGREEMENT........................................................37
SECTION 9.18        SUCCESSORS AND ASSIGNS..................................................37
SECTION 9.19        REGISTERED NOTES........................................................37
SECTION 9.20        NO FIDUCIARY RELATIONSHIP ESTABLISHED BY LOAN DOCUMENTS.................37
SECTION 9.21        SECTION 1110 COMPLIANCE.................................................37
SECTION 9.22        CONFIDENTIALITY.........................................................38
SECTION 9.23        COVENANTS OF THE AGENT AND LENDERS......................................38
SECTION 9.24        LENDERS' REPRESENTATIONS AND WARRANTIES.................................38













                                         SECURED CREDIT AGREEMENT


         This Secured Credit Agreement (this "Agreement"), dated as of October 10, 2002, is made and entered into
among FRONTIER AIRLINES, INC.,  a Colorado corporation, as Borrower (the "Borrower"), the Lenders listed on the
signature pages hereof (the "Lenders"), and CREDIT AGRICOLE INDOSUEZ, as agent for the Lenders (the "Agent").

                                        PRELIMINARY STATEMENT

         To finance a portion of the purchase price of up to * (*) Airbus A319-100 aircraft, together with, in
each case, two (2) CFM56-5B5 engines installed thereon (as more specifically described in each Secured Credit
Agreement Supplement), the Borrower desires to borrow from the Lenders funds up to a maximum principal amount of
$*.

         NOW, THEREFORE, the Borrower, the Agent and the Lenders hereby agree as follows (with capitalized terms
used herein and not otherwise defined herein having the respective meanings set forth in Appendix X):


                                               ARTICLE I

                                         CREDIT FACILITY


Section 1.01   Commitment to Lend.  (a) Term Loans.  Upon the terms and subject to the conditions of
this Agreement, each Lender agrees to make on each Delivery Date of an Aircraft, provided each such Delivery Date
occurs on or before the Termination Date, a Term Loan to the Borrower in an aggregate principal amount not
exceeding one third (1/3) of such Lender's Commitment.  The aggregate amount of the Commitments for all Aircraft
on the Agreement Date is $*.

         (b)   Type of Loans.  Subject to the terms and conditions of this Agreement, each Loan may, at
the option of the Borrower, be made as a Eurodollar Rate Loan or a Fixed Rate Loan of any Type.

Section 1.02   Manner of Borrowing.  (a)  The Borrower shall give the Agent notice (which shall be
irrevocable) no later than 10:00 a.m. on the third Eurodollar Business Day before the Delivery Date.  Each such
notice shall be in the form of Schedule 1.02 and shall specify (i) the date of the Delivery Date, which
shall be a Eurodollar Business Day, (iii) the Type of Eurodollar Rate Loan or Fixed Rate Loan requested and
(iv) the amount of such requested Loan, the aggregate amount of which Loan requested shall be not more than
the lesser of $* and the maximum amount that can then be borrowed under the Commitments, as applicable.  Upon
receipt of any such notice, the Agent shall promptly notify each Lender of the contents thereof and of the
amount and Type of each Loan to be made by such Lender on the Delivery Date.

         (b)      Not later than 11:00 a.m. on each Delivery Date, each Lender shall make available to
the Agent, in Dollars in funds immediately available to the Agent at the Agent's Office, the Term Loan to be
made by such Lender on such date.  Any Lender's failure to make any Term Loan to be made by it on the Delivery
Date shall not relieve any other Lender of its obligation to make any Term Loan to be made by such other Lender
on such date, but such other Lender shall not be liable for such failure.  The obligations of the Lenders to
make Term Loans hereunder are several and not joint.

         (c)      Unless the Agent shall have received notice from a Lender prior to 10:00 a.m. on the
Delivery Date for the making of any Term Loan that such Lender will not make available to the Agent the Term
Loan requested to be made by such Lender on such date, the Agent may assume that such Lender has made such
Term Loan available to the Agent on such date in accordance with Section 1.02(b) and the Agent in its sole
discretion may, in reliance upon such assumption, make available to the Borrower on the Delivery Date a
corresponding amount on behalf of such Lender.  If and to the extent such Lender shall not have so made
available to the Agent the Term Loan requested to be made by such Lender and the Agent shall have so made
available to the Borrower a corresponding amount on behalf of such Lender, such Lender shall, on demand, pay
to the Agent such corresponding amount together with interest thereon, for each day from the date such amount
shall have been so made available by the Agent to the Borrower until the date such amount shall have been
repaid to the Agent, at the Eurodollar Rate until (and including) the third Business Day after demand is made
and thereafter at the applicable rate of interest provided in Section 1.03(a).  If such Lender does not pay
such corresponding amount promptly upon the Agent's demand therefor, the Agent may notify the Borrower and
the Borrower shall immediately repay such corresponding amount to the Agent together with accrued interest
thereon at the applicable rate of interest provided in Section 1.03(a).

         (d)      Subject to the terms and conditions hereof, all Term Loans made available to the Agent
in accordance with Section 1.02(b) shall be disbursed by the Agent on the Delivery Date in Dollars in funds
immediately available by credit to an account of AVSA; provided that, if the aggregate amount of such Term Loans
made available on such Delivery Date is greater than the balance of the purchase price owing to AVSA, the excess
will be paid directly to the Borrower or its order or in such other manner as may have been specified in the
applicable notice and as shall be acceptable to the Agent.

Section 1.03   Interest.  (a)  Rates.  (i)  Subject to Section 1.03(a)(ii), (A) each Loan shall bear
interest on the outstanding principal amount thereof at a rate per annum equal to (1) so long as it is a Fixed
Rate Loan, the Fixed Rate plus the Applicable Margin and (2) so long as it is a Eurodollar Rate Loan, the applicable
Eurodollar Rate plus the Applicable Margin and (B) each other amount due and payable under the Loan Documents
shall, to the maximum extent permitted by Applicable Law, bear interest at a rate per annum equal to the Fixed
Rate or the Eurodollar Rate, as applicable, and as in effect from time to time, plus the Applicable Margin.

                  (ii)   During an Event of Default (and whether before or after judgment), each Loan
         (whether or not due) and, to the maximum extent permitted by Applicable Law, each other amount due and
         payable under the Loan Documents shall bear interest at a rate per annum equal to the applicable
         Post-Default Rate.

         (b)   Payment.  Interest (i) shall be payable on each Payment Date for such Loan, (ii) on any
Loan, shall be payable when such Loan shall be due (whether at maturity, by reason of notice of prepayment or
acceleration or otherwise), but only to the extent then accrued on the amount then so due, and (iii) on all other
amounts due and payable under the Loan Documents, shall be payable on demand.  Interest at the Post-Default Rate
shall be payable on demand.

         (c)   Conversion and Continuation.  (i)  Any Fixed Rate Loan of any Type shall continue as a
Fixed Rate Loan of such Type and may not be converted into a Eurodollar Rate Loan or a Fixed Rate Loan of any other
Type.

                  (ii)   Any Eurodollar Rate Loan of any Type shall continue as a Eurodollar Rate Loan of
         such Type unless the Borrower shall have given the Agent a notice in accordance with Section 1.03(c)(iv)
         requesting that such Eurodollar Rate Loan be converted into a Fixed Rate Loan of the Type set forth in
         such notice on the next succeeding Payment Date for such Eurodollar Rate Loan, provided, however, that
         the Borrower shall not be permitted to convert any such Eurodollar Rate Loan pursuant to this Section
         1.03(c)(ii) if (A) it has made the election referred to in Section 1.03(c)(iii) or (B) a Default or an
         Event of Default exists.

                  (iii)  Notwithstanding Sections 1.03(c)(ii) and (iv), the Borrower may elect in any
         notice of borrowing provided to the Agent in accordance with Section 1.02(a) that the Eurodollar Rate
         Loan of the Type specified in such notice be converted into a Fixed Rate Loan of the Type specified in
         such notice on the date which is the Payment Date for such Eurodollar Rate Loan closest to the second
         anniversary of the Delivery Date specified in such notice.  Upon receipt by the Agent of such notice,
         each Lender shall use its reasonable efforts to enter into a Swap Transaction in order for (i) the
         Lenders to be able to provide the Borrower with such Fixed Rate Loan on such Payment Date and (ii) the
         Agent, on behalf of the Lenders, to be able to provide the Borrower with the Fixed Rate for such Fixed
         Rate Loan on or prior to such Delivery Date.

                  (iv)   The Borrower shall give the Agent notice (which shall be irrevocable) of the
         conversion of any Eurodollar Rate Loan into a Fixed Rate Loan no later than 10:00 a.m. on the third
         Eurodollar Business Day before any Payment Date for such Loan.  Each notice of conversion shall be in
         the form of Schedule 1.03(c)(iv) and shall specify (A) the requested Payment Date of such conversion,
         (B) the amount and Type of the Eurodollar Rate Loan to be converted and (C) the amount and Type of the
         Fixed Rate Loan into which such Eurodollar Rate Loan is to be converted.  Upon receipt of any such
         notice, the Agent shall promptly notify each Lender of (x) the contents thereof, (y) the amount and Type
         of the Eurodollar Rate Loan to be converted and (z) the amount and Type of the Fixed Rate Loan into
         which such Eurodollar Rate Loan is to be converted.

         (d)   Maximum Interest Rate.  Nothing contained in the Loan Documents shall require the Borrower
at any time to pay interest at a rate exceeding the Maximum Permissible Rate.  If interest payable by the
Borrower on any date would exceed the maximum amount permitted by the Maximum Permissible Rate, such interest
payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period,
to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be
increased by the unpaid amount of such reduction.  Any interest actually received for any period in excess
of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loans.

Section 1.04   Repayment.  Each Loan shall mature and become due and payable and shall be repaid by the
Borrower in * (*) consecutive semi-annual installments or * (*) consecutive quarterly installments, as specified
in the notice of borrowing for such Loan, payable on successive Payment Dates commencing on the initial Payment
Date for such Loan and ending on the Maturity Date for such Loan.  Each such installment shall be in the amount
set forth in the Secured Credit Agreement Supplement for such Loan, except that, in any event, the final
installment shall be in an amount equal to the amount of such Loan then outstanding.

Section 1.05   Prepayments.  (a)  Optional Prepayments.  The Borrower may, from time to time, prepay one or
more of the Loans in whole or in part, without premium or penalty, and partial prepayments shall be in an
aggregate principal amount of at least $* and shall be applied ratably among the Lenders.  The Borrower shall
give the Agent notice of each prepayment pursuant to this Section 1.05(a) no later than 10:00 a.m. on the fifth
Business Day, before the date of such prepayment.  Each such notice of prepayment shall be in the form of
Schedule 1.05(a) and shall specify (i) the date such prepayment is to be made and (ii) the amount and Type of the
Loan to be prepaid.  Upon receipt of any such notice, the Agent shall promptly notify each Lender of the contents
thereof and the amount and Type of the Term Loan of such Lender to be prepaid.  Amounts to be prepaid pursuant to
this Section 1.05(a) shall (i) irrevocably be due and payable on the date specified in the applicable notice of
prepayment, together with all accrued interest thereon to the date of prepayment and all other amounts payable
under the Loan Documents, including, the amounts payable pursuant Section 7.04 hereof and (ii) be applied to the
installments of the Loan subject to such prepayment in the inverse order of their normal maturity.

         (b)   Mandatory Prepayments.

                  (i)      Event of Loss.  On the date on which the Borrower is required pursuant to Section
         4.1(a) of the Mortgage to make payment for an Event of Loss with respect to any Aircraft, the Loan in
         respect of such Aircraft shall become due and payable at 100% of the aggregate outstanding amount of
         such Loan, together with all accrued interest thereon to the date of prepayment and all other amounts
         payable under the Loan Documents, including, all amounts payable pursuant to Section 7.04 hereof.

                  (ii)     Illegality.  On the date any Term Loan held by a Lender shall be subject to
         mandatory prepayment pursuant to Section 7.01 hereof due to an Illegality Event (as defined in Section
         7.01 hereof), such Term Loan or portions thereof shall become due and payable at 100% of the aggregate
         outstanding amount of such Term Loan or portion thereof, together with all accrued interest thereon
         to the date of prepayment and all other amounts payable under the Loan Documents, including, the
         amounts payable pursuant Section 7.04 hereof.

         (c)   Reborrowing.  Amounts of Loans prepaid may not be reborrowed.

Section 1.06   Extent of Interest of Lender.  No Lender shall have any further interest in, or other right
with respect to, the mortgage and security interests created by the Mortgage when and if all of such Lender's
Term Loans and interest on all Notes held by such Lender and all other sums payable to such Lender hereunder,
under the Mortgage and under such Notes shall have been indefeasibly paid in full.

Section 1.07   Reduction of Commitments.  The Borrower may reduce or terminate the Commitments by giving the
Agent notice (which shall be irrevocable) thereof no later than 10:00 a.m. on the fifth Business Day before the
requested date of such reduction or termination, except that no reduction or termination of the Commitments shall
be effective prior to the 10th day after the Agreement Date.  Upon receipt of any such notice, the Agent shall
promptly notify each Lender of the contents thereof and, if applicable, the amount to which such Lender's
Commitments are to be reduced.

Section 1.08   Fees.  (a)  Fee Letters.  The Borrower shall pay to the Agent (for the account of the Agent)
fees in the amounts and on the dates as separately agreed between the Borrower and the Agent and the Agent shall
pay to each Lender fees in the amounts and on the dates as separately agreed between the Agent and each Lender.

         (b)   Fees Non-Refundable.  Subject to Section 1.12(b) hereof, none of the fees payable under Section 1.08(a)
shall be refundable in whole or in part.

Section 1.09   Computation of Interest and Fees.  Fixed Rate interest shall be calculated on the basis of a
year of 360 days comprised of twelve 30-day months and Eurodollar Rate interest shall be calculated on the basis
of a year of 360 days and the actual number of days elapsed.  Interest for any period shall be calculated from
and including the first day thereof to but excluding the last day thereof.

Section 1.10   Evidence of Indebtedness.  Each Lender's Term Loan and the Borrower's obligation to repay such
Term Loan with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the
records of such Lender and a Note payable to the order of such Lender which, subject to Section 9.19, may be a
Registered Note.  The records of each Lender shall be prima facie evidence of such Lender's Term Loan and accrued
interest thereon and of all payments made in respect thereof.

Section 1.11   Payments by the Borrower.  (a)  Time, Place and Manner.  All payments due to the Agent under
the Loan Documents shall be made to the Agent at the Agent's Office or to such other Person or at such other
address as the Agent may designate by notice to the Borrower.  All payments due to any Lender under the Loan
Documents shall, in the case of payments on account of principal of or interest on the Loans or fees, be made to
the Agent at the Agent's Office and, in the case of all other payments, be made directly to such Lender at its
Domestic Lending Office or at such other address as such Lender may designate by notice to the Borrower.  All
payments due to any Lender under the Loan Documents, whether made to the Agent or directly to such Lender, shall
be made for the account of, in the case of payments in respect of Eurodollar Rate Loans, such Lender's Eurodollar
Lending Office and, in the case of all other payments, such Lender's Domestic Lending Office.  A payment by the
Borrower shall not be deemed to have been made on any day unless such payment has been received by the required
Person, at the required place of payment, in Dollars in funds immediately available to such Person at such place,
no later than 12:00 noon on such day.

         (b)   No Reductions.  All payments due to the Agent or any Lender under the Loan Documents, and all other
terms, conditions, covenants and agreements to be observed and performed by the Borrower thereunder, shall be
made, observed or performed by the Borrower without any reduction or deduction whatsoever, including any
reduction or deduction for any set-off, recoupment, counterclaim (whether sounding in tort, contract or
otherwise) or Tax, except, subject to Section 1.13, for any withholding or deduction for Taxes required to be
withheld or deducted under Applicable Law.

         (c)   Extension of Payment Dates.  Whenever any payment to the Agent or any Lender under the Loan Documents
would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, or, in the case of
payments of the principal of any Loans, a Eurodollar Business Day, such payment shall instead be due on the next
succeeding Business or Eurodollar Business Day, as the case may be, unless, in the case of a payment of the
principal of any Loans, such extension would cause payment to be due in the next succeeding calendar month, in
which case such due date shall be advanced to the next preceding Eurodollar Business Day.  If the date any
payment under the Loan Documents is due is extended (whether by operation of any Loan Document, Applicable Law or
otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder.

Section 1.12   Distribution of Payments by the Agent.  (a)  The Agent shall promptly distribute to each Lender
its ratable share of each payment received by the Agent under the Loan Documents for the account of the Lenders
by credit to an account of such Lender at the Agent's Office or by wire transfer to an account of such Lender at
an office of any other commercial bank located in the United States.

         (b)      Unless the Agent shall have received notice from the Borrower prior to the date on
which any payment is due to the Lenders under the Loan Documents that the Borrower will not make such payment in
full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the
Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date a corresponding amount with respect to the amount then due to such Lender.  If and to the extent
the Borrower shall not have so made such payment in full to the Agent and the Agent shall have so distributed to
any Lender a corresponding amount, such Lender shall, on demand, repay to the Agent the amount so distributed
together with interest thereon, for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent, at the Federal Funds Rate until (and including) the third
Business Day after demand is made and thereafter the applicable rate of interest provided in Section 1.03(a).

Section 1.13   Taxes.  (a)  (i)  Taxes Payable by the Borrower.  If under Applicable Law any Tax is required
to be withheld or deducted by the Borrower from, or is otherwise payable by the Borrower in connection with, any
payment to the Agent or any Lender under the Loan Documents, the Borrower (A) shall (1), if so required, withhold
or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing
authority in accordance with Applicable Law and (2) indemnify the Agent and such Lender in accordance with the
provisions of Section 9.02(c) against its failure so to do and (B) shall, subject to Section 1.13(a)(iii), pay to
the Agent or such Lender, as applicable, such additional amounts as may be necessary so that the net amount
received by the Agent or such Lender with respect to such payment, after withholding or deducting all Taxes
required to be withheld or deducted by the Borrower, is equal to the full amount payable under the Loan
Documents.  If any Tax is withheld or deducted by the Borrower from, or is otherwise payable by the Borrower in
connection with, any payment payable to the Agent or any Lender under the Loan Documents, the Borrower shall, as
soon as possible after the date of such payment, furnish to the Agent or such Lender, as applicable, the original
or a certified copy of a receipt for such Tax from the applicable taxing authority.  Except for any payment then
exempt from withholding pursuant to (aa) a tax treaty, (bb) an exemption from withholding resulting from a
Lender's status as a United States Person or (cc) an exemption from withholding resulting from a Lender being
considered to have received "effectively connected" income pursuant to Code section 882, if any payment due to
the Agent or any Lender under the Loan Documents is or is expected to be made without withholding or deducting
therefrom, or otherwise paying in connection therewith, any Tax payable by the Borrower to any taxing authority,
the Borrower shall, within 30 days after any request from the Agent or such Lender, as applicable, furnish to the
Agent or such Lender a certificate from such taxing authority, or an opinion of counsel acceptable to the Agent
or such Lender, in either case stating that no Tax payable to such taxing authority was or is, as the case may
be, required to be withheld or deducted from, or otherwise paid by the Borrower in connection with, such payment.

                  (ii)  Taxes Payable by the Agent or any Lender.  Subject to the limitations contained in
         Section 1.13(c), the Borrower shall, promptly upon request by the Agent or any Lender for the payment
         thereof, but subject to Section 1.13(a)(iii), pay to the Agent or such Lender, as the case may be, (A)
         all Taxes with respect to any payment due to the Agent or such Lender under the Loan Documents, (B)
         all Taxes payable by the Agent or such Lender as a result of payments made by the Borrower (whether
         made to a taxing authority or to the Agent or such Lender) pursuant to this Section 1.13(a)(ii) and
         (C) all Taxes upon or with respect to, based upon or measured by any of the following the purchase,
         sale, import, export, registration, ownership, delivery, non-delivery, leasing, sub-leasing, operation,
         repair, modification, overhaul, testing, possession, redelivery, repossession, control, use, storage,
         fueling, manning or supplying of any Aircraft, any Engine or any Part.

                  (iii)    Forms Regarding U.S. Withholding Taxes.  There shall be submitted to the Borrower
         and the Agent, (A) on or before the first date that interest or fees are payable or creditable to
         such Lender under the Loan Documents, (1) if at the time the same are applicable, (aa) by each Lender
         that is not a United States Person, two duly completed and signed copies of Internal Revenue Service
         Form W-8BEN or W-8ECI, in either case entitling such Lender to a complete exemption from withholding
         of any United States federal income taxes on all amounts to be received by such Lender under the Loan
         Documents, or (bb) by each Lender that is a Non-US Lender, (x) a duly completed Internal Revenue Service
         Form W-8BEN and (y) a certification in the form of Schedule 1.13(a)(iii) that such Lender is a
         Non-US Lender or (2) if at the time any of the foregoing are inapplicable, duly completed and signed
         copies of such form (including Internal Revenue Service Form W-81MY, if applicable), if any, as entitles
         such Lender to exemption from withholding of United States federal income taxes to the maximum extent
         to which such Lender is then entitled under Applicable Law, and (B) from time to time thereafter, prior
         to the expiration or obsolescence of any previously delivered form or upon any previously delivered form
         becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any,
         as entitles such Lender to exemption from withholding of United States federal income taxes to the maximum
         extent to which such Lender is then entitled under Applicable Law.  Each Lender shall promptly notify the
         Borrower and the Agent if (A) it is required to withdraw or cancel any form or certificate previously
         submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B)
         payments to it are or will be subject to withholding of United States federal income taxes to a greater
         extent than the extent to which payments to it were previously subject.  Upon the request of the Borrower
         or the Agent, each Lender that is a United States Person shall from time to time submit to the Borrower
         and the Agent a certificate to the effect that it is such a United States Person and a duly completed
         Internal Revenue Service Form W-9.

         (b)      Credits and Deductions.  If the Agent or any Lender is, in its reasonable business judgment,
         able to apply for any credit, deduction or other reduction in Taxes by reason of any payment made by the
         Borrower under Section 1.13(a)(i), the Agent or such Lender, as the case may be, shall use reasonable
         efforts to obtain such credit, deduction or other reduction and, upon receipt thereof, will pay to the
         Borrower such amount, not exceeding the increased amount paid by the Borrower, as is equal to the net
         after-tax value to the Agent or such Lender, in its reasonable business judgment, of such part of such
         credit, deduction or other reduction as it considers to be allocable to such payment by the Borrower,
         having regard to all of the Agent's or such Lender's dealings giving rise to similar credits, deductions
         or other reductions in relation to the same tax period and to the cost of obtaining the same; provided,
         however, that (i) the Agent or such Lender, as the case may be, shall not be obligated to disclose to
         the Borrower any information regarding its tax affairs or computations (except that the Agent or any
         Lender, as the case may be, shall provide the Borrower with notice of any credits, deductions or other
         reductions in Taxes by reason of any payment made by the Borrower under Section 1.13(a)(i)) and (ii)
         nothing in this Section 1.13(b) shall interfere with the right of the Agent or such Lender to arrange
         its tax affairs as it deems appropriate.

         (c)      Exclusions.  The payment described in Section 1.13(a) shall not apply to and Borrower shall
not make any payments to the Agent or Lender regarding:

                  (i)      Income Taxes;

                  (ii)     U.S. Federal withholding Taxes except to the extent such Taxes are required to be
         withheld as a result of (aa) in the case of a Person that is a Lender on the Agreement Date, a
         Regulatory Change Enacted after the Agreement Date and (bb) in the case of a Person that becomes a
         Lender after the Agreement Date, a Regulatory Change Enacted after date such Person becomes a Lender;

                 (iii)    Taxes imposed on the Agent or any Lender resulting from such Person not claiming
         any applicable exemption or rate reduction under any applicable law or treaty or failing to comply
         with certification, information, documentation, reporting or similar requirements concerning the
         nationality, residence, identity or connection with the jurisdiction imposing such Taxes if such
         Person was aware of such exemptions, rate reductions or the requirement to comply and, with respect
         to compliance, such Person's compliance is required by applicable law or treaty as a precondition
         to relief or exemption from such Taxes (however, such compliance shall not be required to the extent
         that it results in the Agent or any Lender becoming subject to any additional Taxes unless the Borrower
         agrees to pay such additional Taxes);

                  (iv)     Taxes imposed upon the Agent or any Lender resulting from the gross negligence or
         willful misconduct of such Person;

                  (v)      Taxes imposed upon the Agent or any Lender as a result of any transfer, assignment
         or sale by such Person of the Note, the Mortgage, Loan Documents or any partial interest therein
         (except in the case of any transfer arising as a result of any action of, or request by, the Borrower
         or in the case of an Event of Default); and

                  (vi)     Taxes imposed upon the Agent or any Lender with respect to any period after (aa) the
         termination of the Mortgage, in accordance with the terms thereof and (bb) payment of all amounts payable
         under the Loan Documents having been made (except to the extent that such Taxes relate to actions or
         events occurring prior to the periods described in clauses (aa) and (bb) hereof).

Section 1.14   Pro Rata Treatment.  Except to the extent otherwise provided herein, (a) Loans of any Type to
be made on any day shall be made by the Lenders pro rata in accordance with their respective Commitments (b)
Eurodollar Rate Loans of any Type shall be converted into Fixed Rate Loans of any Type pro rata in accordance
with the respective amounts of Term Loans made by the Lenders, (c) each reduction in the Commitments shall be
made pro rata in accordance with the respective amounts thereof and (d) each payment of the principal of or
interest on the Loans shall be made for the account of the Lenders pro rata in accordance with the respective
amounts thereof then due and payable.

                                               ARTICLE II

                                           CONDITIONS TO LOANS

Section 2.01   Conditions to Agreement Date.  The obligation of each Lender to enter into this Agreement and
commit to make Term Loans hereunder is subject to the determination of each Lender, in its sole and absolute
discretion, that each of the following conditions has been fulfilled:

         (a)      the Agent shall have received each of the following, in form and substance and, in the
case of the materials referred to in clauses (i) and (ii), certified in a manner satisfactory to the Agent and
the Lenders:

                  (i)    a certificate of the Secretary or an Assistant Secretary of the Borrower, dated
         the Agreement Date, substantially in the form of Schedule 2.01(a)(i), to which shall be attached copies
         of (i) the resolutions, duly authorizing the execution, delivery and performance by the Borrower of this
         Agreement, the Mortgage and each other document required to be executed and delivered by the Borrower on
         each Delivery Date in accordance with the provisions hereof; (ii) articles of incorporation referred to
         in such certificate; and (iii) by-laws referred to in such certificate;

                  (ii)   a good standing certificate with respect to the Borrower, issued as of a recent
         date by the Secretary of State or other appropriate official of such Person's jurisdiction of
         incorporation;

                  (iii)  a certificate of the president or chief financial officer of the Borrower, dated
         the Agreement Date, in the form of Schedule 5.01(c);

                 (iv)   a duly executed copy of this Agreement;

                  (v)    a duly executed copy of the Mortgage;

                  (vi)   such additional materials as any Lender may have requested pursuant to Section
         5.01(e); and

         (b)      all fees payable on or prior to the requested date of such Loan pursuant to Section 1.08,
and all amounts payable pursuant to Section 9.02 for which invoices have been delivered to the Borrower on
or prior to such date, shall have been paid in full.

Section 2.02   Conditions to Each Loan.  The obligation of each Lender to make each Term Loan requested to be
made by it, including its initial Term Loan, is subject to the determination of such Lender, in its sole and
absolute discretion, that each of the following conditions has been fulfilled:

         (a)      the Agent shall have received an officer's certificate, dated the Delivery Date, satisfactory
to the Agent and the Lenders relating to the matters referred to in clauses (i), and (ii) of Section 2.01(a);

         (b)      the Agent shall have received each of the following:

                  (i)    a duly executed copy of the Secured Credit Agreement Supplement;

                  (ii)   a duly executed Note for each Lender in respect of the Term Loan to be made by
         such Lender in connection with the Aircraft;

                  (iii)  a duly executed copy of the Mortgage, the Mortgage Supplement and each previously
         delivered Mortgage Supplement, if any;

                  (iv)   a duly executed copy of the Consent and Agreement and the Engine Consent and
         Agreement;

                  (v)    a copy of the Warranty Bill of Sale and the FAA Bill of Sale;

                  (vi)   evidence that the Mortgage, each Mortgage Supplement and the FAA Bill of Sale
         have been duly filed with the FAA;

                  (vii)  a certified copy of the Clauses 12 and 13 of the Purchase Agreement and a
         certified copy of Section 2 of Exhibit B to the Engine Agreement;

                  (viii) either (A) such UCC-1 financing statements and other documents as the Agent may
         request, the filing or recordation of which is necessary or appropriate in the Agent's determination to
         create or perfect a security interest in the Collateral under Applicable Law, or (B) evidence of the
         filing or recordation of the same in such offices as the Agent shall have specified;

                  (ix)   evidence that the Aircraft has been duly certified by the FAA as to type and
         airworthiness and has a current, valid U.S. standard certificate of airworthiness issued by the FAA or
         an export certificate of airworthiness for the United States issued by the German Federal Civil Aviation
         Administration;

                  (x)    evidence that the application for registration of the Aircraft in the name of the
         Borrower has been duly made with the FAA;

                  (xi)   an opinion of Daugherty, Fowler, Peregrin & Haught, special counsel in Oklahoma
         City, Oklahoma, dated the Delivery Date, in form and substance satisfactory to the Agent and the Lenders;

                  (xii)  an opinion of counsel for the Borrower, dated the Delivery Date, in form and
         substance satisfactory to the Agent and the Lenders;

                  (xiii) an opinion of in-house counsel of the Borrower, dated the Delivery Date, in form
         and substance satisfactory to the Agent and the Lenders;

                  (xiv)  an opinion of in-house counsel of AVSA, dated the Delivery Date, in form and
         substance satisfactory to the Agent and the Lenders;

                  (xv)   an opinion of counsel for the Agent, dated the Delivery Date, in form and
         substance satisfactory to the Agent and the Lenders;

                  (xvi)  an insurance broker's report from a Qualified Insurance Broker, and certificates
         of insurance as to the due compliance with the terms of Article V of the Mortgage relating to insurance
         with respect to the Aircraft;

                  (xvii) evidence that all Buyer Furnished Equipment other than Inflight Equipment has
         been purchased and installed in the Aircraft;

                  (xviii)such additional materials as any Lender may have requested pursuant to Section
         5.01(e);

         (c)      the Agent shall be satisfied that any required license, and all customs formalities,
relating to the import of the Aircraft in the United States of America have been or will be obtained or complied
with;

         (d)      the Agent shall be satisfied that the Borrower has received good and marketable title to the
Aircraft, free and clear of all Liens (other than the Lien of the Mortgage) and that the Mortgage creates
a valid, perfected, first priority security interest and Lien in and on the Aircraft being delivered on the
Delivery Date therefor and each previously delivered Aircraft and Leveraged Lease Aircraft, if any;

         (e)      all fees payable on or prior to the requested date of such Loan pursuant to Section 1.08,
and all amounts payable pursuant to Section 9.02 for which invoices have been delivered to the Borrower on
or prior to such date, shall have been paid in full or arrangements satisfactory to the Agent shall have been
made to cause them to be paid in full concurrently with the disbursement of the proceeds of the Loans to be made
on such date;

         (f)      the Agent shall have received a notice of borrowing with respect to such Loan complying
with the requirements of Section 1.02;

         (g)      each Loan Document Representation and Warranty shall be true and correct at and as of the
time such Loan is to be made, both with and without giving effect to such Loan or from the application of the
proceeds thereof;

         (h)      no Default shall have occurred and be continuing at the time such Loan is to be made or
would result from the making of such Loan or from the application of the proceeds thereof;

         (i)      no Event of Loss (or event which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine has occurred; and

         (j)      no change in the condition of the financial markets shall have occurred such that funds
are not available to any Lender and the Term Loan to be made by any Lender will not contravene any Applicable
Law applicable to such Lender.

                                               ARTICLE III

                                CERTAIN REPRESENTATIONS AND WARRANTIES

         In order to induce each Lender to enter into this Agreement and to make each Loan requested to be made
by it, the Borrower represents and warrants as follows:

Section 3.01   Organization; Power; Qualification.  The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of incorporation, has the corporate power and
authority to own its properties and to carry on its businesses as now being and hereafter proposed to be
conducted and is duly qualified and in good standing as a foreign corporation, and is authorized to do business,
in all jurisdictions in which the character of its properties or the nature of its businesses requires such
qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the
aggregate, has not had and will not have a Materially Adverse Effect on (a) the Borrower or (b) the Collateral;
and is a "citizen of the United States" (as defined in Section 40102 of the Federal Aviation Act) holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant to the Federal Aviation Act for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of cargo.

Section 3.02   Place of Business; Subsidiaries.  The Borrower's chief executive office and principal place of
business is at the address set forth in Section 9.01(a)(ii) hereof.

Section 3.03   Authorization; Enforceability; Required Consents; Absence of Conflicts.
The Borrower has the power, and has taken all necessary action (including any necessary stockholder action) to
authorize it, to execute, deliver and perform in accordance with their respective terms the Loan Documents to
which it is a party and to borrow hereunder in the unused amount of the Commitments.  This Agreement has been,
and each of the other Loan Documents to which the Borrower is a party when delivered to the Agent will have been,
duly executed and delivered by the Borrower and is, or when so delivered will be, a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.  The execution, delivery and performance in accordance with their
respective terms by the Borrower of the Loan Documents to which it is a party, and each borrowing hereunder,
whether or not in the amount of the unused Commitments, do not and (absent any change in any Applicable Law or
applicable Contract) will not (a) require any Governmental Approval or any other consent or approval, including
any consent or approval of the stockholders of the Borrower, to have been obtained or any Governmental
Registration to have been made, other than Governmental Approvals and other consents and approvals and
Governmental Registrations that have been obtained or made, as the case may be, are final and not subject to
review on appeal or to collateral attack, and are in full force and effect on the Agreement Date or (b) violate,
conflict with, result in a breach of, constitute a default under, or result in or require the creation of any
Lien (other than the Security Interest) upon any assets of the Borrower under, (i) any Contract to which the
Borrower is a party or by which the Borrower or any of its properties may be bound or (ii) any Applicable Law.

Section 3.04   Taxes.  The Borrower has (a) filed all Tax returns required to have been filed by it under
Applicable Law, (b) paid all Taxes that are due and payable by it or have been assessed against it except for
Taxes the failure to have paid which does not contravene Section 4.04 and (c) to the extent required by generally
accepted accounting principles, reserved against all Taxes that are payable by it but are not yet due or that are
due and payable by it or have been assessed against it but have not yet been paid.

Section 3.05   Litigation.  There are not, in any court or before any arbitrator of any kind or before or by
any governmental or non-governmental body, any actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened (nor, to the knowledge of the Borrower, is there any basis therefor) against or in any other
way relating to or affecting (a) the Borrower or any of its businesses or properties, (b) any Loan Document to
which the Borrower is a party or (c) the Collateral, except, in each case, actions, suits or proceedings that, if
adversely determined, would not, singly or in the aggregate, have a Materially Adverse Effect on (x) the
Borrower, (y) any Loan Document or (z) the Collateral.

Section 3.06   Burdensome Provisions.  The Borrower is not a party to or bound by any Contract or Applicable
Law, compliance with which would reasonably be expected to have a Materially Adverse Effect on (a) the Borrower,
(b) any Loan Document to which the Borrower is a party or (c) the Collateral.

Section 3.07   No Adverse Change or Event.  Except as disclosed in the financial statements for the quarterly
period ending on June 30, 2002, since March 31, 2002, no change in the business, financial condition or
operations of the Borrower has occurred, and no event has occurred or failed to occur, that has had or could
reasonably be expected to have, either alone or in conjunction with all other such changes, events and failures,
a Materially Adverse Effect on (a) the Borrower, (b) any Loan Document to which the Borrower is a party or (c)
the Collateral.

Section 3.08   Additional Adverse Facts.  Except for facts and circumstances disclosed in the notes to the
financial statements referred to in Section 5.02(a), no fact or circumstance is known to the Borrower, as of the
Agreement Date or the Delivery Date, as applicable, that, either alone or in conjunction with all other such
facts and circumstances, has had or could reasonably expected to have (so far as the Borrower can foresee) a
Materially Adverse Effect on (a) the Borrower, (b) any Loan Document to which the Borrower is a party or (c) the
Collateral.

Section 3.09   Investment Company Act.  The Borrower is not an "investment company" or a Person "controlled"
by an "investment company", within the meaning of the Investment Company Act of 1940.

Section 3.10   Title to Aircraft.  The Borrower has or will have, upon disbursement by the Lenders to the
Borrower of the proceeds of the Loan, good and marketable title to the Aircraft financed by such Loan, free and
clear of Liens, charges and encumbrances except for the Lien of the Mortgage, and on the Delivery Date an
application for registration of the Aircraft in the name of the Borrower as owner will have been duly filed with
the FAA.

Section 3.11   Mortgage Security Interest.  Except for (A) the registration of the Aircraft financed by such
Loan pursuant to the Federal Aviation Act, (B) the filing for recording pursuant to said Act of the Mortgage and
the Mortgage Supplement and FAA Bill of Sale relating to such Aircraft, and (C) the filing of financing
statements (and continuation statements at periodic intervals) with respect to the security and other interests
created by such documents under the Uniform Commercial Code with the Secretary of State in the State of Colorado,
no further action, including any filing or recording of any document (including any financing statement in
respect thereof under Article 9 of the Uniform Commercial Code of any applicable jurisdiction), is necessary or
advisable in order to establish and perfect the Mortgagee's first priority security interest in and Lien on such
Aircraft and each previously delivered Aircraft, if any, as against the Borrower or any third parties in any
applicable jurisdictions in the United States of America.

Section 3.12   Pari Passu Status.  The Loans and other obligations of the Borrower to the Lenders under the
Loan Documents will at all times rank at least pari passu in priority of payment with all of the Borrower's other
unsecured Indebtedness.

Section 3.13   Securities Act of 1933.  Neither the Borrower nor any authorized agent of the Borrower has
offered, and neither the Borrower nor any authorized Person acting on its behalf will hereafter offer, any
interest that may be deemed a security in respect of any Aircraft or Note for sale to, or solicit any offers to
buy any thereof from, or otherwise approach or negotiate in respect thereof with, any Person or Person
whomsoever, so as thereby to result in the offer and sale of such interests being in violation of the provisions
of Section 5 of the Securities Act of 1933, as amended.

Section 3.14   Purchase Agreement.  The Borrower is not in default in the performance of any term or condition
of the Purchase Agreement which materially adversely impairs the transactions contemplated by the Loan Documents.

Section 3.15   Event of Default; Event of Loss.  There has not occurred any event which constitutes a Default
or an Event of Default which is presently continuing and there has not occurred any event which constitutes or
would, with the passage of time or the giving of notice, or both, constitute an Event of Loss.

Section 3.16   ERISA.  The Borrower has not engaged in any transaction in connection with which the Borrower
could be subjected to either a civil penalty assessed pursuant to Section 5.02 (i) of ERISA, or a tax imposed by
Section 4975 of the Code.  Neither the execution and delivery by the Borrower of any Loan Documents to which it
is or is to become a party nor any of the transactions contemplated by the Loan Documents will involve any
prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.

                                               ARTICLE IV

                                            CERTAIN COVENANTS

         From the Agreement Date and until the Repayment Date,

         A.  The Borrower shall:

Section 4.01   Preservation of Existence.  Preserve and maintain its corporate existence, except that this
Section 4.01 shall not apply to termination of its corporate existence pursuant to a merger or consolidation to
which Section 4.13 does not apply.

Section 4.02   Payment of Taxes and Liabilities.  Pay or discharge before they become delinquent all Taxes and
all Liabilities that are or might become Liens on any of its properties, except that this Section 4.02 shall not
apply to Taxes and Liabilities that are being contested in good faith by appropriate proceedings and for which
adequate reserves, in an amount not less than the amount required by generally accepted accounting principles,
have been provided.

Section 4.03   Compliance With Applicable Laws and Contracts.  Comply with all Applicable Laws and the terms
of all Contracts to which it is a party or by which it or any of its properties may be bound, except that this
Section 4.03 shall not apply to any non-compliance that (a) has been excused or waived under the relative
Applicable Law or Contract or (b) either alone or when aggregated with all other such non-compliances, would not
have a Materially Adverse Effect on the Borrower and its Consolidated Subsidiaries taken as a whole.

Section 4.04   Preservation of Loan Document Enforceability and Security Interest.  Take all actions
(including obtaining or making, as the case may be, and maintaining in full force and effect all consents and
Governmental Approvals and Governmental Registrations) that are required so that its obligations under the Loan
Documents will at all times be legal, valid and binding and enforceable in accordance with their respective
terms, and in the event any Person  not a party to this Agreement institutes any action or proceeding seeking to
establish, that (i) any provision of the Loan Documents is invalid, not binding or unenforceable or (ii) the
Security Interest is not a valid and perfected first priority security interest in the Collateral subject only to
Permitted Liens, then the Borrower shall take such commercially reasonable actions as may be necessary to defend
or terminate such action or proceeding instituted by such Person.

Section 4.05   Use of Proceeds.  Use the proceeds of the Loans in connection with the purchase of the Aircraft
and Buyer Furnished Equipment.  None of the proceeds of any of the Loans shall be used to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning
of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for
the purpose of purchasing or carrying any margin stock.

Section 4.06   Air Carrier.  So long as any amount remains outstanding hereunder or under the other Loan
Documents it will be a U.S. Air Carrier.

Section 4.07   Recording.  Cause each FAA Bill of Sale, the Mortgage, and all supplements and amendments to
the Mortgage to be promptly filed and recorded, or filed for recording, to the extent permitted under the Federal
Aviation Act, or required under any other Applicable Law.  Upon the execution and delivery of each FAA Bill of
Sale, the Mortgage and each Mortgage Supplement, such documents shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the FAA Bill of Sale, second, the FAA
registration application, and third, the Mortgage and the Mortgage Supplement.  The Borrower agrees to furnish
the Agent with copies of the foregoing documents with recording data as promptly as practicable following the
issuance of same by the FAA.

Section 4.08   Security Interest.  Be responsible for, and bear all out-of-pocket expenses of the Agent for,
the recording and re-recording, registering and re-registering and filing and re-filing of the Mortgage, all
amendments to the Mortgage, each Mortgage Supplement, each financing statement, each continuation statement and
such other instruments as may be necessary to maintain that, so long as the Mortgage remains in effect, the
Mortgage remains a first priority and perfected Lien on the Mortgaged Property.  The Borrower will furnish to the
Agent evidence reasonably satisfactory to the Agent of every such recording, registering and filing which is not
filed, recorded or registered by the Agent. The Borrower appoints the Agent as its irrevocable attorney-in-fact
(said agency coupled with an interest) to take all such action and execute all such documents in the Agent's own
name or in the name of the Borrower in order to carry out the intent of this Section 4.08. The Agent shall notify
the Borrower prior to taking any action under this Section 4.08.

Section 4.09   Further Assurances.  Cause to be done, executed, acknowledged and delivered all and every such
further acts, conveyances and assurances as the Agent shall reasonably require for accomplishing the purposes of
this Agreement and the other Loan Documents; provided that any instrument or other document so executed by the
Borrower will not expand any obligations or limit any rights of the Borrower in respect of the transactions
contemplated by any of the Loan Documents.  The Borrower shall cause each Aircraft to be duly registered, and at
all times thereafter to remain duly registered, in the name of the Borrower, except as otherwise required or
permitted hereunder or under the Mortgage.

         B.  The Borrower shall not:

Section 4.10   Transfer of Aircraft.  Voluntarily convey or transfer any interest in the Aircraft, any of the
other Collateral or its rights under the Loan Documents or any part thereof to any Person except as expressly
permitted by the Loan Documents.

Section 4.11   Place of Business, Etc.  Change its chief executive office and principal place of business or
its state of incorporation without (i) giving the Agent at least thirty (30) days' prior written notice thereof
and (ii) filing one or more Uniform Commercial Code financing statements, in form and substance satisfactory to
the Agent, in the jurisdiction where the Borrower is incorporated.  The Borrower will not change its name or do
business under any other name.

Section 4.12   Liens.  Permit to exist, at any time, any Lien upon the Collateral or any part thereof, or upon
any proceeds therefrom, except that this Section 4.12 shall not apply to Permitted Liens.

Section 4.13   Merger or Consolidation.  Not consolidate with or merge into any other corporation or convey or
transfer substantially all of its assets as an entirety to any Person unless:

                  (i)  the corporation formed by such consolidation or into which the Borrower is merged
         or the Person that acquires by conveyance or transfer substantially all of the assets of the Borrower as
         an entirety shall be a "citizen of the United States" as defined in Section 40102 of the Federal
         Aviation Act and shall be a U.S. Air Carrier, and the Agent, as Mortgagee on behalf of the Lenders, will
         be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code;

                  (ii)  (A) the tangible net worth (as determined in accordance with  Generally Accepted
         Accounting Principles) of the corporation formed by such consolidation or into which the Borrower is
         merged or the Person that acquires by conveyance or transfer substantially all of the assets of the
         Borrower as an entirety, immediately after giving effect to such transaction, is not less than the
         tangible net worth (as determined in accordance with  Generally Accepted Accounting Principles) of the
         Borrower immediately prior to such transaction, and (B) the credit rating of the corporation formed by
         such consolidation or into which the Borrower is merged or the Person that acquires by conveyance or
         transfer substantially all of the assets of the Borrower as an entirety, immediately after giving effect
         to such transaction, is no worse than the credit rating (as determined by S&P, Moody's or Fitch Ratings,
         as applicable) of the Borrower immediately prior to such transaction.

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

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

                  (v)  the Borrower shall have delivered to the Agent a certificate signed by the
         President or any Vice President and by the Secretary or an Assistant Secretary of the Borrower, and an
         opinion of counsel (which may be the Borrower's General Counsel) reasonably satisfactory to the Agent,
         each stating that such consolidation, merger, conveyance or transfer and the assumption agreement
         mentioned in clause (ii) above comply with this Section 4.13 and that all conditions precedent herein
         provided for relating to such transaction have been complied with; and

                  (vi)  the corporation formed by such consolidation or into which the Borrower is
         merged or the Person that acquires by conveyance or transfer substantially all of the assets of the
         Borrower shall make such filings and recordings, including any filing or recording with the FAA pursuant
         to the Federal Aviation Act, as shall be necessary or desirable to evidence such consolidation, merger,
         conveyance or transfer with or to such successor.

         Upon any consolidation or merger, or any conveyance or transfer of substantially all of the assets
of the Borrower as an entirety in accordance with this Section 4.13, the successor corporation or Person
formed by such consolidation or into which the Borrower is merged or to which such conveyance or transfer
is made shall succeed to, and be substituted for, and may exercise every right and power of, and shall have
every obligation to the same extent as, the Borrower under this Agreement with the same effect as if such
successor corporation or Person had been named as the Borrower herein.  No such conveyance or transfer of
substantially all of the assets of the Borrower as an entirety shall have the effect of releasing the Borrower
or any successor corporation or Person that shall theretofore have become such in the manner prescribed in
this Section 4.13 from its liability in respect of any Loan Document to which it is a party.  Nothing contained
herein shall permit any lease, sublease or other arrangement for the use, operation or possession of the
Aircraft except in compliance with the applicable provisions of the Mortgage.

                                               ARTICLE V

                                              INFORMATION

Section 5.01   Information to Be Furnished.  From the Agreement Date and until the Repayment Date, the
Borrower shall furnish to each Lender:

         (a)   Quarterly Financial Statements.  As soon as available and in any event within 60 days after
the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower,
commencing with the quarterly period ended September 30, 2002, consolidated and consolidating balance sheets
of the Borrower and the Consolidated Subsidiaries as at the end of such quarterly period and the related
consolidated and consolidating statements of income, retained earnings and cash flows of the Borrower and the
Consolidated Subsidiaries for such quarterly period and for the elapsed portion of the fiscal year ended with
the last day of such quarterly period, setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year.

         (b)   Year-End Financial Statements; Accountants' Certificate.  As soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year
ending March 31, 2003:

                  (i)    consolidated and consolidating balance sheets of the Borrower and the
         Consolidated Subsidiaries as at the end of such fiscal year and the related consolidated and
         consolidating statements of income, retained earnings and cash flows of the Borrower and the
         Consolidated Subsidiaries for such fiscal year, setting forth in comparative form the figures
         as at the end of and for the previous fiscal year; and

                  (ii)   an audit report of KPMG LLP, or other independent certified public accountants of
         recognized standing satisfactory to the Required Lenders, on such of the financial statements referred
         to in clause (i) as are consolidated financial statements, which report shall be in scope and substance
         satisfactory to the Required Lenders.

         (c)   Officer's Certificate as to Financial Statements and Defaults.  At the time that financial
statements are furnished pursuant to Section 5.01(a) or (b), a certificate of the president or chief financial
officer of the Borrower in the form of Schedule 5.01(c).

         (d)   Reports; Filings.  As soon as practicable, copies of (i) all such financial statements
and reports as the Borrower shall send to its stockholders and (ii) all registration statements and all regular
or periodic reports that the Borrower shall file, or may be required to file, with the Securities and Exchange
Commission or any successor commission.

         (e)   Requested Information.  From time to time and promptly upon reasonable request of any
Lender, such Information regarding (i) the Loan Documents to which the Borrower is a party, the Loans or the
business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower,
and/or (ii) the Aircraft and the Records.

         (f)   Notice of Defaults and Events of Default.  Promptly after the occurrence thereof and actual
knowledge thereof by a Responsible Officer of the Borrower, notice of any Default or Event of Default.

Section 5.02   Accuracy of Financial Statements and Information.  The Borrower represents and warrants that
(a) the statements of financial position of the Borrower as of March 31, 2002 and the date of the most recently
concluded fiscal quarter of the Borrower for which a statement of financial position has been provided and the
related statements of earnings and cash flow of the Borrower in all material respects for the year and fiscal
quarter, respectively, then ended, copies of which have been furnished to the Lenders, are complete and correct
and fairly present the financial condition of the Borrower at such date and the results of operations and cash
flow of the Borrower for the period ended on such dates, in accordance with generally accepted accounting
principles consistently applied, and subject, in the case of the statements pertaining to the Borrower's most
recently concluded fiscal quarter, to normal year-end adjustments, and, except as disclosed in the financial
statements for the quarterly period ending on June 30, 2002, since March 31, 2002, there has been no material and
adverse change in the business, financial condition or operations of the Borrower and (b) none of the reports,
financial statements, certificates or other Information furnished by or on behalf of the Borrower to the Agent or
the Lenders in connection with the negotiation of the Loan Documents or delivered hereunder (as modified or
supplemented by other Information so furnished) contains any material misstatement of fact or omits to state any
material necessary to make the statements therein, in the light of the circumstances under which they were made,
not misleading.

                                               ARTICLE VI

                                                DEFAULT

Section 6.01   Remedies upon Event of Default.  During the continuance of any Event of Default (other than an
Event of Default specified in Section 6.01(g) or (h) of the Mortgage) and in every such event, the Agent, upon
notice to the Borrower, may, in addition to the exercise of any of its rights under the Mortgage with respect to
all or any part of the Mortgaged Property, do either or both of the following:  (a) declare, in whole or, from
time to time, in part, the principal of and interest on the Loans and the Notes and all other amounts owing under
the Loan Documents to be, and the Loans and the Notes and all such other amounts shall thereupon and to that
extent become, due and payable and (b) terminate, in whole or, from time to time, in part, the Commitments.  Upon
the occurrence of an Event of Default specified in Section 6.01(g) or (h) of the Mortgage, automatically and
without any notice to the Borrower, (a) the principal of and interest on the Loans and the Notes and all other
amounts owing under the Loan Documents shall be due and payable and (b) the Commitments shall terminate.
Presentment, demand, protest or notice of any kind (other than the notice provided for in the first sentence of
this Section 6.01) are hereby expressly waived.

                                               ARTICLE VII

                                   ADDITIONAL CREDIT FACILITY PROVISIONS

Section 7.01   Illegality Event.  If any Regulatory Change shall, in the reasonable opinion of any Lender,
make it unlawful for such Lender to fund or maintain its funding with respect to any of the Term Loans or to give
effect to all or any part of its rights or obligations under the Loan Documents (each such event being
hereinafter referred to as an "Illegality Event"), such Lender shall promptly notify the Borrower and the Agent
in writing of the event by reason of which it is claiming that an Illegality Event has occurred.

Section 7.02   Regulatory Changes.  If in the determination of any Lender (a) any Regulatory Change Enacted
after the Agreement Date shall directly or indirectly (i) reduce the amount of any sum received or receivable by
such Lender with respect to any Term Loan or the return to be earned by such Lender on any Term Loan, (ii) impose
a cost on such Lender or any Affiliate of such Lender that is attributable to the making, funding or maintaining
of, or such Lender's commitment to make, any Term Loan, (iii) require such Lender or any Affiliate of such Lender
to make any payment on or calculated by reference to the gross amount of any amount received by such Lender under
any Loan Document or (iv) reduce, or have the effect of reducing, the rate of return on any capital of such
Lender or any Affiliate of such Lender that such Lender or such Affiliate is required to maintain on account of
any Term Loan or such Lender's commitment to make any Term Loan and (b) such reduction, increased cost or payment
shall not be fully compensated for by an adjustment in the applicable rates of interest payable under the Loan
Documents, then the Borrower shall pay to the Agent for the account of such Lender such additional amounts as
such Lender determines will, together with any adjustment in the applicable rates of interest payable hereunder,
fully compensate for such reduction, increased cost or payment.  Such additional amounts shall be payable, in the
case of those applicable to prior periods, within 15 days after request by such Lender for such payment and, in
the case of those applicable to future periods, on the dates specified, or determined in accordance with a method
specified, by such Lender.

Section 7.03   Capital Requirements.  If in the determination of any Lender any Regulatory Change relating to
a Capital Adequacy Requirement Enacted after the Agreement Date requires, such Lender or any Affiliate of such
Lender, to maintain capital on account of any Term Loan or such Lender's Commitment in a greater amount than such
Lender or such Affiliate would otherwise have maintain on account of such Term Loan or Commitment, then, upon
request by such Lender, the Borrower shall from time to time thereafter pay to such Lender such additional
amounts as such Lender determines will fully compensate for any reduction in the rate of return on the capital
that such Lender or such Affiliate is so required to maintain on account of such Term Loan or Commitment.  Such
additional amounts shall be payable, in the case of those applicable to prior periods, within 15 days after
request by such Lender for such payment and, in the case of those relating to future periods, on the dates
specified, or determined in accordance with a method specified, by such Lender.

Section 7.04   Funding Losses; Swap Losses and Gains.  The Borrower shall pay to the Agent for the account of
each Lender, within 15 days of demand therefor, such amount or amounts as such Lender determines are necessary to
compensate it for all reasonable losses, expenses and liabilities (including, any loss, expense, or liability
incurred by such Lender in connection with the liquidation or reemployment of deposits or funds required by it to
make or carry its Term Loans and/or the unwinding, or adjusting of any terms, of any Swap Transaction) that such
Lender sustains or may sustain:

                  (i) if for any reason (other than a default by such Lender) the making of, or conversion of,
a Term Loan does not occur on a date specified therefor in a notice of borrowing pursuant to Section 1.02(a)
and/or Section 1.03(c)(iii) or a notice of conversion pursuant to Section 1.03(c)(iv) (whether or not rescinded,
cancelled or withdrawn or deemed rescinded, cancelled or withdrawn, pursuant to Section 7.01 or otherwise), or

                  (ii) if any repayment (including, without limitation, payment after acceleration) of any
of its Term Loans constituting Eurodollar Rate Loans (other than Term Loans constituting Eurodollar Rate Loans,
which are subject to the conversion provisions of Section 1.03(c)(iii)) occurs on a date which is not a Pay-
ment Date applicable thereto, or

                  (iii) if any scheduled repayment of any of its Term Loans constituting Fixed Rate Loans or
Term Loans constituting Eurodollar Rate Loans, which are subject to the conversion provisions of Section 1.03
(c)(iii), occurs on a date which is not a Payment Date applicable thereto, or

                  (iv) as a consequence of any repayment after acceleration of any of its Term Loans constituting
Fixed Rate Loans or Term Loans constituting Eurodollar Rate Loans, which are subject to the conversion provisions
of Section 1.03(c)(iii), or

                  (v) if any prepayment of any of its Term Loans constituting Eurodollar Rate Loans (other
than Term Loans constituting Eurodollar Rate Loans, which are subject to the conversion provisions of Section
1.03(c)(iii)), is made on a date which is not a Payment Date applicable thereto, or

                  (vi) if any prepayment of any of its Term Loans constituting Fixed Rate Loans or Term Loans
constituting Eurodollar Rate Loans, which are subject to the conversion provisions of Section 1.03(c)(iii),
is made prior to the final maturity date thereof, or

                  (vii) as a consequence of any default by the Borrower in repaying its Eurodollar Rate Loans
and/or Fixed Rate Loans or any other amounts owing hereunder in respect of its Eurodollar Rate Loans or Fixed
Rate Loans when required by the terms of this Agreement.

         If, as a result of any of the events set forth in this Section 7.04, any Lender receives an amount in
connection with the unwinding, or adjusting of any terms, of any Swap Transaction entered into in connection with
the Loan to be prepaid, such Lender shall, unless a Default or an Event of Default has occurred and is
continuing, pay such amount to the Borrower.  Upon the request of the Borrower, each Lender will provide to the
Borrower a good faith estimate of the Swap Transaction breakage losses or gains, if any, related to the Notes in
connection with the occurrence, or anticipated occurrence, of any event contemplated by the Loan Documents that
might give rise to an obligation to pay such losses or gains.  Upon determination by a Lender of any such losses
or gains payable to or by it, as the case may be, such Lender will provide to the Borrower a certificate,
certifying such losses or gains, which certified amount shall be conclusive absent manifest error.  All breakage
losses or gains relating to any Swap Transaction will be determined in accordance with standard ISDA terms and
will be payable in Dollars.

Section 7.05   Certain Determinations.  In making the determinations contemplated by Sections 1.13(a), 7.02,
7.03 and 7.04, each Lender may make such estimates, assumptions, allocations and the like that such Lender in
good faith determines to be appropriate, and such Lender's selection thereof in accordance with this Section
7.05, and the determinations made by such Lender on the basis thereof, shall be final, binding and conclusive
upon the Borrower, except, in the case of such determinations, for manifest errors in computation or
transmission.  Each Lender shall furnish to the Borrower upon request a certificate outlining in reasonable
detail the computation of any amounts claimed by it under Sections 1.13(a), 7.02, 7.03 and 7.04 and the
assumptions underlying such computations.  The Agent (on behalf of such Lender) shall notify the Borrower of any
event occurring after the date hereof entitling such Lender to compensation under Sections 7.02 or 7.03 as
promptly as practicable, but in any event within 90 days, after a Responsible Officer of such Lender obtains
actual knowledge thereof; provided that (A) such Lender shall only be entitled to compensation under such
Sections for the period from and after the date that is 90 days prior to the date the Agent does give such notice
and (B) such Lender will use commercially reasonable efforts (at the Borrower's expense) to mitigate the amount
of required compensation associated with such event.

         The Borrower shall not be required to make payments to any Lender (A) under Section 7.02 or 7.03, if a
claim hereunder arises solely through circumstances peculiar to such Lender and which do not affect commercial
lenders similar to such Lender in the jurisdiction of organization of such Lender generally or (B) under Section
1.13(a), 7.02 or 7.03, if such Lender is required by the Borrower to sell its Notes to an Eligible Assignee
designated by the Borrower as provided below and fails to do so.

         If  the Agent (on behalf of any Lender) gives notice of a claim against the Borrower under Section
1.13(a), 7.02 or 7.03 hereof, the Borrower shall have the right (i) to require such Lender to sell its Notes to
an Eligible Assignee designated by the Borrower for an amount equal to the outstanding principal amount thereof
plus accrued interest thereon to the date of sale, together with any amounts payable pursuant to Section 7.04 and
all other amounts owing hereunder or under the other Loan Documents, if any, or (ii) to prepay the outstanding
principal amount of Notes held by such Lender, together with accrued interest to the date of such prepayment and
amounts payable pursuant to Section 7.04, if any, and all other amounts owing hereunder or under the other Loan
Documents.

Section 7.06   Change of Lending Office.  If an event occurs with respect to a Lending Office of any Lender
that obligates the Borrower to pay any amount under Section 1.13, makes operable the provisions of Section 7.01 or
entitles such Lender to make a claim under Section 1.13(a), 7.02 or 7.03, such Lender shall, if requested by the
Borrower, use reasonable efforts to designate another Lending Office or Offices the designation of which will
reduce the amount the Borrower is so obligated to pay, eliminate such operability or reduce the amount such
Lender is so entitled to claim, provided that such designation would not, in the business judgment of such
Lender, be disadvantageous to such Lender in any manner or contrary to such Lender's policies.  Each Lender may
at any time and from time to time change any Lending Office and shall give notice of any such change to the Agent
and the Borrower.  Except in the case of a change in Lending Offices made at the request of the Borrower, the
designation of a new Lending Office by any Lender shall not obligate the Borrower to pay any amount to such
Lender under Section 1.13, make operable the provisions of Section 7.01 or entitle such Lender to make a claim
under Section 1.13(a), 7.02 or 7.03 if such obligation, the operability of such clause or such claim results
solely from such designation and not from a Regulatory Change Enacted thereafter.

Section 7.07   Loan Structure.  On the delivery date of any Aircraft or Leveraged Lease Aircraft, this
Agreement may be combined with a subordinated debt or junior debt facility or a leveraged lease facility, subject
to prior approval of the tax equity provider and satisfactory intercreditor and other transaction documents
approved by the Agent and the Lenders and provided the Borrower submits a written request therefor to the Agent
and the Lenders 45 days prior to such delivery date.  The Lenders shall not unreasonably withhold approval for
any recognized junior debt provider or tax equity provider of good credit standing and with recognized experience
in the financing of large commercial aircraft, subject to mutual agreement on intercreditor matters.  In the
event the Borrower elects that one or more of the Airbus model A319-100 aircraft contemplated to be financed
under this Agreement be financed by the Agent and the Lenders on a leveraged lease basis (such aircraft to be
financed by the Agent and the Lenders on a leveraged lease basis, in each case, a "Leveraged Lease Aircraft" and
collectively, the "Leveraged Lease Aircraft"), the Borrower agrees that (i) any event of default or similar
event  under any such leveraged lease facility with respect to such Leveraged Lease Aircraft shall constitute an
Event of Default under the Loan Documents and (ii) to the extent there is a single tax equity provider for two or
more Leveraged Lease Aircraft, it shall use its reasonable best efforts to arrange that such Leveraged Lease
Aircraft are cross-collateralized.

                                               ARTICLE VIII

                                                THE AGENT

Section 8.01   Appointment and Powers.  Each Lender hereby irrevocably appoints and authorizes Credit Agricole
Indosuez, and Credit Agricole Indosuez hereby agrees, to act as the agent for and representative (within the
meaning of Section 9-102(a)(72) of the Uniform Commercial Code) of such Lender under the Loan Documents with such
powers as are delegated to the Agent and the Secured Party by the terms thereof, together with such other powers
as are reasonably incidental thereto.  The Agent's duties shall be purely ministerial and it shall have no duties
or responsibilities except those expressly set forth in the Loan Documents.  The Agent shall not be required
under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of the Loan
Documents or Applicable Law or (b) would expose it to any Liability or expense against which it has not been
indemnified to its satisfaction.  The Agent shall not, by reason of its serving as the Agent, be a trustee or
other fiduciary for any Lender.

Section 8.02   Limitation on Agent's Liability.  Neither the Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them
under or in connection with the Loan Documents, except for its or their own gross negligence, willful misconduct
or knowing violations of law.  The Agent shall not be responsible to any Lender for (a) any recitals, statements,
representations or warranties contained in the Loan Documents or in any certificate or other document referred to
or provided for in, or received by any of the Lenders under, the Loan Documents, (b) the validity, effectiveness
or enforceability of the Loan Documents or any such certificate or other document, (c) the value or sufficiency
of the Collateral or (d) any failure by the Borrower to perform any of their obligations under the Loan
Documents.  The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact so long as the Agent was not grossly negligent in selecting or
directing such agents or attorneys-in-fact.  The Agent shall be entitled to rely upon any certification, notice
or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it
to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent.
Subject to the penultimate sentence of Section 8.01, the Agent agrees to act or refrain from acting in accordance
with instructions received from the Required Lenders as to any matters relating to the Loan Documents and the
Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in
accordance with such instructions signed by the Required Lenders.  The Lenders agree that such instructions of
the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the
Lenders.

Section 8.03   Defaults.  The Agent shall not be deemed to have knowledge of the occurrence of a Default
(other than the non-payment to it of principal of or interest on Loans or fees) unless the Agent has received
notice from a Lender or the Borrower specifying such Default and stating that such notice is a "Notice of
Default".  In the event that the Agent has knowledge of such a non-payment or receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the Lenders.  In the event of any Default,
the Agent shall (a) in the case of a Default that constitutes an Event of Default, take one or more of the
actions referred to in clauses (a) and (b) of the first sentence of Section 6.01 hereof and in Section 6.2 of the
Mortgage if so directed by the Required Lenders and (b) in the case of any Default, take such other action with
respect to such Default as shall be reasonably directed by the Required Lenders.  Unless and until the Agent
shall have received such directions, in the event of any Default, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders.

Section 8.04   Rights as a Lender.  Each Person acting as the Agent that is also a Lender shall, in its
capacity as a Lender, have the same rights and powers under the Loan Documents as any other Lender and may
exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall include
such Person in its individual capacity.  Each Person acting as the Agent (whether or not such Person is a Lender)
and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the Borrower and their Affiliates as if it
were not acting as the Agent, and such Person and its Affiliates may accept fees and other consideration from the
Borrower and their Affiliates for services in connection with the Loan Documents or otherwise without having to
account for the same to the Lenders.

Section 8.05   Indemnification.  The Lenders agree to indemnify the Agent (to the extent not reimbursed by the
Borrower under the Loan Documents), ratably on the basis of the respective principal amounts of the Loans
outstanding made by the Lenders (or, if no Loans are at the time outstanding, ratably on the basis of their
respective Commitments), for any and all Liabilities, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including the costs and expenses that the Borrower is obligated to pay under the Loan
Documents) in any way relating to or arising out of the Loan Documents or any other documents contemplated
thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the
extent they arise from gross negligence, willful misconduct or knowing violations of law by the Agent.

Section 8.06   Non-Reliance on Agent and Other Lenders.  Each Lender agrees that it has made and will continue
to make, independently and without reliance on the Agent or any other Lender, and based on such documents and
information as it deems appropriate, its own credit analysis of the Borrower, its own evaluation of the
Collateral and its own decision to enter into the Loan Documents and to take or refrain from taking any action in
connection therewith.  The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of the Loan Documents or any other document referred to or provided for therein or to
inspect the properties or books of the Borrower or the Collateral.  Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by the Agent under the Loan
Documents, the Agent shall have no obligation to provide any Lender with any information concerning the business,
status or condition of the Borrower, the Loan Documents or the Collateral that may come into the possession of
the Agent or any of its Affiliates.

Section 8.07   Execution and Amendment of Loan Documents on Behalf of the Lenders.  Each Lender hereby
authorizes the Agent to execute and deliver, in the name of and on behalf of such Lender, (a) the Mortgage, each
Mortgage Supplement, each Consent and Agreement and each Engine Consent and Agreement, (b) all UCC financing and
continuation statements and other documents the filing or recordation of which are, in the determination of the
Agent, necessary or appropriate to create, perfect or maintain the existence or perfected status of the Security
Interest and (c) any other Loan Document requiring execution by or on behalf of such Lender.  The Agent shall
consent to any amendment of any term, covenant, agreement or condition of the Mortgage, any Mortgage Supplement,
any Consent and Agreement or any Engine Consent and Agreement, or to any waiver of any right thereunder, if, but
only if, the Agent is directed to do so in writing by the Required Lenders; provided, however, that (i) the Agent
shall not be required to consent to any such amendment or waiver that affects its rights or duties and (ii) the
Agent shall not, unless directed to do so in writing by each Lender, (A) consent to any assignment by the
Borrower of any of its rights or obligations under any such agreement or (B) release any Collateral from the
Security Interest, except as required or contemplated by the Loan Documents.

Section 8.08   Resignation of the Agent.  The Agent may at any time give notice of its resignation to the
Lenders and the Borrower, provided, however, that the Agent shall be required to resign and provide notice
thereof to the Lenders and the Borrower in the event the Agent, in its capacity as a Lender, has assigned all of
its rights and obligations as a Lender under the Loans and the Loan Documents.  Upon receipt of any such notice
of resignation, the Required Lenders may, after consultation with the Borrower, appoint a successor Agent.  If no
successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders and after consultation with the Borrower, appoint a successor Agent.  Upon the acceptance by any
Person of its appointment as a successor Agent, (a) such Person shall thereupon succeed to and become vested with
all the rights, powers, duties and obligations of the retiring Agent and the retiring Agent shall be discharged
from its duties and obligations as Agent under the Loan Documents and (b) the retiring Agent shall promptly
transfer all Collateral within its possession or control to the possession or control of the successor Agent and
shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer
the rights of the Agent with respect to the Collateral to the successor Agent.  After any retiring Agent's
resignation as Agent, the provisions of this  Article 8 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting as the Agent.  Notwithstanding anything
contained in this Section 8.08 to the contrary, unless the successor Agent is a financial institution having a
combined capital and surplus equal to or in excess of $500,000,000, the appointment of such successor Agent shall
require the prior written consent of the Borrower (unless an Event of Default exists, in which case the consent
of the Borrower shall not be required), such consent not to be unreasonably withheld or delayed.


                                               ARTICLE IX

                                              MISCELLANEOUS

Section 9.01   Notices and Deliveries.  (a)  Notices and Materials Other than Collateral.  Except as provided
in Section 9.01(b):

                  (i)   Manner of Delivery.  All notices, communications and materials (including all
         Information) to be given or delivered pursuant to the Loan Documents shall, except in those cases
         where giving notice by telephone is expressly permitted, be given or delivered in writing (which
         shall include telecopy transmissions).  Notices under Sections 1.02, 1.03(c), 1.05, 1.07 and 6.01
         may be by telephone, promptly, in the case of each notice other than one under Section 6.01, confirmed
         in writing.  In the event of a discrepancy between any telephonic notice and any written confirmation
         thereof, such written confirmation shall be deemed the effective notice except to the extent that the
         Agent has acted in reliance on such telephonic notice.

                  (ii)  Addresses.  All notices, communications and materials to be given or delivered pursuant
         to the Loan Documents shall be given or delivered at the following respective addresses and telecopier
         and telephone numbers and to the attention of the following individuals or departments:

                              (A)     if to the Borrower, to it at:

                                      Frontier Center One
                                      7001 Tower Road
                                      Denver, CO 80249

                                      Attention: Chief Financial Officer
                                      Telecopy: 720-374-4375


                              (B)     if to the Agent, to it at:

                                      666 Third Avenue
                                      New York, NY 10017-4011

                                      Attention:        Head of Aerospace Group
                                      Telephone:        (646) 658-2157
                                      Telecopy:         (646) 658-2151

                                      With a copy to (for administrative notices):

                                      Credit Agricole Indosuez
                                      55 East Monroe, 47th floor
                                      Chicago, Illinois 60603 - USA

                                      Primary contacts: Kathy Lasky, Loan Administrator,
                                                        Julie Ferrer,  Senior Loan Administrator

                                      Telephone:             (312) 917-7545/(312)917-7421
                                      Telecopy:              (312) 372-3848

                                      Backup: Karen Bergstrom, AVP Administrative Services

                                      Telephone:             (312) 917-7420
                                      Telecopy:              (312) 372-3848


                              (C)     if to any Lender, to it at the address or telex , telecopier or
                  telephone number and to the attention of the individual or department, set forth below such
                  Lender's name under the heading "Notice Address" on Annex A or, in the case of a Lender that
                  becomes a Lender pursuant to an assignment, set forth under the heading "Notice Address" in the
                  Notice of Assignment given to the Borrower and the Agent with respect to such assignment;

or at such other address or telecopier or telephone number or to the attention of such other individual or
department as the party to which such information pertains may hereafter specify for the purpose in a notice
specifically captioned "Notice of Change of Address" given to (x) if the party to which such information pertains
is the Borrower, the Agent and each Lender, (y) if the party to which such information pertains is the Agent, the
Borrower and each Lender and (z) if the party to which such information pertains is a Lender, the Borrower and
the Agent.

                  (iii) Effectiveness.  Each notice and communication and any material to be given or
         delivered pursuant to the Loan Documents shall be deemed so given or delivered (A) if sent by
         registered or certified mail, postage prepaid, return receipt requested, on the third Business Day
         after such notice, communication or material, addressed as above provided, is delivered to a United
         States post office and a receipt therefore is issued thereby, (B) if sent by any other means of
         physical delivery, when such notice, communication or material is delivered to the appropriate
         address as above provided, (C) if sent by telecopier, when such notice, communication or material
         is transmitted to the appropriate telecopier number as above provided and is received at such number
         and (D) if given by telephone, when communicated to the individual or any member of the department
         specified as the individual or department to whose attention notices, communications and materials
         are to be given or delivered, or, in the case of notice by the Agent to the Borrower under Section
         6.01 given by telephone as above provided, if any individual or any member of the department to
         whose attention notices, communications and materials are to be given or delivered is unavailable
         at the time, to any other officer or employee of the Borrower, except that (x) notices of a change
         of address, telecopier or telephone number or individual or department to whose attention notices,
         communications and materials are to be given or delivered shall not be deemed given until received
         and (y) notices, communications and materials to be given or delivered to the Agent or any Lender
         pursuant to Sections 1.02, 1.03(c), 1.05, 1.07 and 1.12(b) and Article 5 shall not be deemed given
         or delivered until received by the officer of the Agent or such Lender responsible, at the time,
         for the administration of the Loan Documents.

         (b)   Collateral.  Until the Agent shall otherwise specify, all Collateral to be delivered to
the Agent pursuant to the Loan Documents consisting of instruments, securities, chattel paper, letters of
credit or documents shall be delivered to the Agent at the Agent's Office either by hand delivery or by
registered or certified mail, postage prepaid, return receipt requested, in either case insured in an amount
not less than the greater of the aggregate face amount and the aggregate fair market value of the Collateral
so being delivered. All other Collateral to be delivered to the Agent pursuant to the Loan Documents shall
be delivered to such Person, at such address, by such means and in such manner as the Agent may designate.

Section 9.02   Expenses; Indemnification.  Whether or not any Loans are made hereunder, the Borrower shall:

         (a)      pay or reimburse the Agent and each Lender for all transfer, documentary, stamp and similar
taxes, and all recording and filing fees and taxes, payable in connection with, arising out of, or in any way
related to, the execution, delivery and performance of the Loan Documents or the making of the Loans;

         (b)      pay or reimburse the Agent and each Lender for all reasonable and documented costs and
expenses (including out-of-pocket expenses, travel expenses and  fees and disbursements of legal counsel,
appraisers, accountants and other experts employed or retained by the Agent) incurred by the Agent and each
Lender in connection with, arising out of, or in any way related to (i) the negotiation, preparation, execution
and delivery of (A) the Loan Documents and (B) whether or not executed, any waiver, amendment or consent
thereunder or thereto, (ii) the administration of and any operations under the Loan Documents, (iii) consulting
with respect to any matter in any way arising out of, related to, or connected with, the Loan Documents,
including (A) the protection or preservation of the Collateral, (B) the protection, preservation, exercise or
enforcement of any of the rights of the Agent or the Lenders in, under or related to the Collateral or the Loan
Documents or (C) the performance of any of the obligations of the Agent or the Lenders under or related to the
Loan Documents, (iv) protecting or preserving the Collateral or (v) protecting, preserving, exercising or
enforcing any of the rights of the Agent or the Lenders in, under or related to the Collateral or the Loan
Documents , including defending the Security Interest as a valid, perfected, first priority security interest in
the Collateral subject only to Permitted Liens;

         (c)      indemnify and hold each Indemnified Person harmless from and against all losses (including
judgments, penalties and fines) suffered, and pay or reimburse each Indemnified Person for all costs and
expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained
by such Indemnified Person) incurred, by such Indemnified Person in connection with, arising out of, or in any
way related to (i) any Loan Document Related Claim (whether asserted by such Indemnified Person or the Borrower
or any other Person), including the prosecution or defense thereof and any litigation or proceeding with respect
thereto (whether or not, in the case of any such litigation or proceeding, such Indemnified Person is a party
thereto), or (ii) any investigation, governmental or otherwise, arising out of, related to, or in any way
connected with, the Loan Documents or the relationships established thereunder.

                  The foregoing indemnity shall not extend to any Loan Document Related Claim of any Indemnified
Person to the extent (x) relating to or arising out of a claim by the Borrower against such Indemnified Person
which results in a judgment of a court of competent jurisdiction in favor of the Borrower, or (y) attributable to
one or more of the following:  (1) acts or omissions involving the willful misconduct or gross negligence of such
Indemnified Person or any Person acting on behalf of such Indemnified Person; (2) any Tax, or increase in tax
liability under any tax law with respect to such Indemnified Person (such matter being subject to the indemnity
in Section 1.13 hereof); (3) a failure on the part of the Agent to distribute in accordance with the Loan
Documents any amounts received and distributable by it thereunder to such Indemnified Person; (4) any breach of
undertaking or any misrepresentation contained herein or in any other Loan Document to which such Indemnified
Person is a party or any agreement relating hereto or thereto by such Indemnified Person and in each case not
attributable directly or indirectly to any breach of undertaking, any misrepresentation or any noncompliance with
any of the terms hereof or of any other Loan Document or any agreement relating hereto or thereto by the
Borrower; (5) a Lender Lien created by, through, under or in favor of such Indemnified Person; or (6) a violation
of the Securities Act relating to or arising out of the offer, issuance, sale or delivery by such Indemnified
Person (or any person who controls such Indemnified Person within the meaning of Section 15 of the Securities
Act) of any security based upon the credit of the Borrower.

                  If a claim is made against an Indemnified Person involving one or more Loan Document Related
Claims and such Indemnified Person has notice thereof, such Indemnified Person (or its agent) shall promptly
after receiving such notice give notice of such claim to the Borrower; provided that the failure to provide such
notice shall not release the Borrower from any of its obligations to indemnify hereunder except to the extent that
the Borrower is prejudiced as a result of the failure to give such notice in a timely fashion, and payment by the
Borrower to an Indemnified Person pursuant to this Section 9.02 shall not be deemed to constitute a waiver or
release of any right or remedy which the Borrower may have against such Indemnified Person for any actual damages
as a result of the failure by such Indemnified Person to give the Borrower such notice.  Subject to the rights of
insurers under policies of insurance maintained by the Borrower and to the last sentence of this paragraph, the
Borrower shall have the right to investigate, and the right, in its sole discretion and in the name of such
Indemnified Person or in its own name, to contest, defend or compromise, any Loan Document Related Claim for
which indemnification is sought and such Indemnified Person shall cooperate, at the sole cost and expense of the
Borrower, with all commercially reasonable requests of the Borrower in connection therewith.  Where the Borrower
or the insurers under a policy of insurance maintained by the Borrower undertake the defense of an Indemnified
Person with respect to, or contest, a Loan Document Related Claim indemnified by the Borrower, no additional
legal fees or expenses of such Indemnified Person in connection with the defense or contest of such Loan Document
Related Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of the
Borrower or the insurers, as applicable; provided that, if in the reasonable opinion of such Indemnified Person
an actual or potential conflict of interest exists where it is advisable for such Indemnified Person to be
represented by separate counsel, the reasonable fees and expenses of such separate counsel shall be borne by the
Borrower.  Subject to the requirements of any policy of insurance, an Indemnified Person may participate at its
own expense in any judicial or administrative proceeding controlled by the Borrower pursuant to the preceding
provisions; provided that such Indemnified Person's participation does not, in the opinion of the independent
counsel appointed by the Borrower or its insurers to conduct such proceedings, materially interfere with such
control; and such participation shall not constitute a waiver of the indemnification provided.  Further, if a
Loan Document Related Claim as to which indemnification is sought by an Indemnified Person cannot be severed from
unrelated claims or matters relating to such Indemnified Person, then such Indemnified Person shall control the
contest or defense of such Loan Document Related Claim (and, for the avoidance of doubt, the foregoing shall not
prejudice such Indemnified Person's right to indemnification hereunder).  Notwithstanding any of the foregoing to
the contrary, the Borrower shall not be entitled to assume responsibility for and control of any such judicial or
administrative proceedings relating to any Indemnified Person (A) if an Event of Default shall have occurred and
be continuing; (B) if such proceedings would reasonably be expected to involve any risk of the sale, forfeiture
or loss of, or the creation of any Lien (other than a Permitted Lien) on, any Aircraft, any Airframe, any Engine
or any Part or any part thereof, unless bonded in a manner and amount acceptable to the Agent and the Lenders;
(C) if such proceedings, or the failure to promptly pay the related Loan Document Claim, would reasonably be
expected to materially adversely affect the ability of the Borrower to perform its obligations under the Loan
Documents or in any way materially adversely affect the interests of such Indemnified Person; (D) if such
proceeding would entail any risk of criminal liability to such Indemnified Person; or (E) unless prior to
commencing any judicial or administrative proceeding, the Borrower shall have acknowledged in writing its
liability to such Indemnified Person for the contested amount of the Loan Document Related Claim.

                  Notwithstanding the foregoing provisions, if at any time such Indemnified Person waives its
right of indemnification in respect of a Loan Document Related Claim, or if, after having received payment of
indemnification from the Borrower in respect of such Loan Document Related Claim, such Indemnified Person returns
such payment to the Borrower, then the Borrower shall not be entitled to contest or defend, or to continue to
contest or defend, any such Loan Document Related Claim.

                  In the case of any Loan Document Related Claim indemnified by the Borrower which is covered by
a policy of insurance maintained by the Borrower, each Indemnified Person agrees, at the sole cost and expense of
the Borrower, to co-operate reasonably with the insurers in the exercise of their rights to investigate, defend
or compromise such Loan Document Related Claim as may be reasonably required to retain the benefits of such
insurance with respect to such Loan Document Related Claim.

                  To the extent that a Loan Document Related Claim indemnified by the Borrower hereunder is in
fact paid in full by the Borrower, the Borrower shall be subrogated to the rights and remedies of the Indemnified
Person on whose behalf such Loan Document Related Claim was paid (other than rights of such Indemnified Person
under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to
such Loan Document Related Claim.  Should an Indemnified Person receive any payment from any party other than the
Borrower or its insurers, in whole or in part, with respect to any Loan Document Related Claim paid by the
Borrower or its insurers under this Agreement, such Indemnified Person shall promptly pay the amount paid (but
not an amount in excess of the amount the Borrower or any of its insurers has paid in respect of such Loan
Document Related Claim) over to the Borrower, provided that no Event of Default has occurred and is continuing.

Section 9.03   Amounts Payable Due upon Request for Payment.  All amounts payable by the Borrower under
Section 9.02 and under the other provisions of the Loan Documents shall, except as otherwise expressly provided,
be due within 30 days of demand therefor.

Section 9.04   Remedies of the Essence.  The various rights and remedies of the Agent and the Lenders under
the Loan Documents are of the essence of those agreements, and the Agent and the Lenders shall be entitled to
obtain a decree requiring specific performance of each such right and remedy.

Section 9.05   Rights Cumulative.  Each of the rights and remedies of the Agent and the Lenders under the Loan
Documents shall be in addition to all of their other rights and remedies under the Loan Documents and Applicable
Law, and nothing in the Loan Documents shall be construed as limiting any such rights or remedies.

Section 9.06   Amendments; Waivers.  (i)  Any term, covenant, agreement or condition of the Loan Documents
may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver
is in writing and is signed by (A) in the case of an amendment or waiver with respect to the Loan Documents
referred to in Section 8.07(a), the Agent, (B) in the case of an amendment or waiver with respect to any other
Loan Document, the Required Lenders and, if the rights and duties of the Agent are affected thereby, by the Agent
and (C) in the case of an amendment with respect to any Loan Document, by the Borrower; provided, however, that
no amendment or waiver shall be effective, unless in writing and signed by each Lender affected thereby, to the
extent it (1) changes the numerical amount of such Lender's Commitment, (2) reduces the principal of or the rate
of interest on such Lender's Term Loans or Notes or the fees payable to such Lender hereunder, (3) postpones any
date fixed for any payment of principal of or interest on such Lender's Loans or Notes or the fees payable to
such Lender hereunder or (4) amends Section 1.14, this Section 9.06 or any other provision of this Agreement
requiring the consent or other action of all of the Lenders.

                  (ii) (A)   (1)   Unless otherwise specified in an amendment or waiver, an amendment or
         waiver under the Loan Documents shall be effective only in the specific instance and for the specific
         purpose for which given.

                             (2)   By entering into an amendment with respect to, or giving a waiver under,
                  a Section of the Loan Documents, the Lenders shall not be deemed to have, or to have
                  intended to have, (aa) waived any rights that they, or any of them, then or thereafter may have
                  under any other provisions of the Loan Documents and (bb) if such amendment or waiver was
                  occasioned by a particular fact or facts, accepted that fact or those facts for any other
                  purpose or Section of the Loan Documents, including Section 3.07 of the Credit Agreement, so
                  that, for purposes of Section 3.07, if such fact or facts has had or could have, either alone,
                  or together with other facts, a Materially Adverse Effect, such Materially Adverse Effect shall
                  be a change or event subject to Section 3.07, notwithstanding such amendment or waiver.

                  (iii)  No election not to exercise, failure to exercise or delay in exercising any right,
         nor any course of dealing or performance, shall operate as a waiver of any right of the Agent or
         any Lender under the Loan Documents or Applicable Law, nor shall any single or partial exercise of any
         such right preclude any other or further exercise thereof or the exercise of any other right of the
         Agent or any Lender under the Loan Documents or Applicable Law.

Section 9.07   Set-Off.  The Agent and each Lender is hereby authorized by the Borrower, at any time and from
time to time, without notice, during any Event of Default, to set off against, and to appropriate and apply to
the payment of, the Liabilities of the Borrower under the Loan Documents (whether owing to such Person or to any
other Person that is the Agent or a Lender and whether matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all Liabilities owing by such Person or any of its Affiliates to the Borrower or any Wholly
Owned Subsidiary (whether payable in Dollars or any other currency, whether matured or unmatured and, in the case
of Liabilities that are deposits, whether general or special, time or demand and however evidenced and whether
maintained at a branch or office located within or without the United States).

Section 9.08   Sharing of Recoveries.  (a)  Each Lender agrees that, if, for any reason, including as a result
of (i) the exercise of any right of counterclaim, set-off, banker's lien or similar right, (ii) its claim in any
applicable bankruptcy, insolvency or other similar proceeding being deemed secured by a Debt owed by it to the
Borrower, including a claim deemed secured under Section 506 of the Bankruptcy Code, or (iii) the allocation of
payments by the Agent or the Borrower in a manner contrary to the provisions of Section 1.14, such Lender shall
receive payment of a proportion of the aggregate amount due and payable to it hereunder as principal of or
interest on the Loans or fees that is greater than the proportion received by any other Lender in respect of the
aggregate of such amounts due and payable to such other Lender hereunder, then the Lender receiving such
proportionately greater payment shall purchase participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) in the rights of the other Lenders hereunder so that all such
recoveries with respect to such amounts due and payable hereunder (net of costs of collection) shall be pro rata;
provided that if all or part of such proportionately greater payment received by the purchasing Lender is
thereafter recovered by or on behalf of the Borrower from such Lender, such purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to such Lender to the extent of such recovery, but
without interest (unless the purchasing Lender is required to pay interest on the amount recovered to the Person
recovering such amount, in which case the selling Lender shall be required to pay interest at a like rate).  So
long as the purchasing Lender has not advised it to the contrary, each selling Lender may assume, for purposes of
Section 9.09(b), that no Tax is required to withheld or deducted by the Borrower from, or is otherwise payable by
the Borrower in connection with, any payment by the Borrower to or for the account of such Lender under the Loan
Documents.  The Borrower expressly consents to the foregoing arrangements and agrees that any holder of a
participation in any rights hereunder so purchased or acquired pursuant to this Section 9.08(a) shall, with
respect to such participation, be entitled to all of the rights of a Lender under Sections 1.13, 7.02, 7.03,
7.04, 7.05, 7.06, 9.02 and 9.07 (subject to any condition imposed on a Lender hereunder with respect thereto,
including delivery of the forms and certificates required under Section 1.13(a)(iii)) and may exercise any and
all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted
to the holder of such participation for Loans in the amount of such participation.

         (b)      Each Lender agrees to exercise any right of counterclaim, set-off, banker's lien or similar
right that it may have in respect of the Borrower in a manner so as to apportion the amount subject to such
exercise, on a pro rata basis, between (i) obligations of the Borrower for amounts subject to the sharing
provisions of Section 9.08(a) and (ii) other Liabilities of the Borrower.

Section 9.09   Assignments and Participations.  (a)  Assignments.  (i)  The Borrower may not assign any of its
rights or obligations under the Loan Documents without the prior written consent of (A) in the case of the Loan
Documents referred to in Section 8.07(a), the Agent and (B) in the case of any of the other Loan Documents, each
Lender, and no assignment of any such obligation shall release the Borrower therefrom unless the Agent or each
Lender, as applicable, shall have consented to such release in a writing specifically referring to the obligation
from which the Borrower is to be released.

                  (ii)   Each Lender may from time to time assign any or all of its rights and obligations
         under the Loan Documents to one or more Persons, without the consent of the Borrower; provided that, no
         such assignment shall be effective unless (A) the assignment occurs after the Termination Date and is to
         an Eligible Assignee unless it is consented to by (i) the Borrower (unless an Event of Default exists,
         in which case the consent of the Borrower shall not be required), such consent not to be unreasonably
         withheld or delayed, and (ii) the Agent, (B) any partial assignment (to anyone other than to an existing
         Lender) shall be in an amount of not less than $* unless it is consented to by the Borrower (unless an
         Event of Default exists, in which case the consent of the Borrower shall not be required), such consent
         not to be unreasonably withheld or delayed, (C) the assignment shall involve the assignment of a
         corresponding fixed percentage of all of the assignor's rights and obligations under the Loan Documents,
         (D) a Notice of Assignment with respect to the assignment, duly executed by the assignor and the
         assignee, shall have been given to the Borrower (unless an Event of Default exists) and the Agent, (E)
         in the case of an assignment of a Registered Note, such Registered Note shall have been surrendered for
         registration of assignment duly endorsed by (or accompanied by a written instrument of assignment duly
         executed by) the Registered Holder and such assignment shall have been recorded on the Register, (F)
         after such assignment the total number of Lenders shall be ten (10) or fewer and (G) except in the case
         of an assignment by the Lender that is the Agent, the Agent shall have been paid an assignment fee of
         $*.  Upon any effective assignment, the assignor shall be released from the obligations so assigned and,
         in the case of an assignment of all of its Term Loans and Commitment, shall cease to be a Lender.  In
         the event of any effective assignment by a Lender, the Borrower shall, against (except in the case of a
         partial assignment) receipt of the existing Note of the assignor Lender, issue a new Note to the
         assignee Lender.  So long as no Event of Default shall have occurred and be continuing, no such
         assignment shall, at the time of such assignment, increase the obligation of the Borrower under the Loan
         Documents and the assignee Lender shall not be entitled to any amounts that would otherwise be payable
         to it under Section 1.13, 7.01, 7.02 or 7.03,  unless (i) such amounts would have been payable to the
         assignor Lender if such assignment had not been granted or (ii) such amounts are a result of a
         Regulatory Change Enacted after the date such Person becomes a Lender.

         (b)   Participations.  Each Lender may from time to time sell or otherwise grant participations
in any or all of its rights and obligations under the Loan Documents without the consent of the Borrower, the
Agent or any other Lender.  In the event of any such grant by a Lender of a participation, such Lender's
obligations under the Loan Documents to the other parties thereto shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, and the Borrower, the Agent and the other Lenders may
continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations
thereunder.  A Lender may not grant to any holder of a participation the right to require such Lender to take
or omit to take any action under the Loan Documents, except that a Lender may grant to any such holder the
right to require such holder's consent to (i) reduce the principal of or the rate of interest on such Lender's
Loans or the fees payable to such Lender hereunder, (ii) postpone any date fixed for any payment of principal
of or interest on  such Lender's Term Loans or the fees payable to such Lender hereunder, (iii) permit the
Borrower to assign any of its obligations under the Loan Documents to any other Person, or (iv) release any
Collateral from the Security Interest except as required or contemplated by the Loan Documents.  No holder
of a participation shall have any rights whatsoever directly against the Borrower.

Section 9.10   Governing Law.  The rights and duties of the Borrower, the Agent and the Lenders under this
Agreement and the Notes (including matters relating to the Maximum Permissible Rate), and the other Loan
Documents, shall in all respects be governed by, and construed in accordance with, the internal laws of the State
of New York (as opposed to conflict of law provisions), including all matters of construction, validity and
performance.

Section 9.11   Judicial Proceedings; Waiver of Jury Trial.  (a)  Each party hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of
the State of New York sitting in New York County and of the United States District Court of the Southern District
of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to
this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to
this Agreement against another party or its properties in the courts of any jurisdiction.

         (b)      Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (a) of
this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

         (c)      Each party to this Agreement irrevocably consents to service of process in the manner provided
for notices in Section 9.01(a).  Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.

         THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING
ANY LOAN DOCUMENT RELATED CLAIM.

Section 9.12   Judgment Currency.  If in connection with determining the amount of a judgment to be rendered
in a currency other than Dollars (a "Foreign Currency"), it is necessary to convert a sum payable by the Borrower
to an Indemnified Person under the Loan Documents in Dollars into such Foreign Currency, then, unless another
rate of exchange is required under Applicable Law, the rate of exchange used shall be the Agent's spot rate of
exchange in New York on the Business Day preceding the day on which final judgment is to be rendered.  The
obligations of the Borrower in respect of any such sum payable by it to such Indemnified Person under the Loan
Documents in Dollars shall, notwithstanding any such judgment in such Foreign Currency, be discharged only to the
extent that on the Business Day following actual receipt by such Indemnified Person of the amount of the judgment
in such Foreign Currency, such Indemnified Person is able to purchase Dollars in New York with such sum of
Foreign Currency, whether or not at the Agent's spot rate of exchange.  As a separate obligation and
notwithstanding any such judgment, the Borrower shall pay to such Indemnified Person on demand in Dollars any
difference between the amount originally payable by the Borrower to such Indemnified Person in Dollars and the
amount of Dollars that may be so purchased.  In the event that the amount that may be so purchased exceeds the
amount originally payable, such Indemnified Person shall promptly remit such excess to the Borrower.

Section 9.13   Limitation Of Liability.  NEITHER THE PARTIES HERETO NOR ANY OTHER INDEMNIFIED PERSON SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND EACH PARTY HERETO AND EACH OTHER INDEMNIFIED PERSON HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL, AND, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, PUNITIVE, DAMAGES SUFFERED IN CONNECTION WITH ANY LOAN DOCUMENT RELATED CLAIM.

Section 9.14   Severability of Provisions.  Any provision of the Loan Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.  To the extent permitted by Applicable Law, the
Borrower hereby waives any provision of Applicable Law that renders any provision of the Loan Documents
prohibited or unenforceable in any respect.

Section 9.15   Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto were upon the same instrument.

Section 9.16   Survival of Obligations.  Except as otherwise expressly provided therein, the rights and
obligations of the Borrower, the Agent, the Lenders and the other Indemnified Persons under the Loan Documents
shall survive the Repayment Date and the termination of the Security Interest.

Section 9.17   Entire Agreement.  This Agreement and the Notes embody the entire agreement among the Borrower,
the Agent and the Lenders relating to the subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the subject matter hereof.

Section 9.18   Successors and Assigns.  All of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns.

Section 9.19   Registered Notes.  A Lender that is a Non-US Lender and that has complied with Section
1.13(a)(iii)(A)(1) may have its Notes issued as Registered Notes, and for this purpose the Borrower shall cause
to be maintained a Register.  Once issued, Registered Notes may not be exchanged for Notes that are not Registered
Notes and the ownership of Registered Notes, and of the Loans evidenced thereby, may be transferred only in
accordance with the provisions of Section 9.09(a)(ii)(E).

Section 9.20   No Fiduciary Relationship Established By Loan Documents.  The relationship between the Borrower
and the Lenders is that of DEBTOR and CREDITOR.  The Loan Documents are not intended to, and do not, establish a
FIDUCIARY relationship, nor does a FIDUCIARY relationship otherwise exist, between the Borrower on the one hand,
and Agent and the Lenders, on the other hand.  The parties hereto have dealt at arm's length in negotiating the
Loan Documents.

Section 9.21   Section 1110 Compliance.  Notwithstanding any provision herein or elsewhere contained to the
contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this
Agreement and the other Loan Documents are expressly intended to be, shall be and should be construed so as to
be, entitled to the full benefits of 11 U.S.C. Section 1110, as amended from time to time, and any successor
provision thereto.

Section 9.22   Confidentiality.  Except to the extent otherwise required by applicable law or, as required to
be filed publicly with the Securities and Exchange Commission, or unless the Borrower, the Lenders and the Agent
shall otherwise consent in writing, each party to this Agreement agrees to maintain the confidentiality of this
Agreement (and all drafts hereof and documents ancillary hereto) in its communications with third parties other
than any Indemnified Person and not to disclose, deliver or otherwise make available to any third party (other
than its prospective successors and permitted assignees and its or such prospective successor's or permitted
assignee's directors, officers, employees, insurance consultants, rating agencies, agents, accountants, counsel
or other advisors or to bank examiners or other regulatory personnel, in each case, on a confidential basis) the
original or any copy of all or any part of this Agreement (or any draft hereof and documents ancillary hereto)
except to an Indemnified Person.

         None of the Borrower, the Agent, or any of their respective Affiliates shall issue any news release or
make any public announcement pertaining to the transactions contemplated by this Agreement and the Loan Documents
without the prior written consent of the other (which consent shall not be unreasonably withheld) unless such
news release or public announcement is required by applicable law, in which case the parties shall consult with
each other prior to the issuance of such news release or public announcement.

Section 9.23   Covenants of the Agent and Lenders.  (a)  Quiet Enjoyment.  The Agent and each Lender each
agrees that neither it nor any of its Affiliates, nor anyone acting on behalf of any such Person will interfere
in the Borrower's quiet enjoyment of the Aircraft so long as no Event of Default shall have occurred and be
continuing.

         (b)   Lender Liens.  The Agent and each Lender hereby severally covenants and agrees with
each of the other parties hereto that so long as (i) it remains the Agent or a Lender, as the case may be, and
(ii) the Lien of the Mortgage on the Aircraft has not been released in accordance with the terms of the Loan
Documents, it will (x) take such action as may be necessary to discharge any Lender Liens, if any, on the
Aircraft attributable to it or any of its Affiliates and (y) indemnify and hold harmless the other parties hereto
from and against any loss, cost or expense which may be suffered or incurred by any such Person as a result of
its failure to discharge and satisfy any such Lender Lien.

         (c)   Transfer Restrictions.  Each Lender covenants that (notwithstanding anything herein or
in any other Loan Document to the contrary) it will not transfer its Notes or any interest under any of the Loan
Documents unless the transferee makes the representations and warranties contained in Section 9.24.

Section 9.24   Lenders' Representations and Warranties.  Each Lender severally represents and warrants to each
of the other Parties hereto, as of the date hereof and as of each Delivery Date that:

         (a)      it is s acquiring its Notes in the ordinary course of its business and it has no present
intention of distributing or reselling any interest to be acquired by it hereunder or under any of the other
Loan Documents or any part thereof in violation of the Securities Act of 1933, as amended; and

         (b)      no part of the funds to be used by it to purchase or fund, as the case may be, its Notes
or its interest under any of the Loan Documents constitutes plan assets of an employee benefit plan which
is subject to ERISA and/or subject to Section 4975 of the United States Internal Revenue Code of 1986, as
amended.  As used in this Section 9.24(b), the term "plan assets" shall have the meaning assigned to such
term under ERISA and the regulations promulgated thereunder.










         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized officers all as of the Agreement Date.

                                                     FRONTIER AIRLINES, INC.


                                                     By                                             
                                                          Name:
                                                          Title:

                                                     CREDIT AGRICOLE INDOSUEZ,
                                                     as Agent and as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:





                                                     Agreement Date:






                                                     DVB BANK AG,
                                                     as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:








                                                     LILIENTHAL CAPITAL CORP.,
                                                     as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:








                                                   ANNEX A

Lenders, Lending Offices
and Notice Addresses                                           Commitment
Credit Agricole Indosuez                                           $*
Domestic Lending Office:
Credit Agricole Indosuez
666 Third Avenue
New York, NY 10017-4011
Attention:        Head of Aerospace Group
Telephone:        (646) 658-2157
Facsimile:        (646) 658-2151
Eurodollar Lending Office:
Same as above
Notice Address:
Credit Agricole Indosuez
666 Third Avenue
New York, NY 10017-4011
Attention:        Head of Aerospace Group
Telephone:        (646) 658-2157
Facsimile:        (646) 658-2151

With a copy to (for administrative notices)

Credit Agricole Indosuez
55 East Monroe, 47th floor
Chicago, Illinois 60603 - USA

Primary contacts: Kathy Lasky, Loan Administrator; Julie
Ferrer,  Senior Loan Administrator
Telephone:             (312) 917-7545/(312)917-7421
Facsimile:             (312) 372-3848

Backup: Karen Bergstrom, AVP Administrative Services
Telephone:             (312) 917-7420
Facsimile:             (312) 372-3848
Payment Details:
Bank:    Citibank, New York
Acct No.: *
For credit to:    Credit Agricole Indosuez Chicago
Branch - CAI-CAP
ABA No.:          *
SWIFT No.:    *
Ref:                 Frontier Airlines Inc.

Lenders, Lending Offices
and Notice Addresses                                           Commitment
DVB BANK AG                                                        $*
Domestic Lending Office:
DVB Bank AG
London Branch
80 Cheapside
London, EC2V 6EE
ENGLAND
Attention:           Loan Administration
Telephone: +44 20 7618 9600
Facsimile:  +44 20 7618 9652
Eurodollar Lending Office:
Same as above
Notice Address:
DVB Bank AG
New York Representative Office
609 Fifth Avenue
New York, NY  10017-1021
Attention: Christian Wulf
Telephone: (212) 588-8864
Facsimile:  (212) 588-8936 or 8937

With a copy to

DVB Bank AG
London Branch
80 Cheapside
London, EC2V 6EE
ENGLAND
Attention:           Loan Administration
Telephone: +44 20 7618 9600
Facsimile:  +44 20 7618 9652
Payment Details:
Bank:  HSBC Bank, New York
ABA:   *
Swift:     *
Account No:   *
Account Name:     DVB Bank AG, Frankfurt
Reference:For attn. DVB London (3016651)


Lenders, Lending Offices
and Notice Addresses                                           Commitment
Lilienthal Capital Corp.                                           $*
Domestic Lending Office:
Lilienthal Capital Corp.
c/o Global Securitization Services
114 West 47th Street, Suite 1715
New York, NY 10036
Attn: Kevin Burns
Telephone:  (212) 302-8330
Facsimile: (212) 302-8767

Eurodollar Lending Office:
Same as above
Notice Address:
Lilienthal Capital Corp.
c/o Global Securitization Services
114 West 47th Street, Suite 1715
New York, NY 10036
Attn: Kevin Burns
Telephone:  (212) 302-8330
Facsimile: (212) 302-8767

with a copy to:

Bayerische Hypo-und Vereinsbank AG, New York Branch
150 East 42nd Street
New York, NY 10017
Attn:    Evelyn Moesch Clarke
Telephone:        (212) 672-5870
Facsimile:        (212) 672-5593

and
Attn:    Michael Trentzsch, Aircraft Finance
Telephone:        (212) 672-5834
Facsimile:        (212) 672-5516

Payment Details:
Banker's Trust Co. NY
ABA: *
A/C Name: Lilienthal Capital Corp.
A/C#: *
Re: Frontier Airlines 2002








                                                                                  Schedule 1.02

                                                NOTICE OF BORROWING

[Name and address
of Agent in accordance with
Section 9.01(a)(ii)]

Date:

Gentlemen:

         Reference is made to the Secured Credit Agreement, dated as of __________, 2002, among Frontier
Airlines, Inc., the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as Agent
(the "Secured Credit Agreement").  The undersigned hereby gives notice pursuant to Section 1.02 of the
Secured Credit Agreement of its request to have the following Loan made to it on the Delivery Date:

                  Type of Loan1                                    Amount
                                                                             

         [Please disburse the proceeds of the Loan by [insert requested method of disbursement]]

         The Delivery Date for the Aircraft specified below is: _____________

                  (i)   Airframe:  One (1) Airbus Model A319-100 aircraft, U.S. Registration
                  No. ________; manufacturer's serial no. ________; and



                  (ii)   Engines:  Two (2) CFM International, Inc. Model CFM56-5B5 engines bearing,
                  respectively, manufacturer's serial nos. ________ and ________ (each of which engines
                  has 750 or more rated takeoff horsepower or the equivalent of such horsepower).



         [The undersigned hereby requests pursuant to Section 1.03(c)(iii) of the Secured Credit Agreement that
the Eurodollar Rate Loan of the Type herein specified be converted on the date which is the Payment Date for such
Eurodollar Rate Loan closest the second anniversary of the Delivery Date into the following Fixed Rate Loan:]

                  Type of Loan1                             Conversion Payment Date
                                                                                       


         The undersigned both individually and on behalf of the Borrower, represents and warrants that (a) the
borrowing requested hereby complies with the requirements of the Secured Credit Agreement and (b) except to the
extent set forth on Annex A hereto, (i) each Loan Document Representation and Warranty is true and correct at and
as of the date hereof and (except to the extent the undersigned gives notice to the Lenders to the contrary prior
to 5:00 p.m. on the Business Day before the requested date for the making of the Loan) will be true and correct
at and as of the time the Loan is made, in each case both with and without giving effect to the Loan and the
application of the proceeds thereof, (ii) no Default has occurred and is continuing as of the date hereof or
would result from the making of the Loan or from the application of the proceeds thereof if the Loans were made
on the date hereof, and (except to the extent the undersigned gives notice to the Lenders to the contrary prior
to 5:00 p.m. on the Business Day before the requested date for the making of the Loan) no Default will have
occurred and be continuing at the time the Loans is to be made or would result from the making of the Loan or
from the application of the proceeds thereof, and (iii) no Event of Loss (or event which with the passage of time
would become an Event of Loss) with respect to the Airframe or any Engine to be financed by the Loan requested
hereunder.

                                                     FRONTIER AIRLINES, INC.

                                                     By                                             
                                                          Name:
                                                          Title:















1.  Be sure to specify the duration of the Interest Period (e.g., three/six-months).







                                                                                  Schedule 1.03(c)(iv)

                                               NOTICE OF CONVERSION

[Name and address
of Agent in accordance with
Section 9.01(a)(ii)]

Date:

Gentlemen:

         Reference is made to the Secured Credit Agreement, dated as of __________, among Frontier Airlines,
Inc., the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as Agent (the "Secured
Credit Agreement").  The undersigned hereby gives notice pursuant to Section 1.03(c)(iv) of the Secured Credit
Agreement of its desire to convert the Eurodollar Rate Loans specified below into Fixed Rate Loans of the Types
and in the amounts specified below on [insert Payment Dates on which conversions are to occur]:

                                      Conversion
Current Eurodollar Rate Loan1   Payment Date   Amount  To be Converted into Fixed Rate Loan1




         The undersigned represents and warrants that the conversions requested hereby comply with the
requirements of the Secured Credit Agreement.

                                                     FRONTIER AIRLINES, INC.

                                                     By                                             
                                                          Name:
                                                          Title:

1.   Be sure to specify the duration of the Interest Period (e.g., three/six-months).





                                                                                  Schedule 1.05(a)


                                               NOTICE OF PREPAYMENT


[Name and address
of Agent in accordance with
Section 9.01(a)(ii)]

Date:

Gentlemen:

         Reference is made to the Secured Credit Agreement, dated as of _____________, among Frontier Airlines,
Inc., the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as Agent (the "Secured
Credit Agreement").  The undersigned hereby gives notice pursuant to Section 1.05(a) of the Secured Credit
Agreement that it will prepay the Loans specified below on [insert Payment Dates of prepayment]:

Current
Type of Loan1                        Prepayment Payment Date            Amount





         The undersigned represents and warrants that the prepayment requested hereby complies with the
requirements of the Secured Credit Agreement.

                                                     FRONTIER AIRLINES, INC.

                                                     By                                             
                                                          Name:
                                                          Title:


1.   Be sure to specify the duration of the Interest Period (e.g., three/six-months).






                                                                                  Schedule 1.13(a)(iii)



Non-US Lender Certificate
Frontier Airlines, Inc.
Credit Agricole Indosuez

Gentlemen:

         Reference is made to the Secured Credit Agreement, dated as of __________, among Frontier Airlines,
Inc., the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as Agent (the "Secured
Credit Agreement").  Terms used herein that are defined in such Secured Credit Agreement are used with the
meanings therein ascribed to them.

         The undersigned hereby (a) certifies to the Borrower and the Agent that (i) it is a Non-US Lender and
(ii) is entitled to submit an Internal Revenue Service Form W-8BEN and (b) agrees to indemnify and defend the
Borrower and the Agent from, and hold each of them harmless against, any and all losses, liabilities, claims,
damages, and expenses of any kind arising out of, resulting from, or in any way connected with the certification
made pursuant to clause (a) being incorrect.

                                                     Very truly yours,


                                                     [Lender]

                                                     By:                                            
                                                          Name:
                                                          Title:






                                                                                  Schedule 2.01(a)(i)

                                               [NAME OF THE COMPANY]

                                        CERTIFICATE AS TO RESOLUTIONS, ETC.

         I, __________, [Assistant] Secretary of [name of Company], a __________ corporation (the "Company"),
hereby certify, pursuant to Section 2.01(a)(i) of the Secured Guaranteed Credit Agreement dated as of __________,
2002 among Frontier Airlines, Inc., the lenders listed on the signature pages thereof and Credit Agricole
Indosuez, as Agent, that:

         1.       The below named persons have been duly elected (or appointed) and have duly qualified as, and
on this day are, officers of the Company holding their respective offices below set opposite their names, and the
signatures below set opposite their names are their genuine signatures:

Name                                  Office                           Signature
[Insert names and offices of
persons authorized to sign the Loan
Documents to which the Company is a
party and any related documents]
         2.       Attached as Annex A is a true and correct copy of resolutions duly adopted by [unanimous
written consent of] the Board of Directors of the Company.  Such resolutions have not been amended, modified or
revoked and are in full force and effect on the date hereof.

         3.       [List Loan Documents to which the Company is a party], in each case as executed and delivered
on behalf of the Company, are in the forms thereof approved by [unanimous written consent of] the Board of
Directors of the Company.

         4.       Attached as Annex B is a true and correct copy of the Articles of Incorporation of the Company
as in effect on __________, 2002 and at all subsequent times to and including the date hereof.

         5.       Attached as Annex C is a true and correct copy of the Bylaws of the Company as in effect on
__________, 2002 and at all subsequent times to and including the date hereof.

         IN WITNESS WHEREOF, I have signed this certificate this __ day of __________, 2002.


                                                          [Assistant] Secretary

         I, __________, [title] of the Company, hereby certify that [name of the above [Assistant] Secretary] has
been duly elected or appointed and has been duly qualified as, and on this day is, [Assistant] Secretary of the
Company, and the signature in paragraph 1 above is his genuine signature.

         IN WITNESS WHEREOF, I have signed this certificate this __ day of __________, 2002.


                                                          [Title]








                                                                                  Schedule 5.01(c)

                                              FRONTIER AIRLINES, INC.

                                CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS

         I, __________, [Chief Financial Officer] of Frontier Airlines, Inc., a Colorado corporation (the
"Borrower"), hereby certify, pursuant to Section 5.01(b) of the Secured Credit Agreement dated as of __________,
20__ among the Borrower, the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as
Agent, that:

         1.       The accompanying [unaudited]1 consolidated and consolidating financial statements of the
Borrower and the Consolidated Subsidiaries as at __________ and for the [fiscal year][quarterly accounting
period]2 ending __________, 20__, are complete and correct and present fairly, in accordance with Generally
Accepted Accounting Principles (except for changes therein or departures therefrom described below that have been
approved in writing by Messrs. __________, the Borrower's current independent certified public accountants), the
consolidated and consolidating financial position of the Borrower and the Consolidated Subsidiaries as at the end
of such [fiscal year][quarterly period]2, and the consolidated and consolidating results of operations and cash
flows for such quarterly period, and for the elapsed portion of the fiscal year ended with the last day of
[fiscal year][such quarterly period]2, in each case on the basis presented [and subject only to normal yearend
auditing adjustments]1.

         2.       (a)  The changes in and departures from Generally Accepted Accounting Principles are as follows:

         [                 ]

All such changes have been approved in writing by Messrs.  __________.

                  [[(b)  Attached as Annex A are [unaudited]1 consolidated and consolidating financial statements
of the Borrower and the Consolidated Subsidiaries as at __________ and for the [fiscal year][quarterly accounting
period]2 ending __________, 20__, which have been prepared in accordance with Generally Accepted Accounting
Principles without giving effect to the changes referred to in Paragraph 2(a) of this Certificate or any previous
Certificate.  Such financial statements are complete and correct and present fairly, in accordance with Generally
Accepted Accounting Principles, the consolidated and consolidating financial position of the Borrower and the
Consolidated Subsidiaries as at the end of such [fiscal year][quarterly period]2, and the consolidated and
consolidating results of operations and cash flows for such quarterly period, and for the elapsed portion of the
fiscal year ending with the last day of such [fiscal year][quarterly period]2, in each case on the basis
presented [and subject only to normal yearend auditing adjustments]1.]3]

         3.       Based on an examination sufficient to enable me to make an informed statement, to the best of
my knowledge, no Default exists, including, in particular, any such arising under the provisions of Article 4,
except the following [annual certificate only.]:

[If none such exist, insert "None"; if any do exist, specify the same by Section, give the date the same
occurred, and the steps being taken by the Borrower or a Subsidiary with respect thereto.]

Dated:  ______________________

                                                                                
                                                       [Chief Financial Officer]




1.   Include only in the case of a certificate to be delivered with respect to quarterly financial statements.

2.   Include first alternative in the case of a certificate to be delivered with respect to year-end financial
     statements; include second alternative in the case of a certificate to be delivered with respect to
     quarterly financial statements.

3.   Paragraph (b) should be included in, and Annex A attached to, the Certificate only if changes from Generally
     Accepted Accounting Principles are specified in Paragraph 2(a) of this or any previous Certificate.







                                                                                  Schedule 9.09(a)

                                               NOTICE OF ASSIGNMENT

[Name and address
of Borrower in accordance with
Section 9.01(a)(ii)]

[Name and address
of Agent in accordance with
Section 9.01(a)(ii)]

Date:

Gentlemen:

         Reference is made to the Secured Credit Agreement, dated as of __________, among Frontier Airlines,
Inc., the lenders listed on the signature pages thereof and Credit Agricole Indosuez, as Agent (the "Secured
Credit Agreement").  The undersigned hereby give notice pursuant to Section 9.09(a) of the Credit Agreement that
[name of Assignor] [(the "Assignor")]1 has made the following assignment to [name of Assignee] [(the
"Assignee")]2:

                  Rights and Obligations
                  Assigned:

                  Effective Date of
                  Assignment:

         [The Assignee's Lending Offices and address for notices are as follows:

                  Domestic Lending Office:

                  Eurodollar Lending Office:

                  Notice Address:]3






         [The Assignor hereby requests that [the Borrower and] [the Agent] consent to the assignment described
above by signing a copy of this letter in the space provided below and returning it to the Assignor.  Such
consent shall release the Assignor from all of the obligations described above as having been assigned to the
Assignee.]4

                                                     [NAME OF ASSIGNOR]

                                                     By                                             
                                                          Name:
                                                          Title:

                                                          [NAME OF ASSIGNEE]

                                                     By                                             
                                                          Name:
                                                          Title:

[Assignment and release consented to:]4

FRONTIER AIRLINES, INC.

By                                          
     Name:
     Title:

CREDIT AGRICOLE INDOSUEZ,
as Agent

By                                          
     Name:
     Title:



1.   Include definition if Footnote 4 material is to be included.

2.   Include definition if Footnote 3 or Footnote 4 material is to be included.

3.   Omit if the Assignee is a Lender.

4.   Include the appropriate portion of the bracketed provision if (i) the Assignor desires to be released
     from the assigned obligations, (ii) the consent of the Borrower and/or the Agent is required for such
     release and (iii) the Assignor has not otherwise obtained such consents.






                                                                                            EXHIBIT A

                                              FRONTIER AIRLINES, INC.

                                                  PROMISSORY NOTE

                                                                                 _______________, 20__


No. __
US$ ______________________


         FOR VALUE RECEIVED, FRONTIER AIRLINES, INC. (the "Borrower") hereby promises to pay to the order of
__________ (the "Lender"), for the account of its applicable Lending Office, the principal amount of
___________________________ ($________________) (the "Term Loan"), in principal installments on the Payment
Dates and in the amounts set forth on Schedule 1 hereto, and to pay interest on the outstanding principal
amount of the Term Loan on such Payment Dates at the rates specified in Section 1.03 of the Credit Agreement
referred to below.  All payments due to the Lender hereunder shall be made to the Lender at the place, in
the type of money and funds and in the manner specified in Section 1.11 of such Credit Agreement.

         Each holder hereof is authorized to endorse on the grid attached hereto, or on a continuation thereof,
the Term Loan of the Lender and each payment, with respect thereto.

         Presentment, demand, protest, notice of dishonor and notice of intent to accelerate are hereby
waived by the undersigned.

         This Promissory Note evidences the Term Loan made under, and is entitled to the benefits of, the
Secured Credit Agreement, dated as of __________, 2002, among the Borrower, the lenders listed on the
signature pages thereof and Credit Agricole Indosuez, as Agent, as the same may be amended or supplemented
from time to time. Reference is made to such Secured Credit Agreement, as so amended or supplemented, for
provisions relating to the prepayment and the acceleration of the maturity hereof.  This Promissory Note
is also entitled to the benefits of the Mortgage, the Mortgage Supplements, the Consent and Agreements and
the Engine Consent and Agreements.

         This Promissory Note shall, pursuant to New York General Obligations Law Section 5-1401, be governed
by the law of the State of New York.

         [This is a Registered Note, and it and the Term Loan evidenced hereby may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or transfer on the Register and
compliance with the other requirements provided for in the Secured Credit Agreement.]




         IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be executed by its duly authorized
officer all as of the day and year first above written.

                                                          FRONTIER AIRLINES, INC.

                                                     By                                             
                                                          Name:
                                                          Title:







                                               SCHEDULE I
                                                   TO
                                          FRONTIER AIRLINES, INC.

                                             PROMISSORY NOTE

                                          _______________, 20__





Delivery Date:

                                                  Principal
Payment No.          Payment Date                Installment            Outstanding
                                                    Amount                Balance

                     Delivery Date
       1
       2
       3
       4
       5
       6
       7
       8
       9
      10
      11
      12
      13
      14
      15
      16
      17
      18
      19
      20
      21
      22
      23
      24
      25
      26
      27
      28
      29
      30
      31
      32
      33
      34
      35
      36
      37
      38
      39
      40
      41
      42
      43
      44
      45
      46
      47
      48







                                                       GRID

                                                  PROMISSORY NOTE

                                                                                                    

                                                         Amount of                    Notation
Date                      Amount of Loan              Principal Repaid                 Made By

                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    





                                                                                            EXHIBIT B



                                    SECURED CREDIT AGREEMENT SUPPLEMENT NO. ___


         SECURED CREDIT AGREEMENT SUPPLEMENT NO. __, dated ______________ between FRONTIER AIRLINES, INC., a
Colorado corporation, as Borrower, the LENDERS, and CREDIT AGRICOLE INDOSUEZ, as Agent.

         WHEREAS, the Borrower has heretofore executed and delivered the Secured Credit Agreement dated as of
__________ __, 2002 between the Borrower, the Lenders and the Agent (the "Secured Credit Agreement"), which
Secured Credit Agreement provides, among other things, for the execution and delivery from time to time of
Secured Credit Agreement Supplements, each substantially in the form hereof, for the purpose of financing the
Loans of one or more Aircraft as and when requested by the Borrower in accordance with the terms thereof; and

         WHEREAS, the Secured Credit Agreement relates, among other things, to the Aircraft specifically
described below;

         NOW, THEREFORE, the Borrower, the Agent and the Lenders hereby agree as follows (with capitalized
terms used herein and not otherwise defined herein shall have the respective meanings set forth in Appendix X):

         The Loan to be made by the Lenders for the financing of the Aircraft identified below is
$______________.  On the Delivery Date for such Aircraft, each Lender will make available to the Borrower
its Term Loan in respect of such Aircraft and the Borrower will become obligated to repay such Term Loans
as provided in the Secured Credit Agreement in the aggregate principal amounts and on the Payment Dates as
set forth in Schedule 1 to this Secured Credit Agreement Supplement, together with interest on the aggregate
unpaid principal amount thereof from time to time outstanding in accordance with Section 1.03 of the Secured
Credit Agreement.

                  (i)   Airframe:  One (1) Airbus Model A319-111 aircraft, U.S. Registration
                  No. ________; manufacturer's serial no. ________; and



                  (ii)   Engines:  Two (2) CFM International, Inc. Model CFM56-5B5/P engines bearing,
                  respectively, manufacturer's serial nos. ________ and ________ (each of which engines
                  has 750 or more rated takeoff horsepower or the equivalent of such horsepower).



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

         This Secured Credit Agreement Supplement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of New York, including all matters of construction, validity
and performance.

         This Secured Credit Agreement Supplement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures were upon the same instrument.

                                      [This space intentionally left blank.]






         IN WITNESS WHEREOF, the parties hereto have caused this Secured Credit Agreement Supplement to be
executed by their duly authorized officers all as of the day and year first above written.

                                                     FRONTIER AIRLINES, INC.

                                                     By                                             
                                                          Name:
                                                          Title:

                                                     CREDIT AGRICOLE INDOSUEZ,
                                                     as Agent and as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:






                                                     DVB BANK AG,
                                                     as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:








                                                     LILIENTHAL CAPITAL CORP.,
                                                     as a Lender


                                                     By                                             
                                                          Name:
                                                          Title:












                                                    SCHEDULE I
                                                        TO
                                    SECURED CREDIT AGREEMENT SUPPLEMENT NO. ___





Delivery Date:

                                                   Principal
Payment No.          Payment Date                Installment            Outstanding
                                                    Amount                Balance

       1
       2
       3
       4
       5
       6
       7
       8
       9
      10
      11
      12
      13
      14
      15
      16
      17
      18
      19
      20
      21
      22
      23
      24
      25
      26
      27
      28
      29
      30
      31
      32
      33
      34
      35
      36
      37
      38
      39
      40
      41
      42
      43
      44
      45
      46
      47
      48
EX-10 6 n913fragreement.htm N913FR AGREEMENT Frontier Airlines, Inc 10q 


                                                                                             

                                     AIRCRAFT MORTGAGE AND SECURITY AGREEMENT



                                           Dated as of October 10, 2002



                                                      Between



                                             FRONTIER AIRLINES, INC.,
                                                  as Mortgagor



                                                      and



                                             CREDIT AGRICOLE INDOSUEZ,
                                              as Agent, as Mortgagee



                       Up to Three (3) Airbus A319-111 Aircraft, together with in each case,
                                   Two (2) CFM56-5B5/P Engines Installed thereon

                                                                                             










                                TABLE OF CONTENTS

                                                                                            Page


ARTICLE I             DEFINITIONS............................................................5

ARTICLE II            REGISTRATION, MAINTENANCE AND OPERATION OF AIRCRAFT; POSSESSION AND
                      LEASES; INSIGNIA.......................................................5

     SECTION 2.1      REGISTRATION AND MAINTENANCE...........................................5
     SECTION 2.2      OPERATION..............................................................6
     SECTION 2.3      POSSESSION AND LEASES..................................................6
     SECTION 2.4      INSIGNIA...............................................................9
     SECTION 2.5      LIENS..................................................................9

ARTICLE III           REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND
                      ADDITIONS..............................................................9

     SECTION 3.1      REPLACEMENT OF PARTS...................................................9
     SECTION 3.2      POOLING OF PARTS......................................................10
     SECTION 3.3      ALTERATIONS, MODIFICATIONS AND ADDITIONS..............................10
     SECTION 3.4      SUBSTITUTION OF ENGINES...............................................11
     SECTION 3.5      INFLIGHT EQUIPMENT....................................................11

ARTICLE IV            EVENT OF LOSS.........................................................11

     SECTION 4.1      EVENT OF LOSS WITH RESPECT TO ANY AIRCRAFT............................11
     SECTION 4.2      EVENT OF LOSS WITH RESPECT TO AN ENGINE...............................12
     SECTION 4.3      APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR REQUISITION
                      OF TITLE, ETC.........................................................13
     SECTION 4.4      REQUISITION FOR USE OF THE AIRCRAFT BY THE UNITED STATES GOVERNMENT...13
     SECTION 4.5      REQUISITION FOR USE OF AN ENGINE BY THE UNITED STATES GOVERNMENT......13
     SECTION 4.6      APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENTS OF DEFAULT.........14

ARTICLE V             INSURANCE.............................................................14

     SECTION 5.1      BODILY INJURY AND PROPERTY DAMAGE LIABILITY INSURANCE.................14
     SECTION 5.2      INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT......................15
     SECTION 5.3      WAR-RISK, HIJACKING AND RELATED PERILS INSURANCE......................16
     SECTION 5.4      REPORTS, ETC..........................................................16
     SECTION 5.5      SELF-INSURANCE........................................................17
     SECTION 5.6      ADDITIONAL INSURANCE..................................................17
     SECTION 5.7      INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE....................18
     SECTION 5.8      APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT.......18
     SECTION 5.9      TERMS OF INSURANCE POLICIES...........................................18
     SECTION 5.10     INSURANCE POLICIES FOLLOWING THE REPAYMENT DATE.......................19

ARTICLE VI            DEFAULTS AND REMEDIES.................................................19

     SECTION 6.1      EVENT OF DEFAULT......................................................19
     SECTION 6.2      RIGHTS AGAINST MORTGAGED PROPERTY.....................................21
     SECTION 6.3      PROVISIONS REGARDING SALE.............................................24
     SECTION 6.4      EXERCISE OF REMEDIES..................................................24
     SECTION 6.5      APPLICATION OF SALE AND OTHER PROCEEDS................................25

ARTICLE VII           TERMINATION...........................................................25

     SECTION 7.1      RELEASE OF MORTGAGED PROPERTY.........................................25

ARTICLE VIII          TERM..................................................................26


ARTICLE IX            THE MORTGAGEE.........................................................26


ARTICLE X             BANKRUPTCY............................................................27


ARTICLE XI            MISCELLANEOUS.........................................................27

     SECTION 11.1     MISCELLANEOUS.........................................................27
     SECTION 11.2     COUNTERPARTS..........................................................27
     SECTION 11.3     APPLICABLE LAW........................................................27
     SECTION 11.4     INSPECTION............................................................27
     SECTION 11.5     NO LEGAL TITLE TO MORTGAGED PROPERTY IN THE LENDERS...................28
     SECTION 11.6     NO ACTION CONTRARY TO COMPANY'S RIGHTS; QUIET ENJOYMENT...............28



EXHIBITS AND ANNEXES

Exhibit A             Form of Mortgage Supplement
Appendix X            Definitions





                                                                   2




                             AIRCRAFT MORTGAGE AND SECURITY AGREEMENT 


This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (this "Mortgage"), dated as of October 10, 2002,
is made and entered into between FRONTIER AIRLINES, INC., a Colorado corporation, as Mortgagor
(the "Company"), and CREDIT AGRICOLE INDOSUEZ, as Agent, acting on its own behalf as Agent and
as the agent for the Lenders (in such capacity, together with its successors and assigns, the
"Mortgagee").

WHEREAS, the Company has entered into a Secured Credit Agreement dated as of October 10, 2002
(the "Secured Credit Agreement") with the Mortgagee and the Lenders listed on the signature pages
thereof and the terms of the Secured Credit Agreement require that the obligations of the Company
thereunder in respect of the Loans (as hereinafter defined) be secured by a valid and perfected
first priority security interest in the Mortgaged Property (as defined below);

WHEREAS, the Company is the legal and beneficial owner of the Mortgaged Property;

WHEREAS, the Company wishes to grant certain first priority security interests in favor of the
Mortgagee for the security and benefit of the Secured Parties; and

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

NOW, THEREFORE, THIS MORTGAGE WITNESSETH and it is hereby agreed and declared as follows:

                                    GRANT OF SECURITY INTEREST

To secure the prompt payment and performance of all Secured Obligations and the performance and
observance of the agreements, covenants and provisions contained herein and in the Secured Credit
Agreement and the other Loan Documents, and in consideration of the premises and of the covenants
herein contained, the Company has transferred, assigned, granted, bargained, sold, conveyed,
mortgaged, hypothecated and pledged, and does hereby transfer, assign, grant, bargain, sell,
convey, mortgage, hypothecate and pledge to the Mortgagee, its successors and assigns, for the
security and benefit of the Secured Parties, a valid and perfected first priority security interest
in and lien on all right, title, interest, claims and demands of the Company in and to the property,
rights and privileges described in Granting Clauses I to VII hereof, inclusive, whether now or
hereafter acquired (which property collectively, including all property hereafter specifically
subjected to the Lien of this Mortgage by a Mortgage Supplement hereto, is hereinafter called the
"Mortgaged Property"), to wit:

GRANTING CLAUSE I

Each Aircraft (including each Airframe, each Engine, all Buyer Furnished Equipment (other than
Inflight Equipment) and Parts) as the same is now and will hereafter be constituted, whether now
owned by the Company or hereafter acquired, and in the case of such Engines, whether or not any
such Engines shall be installed in or attached to any Airframe or any other airframe, and all
replacements thereof and substitutions therefor to which the Company shall from time to time
acquire title, all as may be more particularly described in each Mortgage Supplement hereto.

GRANTING CLAUSE II

All substitutions, replacements and renewals of the property described in the foregoing Granting
Clause I and all accessions, improvements, accumulations and additions thereto or therein (other
than accessions or additions which constitute appliances, parts, instruments, appurtenances,
accessories, furnishings or other equipment excluded from the definition of Parts), whether such
accessions and additions are now owned by the Company or hereafter acquired and all other property
which shall be subjected to the Lien of this Mortgage by delivery or writing of any kind.

GRANTING CLAUSE III

All payments and proceeds or other revenues or income in respect of any sale, lease or other
disposition of any or all of the properties described in these Granting Clauses and all proceeds
of insurance and requisition (including, but not limited to the insurance required under Article V
hereof) and any other proceeds of any kind resulting from an Event of Loss with respect thereto
but excluding any proceeds generated from the transportation of passengers, cargo or mail prior
to repossession of any Aircraft after an Event of Default.

GRANTING CLAUSE IV

All right, title, interest, claims and demands of the Company in respect of each Aircraft, in,
to and under

                  (a)   Clause 12 (Warranties and Service Life Policy) and Clause 13 (Patent
         Indemnity) of the Purchase Agreement insofar as they relate to any Aircraft or any
         element thereof, the warranties and indemnities, including all limitations thereto,
         provided in Section 2 of Exhibit B in the Engine Agreement and all claims arising under
         such provisions in respect of the Engines and the Bills of Sale (reserving to the Company,
         however, all of the Company's other rights and interest in and to the Purchase Agreement
         and the Engine Agreement) together with all rights, powers, privileges, options and other
         benefits of the Company in respect of such provisions (subject to such reservation) with
         respect to any Airframe or any Engine, including, without limitation, the right to make
         all waivers and agreements, to give and receive all notices and other instruments or
         communications, and to take such action upon the occurrence of a default in respect of such
         provisions, including the commencement, conduct and consummation of legal, administrative
         or other proceedings, as shall be permitted thereby or by law, and to do any and all other
         things which the Company is or may be entitled to do in respect of such provisions (subject
         to such reservation), subject, with respect to the Purchase Agreement, to the terms and
         conditions of the Consent and Agreement and, with respect to the Engine Agreement, the
         Engine Consent and Agreement,

                  (b)   all rights under warranties and indemnities in respect of the Buyer
         Furnished Equipment (other than Inflight Equipment) for any Aircraft or any element
         thereof,

                  (c)   the Warranty Bill of Sale in respect of such Aircraft, and

                  (d)   the FAA Bill of Sale in respect of such Aircraft.

GRANTING CLAUSE V

All monies and securities from time to time deposited or required to be deposited with the
Mortgagee pursuant to any terms of this Mortgage or required hereby to be held by the Mortgagee
hereunder as security for the obligations of the Company hereunder or otherwise.

GRANTING CLAUSE VI

All estate, right, title, interest and claims whatsoever, at law as well as in equity, which the
Company has or possesses on the date of this Mortgage or to which the Company may thereafter
become legally or equitably entitled, in the property described in the foregoing Granting Clauses
or,  subject to the exclusions specifically set forth in Granting Clause III above, the proceeds
thereof.

GRANTING CLAUSE VII

All payments and proceeds or other revenues or income under the CRAF program with respect to any
Aircraft.

GRANTING CLAUSE VIII

All right, title, interest, claims and demands of the Company in respect of any Aircraft, in, to
and under any lease with respect to such Aircraft.

GRANTING CLAUSE IX

All Records.

TO HAVE AND TO HOLD all and singular the Mortgaged Property unto the Mortgagee and its successors
and assigns as security as aforesaid; upon the terms hereinafter set forth, for the equal and
proportionate benefit, security and protection of all present and future holders of the Loans
outstanding under the Secured Credit Agreement, without preference, priority or distinction of
any Loan over any other Loan by reason of priority of time of issue, sale, negotiation, date of
maturity thereof or otherwise for any cause whatsoever, and for the uses and purposes and subject
to the terms and provisions set forth in this Mortgage; provided, however, that the Mortgagee
will not take any action contrary to the rights of the Company hereunder to the quiet enjoyment
and use of any of theAircraft, except in accordance with the provisions of this Mortgage.

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

Subject to the provisions hereof, the Company does hereby constitute the Mortgagee the true and
lawful attorney of the Company, irrevocably, coupled with an interest and with full power of
substitution, and with full power (in the name of the Company or otherwise) to during the continuance
of an Event of Default ask for, require, demand, and receive, any and all monies and claims for monies
(in each case including insurance and requisition proceeds except as herein otherwise provided) due
and to become due under or arising out of any agreement assigned or pledged hereunder, and all other
property which now or hereafter constitutes part of the Mortgaged Property, to endorse any checks
or other instruments or orders in connection therewith and to file any claims or to take any action
or to institute any proceedings which the Mortgagee may deem to be necessary or advisable in the
premises.  Without limiting the provisions of the foregoing, during the continuance of any Event of
Default under this Mortgage but subject to the terms hereof, the Mortgagee shall have the right
under such power of attorney to sue for, compound and give acquittance for, to accept any offer
of any purchaser to purchase any Airframe and Engines as provided herein and upon such purchase to
execute and deliver in the name of and on behalf of the Company an appropriate bill of sale and other
instruments of transfer relating to such Airframe and Engines, when purchased by such purchaser, and
to perform all other necessary or appropriate acts with respect to any such purchase, and in its
discretion to file any claim or take any other action or proceedings, either in its own name or in
the name of the Company or otherwise, which the Mortgagee may reasonably deem necessary or appropriate
to protect and preserve the right, title and interest of the Mortgagee in and to such rents and other
sums and the security intended to be afforded hereby; provided no action of the Mortgagee pursuant to
this paragraph shall increase the obligations or liabilities of the Company to any Person beyond those
obligations and liabilities specifically set forth in this Mortgage and the other Loan Documents.

The Company does hereby warrant and represent that it has not assigned or pledged, and hereby
covenants and agrees that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned, to anyone other than the
Mortgagee, and that it will not, except as provided in this Mortgage, or except in a manner that
does not adversely affect the Mortgagee and the Lenders, enter into any agreement amending or
supplementing Clause 12 or 13 of the Purchase Agreement, Section 2 of Exhibit B to the Engine
Agreement or any other agreement assigned or pledged hereunder or execute any waiver or modification
of, or consent under, the terms of, or during the continuance of an Event of Default, exercise any
rights, powers or privileges under, the foregoing clauses and sections of the Purchase Agreement or
the Engine Agreement or any such other agreement, or during the continuance of an Event of Default,
settle or compromise any claim arising thereunder, or submit or consent to the submission of any
dispute, difference or other matter arising under or in respect of such clauses and sections of the
Purchase Agreement or the Engine Agreement or any such other agreement to arbitration; provided,
however, that none of the foregoing, without the consent of the Mortgagee, may be undertaken if
the result would be to rescind, cancel, terminate or impair the rights of the "Buyer" under Clause
12 or 13 of the Purchase Agreement or Section 2 of Exhibit B to the Engine Agreement as to the Aircraft.

It is hereby further agreed that any and all property described or referred to in the granting
clauses hereof which is hereafter acquired by the Company shall ipso facto, and without any further
conveyance, assignment or act on the part of the Company or the Mortgagee, become and be subject
to the lien and security interest herein granted as fully and completely as though specifically
described herein, but nothing contained in this paragraph shall be deemed to modify or change the
obligations of the Company contained in the foregoing paragraphs.

The Company agrees that at any time and from time to time, upon the written request of the Mortgagee,
the Company will promptly and duly execute and deliver any and all such further instruments and
documents as the Mortgagee may reasonably determine to be necessary in obtaining the full benefits
of this grant and assignment and of the rights and powers herein granted.

It is hereby covenanted and agreed by and between the parties hereto as follows:

                                      Article I
                                     DEFINITIONS

As used in this Mortgage, except as otherwise herein indicated, the following terms shall have
the respective meanings set forth below or in the location indicated.  Capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in Appendix X hereto.

                                      Article II
                         REGISTRATION, MAINTENANCE AND OPERATION OF
                          AIRCRAFT; POSSESSION AND LEASES; INSIGNIA

Section 2.1     Registration and Maintenance.  The Company, at its own cost and expense,
shall:  (i) upon delivery of each Aircraft, cause the Aircraft to be duly registered in the name
of the Company, and to remain duly registered in the name of the Company under the Federal Aviation
Act and cause the Mortgage to be duly recorded and maintained of record as a first priority mortgage
on the Aircraft; (ii) maintain, service, repair, and overhaul (or cause to be maintained, serviced,
repaired, and overhauled) the Aircraft (and any engine which is not an Engine but which is installed
on the Aircraft) (x) so as to keep the Aircraft in as good an operating condition as when delivered
to the Company from the Manufacturer, ordinary wear and tear excepted, and in such condition
(including timely compliance with all applicable FAA airworthiness directives and Federal Aviation
Regulations) as may be necessary to enablethe airworthiness certification for the Aircraft to be
maintained in good standing at all times under the Company's FAA approved maintenance program and
in accordance with the manufacturer's maintenance planning document (other than during temporary
periods of storage in accordance with applicable regulations) under the Federal Aviation Act,
except when all of the Company's Airbus Model A319-100 series aircraft of comparable vintage
and/or configuration (powered by engines of the same type as those with which the Airframe shall
be equipped at the time of such grounding) registered in the United States have been grounded by
the FAA and (y) in substantially the same manner as the Company maintains, services, repairs or
overhauls similar aircraft  operated by the Company in similar circumstances and without in any
way discriminating against the Aircraft, whether by reason of its owned status or otherwise, or
in such other manner as shall have been approved by the Mortgagee; (iii) maintain or cause to
be maintained (in English or with an English translation) all Records, logs and other materials
required to be maintained in respect of the Aircraft by the FAA; and (iv) upon receipt of a written
request by the Mortgagee, promptly furnish or cause to be furnished to the Mortgagee or any Lender
such information as may be required to enable the Mortgagee or any Lender to file any reports
required to be filed by the Mortgagee or any Lender with any governmental authority because of
such person's interest in the Aircraft hereunder.

Section 2.2     Operation.  The Company will not maintain, use, service, repair, overhaul
or operate the Aircraft in violation of any law or any rule, regulation, treaty order or certificate
of any government or governmental body (domestic or foreign) having jurisdiction, or in violation
of any airworthiness certificate, license or registration relating to the Aircraft issued by any
governmental body.  In the event that any such law, rule, regulation, treaty, order, certificate,
license or registration requires alteration of the Aircraft, the Company will conform thereto or
obtain conformance therewith at no expense to the Mortgagee. Notwithstanding the foregoing, the
Company may contest in good faith the validity or application of any such law, rule, regulation,
treaty, order, certificate, license, registration or violation in any reasonable manner which
does not materially adversely affect the Mortgagee or any Lender or any of their respective
interests in or to the Aircraft or any Loan Document or subject any such Person to risk of civil
or criminal penalties.  If the indemnities or insurance from the United States Government
specified in Section 5.7 hereof or some combination thereof in amounts equal to amounts required
by Section 5.7 hereof, have not been obtained (or if indemnities or insurance in amounts so
required are not available in the commercial aviation insurance market), the Company will not
operate the Aircraft, or suffer or permit any other Person to operate the Aircraft, in or to any
area excluded from coverage by any insurance required to be maintained by the terms of Article V
hereof; provided, however, that the failure of the Company to comply with the provisions of this
sentence shall not give rise to an Event of Default where such failure is attributable to a hi-
jacking, medical emergency, equipment malfunction, weather conditions, navigational error or other
isolated extraordinary event beyond the control of the Company so long as the Company is diligently
proceeding to rectify such failure as soon as practicable.

Section 2.3     Possession and Leases.  The Company will not, without the prior written consent
of the Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld or
delayed, lease or otherwise in any manner deliver, transfer or relinquish possession of any Airframe
or Engine or  install or permit any Engine to be installed on any airframe other than the Airframes;
provided that, so long as no Event of Default shall have occurred and be continuing at the time
of such lease, delivery, transfer or relinquishment of possession or installation, and so long as
the action to be taken shall not deprive the Mortgagee of the prior perfected Lien of the Mortgage
on any Airframe or Engine and the Company shall continue to comply with the provisions of Sections
2.1 and 2.2 and Article V hereof, the Company may, without the prior written consent of the Mortgagee
and the Required Lenders:

(a)      subject the Engines or any engine then installed on any Airframe to normal interchange
         agreements or any Engine to normal pooling or similar arrangements, in each case customary
         in the airline industry and entered into by the Company in the ordinary course of its
         business; provided, that if the Company's title to any Engine shall be divested under any such
         agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect
         to such Engine and the Company shall comply with Section 4.2 hereof in respect thereof;

(b)      deliver possession of any Airframe or Engine to the manufacturer thereof or to any other
         Person for testing, service, repair, maintenance or overhaul work on such Airframe or
         Engine or any Part thereof or for alterations or modifications in or additions to such
         Airframe or Engine to the extent required or permitted by the terms of Section 3.3 hereof;

(c)      install any Engine on an airframe owned by the Company which airframe is free and clear
         of all Liens, except: (A) Permitted Liens and those which apply only to the engines
         (other than Engines), appliances, parts, instruments, appurtenances, accessories, furnishings
         and other equipment (other than Parts) installed on such airframe (but not to such airframe
         as an entirety), (B) the rights of third parties under interchange agreements which would be
         permitted under Section 2.3(a) hereof, provided that the Company's title to such Engine
         shall not be divested as a result thereof, and (C) mortgage Liens or other security interests,
         provided, that (as regards this clause (C)), such mortgage Liens or other security interests
         effectively provide that such Engine shall not become subject to the Lien of such mortgage
         or security interest, notwithstanding the installation thereof on such airframe;

(d)      install an Engine on an airframe leased to the Company or purchased by the Company subject
         to a conditional sale or other security agreement, provided that (x) such airframe is
         free and clear of all Liens, except:  (A) the rights of the parties to the lease or
         conditional sale or other security agreement covering such airframe, or their assignees,
         and (B) Liens of the type permitted by Section 2.3(c) hereof and (y) such lease, conditional
         sale or other security agreement effectively provides that such Engine shall not become
         subject to the Lien of such lease, conditional sale or other security agreement, notwith-
         standing the installation thereof on such airframe;

(e)      install an Engine on an airframe owned by the Company, leased to the Company or purchased
         by the Company subject to a conditional sale or other security agreement under circumstances
         where neither Section 2.3(c) nor Section 2.3(d) hereof is applicable, provided that such
         installation shall be deemed an Event of Loss with respect to such Engine and the Company
         shall comply with Section 4.2 hereof in respect thereof, Mortgagee not intending hereby
         to waive any right or interest it may have to or in such Engine under applicable law
         until compliance by the Company with such Section 4.2; or

(f)      transfer possession of any Airframe or any Engine to the United States of America or any
         instrumentality or agency thereof, the obligations of which are guaranteed by the full
         faith and credit of the United States Government pursuant to a contract, a copy of which
         shall be provided to the Mortgagee and each Lender.

(g)      transfer possession of any Airframe or any Engine to the United States of America or any
         instrumentality or agency thereof pursuant to CRAF so long as the Company shall notify
         the Mortgagee in writing prior to transferring possession of such Airframe or any such
         Engine to the United States of America or any agency or instrumentality thereof pursuant
         to such program and provide the Mortgagee with the name and address of the Contracting
         Office Representative for the Air Mobility Command of the United States Air Force to whom
         notice must be given in the event the Mortgagee desires to give notice as provided in
         Section 6.01 of the Secured Credit Agreement .

The rights of any transferee who receives possession by reason of a transfer permitted by this
Section 2.3 (other than the transfer of an Engine which is deemed an Event of Loss) shall be subject
and subordinate to all the terms of this Mortgage, including, without limitation, the covenants
contained in Article II hereof, the inspection rights contained in Section 11.6 hereof and the
Mortgagee's rights to exercise remedies pursuant to Article VI hereof, and the Company shall remain
primarily liable hereunder for the performance of all of the terms of this Mortgage to the same
extent as if such transfer had not occurred, provided that in the case of the use of any Aircraft
in CRAF, the subject and subordinate requirements herein shall be subject to the notice specified in
Section 6.01 of the Secured Credit Agreement and the other requirements of the CRAF program.  No
pooling agreement, lease or other relinquishment of possession of any Airframe or Engine shall in
any way discharge or diminish any of the Company's obligations hereunder or constitute a waiver
of the Mortgagee's rights or remedies hereunder.

The Mortgagee agrees, for the benefit of the Company and for the benefit of any mortgagee or other
holder of a security interest in any engine owned by the Company, any lessor of any engine leased
to the Company and any conditional vendor of any engine purchased by the Company subject to a
conditional sale agreement or any other security agreement, that no interest shall be created
hereunder in any engine so owned, leased or purchased and that neither the Mortgagee nor its
successors or assigns will acquire or claim, as against the Company or any such mortgagee, lessor,
conditional vendor or other holder of a security interest or any successor or assignee of any
thereof, any right, title or interest in such engine as the result of such engine being installed
on the Airframe.

The Mortgagee acknowledges that any Wet Lease or similar arrangement under which the Company main-
tains operational control of the Aircraft shall not constitute a delivery, transfer or relinquishment
of possession for purposes of this Section 2.3 so long as such Wet Lease shall be for a term
(including any renewals) not exceeding ninety (90) days.  The Mortgagee acknowledges that any
consolidation or merger of the Company or conveyance or transfer of all or substantially all of
the Company's assets permitted by the Loan Documents shall not be prohibited by this Section 2.3.

Section 2.4     Insignia.  On or prior to each Delivery Date, or as soon thereafter as practicable,
the Company agrees to affix and maintain (or cause to be affixed and maintained) in the cockpit
of the Airframe adjacent to the registration certificate therein and on each Engine a nameplate
bearing the inscription:

    "Mortgaged To: Credit Agricole Indosuez, New York, New York, as Mortgagee for the benefit and
     security of the Secured Parties"

(such nameplate to be replaced, if necessary, with a nameplate reflecting the name of any successor
Mortgagee, in each case as permitted under the Loan Documents).

Except as above provided, the Company will not allow the name of any Person to be placed on any
Airframe or Engine as a designation that might be interpreted as a claim of ownership; provided,
that nothing herein contained shall prohibit the Company from placing its customary colors and
insignia on each Airframe or Engine or from otherwise operating the Aircraft in its livery.

Section 2.5     Liens.  The Company will not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to any Aircraft, title thereto or any interest
therein or any other Mortgaged Property, with the exception of Permitted Liens.  The Company will
promptly, at its own expense, take (or cause to be taken) such actions as may be necessary duly
to discharge any such Lien not excepted above if the same shall arise at any time.

                                      Article III
            REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS

Section 3.1     Replacement of Parts.  The Company, at its own cost and expense, will promptly
replace or cause to be replaced all Parts which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever, except as otherwise provided in Section 3.3 hereof.  All replacement Parts shall be
owned by the Company free and clear of all Liens (except Permitted Liens or pooling arrangements
permitted by Section 3.2 hereof and replacement Parts temporarily installed on an emergency basis)
and shall be in as good an operating  condition as and shall have a value, utility and remaining
useful life substantially equal to the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof.  All Parts (other than Obsolete Parts, as
defined in Section 3.3 below) at any time removed from any Airframe or Engine shall remain the
property of the Company and shall remain subject to the Lien of this Mortgage, no matter where
located, until such time as such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above.  Immediately upon any replacement Part becoming incorporated
or installed in or attached to any Airframe or Engine, without further act (subject only to Permitted
Liens and any pooling arrangement permitted by Section 3.2 hereof and except replacement Parts
temporarily installed on an emergency basis), (i) such replacement Part shall become the property
of the Company and shall become subject to this Mortgage and be deemed a Part for all purposes
hereof to the same extent as the Parts originally incorporated or installed in or attached to such
Airframe or Engine and (ii) the replaced Part shall no longer be deemed a Part hereunder.

Section 3.2     Pooling of Parts.  Any Part removed from any Airframe or Engine as provided in
Section 3.1 hereof may be subjected by the Company to a pooling arrangement of the type which is
permitted by Section 2.3(a) hereof; provided, that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in accordance with Section 3.1
hereof as promptly as practicable after the removal of such removed Part.  In addition, any
replacement Part may be owned by any third party subject to such a pooling arrangement, provided,
that the Company, at its expense, as promptly thereafter as practicable, either (i) causes such
replacement Part to become the property of the Company free and clear of all Liens other than
Permitted Liens or (ii) replaces such replacement Part with a further replacement Part owned by
the Company which shall become the property of the Company, free and clear of all Liens other than
Permitted Liens.

Section 3.3     Alterations, Modifications and Additions.  The Company, at its own expense, will make
(or cause to be made) such alterations and modifications in and additions to the Airframes and Engines
as may be required so as to comply with all Applicable Laws of the FAA and to maintain the applicable
standard Certificate of Airworthiness for such Aircraft, in each case, subject to the exception set forth
in Clause 2.1(ii)(x); provided, however, that, the Company may, in good faith, contest the validity or
application of any such law, rule, regulation or order in any reasonable manner which does not materially
adversely affect the Mortgagee or any Lender or  any of their respective interests in or to such Airframe
or Engines or subject any such Person to risk of civil or criminal penalties.  In addition, the Company,
at its own expense, may from time to time make such alterations and modifications in and additions to
any Airframe or Engine as the Company may deem desirable in the proper conduct of its business, including
removal of Parts which the Company deems to be obsolete or no longer suitable or appropriate for use
on such Airframe or Engine (such parts, "Obsolete Parts"); provided that no such alteration, modification,
removal or addition impairs the condition or airworthiness of such Airframe or Engine, or materially
(in the aggregate giving consideration to all prior alterations, modifications, removals or additions)
diminishes the value or diminishes the utility and remaining useful life of such Airframe or
Engine below the value or utility thereof immediately prior to such alteration, modification, removal
or addition assuming such Airframe or Engine was then in the condition required to be maintained by
the terms of this Mortgage.  In addition, the value (but not the utility) of any Airframe or Engine
may be reduced by the value of Obsolete Parts which shall have been removed so long as the aggregate
value of all Obsolete Parts which shall have been removed and not replaced shall not exceed $500,000.
All Parts incorporated or installed in or attached or added to any Airframe or Engine as the result
of such alteration, modification or addition (except those parts which the Company is entitled to use
pursuant to a lease, license or other similar arrangement with a third party and which may be removed
by the Company pursuant to the next sentence) (the "Additional Parts") shall, without further act,
become subject to the Lien of this Mortgage.  Notwithstanding the foregoing sentence, the Company may,
so long as no Event of Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that such Additional Part (i) is in addition to, and not in replacement
of or substitution for, any Part originally incorporated or installed in or attached to such Airframe
or any Engine at the time of delivery thereof hereunder or any Part in replacement of or substitution
for any such Part, (ii) is not required to be incorporated or installed in or attached or added to any
Airframe or Engine pursuant to the terms of Article II hereof or the first sentence of this Section 3.3,
and (iii) can be removed from any Airframe or Engine without impairing the airworthiness or diminishing
the value or utility of such Airframe or Engine which such Airframe or Engine would have had at such time
had such alteration, modification or addition not occurred.  Upon the removal thereof as provided above,
such Additional Part shall no longer be subject to the Lien of this Mortgage or deemed part of the Airframe
or Engine from which it was removed.

Section 3.4     Substitution of Engines.  So long as no Default or Event of Default shall have occurred
and be continuing, the Company shall have the right at its  option at any time, on at least five (5)
Business Days' prior written notice to Mortgagee, to substitute an engine for any Engine subject to this
Mortgage.  In such event, and prior to the date of substitution, the Company shall replace such Engine
hereunder by complying with the terms of Section 4.2 hereof to the same extent as if an Event of Loss
had occurred with respect to such Engine, and upon such replacement, such replaced Engine shall no longer
be deemed an Engine hereunder.

Section 3.5     Inflight Equipment.  The Mortgagee acknowledges and agrees that the Mortgagor may at
any time during the term of this Mortgage install a telephone system and/or an inflight entertainment
system for passenger use on any Aircraft (collectively, the "Inflight Equipment") provided that:

(a)      the owner or financier of the Inflight Equipment will have no Lien on or against such Aircraft
         and no rights with respect to such Aircraft except the right to remove the Inflight Equipment
         from such Aircraft if such owner, financier or the Mortgagor repairs and restores such Aircraft
         as provided below;

(b)      such right of installation and removal is subject to and conditional upon the Mortgagor, or such
         owner or financier, repairing all damage and restoring at no expense or risk to the Mortgagee,
         all alterations made to such Aircraft in connection with the installation or removal of the
         Inflight Equipment to the condition prior to the installation thereof (ordinary wear and tear
         excepted), which removal, repair and restoration will be completed no later than thirty (30) days
         after notice from the Mortgagee of the occurrence of an Event of Default, and will be reasonably
         satisfactory to the Mortgagee; and

(c)      prior to the installation of any Inflight Equipment, the Mortgagor shall provide the Mortgagee
         with the identity and notice particulars of the owner or financier of such Inflight Equipment.

The Mortgagee acknowledges that at all times (i) the owner or financier of the Inflight Equipment has
and will retain sole and exclusive right and title (if applicable) to and in the Inflight Equipment,
(ii) the Inflight Equipment will not constitute a Part or a part of such Aircraft, and (iii) the Inflight
Equipment will not become subject to the Lien of this Mortgage.

                                      Article IV
                                     EVENT OF LOSS

Section 4.1     Event of Loss With Respect to any Aircraft.  Upon the occurrence of an Event of Loss
with respect to any Airframe or any Airframe and the Engines and/or engines then installed thereon, the
Company shall (1) forthwith (and, in any event, within five (5) days after such occurrence) give the
Mortgagee written notice of such Event of Loss and (2) not later than the earlier of (x) the first
Business Day after the ninetieth (90th) day following the occurrence of such Event of Loss or (y) the
fifth (5th) Business Day following the receipt by the loss payee of the insurance proceeds in respect
to such Event of Loss, the Company shall to the extent not previously paid to Mortgagee as insurance
proceeds, pay or cause to be paid to Mortgagee the outstanding principal amount of the Loan relating
to the Aircraft subject to such Event of Loss and all accrued and unpaid interest thereon and all other
Secured Obligations due and owing.

At such time as the Mortgagee shall have received all amounts specified in this Section 4.1, together
with all other amounts that then may be due or accrued hereunder, under the Secured Credit Agreement
or any other Loan Document (1) the Airframe and Engines, if applicable, subject to such Event of Loss
shall be released from the Lien of this Mortgage and (2) the Company will be subrogated to all claims
of Mortgagee, if any, against third parties to the extent the same relate to physical damage to or loss
of the Airframe and Engines which were subject to such Event of Loss.

No Event of Loss with respect to any Airframe or any Airframe and the Engines and/or engines then
installed thereon shall affect the obligation of the Company to pay all installments of principal of,
and interest on, the Loan relating to the Aircraft subject to such Event of Loss as and when due under
the Secured Credit Agreement unless and until the Mortgagee shall have received all amounts specified
in this Section 4.1.

Section 4.2     Event of Loss With Respect to an Engine.  Upon the occurrence of an Event of Loss with
respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect
to the relevant Airframe the Company shall forthwith (and, in any event, within ten (10) days after such
occurrence) give the Mortgagee written notice thereof and shall, within sixty (60) days after the occurrence
of such Event of Loss (or in the case of an Event of Loss described in clause (iv) of the definition thereof,
within ninety (90) days after the Responsible Officer has received actual knowledge of such Event of Loss),
(A) cause to be subject to the Lien of this Mortgage, either by purchasing or allocating hereto from engines
owned by the Company, as replacement for the Engine with respect to which such Event of Loss occurred, an
Acceptable Alternate Engine free and clear of all Liens (other than Permitted Liens) and having a value,
utility and remaining useful life at least equal to, and having been maintained in the same manner as, the
Engine subject to such Event of Loss (assuming that such Engine had been maintained in accordance with this
Mortgage) and (B) at its own expense (i) furnish to the Mortgagee a copy of a full warranty bill of sale,
in form and substance reasonably satisfactory to the Mortgagee, with respect to such replacement engine,
(ii) execute a Mortgage Supplement and record such Mortgage Supplement pursuant to the Federal Aviation Act
and cause a financing statement or statements or other requisite documents of a similar nature to be filed
in such place or places as necessary in order to perfect the security interests therein created by or pursuant
to this Mortgage, (iii) furnish the Mortgagee with such evidence of the Company's title to such replacement
engine and compliance with the insurance provisions of Article V hereof with respect to such replacement
engine as the Mortgagee may reasonably request, and (iv) provide to Mortgagee an opinion of the Company's
counsel to the effect that the Company holds good title to the replacement engine free and clear of all Liens
(other than Permitted Liens permitted by subclause (i) (solely for Taxes not yet due) of clause (d) of the
definition of the term "Permitted Liens") and all of the documentation required to be provided by it pursuant
to Section 4.1 reasonably satisfactory in form and substance to the Mortgagee and the Lenders.  No Event of
Loss with respect to an Engine under the circumstances contemplated by the terms of this Section 4.2 shall
affect the obligation of the Company to pay all installments of principal of, or interest on, the Loans as
and when due thereunder.  For all purposes hereof, each such replacement engine shall be deemed part of the
Mortgaged Property hereunder, and shall be deemed an "Engine."

Section 4.3     Application of Payments From Governmental Authorities for Requisition of Title, etc.
Any payments (other than insurance proceeds the application of which is provided for in Article V hereof)
received at any time by the Mortgagee or by the Company from any governmental authority or other Person with
respect to an Event of Loss resulting from the theft, disappearance, condemnation, confiscation or seizure
of, or requisition of title to or use of, any Airframe or Engine, other than a requisition for use by the
United States Government or any instrumentality or agency of any thereof not constituting an Event of Loss,
will be applied as follows:

(a)      if payments are received with respect to any Airframe (or any Airframe and Engine or engines then
         installed thereon), after reimbursement of Mortgagee for reasonable documented costs and expenses,
         such payments remaining shall be applied in reduction of the amounts required to be paid by the
         Company pursuant to Section 4.1 hereof and following the foregoing application, the balance, if any,
         of such payments shall be distributed to the Company; provided, that the Company shall have fully
         performed or, concurrently therewith, will fully perform the terms of Section 4.1 with respect to
         the Event of Loss for which such payments are made; and

(b)      if such payments are received with respect to an Engine under circumstances contemplated by Section
         4.2 hereof, so much of such payments remaining after reimbursement of the  Mortgagee for reasonable
         documented costs and expenses shall be paid over to, or retained by, the Company, provided that the
         Company shall have fully performed, or concurrently therewith will perform, the terms of Section 4.2
         hereof with respect to the Event of Loss for which such payments are made.

Section 4.4     Requisition for Use of the Aircraft by the United States Government.  In the event of the
requisition for use of any Airframe and the Engines or engines installed on such Airframe by the United States
Government, the Company shall promptly notify the Mortgagee of such requisition, and all of the Company's
rights and obligations under this Mortgage with respect to the Aircraft shall continue to the same extent as
if such requisition had not occurred.  All payments received by the Mortgagee or the Company from the United
States Government for the use of such Airframe and Engines or engines shall be paid over to, or retained by,
the Company.

Section 4.5     Requisition for Use of an Engine by the United States Government.  In the event of the
requisition for use of an Engine by the United States Government (other than in the circumstances contemplated
by Section 4.4 hereof), the Company shall replace such Engine hereunder and the Mortgagee and the Company
shall comply with the terms of Section 4.2 hereof to the same extent as if an Event of Loss had occurred
with respect to such Engine.  Upon compliance with Section 4.2 hereof, any payments received by the Mortgagee
or the Company from the United States Government with respect to such requisition shall be paid over to, or
retained by, the Company.

Section 4.6     Application of Payments During Existence of Events of Default.  Any amount referred to
in this Article IV which is payable to or retainable by the Company shall not be paid to or retained by the
Company if at the time of such payment or retention a Default or an Event of Default shall have occurred and
be continuing, but shall be held by or paid over to the Mortgagee as security for the obligations of the
Company hereby secured and, if the Mortgagee declares this Mortgage to be in default pursuant to Article VI
hereof, applied against the Company's obligations hereby secured as and when due.  At such time as there shall
not be continuing any such Default or Event of Default, such amount shall be paid to the Company to the extent
not previously applied in accordance with the preceding sentence.

                                      Article V
                                      INSURANCE

Section 5.1     Bodily Injury and Property Damage Liability Insurance.

(1)      Except as provided in Section 5.1(2), and subject to the self insurance to the extent permitted by
Section 5.5, at all times (including when the Company is required to carry war-risk insurance pursuant to
Section 5.3 hereof) the Company will carry or cause to be carried with respect to each Aircraft at its expense
(i) comprehensive airline liability (including, without limitation, passenger, bodily  injury, property damage
liability and product liability) insurance (exclusive of manufacturer's product liability insurance) and (ii)
cargo liability insurance, (A) in an amount not less than the greater of (x) the amounts of comprehensive
airline liability insurance from time to time applicable to aircraft owned or operated by the Company of the
same type as the Aircraft and (y) $* per occurrence, (B) of the type and covering the same risks as from time
to time are applicable to aircraft owned or operated by the Company of the same type as the Aircraft and (C)
which is maintained in effect with insurers of internationally recognized reputation and responsibility
reasonably acceptable to the Mortgagee and the Lenders.

(2)      During any period that any Airframe or Engine, as the case may be, is stored on the ground and not
in operation, the Company may carry or cause to be carried as to such non-operating property, in lieu of the
insurance required by Section 5.1(1) hereof, and subject to the self insurance to the extent permitted by
Section 5.5, insurance otherwise conforming with the provisions of said Section 5.1(1) except that (A) the
amounts of coverage shall not be required to exceed the amounts of comprehensive airline liability insurance
from time to time applicable to property owned or leased by the Company of the same type as such non-operating
property and which are on the ground and not in operation and (B) the scope of the risks covered and the type
of insurance shall be the same as from time to time shall be applicable to property owned or leased by the
Company of the same type as such non-operating property and which is on the ground and not in operation.

Section 5.2     Insurance Against Loss or Damage to the Aircraft.

(1)      Except as provided in Section 5.2(2), and subject to the provisions of Section 5.5 hereof permitting
self-insurance, the Company shall maintain or cause to be maintained in effect, at its expense, with insurers
of internationally recognized reputation and responsibility reasonably acceptable to the Mortgagee and the
Lenders, "all-risk" aircraft hull insurance covering each Aircraft and aircraft "all-risk" spare parts
insurance covering Engines and Parts while removed from the Aircraft (to the extent such Engines and Parts
are not covered by aircraft hull insurance); provided, that such insurance shall at all times while such
Aircraft is subject to this Mortgage be for an agreed value of (taking into account self-insurance to the
extent permitted by Section 5.5 hereof) not less than 115% of the aggregate outstanding amount of the Loan
relating to such Aircraft on any date of determination.  In the case of a loss with respect to an engine
(other than an Engine) installed on any Airframe in circumstances which do not constitute an Event of Loss
with respect to such Airframe, the Mortgagee shall promptly remit any payment made to it of any insurance
proceeds in respect of such loss to the Company or any other third party that is entitled to receive such
proceeds.

Except during a period when an Event of Default has occurred and is continuing, all losses will be adjusted
by the Company (giving due regard to the interest of the Mortgagee) with the insurers.  As between the
Mortgagee and the Company, it is agreed that all proceeds of insurance maintained in compliance with the
preceding paragraph and received as the result of the occurrence of an Event of Loss will be applied as follows:

                  (x)   if such payments are received with respect to any Airframe (or any Airframe and the
         Engines installed thereon), such payments remaining, after reimbursement of the Mortgagee for
         reasonable documented costs and expenses, shall be applied in reduction of the Secured Obligations
         relating to the Aircraft subject to such Event of Loss, if not already paid by the Company, or, if
         already paid by the Company, shall be applied to reimburse the Company for its payment of such Secured
         Obligations, and the balance, if any, of such payments remaining thereafter will be paid over to, or
         retained by, the Company, provided that the Company shall have fully performed or, concurrently
         therewith, will fully perform the terms of Section 4.1 with respect to the Event of Loss for which
         such payments are made; and

                  (y)   if such payments are received with respect to an Engine under the circumstances
         contemplated by Section 4.2 hereof, so much of such payments remaining after reimbursement of the
         Mortgagee for reasonable documented costs and expenses shall be paid over to, or retained by, the
         Company, provided that the Company shall have fully performed or, concurrently therewith, will
         fully perform the terms of Section 4.2 hereof with respect to the Event of Loss for which such
         payments are made.

(2)      During any period that any Aircraft is on the ground and not in operation, the Company may carry or
cause to be carried for such Aircraft, in lieu of the insurance required by Section 5.2(1) hereof, and
subject to the self-insurance to the extent permitted by Section 5.5 hereof, insurance otherwise conforming
with the provisions of said Section 5.2(1) except that the scope of the risks and the type of insurance shall
be the same as from time to time is applicable to aircraft owned or leased by the Company of the same type
as the Aircraft similarly stored on the ground and not in operation, provided that, subject to the self-
insurance to the extent permitted by Section 5.5 hereof, the Company shall maintain insurance against risk
of loss or damage to the Aircraft for an agreed value of at least 115% of the aggregate outstanding amount
of the Loan relating to such Aircraft on any date of determination during such period that the Aircraft is
stored on the ground and not in operation.

Section 5.3     War-Risk, Hijacking and Related Perils Insurance.

(1)      The Company shall at all times maintain coverage for war risk, hijacking and related perils at least
as broad as AVN 51 (extended coverage endorsement - aircraft hull).

(2)      If the Company shall at any time operate or propose to operate any Aircraft, Airframe or Engine in
any area of recognized or threatened hostilities, or if war-risk, hijacking or related perils insurance is
maintained by the Company with respect to other aircraft owned or operated by the Company on the same routes
or in such areas (because such aircraft is operated on such routes or areas and not because the aircraft is
operated on such routes or areas and other routes or areas and it is because of operation on such other routes
or in such other areas that such insurance is maintained) the Company shall maintain or cause to be maintained
with respect to each Aircraft worldwide coverage (subject to the exclusion of certain countries then standard
in the aircraft insurance market) of war-risk, hijacking and related perils insurance of substantially the
same type carried by major United States commercial air carriers operating the same or comparable models of
aircraft in such areas and in no event in an amount less than (x) the amounts set forth in Section 5.1 hereof
with respect to liability coverage and (y) for an agreed value at least equal to 115% of the aggregate out-
standing amount of the Loan relating to such Aircraft on any date of determination with respect to hull coverage,
in each case subject to the provisions of Section 5.5 hereof, and such insurance shall, to the extent available,
cover the perils of (a) war, invasion, acts of foreign enemies, hostilities (whether war be declared or not),
civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation
of power; (b) strikes, riots, civil commotions or labor disturbances; (c) any act of one or more persons,
whether or not agents of a sovereign power, for political or terrorist purposes and whether the loss or damage
resulting therefrom is accidental or intentional; (d) any malicious act or act of sabotage; (e) confiscation,
nationalization, seizure, restraint, detention, appropriation, requisition for title or use by or under the
order of any government (whether civil, military or de facto) on public or local authority other than the
State of Registration; and (f) hijacking or any unlawful seizure or wrongful exercise of control of the
Aircraft or crew in flight (including any attempt at such seizure or control) made by any person or persons
on board the Aircraft acting without the consent of the Company.  Furthermore, such policy shall cover claims
excluded from the Hull "All Risks" Policy from occurrences while the Aircraft is outside the control of the
Company by reason of any of the above perils.  The Aircraft shall be deemed to have been restored to the control
of the Company on the safe return of the Aircraft to the Company at an airfield not excluded by the geographical
limits of such policy, and entirely suitable for the operation of the Aircraft (such safe return shall require
that the Aircraft be parked with engines shut down and under no duress).

Section 5.4     Reports, etc.  The Company will furnish, or cause to be furnished to the  Mortgagee and the
Lenders, on or before the Delivery Date for each Aircraft and on each renewal date of the Company's relevant
insurance policies, a report, signed by a Qualified Insurance Broker, describing in reasonable detail the hull
and liability insurance (and property insurance for detached Engines and Parts) then carried and maintained
with respect to the relevant Aircraft and stating the opinion of such firm that (a) all premiums in connection
with such insurance then due have been paid and (b) such insurance complies with the terms hereof. Such report
of the Qualified Insurance Broker shall remain confidential as provided in Section 9.22 of the Secured Credit
Agreement. The Company will cause such Qualified Insurance Broker to agree to advise the Mortgagee and the
Lenders in writing of any default in the payment of any premium and of any other act or omission on the part
of the Company of which it has knowledge and which might invalidate or render unenforceable, in whole or in
part, any insurance on such Aircraft and to send notice to such Persons in writing at least 30 days (seven
days or such lesser period as is available in the case of war-risk and allied perils coverage and ten days in
the case of cancellation for non-payment of premium) prior to the cancellation (but not scheduled expiration)
or material adverse change of any insurance maintained pursuant to this Article 5.  In addition, the Company
will also cause such Qualified Insurance Broker to deliver to the Mortgagee and the Lenders, on or prior to
the date of expiration of any insurance policy referenced in a previously delivered certificate of insurance,
a new certificate of insurance, substantially in the same form as delivered by the Company to such parties
on the Delivery Date for such Aircraft except for changes in the report or the coverage consistent with the
terms hereof.  In the event that the Company shall fail to maintain or cause to be maintained insurance as
herein provided, the Mortgagee or any Lender may at its sole option, but shall be under no duty to, provide
such insurance and, in such event, the Company shall, upon demand, reimburse the Mortgagee or such Lender
for the cost thereof to the Mortgagee or such Lender, as the case may be, without waiver of any other rights
the Mortgagee or such Lender may have; provided, however, that no exercise by the Mortgagee or any Lender,
as the case may be, of said option shall affect the provisions of this Mortgage, including the provisions
that failure by the Company to maintain the prescribed insurance shall constitute an Event of Default.

Section 5.5     Self-Insurance.  The Company may self-insure, by way of deductibles, premiums, adjustment
provisions in insurance policies or otherwise, the risks required to be insured against pursuant to Sections
5.2 and 5.3 under a program applicable to all aircraft (whether owned or leased) in the Company's fleet,
provided, that in no case shall the amount of such self-insurance in regard to Sections 5.2 and 5.3 hereof
exceed $* per occurrence and, provided further, that no deductibles shall be applicable to an Event of Loss.
In the event the prevailing industry minimum deductible for aircraft similar to the Aircraft increases, the
Company and the Mortgagee shall consult one another toward a mutually agreeable modified deductible, such
modified deductible to be effective only upon the written consent of the Mortgagee (on behalf of the Lenders).

Section 5.6     Additional Insurance.  The Company may at its own expense carry insurance with respect to
its interest in any Aircraft in amounts in excess of that required to be maintained by this Article V, and
the Company may be named sole loss payee in respect of such excess amount.  The Mortgagee may carry for its
own account at its sole cost and expense insurance with respect to its interest in any Aircraft, provided
that such insurance does not prevent the Company from carrying the insurance required or permitted by this
Article V or adversely affect such insurance or the cost thereof.

Section 5.7     Indemnification by Government in Lieu of Insurance.  Notwithstanding any provisions of this
Article V requiring insurance, Mortgagee agrees to accept, in lieu of insurance against any risk with respect
to the Aircraft, indemnification from, or insurance provided by, the United States Government or any agency
or instrumentality thereof the obligations of which are supported by the full faith and credit of the United
States Government, against such risk in an amount which, when added to the amount of insurance against such
risk maintained by the Company shall be at least equal to the amount of insurance against such risk otherwise
required by this Article V (taking into account self-insurance permitted by Section 5.5 hereof).  Any such
indemnification or insurance provided by the United States Government shall provide substantially similar
protection as the insurance required by this Article Section 5.  The Company shall furnish, in advance of
attachment of such indemnity or insurance, a certificate of a responsible financial or legal officer of the
Company stating that such indemnification or insurance complies with the preceding sentence, and promptly
following such attachment, a certificate of a responsible financial or legal officer of the Company confirming
in reasonable detail the amount and scope of such indemnification or insurance.

Section 5.8     Application of Payments During Existence of an Event of Default.  Any amount referred to in
this Article V which is payable to or retainable by the Company shall not be paid to or retained by the Company
if at the time of such payment or retention a Special Default or an Event of Default shall have occurred and
be continuing, but shall be held by or paid over to the Mortgagee as security for the obligations of the Company
hereby secured and, if a Special Default or an Event of Default shall have occurred and be continuing, applied
against the obligations of the Company hereby secured as and when due.  At such time as there shall not be
continuing any such Special Default or such Event of Default, such amount shall be paid to the Company to the
extent not previously applied in accordance with the preceding sentence.

Section 5.9     Terms of Insurance Policies.  Any policies carried in accordance with Sections 5.1, 5.2
and 5.3 hereof covering the Aircraft, and any policies taken out in substitution or replacement for any such
policies, (A) shall name the Additional Insureds as additional insureds (but without imposing on any such
party liability to pay  premiums with respect to such insurance), (B) may provide for self-insurance to the
extent permitted in Section 5.5, (C) shall provide that if the insurers cancel such insurance for any reason
whatever, or if the same is allowed to lapse for nonpayment of premium or if any material change is made in
the insurance which adversely affects the interest of any Additional Insured, such lapse, cancellation or
change shall not be effective as to any Additional Insured for 30 days (ten days in the case of lapse for
nonpayment of premiums and seven days in the case of war-risk and allied perils coverage after delivery of
written notice by such insurer to such Additional Insured of such lapse, cancellation or change, (D) shall
provide that, in respect of the respective interests of each Additional Insured in such policies, the insurance
shall not be invalidated or impaired by any action or inaction of the Company or any other Person and shall
insure the respective interests of the Additional Insureds, as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in such policies by the Company or by any other
Person (whether occurring before or after attachment of this Mortgage or whether occurring before or after
any loss or payment under such insurance), (E) shall be primary without any right of contribution from any
other insurance which is carried by any Additional Insured, (F) shall expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured and shall waive any right of subrogation of the insurers against the
Lenders and the Mortgagee, (G) shall, with respect to the hull insurance, waive any right of the insurers to
set-off (except any standard set-off for unpaid premiums), recoupment or counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any liability of any Additional Insured, (H) shall
specifically refer to this Article V and shall acknowledge the general indemnity set forth in the Secured
Credit Agreement, (I) in the case of hull insurance policies carried in accordance with Sections 5.2 and 5.3
hereof, shall name the Mortgagee as sole loss payee (for the benefit of the Secured Parties), (J) shall
contain a 50/50% clause per AVS 103 or its equivalent, and (K) shall provide that in the event of a partial
loss involving any Aircraft, Airframe, or Engine not constituting an Event of Loss, (i) for which proceeds
are in excess of $*, all the proceeds in respect of such partial loss shall be payable to the Mortgagee (for
the benefit of the Secured Parties), it being understood and agreed that in the case of any such payment to
the Mortgagee, the Mortgagee shall, upon receipt of evidence reasonably satisfactory to it and the Lenders
that the damage giving rise to such payment shall have been repaired or that such payment shall then be
required to pay for repairs then being made, pay the amount of such payment to the party having performed or
performing the repairs to such Aircraft and (ii) for which proceeds are $* or less shall be paid, unless a
Default or Event of Default shall have occurred and be continuing, to the Company or its order for cost of
repair of such Aircraft (it being agreed that the dollar amounts referred to in this clause (K) are inclusive
of any applicable deductible and any self-insurance), (L) shall provide that the insurers shall not be entitled
to replace such Aircraft, (M) shall provide that if a Default or Event of Default has occurred and is continuing,
the Mortgagee shall be entitled to initiate claims under the policies, and (N) shall provide that in the event
of a loss involving any Aircraft, Airframe or Airframe and Engine and the same constitutes an Event of Loss,
all the proceeds in respect of such Event of Loss shall be payable to the Mortgagee (for the benefit of the
Secured Parties), it being understood and agreed that, unless a Default or Event of Default shall have occurred
and be continuing, the Mortgagee shall pay any amount in excess of all Secured Obligations relating to such
Aircraft to the Company or its order.

Section 5.10    Insurance Policies following the Repayment Date.  Notwithstanding Section 5.9 hereof, the
Borrower agrees to include the Additional Insureds as additional insureds (but without imposing on any such
party liability to pay  premiums with respect to such insurance) in the insurance policies relating to the
Aircraft, and any policies taken out in substitution or replacement for any such policies, for a period of
two (2) calendar years following the Repayment Date.

                                      Article VI
                                  DEFAULTS AND REMEDIES

Section 6.1     Event of Default.  Any of the following occurrences, events or acts shall constitute an
"Event of Default" under this Mortgage (whether any such occurrence, event or act shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a)      the Company shall not have made a payment of the principal of, or interest on, any Loan or under
         the Secured Credit Agreement or this Mortgage within two (2) Business Days after the same shall have
         become due; or

(b)      the Company shall have failed to make any other payment under any Loan Document (other than those
         described in clause (a) above) after the same shall have become due and such failure shall continue
         for ten (10) Business Days after the Company receives written demand therefor from the Mortgagee or
         from any Lender; or

(c)      the Company shall fail to carry and maintain (or cause to be carried and maintained) on or with respect
         to the Aircraft any insurance coverage or indemnities required by Article V hereof; or

(d)      the Company shall have failed to perform or observe any covenant or agreement contained in Section
         4.01 (insofar as such Section requires the preservation of the corporate existence of the Company),
         4.05, 4.07, 4.08, 4.10 through 4.13, or 5.01(f) of the Secured Credit Agreement; or

(e)      the Company shall have failed to perform or observe (or to cause to be performed or observed) any
         other covenant or agreement to be observed or performed hereunder or under any other Loan Document
         (other than those relating to matters covered by Section 6.1(a), (b), (c) and (d) hereof), and any
         such failure shall continue unremedied for a period of 30 days after receipt by the Company of
         written notice thereof from the Mortgagee or a Lender; or

(f)      any Loan Document Representation and Warranty made by the Company shall prove to have been incorrect
         in any material respect at the time made and shall remain materially incorrect at the time in
         question; provided, however, such incorrectness shall not constitute an Event of Default hereunder
         if the same is able to be cured and is cured within 30 days after the receipt by the Company of a
         written notice from the Mortgagee or a Lender advising the Company of the existence of such
         incorrectness; or

(g)      the commencement of an involuntary case or other proceeding in respect of the Company in an involuntary
         case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable
         federal or state bankruptcy, insolvency or other similar law in the United States or seeking the
         appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official)
         of the Company or for all or substantially all of its property, or seeking the winding-up or liquidation
         of its affairs and the continuation of any such case or other proceeding undismissed or unstayed for
         a period of 60 consecutive days or an order for relief under Chapter 11 of the Bankruptcy Code with
         respect to the Company as debtor or any other order, judgment or decree shall be entered in any
         proceeding by any court of competent jurisdiction appointing, without the consent of the Company,
         a receiver, trustee or liquidator of the Company, or for all or substantially all of its property,
         or sequestering of all or substantially all of the property of the Company and any such order,
         judgment or decree or appointment or sequestration shall be final or shall remain in force undismissed,
         unstayed or unvacated for a period of 60 consecutive days after the date of entry thereof; or

(h)      the commencement by the Company of a voluntary case under the federal bankruptcy laws, as now
         constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency
         or other similar law in the United States, or the consent by the Company to the appointment of or
         taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
         similar official) of the Company or for all or substantially all of its property, or the making by
         the Company of any assignment for the benefit of creditors or the Company shall take any corporate
         action to authorize any of the foregoing; or

(i)      the Company fails or ceases to be a U.S. Air Carrier or shall have been suspended as a U.S. Air
         Carrier or shall otherwise no longer have all applicable licenses (or such licenses shall be
         suspended) necessary to operate as a commercial airline; or

(j)      Immediately upon such time as this Mortgage ceases to create a valid, perfected first priority
         mortgage on any Aircraft, any Airframe or any Engine in favor of the Mortgagee;

(k)      (i) the Borrower shall default in the payment when due of any principal of or interest on, or fail
         to make a scheduled rental payment on, any of its other Indebtedness or any lease obligation; or
         (ii) any event specified in any note, agreement, indenture, lease or other document evidencing or
         relating to any Indebtedness or lease obligation shall occur, and, after giving effect to any
         applicable notice and/or grace periods, the effect of such default (in the case of clause (i)) or
         event (in the case of clause (ii)) is to cause, or to permit the holder or holders of such Indebtedness
         or lease obligation (or a trustee or agent on behalf of such holder or holders) to cause, such
         indebtedness or lease obligation to become due or to be terminated, or to be prepaid in full (whether
         by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity; provided
         that (x) the outstanding amount of such Indebtedness and (y) the capitalized amount of such lease
         obligation shall, singly or in the aggregate, be in excess of $*; or

(l)      the Company asserts, or the Company institutes, or consents to, any action or proceedings seeking
         to establish, that (i) any provision of the Loan Documents is invalid, not binding or unenforceable
         or (ii) the Security Interest is not a valid and perfected first priority security interest in the
         Collateral subject only to Permitted Liens.

(m)      any event of default or similar event under any leveraged lease facility with respect to any Leveraged
         Lease Aircraft shall have occurred and be continuing.

provided, however, that, notwithstanding anything to the contrary contained in this Article VI, any failure
of the Company to perform or observe any covenant, condition, agreement or any error in a representation or
warranty shall not constitute an Event of Default under Section 6.1(c), (d), (e) or (f) if such failure or
error is caused solely by reason of any event that constitutes an Event of Loss so long as the Company is
continuing to comply with all of the terms of Article IV hereof.

Section 6.2     Rights Against Mortgaged Property.  Upon the occurrence of any Event of Default and at any
time thereafter so long as any such Event of Default shall not have been remedied, the Mortgagee may, and if
directed by the Required Lenders shall, in addition to the exercise of any of its rights under Section 6.01
of the Secured Credit Agreement, do one or more of the following with respect to all or any part of the
Mortgaged Property as the Mortgagee, in its sole discretion or, if directed by the Required Lenders, at the
direction of the Required Lenders, shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect:

(a)      Upon the written demand of the Mortgagee and at the Company's expense, the Company shall promptly
         deliver possession of any Airframe and Engine, Part and Record as the Mortgagee may so demand to
         the Mortgagee or its order in the manner and condition required by, and otherwise in accordance with
         all the provisions of, this Mortgage, or the Mortgagee at its option may enter upon the premises where
         all or any part of any Airframe, Engine, Part or Record is located and take immediate possession of
         and remove the same by summary proceedings or otherwise (and at the Mortgagee's option, store the
         same at the Company's premises until disposal thereof by the Mortgagee), all without liability accruing
         to the Mortgagee (other than that caused by the Mortgagee's willful misconduct or gross negligence)
         for or by reason of such entry or taking of possession or removing whether for the restoration of
         damage to property caused by such action or otherwise.  The Company shall, at the request of the
         Mortgagee, promptly execute and deliver to the Mortgagee such instruments or other documents as the
         Mortgagee may deem necessary or advisable to enable the Mortgagee or an agent or representative
         designated by the Mortgagee, at such time or times and place or places as the Mortgagee may specify,
         to obtain possession of all or any part of the Mortgaged Property the possession of which the Mortgagee
         shall at the time be entitled to hereunder; provided that during any period any Aircraft is activated
         under CRAF in accordance with the provisions of Section 2.3(g) of the Mortgage and in the possession
         of the government of the United States of America or an instrumentality or agency thereof, the
         Mortgagee shall not, on account of any Event of Default, be entitled to exercise any of its rights
         under this Section 6.2 against the Mortgaged Property in such manner as to limit the Company's
         control under the Mortgage of the associated Airframe or any Engines installed thereon, unless at
         least sixty (60) days' (or such lesser period as may then be applicable under the Air Mobility
         Command program of the United States Government) prior written notice of default hereunder shall have
         been given by the Mortgagee to the Company with a copy addressed to the Contracting Office Representative
         for the Air Mobility Command of the United States Air Force under the contract with the Company
         relating to such Aircraft.

(b)      To the extent applicable, the Mortgagee shall have the rights and remedies of a secured party under
         the Uniform Commercial Code as enacted in any jurisdiction in which any of the Mortgaged Property
         may be located and, in any case, the Mortgagee may, directly or by such agent as it may appoint,
         without demand of performance and (as permitted by Applicable Laws) with or without possession thereof,
         sell at public or private sale or otherwise realize upon the whole, or from time to time any part,
         of the Mortgaged Property.  If notice of any sale or other disposition is required by law to be given,
         the Company hereby agrees that a notice sent at least ten days before the time of any intended public
         sale, or of the time after which any private sale or other disposition of the Mortgaged Property is
         to be made, shall be reasonable notice of such sale or other disposition;

(c)      The Mortgagee may, either after entry or without entry, proceed by suit or suits at law or in equity
         to foreclose this Mortgage and to sell at public or private sale in connection therewith all or,
         from time to time, any part of the Mortgaged Property;

(d)      The Mortgagee may hold, use, operate, lease to others or keep idle any Aircraft, Airframe or Engines
         as the Mortgagee in its sole discretion may determine, all free and clear of any rights of the
         Company, and without any duty to account to the Company with respect to such action or inaction or
         for any proceeds with respect thereto;

(e)      The Mortgagee may commence legal proceedings for the appointment of a receiver or receivers (to which
         the Mortgagee shall be entitled as a matter of right) to take possession of the Mortgaged Property
         pending the sale thereof pursuant either to the power of sale given in this Section 6.2 or to a
         judgment, order or decree made in any judicial proceeding for the foreclosure or involving the
         enforcement of this Mortgage;

(f)      Upon every taking of possession pursuant to this Section 6.2, the Mortgagee may, from time to time,
         make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions
         and improvements to and of the Mortgaged Property as the Mortgagee may deem proper.  In each such
         case, the Mortgagee shall have the right to hold, use, operate, store, lease, control or manage the
         Mortgaged Property, and to exercise all rights and powers of the Company relating to the Mortgaged
         Property as the Mortgagee shall deem appropriate, including the right to enter into any and all such
         agreements with respect to the use, operation, storage, leasing, control or management of any of the
         Mortgaged Property.  The Company shall promptly, upon demand therefor, reimburse the Mortgagee for
         the amount of any expenditures, plus interest at the Post-Default Rate, made pursuant to this Section
         6.2(f); and

(g)      The Mortgagee shall have, and may exercise, in addition to the aforesaid rights and remedies, all
         other rights and remedies available hereunder, at law or in equity, or by statute, each of which
         may be exercised singly or concurrently with any one or more other rights or remedies.

The Company shall be liable for all reasonable legal fees and other costs and expenses incurred by the
Mortgagee in connection with any default or the exercise of remedies hereunder, including the return of any
Airframe, Engine, Part and Record or in placing such Airframe, Engine, Part or Record in the condition and
airworthiness required by the terms of this Mortgage and the storage of any Airframe or Engine, Part or Record
in the event the Company shall for any reason fail to store the same as above provided.  No waiver by the
Mortgagee of any Event of Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.  To the extent permitted by Applicable Law, the Company hereby waives any rights
now or hereafter conferred by statute or otherwise which may require the Mortgagee to sell, lease or otherwise
use any Aircraft, Airframe or Engine or any part thereof in mitigation of the damages of the Mortgagee as set
forth in this Section 6.2 or which may otherwise limit or modify any of the Mortgagee's rights and remedies
in this Section 6.2.

Section 6.3     Provisions Regarding Sale.  Upon any sale of any of the Mortgaged Property, whether made under
the power of sale hereby given or under judgment, order or decree in any judicial proceedings for the fore-
closure or involving the enforcement of this Mortgage:

(a)      The Mortgagee may make and deliver to the purchaser or purchasers a good and sufficient deed, bill
         of sale and instrument of assignment and transfer of the property sold;

(b)      If so requested by the Mortgagee or by any purchaser, the Company shall ratify and confirm any such
         sale or transfer by executing and delivering to the Mortgagee or to such purchaser all property deeds,
         bills of sale, instruments of assignment and transfers and releases with respect to any Aircraft as
         may be designated in any such request;

(c)      All right, title, interest, claim and demand whatsoever, either at law or in equity or otherwise,
         of the Company of, in and to the property so sold shall be divested.  Such sale shall be a perpetual
         bar both at law and in equity against the Company, its successors and assigns, and against any and
         all Persons claiming or who may claim the property sold or any part thereof from, through or under
         the Company, its successors or assigns;

(d)      The receipt of the Mortgagee or of the Person making such sale shall be a sufficient discharge to
         the purchaser or purchasers at such sale for his or their purchase money, and such purchaser or
         purchasers, and his or their assigns or personal representatives, shall not, after paying such purchase
         money and receiving such receipt of the Mortgagee or of such Person, be obliged to see to the application
         of such purchase money or be in any way answerable for any loss, misapplication or nonapplication thereof;

(e)      To the extent that it may lawfully do so, the Company agrees that it will not at any time insist
         upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of any law now
         or at any time hereafter in force, permitting it to direct the order in which the Mortgaged Property
         or any part thereof shall be sold, or which may delay, prevent or otherwise affect the performance
         or enforcement of this Mortgage and the Company hereby expressly waives all benefit or advantage of
         any such laws and agrees that it will not hinder, delay or impede the execution of any power granted
         and delegated to the Mortgagee in this Mortgage, but will suffer and permit the execution of every
         such power as though no such laws were in force; and

(f)      The Mortgagee shall be entitled, at any sale pursuant to the provisions of this Section 6.3, to credit
         against any purchase price bid at such sale by the Mortgagee all or any part of the unpaid obligations
         owing under or in respect of the Loans or secured by the Lien of this Mortgage, and any proceeds
         actually received by the Mortgagee at such sale shall be applied by the Mortgagee in the manner set
         forth in Section 6.5 hereof.

Section 6.4     Exercise of Remedies.  No delay or omission of the Mortgagee in the exercise of any right,
power, remedy or privilege conferred hereunder shall impair any such right, power, remedy or privilege or be
construed to be a waiver of any Event of Default or acquiescence therein; and every right, power, remedy and
privilege given by this Mortgage to the Mortgagee or the Lenders may be exercised from time to time and as
often as may be deemed expedient by the Mortgagee.  No remedy for the enforcement of the rights of the
Mortgagee or the Lenders shall be exclusive of or dependent on any other such remedy but any one or more of
such remedies may from time to time be exercised independently or in combination.

Section 6.5     Application of Sale and Other Proceeds.  The purchase money proceeds and/or avails of any
sale of the Mortgaged Property, or any part thereof, and the proceeds and the avails of any remedy hereunder,
together with all payments or amounts then held by the Mortgagee as part of the Mortgaged Property, shall be
paid to and applied as follows:

(a)      First, to the payment or reimbursement of costs and expenses of foreclosure or suit, if any, and
         of such sale, or relating to the protection, exercise or enforcement of any right, power or remedy,
         and of all proper compensation, expenses, liability and advances, including legal expenses, court
         costs and reasonable attorneys' fees, owed to, incurred or made by the Mortgagee hereunder, and any
         other documented expenditures incurred or advances made by the Mortgagee in the protection, exercise
         or enforcement of any right, power or remedy or any damages sustained by the Mortgagee, upon such
         Event of Default under this Mortgage, the Secured Credit Agreement or any Loan, and of all taxes,
         assessments or liens superior to the Lien of these presents and all other expenses for which the
         Mortgagee is entitled to reimbursement under any Loan Document;

(b)      Second, to the payment of such amounts remaining as shall be required to pay in full the aggregate
         outstanding amount of all Loans, and the accrued but unpaid interest and other amounts due thereon
         and all other Secured Obligations to the date of distribution, shall be distributed to the Mortgagee;

(c)      Third, if applicable, to the payment of such amounts payable to Credit Agricole Indosuez, as agent
         for the Lenders, and each Lender under, and in accordance with, any leveraged lease facility with
         respect to any Leveraged Lease Aircraft; and

(d)      Fourth, to the payment of the surplus, if any, to the Company, its successors and assigns, or to
         whomsoever may be lawfully entitled to receive the same.

                                      Article VII
                                      TERMINATION

Section 7.1     Release of Mortgaged Property.

(1)      Upon payment in full of the Secured Obligations in respect of any Aircraft, the Mortgagee shall,
upon the request of the Company, promptly execute and deliver to or as directed in writing by the Company
an appropriate instrument releasing the Mortgaged Property relating to such Aircraft from the Lien of this
Mortgage, and the Mortgagee shall execute and deliver such instrument as aforesaid; provided, that this
Mortgage shall earlier terminate and this Mortgage shall be of no further force or effect upon any sale or
final disposition by the Mortgagee of all the Mortgaged Property and the final distribution by the Mortgagee
of all monies or other property or proceeds constituting part of the Mortgaged Property in accordance with
the terms hereof.  Except as aforesaid otherwise provided, this Mortgage and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.

(2)      Upon payment in full of the Secured Obligations in respect of any Aircraft, the Mortgagee shall,
upon the request of the Company, promptly deliver to the Company all Mortgaged Property relating to such
Aircraft then in the custody or possession of the Mortgagee and, if requested by the Company, shall execute
and deliver to the Company for filing in each office in which any financing statement relative to the
Mortgaged Property relating to such Aircraft or any part thereof, shall have been filed, a termination state-
ment under the Uniform Commercial Code releasing the Mortgagee's interest therein or a release of mortgage or
similar instrument in recordable form in each office in which a mortgage was filed releasing the Lien of such
mortgage on the Mortgaged Property relating to such Aircraft covered thereby, and such other documents and
instruments as the Company may reasonably request, all without recourse upon, or warranty whatsoever by,
the Mortgagee (except only that the Mortgagee shall warrant the absence of Liens arising through the Mortgagee),
and at the cost and expense of the Company.

                                      Article VIII
                                         TERM

The term of this Mortgage shall commence on the date hereof and shall end only upon payment and performance
in full of the Secured Obligations.

                                      Article IX
                                     THE MORTGAGEE

Any moneys held by the Mortgagee as security hereunder for future payments by the Company shall, until paid
to the Company, be invested by the Mortgagee, as the Company (unless a Default or Event of Default shall
have occurred and be continuing) may from time to time direct in writing (and in absence of a written
direction by the Company, there shall be no obligation to invest such moneys) in (i) obligations of, or
guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States of America or any State thereof rated at least
P-1 or its equivalent by Moody's Investors Service, Inc. or at least A-1 or its  equivalent by Standard &
Poor's Corporation, (iii) certificates of deposit issued by commercial banks organized under the laws of
the United States or of any political subdivision thereof having a combined capital and surplus in excess
of $500,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's
Investors Service, Inc. or Standard & Poor's Corporation; provided, however, that the aggregate amount at
any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such
bank's capital and surplus, (iv) U.S. dollar denominated offshore certificates of deposit issued by, or
offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof,
and (v) repurchase agreements with any financial institution having combined capital and surplus of at least
$500,000,000 with any of the obligations described in clauses (i) through (iv) as collateral.  There shall
be promptly remitted to the Company or its order (but no more frequently than monthly) any gain (including
interest received) realized as a result of any such investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such investment) unless a Default or an Event of Default shall
have occurred and be continuing.  The Company shall be responsible for any net loss realized as a result of
any such investment and shall reimburse the Mortgagee therefor on demand.

                                      Article X
                                     BANKRUPTCY

It is the intention of the parties that the Mortgagee shall have been granted pursuant to this Mortgage a
"security interest," as the same is used in Section 1110 of the United States Bankruptcy Code, and as a
consequence thereof the Mortgagee shall be entitled (on behalf of the Lenders) to the benefits of Section
1110 of the United States Bankruptcy Code with respect to the right to repossess the Airframe, Engines and
Parts as provided in this Mortgage, and in any circumstances where more than one construction of the terms
and conditions of this Mortgage is possible, a construction which would preserve such benefits shall control
over any construction which would not preserve such benefits or would render them doubtful.

                                      Article XI
                                     MISCELLANEOUS

Section 11.1    Miscellaneous.  Each of the Company and the Mortgagee hereby acknowledges and confirms that
this Agreement is one of the Loan Documents and as a result all of the provisions of each of Section 9.01
Notices and Deliveries, Section 9.06 Amendment; Waivers, Section 9.11 Judicial Proceedings; Waiver of Jury
Trial, Section 9.12 Judgment Currency, and Section 9.14 Severability of Provisions are hereby
incorporated herein by reference thereto (with the Company mutatis mutandis for the Borrower, and the Mortgagee
mutatis mutandis for the Agent) as fully and to the same extent as if set forth herein.

Section 11.2    Counterparts.  This Mortgage may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures were upon the same instrument.

Section 11.3    Applicable Law.  This Mortgage has been delivered in the State of New York and shall in
all respects be governed by, and construed in accordance with, the internal laws of the State of New York (as
opposed to conflict of law provisions), including all matters of construction, validity and performance.

Section 11.4    Inspection.  At reasonable times, and upon at least ten days' prior written notice, the
Mortgagee, or its authorized representatives, may, at the Mortgagee's risk and expense, inspect any Aircraft
and, at the Mortgagee's risk and expense, inspect and make copies of the FAA required books and records of
the Company relating to the maintenance of such Aircraft and shall keep any information or copies obtained
thereby confidential and shall not disclose the same to any Person, except (A) to prospective and permitted
transferees of the Mortgagee's or a Lender's interest who agree to hold such information confidential, (B)
to the Mortgagee's or a  Lender's (or such prospective and permitted transferee's) counsel, independent
insurance advisors, independent auditors or other agents who agree to hold such information confidential,
(C) as may be required by any statute, court or administrative order or decree or governmental ruling or
regulation, or (D) as may be necessary for purposes of protecting the interest of any such Person or for
enforcement of this Mortgage by the Mortgagee; provided, however, that any and all disclosures permitted by
clauses (C) and (D) above shall be made only to the extent necessary to meet the specific requirements or
needs of the Persons for whom such disclosures are hereby permitted.  Any such inspection of such Aircraft
shall be subject to the Company's safety and security rules applicable at the location of such Aircraft,
shall be a visual, walk-around inspection (including an on-board inspection) and shall not include opening
any panels, bays or the like (except when such panels, bays or the like are otherwise open) without the
express consent of the Company, which consent the Company may in its sole discretion withhold; provided that
no exercise of such inspection right shall interfere with the normal operation of such Aircraft by, or the
business of, the Company.  Upon receipt by the Company of a written request from the Mortgagee specifying
that the Mortgagee desires to have an authorized representative observe the next scheduled "C" check or heavy
maintenance visit to be performed on any of the Aircraft (or substantially equivalent successor type of "C"
check or maintenance work), the Company shall cooperate with the Mortgagee to enable the Mortgagee's
representative to observe such next scheduled "C" check or heavy maintenance visit to be performed on such
Aircraft, including reasonable advance notification to the Mortgagee of the time and place of such scheduled
"C" check or heavy maintenance visit; provided that the Mortgagee's authorized representative shall merely
observe such scheduled "C" check or heavy maintenance visit, shall not interfere with or extend in any manner
the normal conduct or duration of the scheduled "C" check or heavy maintenance visit, and shall not be
entitled to direct any of the work performed in connection with such scheduled "C" check or heavy maintenance
visit.

         Neither the Mortgagee nor any Lender shall have any duty to make any such inspection nor shall any
of them incur any liability or obligation by reason of not making any such inspection.

Section 11.5    No Legal Title to Mortgaged Property in the Lenders.  The Lenders shall not have legal
title to any part of the Mortgaged Property.  No transfer, by operation of law or otherwise, of any Note or
other right, title and interest of the Lenders in and to the Mortgaged Property or hereunder shall operate
to terminate this Mortgage or entitle the Lenders or any successor or transferee of the Lenders to an
accounting or to the transfer to it of legal title to any part of the Mortgaged Property.

Section 11.6    No Action Contrary to Company's Rights; Quiet Enjoyment.  Notwithstanding any of the
provisions of this Mortgage to the contrary, so long as no Event of Default shall have occurred and be
continuing, each of the Mortgagee and the Lenders agrees that neither it nor any Person claiming by, through
or under it, will take any action in violation of the Company's rights, including the right to quiet enjoyment,
possession and use of the Aircraft in accordance with the terms of this Mortgage by the Company.


                                  [This space intentionally left blank.]





IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to be duly executed and delivered as of
the date and year first above written.

                                                     FRONTIER AIRLINES, INC.,
                                                        as Mortgagor


                                                     By:                                            
                                                     Title:                                         



                                               CREDIT AGRICOLE INDOSUEZ, as Agent,
                                                        as Mortgagee


                                                     By:                                            
                                                     Title:                                         










                                                                          Exhibit A to
                                               Aircraft Mortgage and Security Agreement



                                         MORTGAGE SUPPLEMENT NO. __


MORTGAGE SUPPLEMENT NO. __ (this "Mortgage Supplement"), dated ______________ between FRONTIER AIRLINES,
INC., a Colorado corporation (hereinafter called the "Company"), and CREDIT AGRICOLE INDOSUEZ, as Agent, acting
on its own behalf as Agent and as the agent for the Lenders (in such capacity, together with its successors
and assigns, the "Mortgagee").

WHEREAS, the Company has heretofore executed and delivered an Aircraft Mortgage and Security Agreement
dated as of __________ __, 2002 between the Company, as Mortgagor, and the Mortgagee, as Mortgagee (the
"Mortgage"), covering the property of the Company therein described, to secure the payment of all Secured
Obligations from time to time outstanding and the assurance and performance by the Company of all of the
terms, provisions, agreements and covenants of the Loan Documents and the Mortgage, all as provided in the
Mortgage (all terms used in this instrument, and not otherwise defined, having the meanings assigned thereto
in the Mortgage);

[WHEREAS, the Mortgage relates to the property specifically described below, and a counterpart of the Mortgage
is attached hereto and made a part hereof and this Mortgage Supplement, together with such counterpart of the
Mortgage, is being filed for recordation on the date hereof with the Federal Aviation Administration as one
document;]

[WHEREAS, the Mortgage relates to the property specifically described herein, and a counterpart of the Mortgage
has been recorded, pursuant to the Federal Aviation Act, by the Federal Aviation Administration at Oklahoma
City, Oklahoma, on ___________, and assigned Conveyance No. _________;]

WHEREAS the Mortgage provides, among other things, for the execution and delivery from time to time of Mortgage
Supplements, each substantially in the form hereof;

WHEREAS, the Company is the owner of the property specifically described herein, free and clear of all Liens,
except the Lien of the Mortgage, and desires to execute and deliver this Mortgage Supplement for the purpose
of specifically subjecting said property to, or confirming, the Lien of the Mortgage; and

WHEREAS, all acts and things prescribed by law and by the Certificate of Incorporation and By-Laws of the
Company necessary to constitute this Mortgage Supplement the valid, binding and legal obligation of the Company,
in accordance with its terms, have been done.

NOW, THEREFORE, this Mortgage Supplement witnesseth, that, to secure the prompt payment and performance of
all Secured Obligations and the performance and observance of the  agreements, covenants and provisions con-
tained in the Mortgage and in the Secured Credit Agreement and the Loans, and in consideration of the premises
and of the covenants therein contained, the Company has transferred, assigned, granted, bargained, sold,
conveyed, mortgaged, hypothecated, pledged, set over, confirmed and granted a security interest in, and does
hereby transfer, assign, grant, bargain, sell, convey, mortgage, hypothecate, pledge, set over, confirm and
grant a security interest in, the following property to the Mortgagee, its successors in trust and assigns,
with power of sale:

                  (i)   Airframe:  One (1) Airbus Model A319-111 aircraft, U.S. Registration No. ________;
         manufacturer's serial no. ________; and

                  (ii)   Engines:  Two (2) CFM International, Inc. Model CFM56-5B5/P engines bearing,
         respectively, manufacturer's serial nos. ________ and ________ (each of which engines has 750 or
         more rated takeoff horsepower or the equivalent of such horsepower).

TO HAVE AND TO HOLD all and singular the aforesaid property unto the Mortgagee, its successors and assigns,
for the uses and purposes and upon the terms, provisions, agreements and covenants set forth in the Mortgage.

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

This Mortgage Supplement has been delivered in the State of New York and shall in all respects be governed
by, and construed in accordance with, the internal laws of the State of New York, including all matters of
construction, validity and performance.

This Mortgage Supplement may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures were upon the same instrument.

                                        [This space intentionally left blank.]






IN WITNESS WHEREOF, the parties hereto have caused this Mortgage Supplement to be duly executed as of the
day and year first above written.

                                                     FRONTIER AIRLINES, INC.,
                                                        as Mortgagor


                                                     By:                                            
                                                     Title:                                         



                                               CREDIT AGRICOLE INDOSUEZ, as Agent,
                                                        as Mortgagee


                                                     By:                                            
                                                     Title:
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