AMERICA WEST AIRLINES INC, 10-K, 1994-03-31

AMERICA WEST AIRLINES INC
10-K, 1994-03-31
AIR TRANSPORTATION, SCHEDULED

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM 10-K
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1993
-----------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

Commission File Number 1-10140
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AMERICA WEST AIRLINES, INC.
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(Exact name of Registrant as specified in its charter)

Delaware 86-0418245
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (602) 693-0800
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Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which
Title or class registered
-------------- ------------------------------

Common Stock, $.25 par value Pacific Stock Exchange
---------------------------- ------------------------------

Securities registered pursuant to Section 12(g) of the Act:

7-3/4% Convertible Subordinated Debentures due 2010
7-1/2% Convertible Subordinated Debentures due 2011
11-1/2% Convertible Subordinated Debentures due 2009
------------------------------------------------------------------------

<PAGE>

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

At March 15, 1994, the aggregate market value of common stock held by
non-affiliates of the Registrant was approximately $60.7 million, and the
aggregate preference value of preferred stock held by non-affiliates of the
Registrant was $1 million.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS

Indicate by check mark whether the Registrant has filed all
documentation and reports required to be filed by Sections 12, 13, or 15(b)
of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ] NOT
APPLICABLE

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.

25,292,102 shares of Common Stock outstanding on March 15, 1994
- ---------------------------------------------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE

Materials have been incorporated by reference into this Report from the
following documents: information and documents from the Registrant's Form
S-1 Registration Statements (Nos. 2-89212, 2-99206 and 33-3800); Form S-3
Registration Statement (No. 33-27416); Quarterly Reports on Form 10-Q (for
the quarters ended September 30, 1986, March 31, 1990 and September 30,
1990); Form 8-A Registration Statement No. 0-12337; Annual Reports on Form
10-K for the years ended December 31, 1992, December 31, 1991, December 31,
1990, December 31, 1989 and December 31, 1987; Schedule 13E-4 No. 5-34444;
and Form T-3 Application for Qualification No. 22-19024 have been
incorporated by reference into Part II, Item 5 and Part IV, Item 14.

TABLE OF CONTENTS
-----------------

Page
----
PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 22
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 25
Item 4. Submission of Matters to a Vote of Security Holders . . 26

PART II

Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . 27
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 30
Item 8. Financial Statements and Supplementary Data . . . . . . 45
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . 46

PART III

Item 10. Directors and Executive
Officers of the Registrant . . . . . . . . . . . . . . . 47
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 51
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . 54
Item 13. Certain Relationships and Related Transactions . . . . . 57

PART IV

Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . . . . . 59

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

PART I

Item 1. Business.
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Overview.
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America West Airlines, Inc. ("America West" or the "Company"), a
Delaware corporation, began operations in 1983. The Company is a full-
service passenger airline which serves 43 destinations in the continental
United States and Mexico City, including its hubs in Phoenix, Arizona and
Las Vegas, Nevada and a mini-hub in Columbus, Ohio. In 1992, the Company
established a code sharing relationship with Mesa Airlines, Inc. for
commuter service, operating under the name "America West Express",
permitting the Company to serve an additional 23 destinations as of
December 31, 1993.

On June 27, 1991, America West filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona (the "Bankruptcy
Court") to reorganize under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code"). The Company is currently operating as a debtor-
in-possession ("D.I.P.") under the supervision of the Bankruptcy Court.
The Company is authorized to operate its business but may not engage in
transactions outside the ordinary course of business without the approval
of the Bankruptcy Court.

Bankruptcy And Reorganization Events.
------------------------------------

Since June 27, 1991, the date America West filed the voluntary petition
with the Bankruptcy Court to reorganize, the Company has obtained D.I.P.
financing, reduced expenses and overhead and restructured its routes and
aircraft fleet. On February 24, 1994, America West selected an investment
proposal pursuant to which it intends to develop a plan of reorganization.

Bankruptcy Events. As a result of the Chapter 11 filing, the
-----------------
prosecution of all actions and claims against America West was
automatically stayed pursuant to Section 362 of the Bankruptcy Code.
America West promptly obtained from the Bankruptcy Court a series of Orders
("First Day Orders") authorizing America West to pay certain critical
vendors and suppliers, and also authorizing the payment of employee wages
and benefits, as necessary to ensure that America West's passenger flight
operations were not disrupted and that the Company's ongoing enterprise
value would be preserved. Approximately $55 million of what otherwise
would have been pre-petition unsecured debt was authorized by the
Bankruptcy Court to be paid pursuant to the First Day Orders.

In addition, certain stipulations between the Company and providers of
aircraft and aircraft-related equipment were negotiated and approved by the
Bankruptcy Court pursuant to Section 1110 and Section 365 of the Bankruptcy
Code. These stipulations resulted in America West receiving certain
deferrals, concessions and other payment term modifications in return for
the assumption and/or conversion of the debts arising from the agreements
to post-petition administrative expense priority status under Section 503
and Section 507 of the Bankruptcy Code. For further information on the
effect of the stipulations, and subsequent events relating thereto, see
Bankruptcy And Reorganization Events -- Route Structure and Aircraft Fleet
Reductions, below.

Subsequent to the case being filed, the United States Trustee for the
District of Arizona appointed an Official Committee of Unsecured Creditors
(the "Creditors' Committee") and an Official Committee of Equity Security
Holders (the "Equity Committee") as provided by Section 1102 of the
Bankruptcy Code. Each of these committees has certain rights and
obligations provided for by the Bankruptcy Code and other applicable law,
and have continued as active participants in the bankruptcy case since
their appointment. Each of the committees has retained professional
advisors to assist them in the bankruptcy proceedings, including attorneys
and accountants, as well as financial and industry advisors. The expenses
associated with the committees and their advisors, as allowed by the
Bankruptcy Court, must be paid by the Company as administrative expenses
pursuant to certain orders of the Bankruptcy Court providing for the
payment of professional fees and expenses. The Company anticipates that
each of the committees will continue to be actively involved in the
bankruptcy proceedings on behalf of their respective constituents,
particularly with respect to the development, negotiation and confirmation
of a plan of reorganization for the Company.

The Company anticipates that the reorganization process will result in
the restructuring, cancellation and/or replacement of the interests of its
existing common and preferred stockholders. Because of the "absolute
priority rule" of Section 1129 of the Bankruptcy Code, which requires that
the Company's creditors be paid in full (or otherwise consent) before
equity holders can receive any value under a plan of reorganization, the
Company previously disclosed that it anticipated that the reorganization
process would result in the elimination of the Company's existing equity
interests. However, due to recent events, including sustained improvement
in the Company's operating results as a result of the general improvement
in the condition of the United States' economy and airline industry, some
form of distribution to the equity interests pursuant to Section 1129 may
occur. However, there can be no assurances in this regard.

On February 24, 1994, the Company selected an investment proposal as the
basis for developing the Company's plan of reorganization, which proposal
might result in a potential distribution to the Company's current equity
holders as part of a plan of reorganization, however, there can be no
assurances in this regard. See also Bankruptcy and Reorganization Events
-- Plan of Reorganization, below.

The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these costs, which are
being expensed as incurred, has affected and is expected to continue to
affect the results of operations.

Debtor-in-Possession Financing. In 1991, affiliates of Guinness Peat
------------------------------
Aviation ("GPA"), Northwest Airlines, Inc. ("Northwest") and Kawasaki
Leasing International Inc. ("Kawasaki") provided $78 million of D.I.P.
financing to the Company. In September 1992, America West received an
additional $53 million in D.I.P. financing, bringing the total outstanding
D.I.P. financing at December 31, 1992, to $110.8 million which consisted of
$69.8 million from GPA, $23 million from Kawasaki, $10 million from Ansett
Worldwide Aviation Services ("Ansett") and $8 million from several Arizona-
based entities. The D.I.P. financing is collateralized by substantially
all of the Company's assets.

The financing provided by Northwest was repaid in full at the time of
the September 1992 D.I.P. financing. America West also reconstituted its
board of directors concurrent with

the September 1992 D.I.P. financing. In September 1993, the D.I.P. lenders
extended the maturity date of the D.I.P. financing from September 30, 1993
to June 30, 1994. At the time of the September 1993 extension, the
financing provided by Ansett was repaid in full.

Interest on all funds advanced under the D.I.P. facility accrues at 3.5
percent over the 90-day London Interbank Offered Rate ("LIBOR") and is
payable quarterly. Principal repayments in the amount of $5.54 million
were made on March 1993 and June 1993. As a result of the September 1993
extension of the D.I.P. financing maturity date, the Company is required to
repay $5 million of principal on March 31, 1994. The remaining outstanding
balance will be due upon the earlier of June 30, 1994, or upon the
effective date of a confirmed Chapter 11 plan of reorganization (the
"Reorganization Date"). The amended terms of the D.I.P. financing require
the Company to notify the D.I.P. lenders if the unrestricted cash balance
of the Company exceeds $125 million. Upon receipt of such notice, the
D.I.P. lenders may require the Company to prepay the D.I.P. financing by
the amount of such excess. During the first quarter of 1994, the Company
notified the D.I.P. lenders that the Company's unrestricted cash exceeded
$125 million; however, to date, the D.I.P. lenders have not exercised their
prepayment rights.

As a condition to extending the maturity date of the D.I.P. financing in
September 1993, the Company also agreed to pay a facility fee of $627,000
to the D.I.P. lenders on September 30, 1993 and to pay an additional
facility fee equal to 1/4 percent of the then outstanding balance of the
D.I.P. financing on March 31, 1994. As of December 31, 1993, the
outstanding amount due under the D.I.P. financing was approximately $83.6
million. Presently, the Company does not possess sufficient liquidity to
satisfy the D.I.P. financing nor does it appear that new equity capital
will be obtained and a plan of reorganization confirmed prior to June 30,
1994. Consequently, the Company will be required to obtain alternative
repayment terms from its current D.I.P. lenders. Although there can be no
assurance that alternative repayment terms will be obtained, the Company
believes that any required extension of the D.I.P. financing would be for a
short period of time and would be concurrent with the implementation of a
plan of reorganization.

In connection with the D.I.P. financing provided by Kawasaki, the
Company agreed to convert advanced cash credits for 24 Airbus A320 aircraft
(the "Kawasaki Aircraft") previously advanced by Kawasaki into an unsecured
priority term loan (the "Kawasaki Term Loan"). At December 31, 1993, the
amount of the Kawasaki Term Loan was $68.4 million, including accrued
interest of $21.9 million. Until the Reorganization Date, the Kawasaki
Term Loan will accrue interest at 12 percent per annum and such interest
will be added to principal. On the Reorganization Date, 85 percent of the
Kawasaki Term Loan will be converted into an eight-year term loan which
will accrue interest at 2 percent over 90-day LIBOR and will be secured by
substantially all the assets of the Company if the D.I.P. financing is
fully repaid. Principal on such loan will be due and payable in equal
quarterly installments, plus interest, commencing after the Reorganization
Date. The Company has the right to prepay the Kawasaki Term Loan if the
D.I.P. financing is fully repaid. The remaining 15 percent of the Kawasaki
Term Loan will be treated as a general unsecured claim without priority
status under the Company's plan of reorganization. In the first quarter of
1994, the Company received information that the Kawasaki Term Loan was
purchased by a third party.

Route Structure and Aircraft Fleet Reductions. Since its bankruptcy
---------------------------------------------
filing, the Company has reviewed its route structure and flight schedules
and the resulting requirements for aircraft. In September 1991, America
West reduced the size of its fleet from 123 to 101 aircraft. The Company
further reduced its fleet in September 1992 and, as of December 1993, the
Company operated 85 aircraft. In connection with such fleet reductions,
the Company renegotiated many of its aircraft lease and loan agreements.
The Company returned aircraft to those providers whose aircraft were not
consistent with the Company's revised business strategy and to those
providers who were unwilling or unable to accept the revised terms proposed
by the Company. Aircraft providers whose aircraft were returned to them
in connection with the Company's fleet reduction and restructuring efforts
may be entitled to unsecured pre-petition claims and/or administrative
claims in the bankruptcy case for damages arising from the return of the
aircraft. See Bankruptcy And Reorganization Events -- Claims, below.

In general, the Company received rent deferrals in 1991 and further rent
deferrals and rent reductions in 1992 from many of its aircraft providers.
The rent reductions in 1992 reduced the rents on the affected aircraft to
better reflect what the Company believed to be the fair market rent of the
affected aircraft at the time of the reduction. In order to induce the
lessors to accept rent reductions, the Company agreed that the rent on
certain Boeing 737-300 and 757-200 aircraft would be readjusted to the
current market rent effective August 1, 1994 and, if elected by the lessor,
would be readjusted at two other times during the remaining term of the
lease; however, such readjustments may not occur within two years of one
another. The Company also agreed in certain cases that lessors could call
the aircraft upon 180 days notice if the lessor had a better lease proposal
from another party which the Company was unwilling to match. During the
period August 1, 1994 through July 31, 1995, certain of these lessors may
call their aircraft without first giving the Company the right to match any
competing offer. Call rights with a right of first refusal affect 16
aircraft and call rights without a right of first refusal affect 10
aircraft. In addition, in order to induce several lessors to extend the
lease terms of their aircraft, the Company agreed that the aircraft could
be called by the lessors at the end of the original lease term. One lessor
of 11 aircraft has the right to terminate each lease at the end of the
original lease term of each aircraft. Such lessor also has the right to
call its aircraft on 90 days notice at any time prior to the end of the
amended lease term. America West has no right of first refusal with
respect to such aircraft. To date, no lessor has exercised its call rights.

Principal payments on certain loans secured by aircraft were deferred
for the period August 1, 1992 through January 31, 1993 and will be repaid
over the remaining terms of five to nine years. Interest payments due in
July and August 1992, on such loans were deferred until the first quarter
of 1993 and were repaid in three equal monthly installments without
interest. A more comprehensive description of the rent deferrals and
reductions as well as the loan deferrals is set forth herein in Item 7.
------
Management's Discussion and Analysis of Financial Condition and Results of
Operations and in Item 8. Financial Statements and Supplementary Data -
------
Note 1 of Notes to Financial Statements.

Claims. The reorganization process is expected to result in the
------
cancellation and/or restructuring of substantial debt obligations of the
Company. Under the Bankruptcy Code, the Company's pre-petition liabilities
are subject to settlement under a plan of reorganization. The Bankruptcy
Code also requires that all administrative claims be paid on the effective
date of a plan of reorganization unless the respective claimants agree to
different treatment. There are differences between the amounts at which
claims liabilities are recorded in the financial

statements and the amounts claimed by the Company's creditors and such
differences are material. Significant litigation may be required to
resolve any disputes.

The Bankruptcy Court set February 28, 1992, as the last date for the
filing of proofs of claim under the Bankruptcy Code and the Company's
creditors have submitted claims for liabilities not paid and for damages
incurred. Claims for administrative expenses (administrative claims) were
not required to be filed by that date.

Due to the uncertain nature of many of the potential claims, America
West is unable to project the magnitude of such claims with any degree of
certainty. However, the claims (pre-petition claims and administrative
claims) that have been filed against the Company are in excess of $2
billion. Such aggregate amount, includes claims of all character,
including, but not limited to, unsecured claims, secured claims, claims
that have been scheduled but not filed, duplicative claims, tax claims,
claims for leases that were assumed, and claims which the Company believes
to be without merit; however, claims filed for which an amount was not
stated, are not reflected in such amount. The Company is unable to
estimate the potential amount of such unstated claims; however, the amount
of such claims could be material.

The Company is in the process of reviewing the general unsecured claims
asserted against the Company. In many instances, such review process will
include the commencement of Bankruptcy Court proceedings in order to
determine the amount at which such claims should be allowed. The Company
has accrued its estimate of claims that will be allowed or the minimum
amount at which it believes the asserted general unsecured claims will be
allowed if there is no better estimate within the range of possible
outcomes. However, the ultimate amount of allowed claims will be different
and such differences could be material. The Company is unable to estimate
the amount of such difference with any reasonable degree of certainty at
this time.

The Bankruptcy Code requires that all administrative claims be paid on
the effective date of a plan of reorganization unless the respective
claimants agree to different treatment. Consequently, depending on the
ultimate amount of administrative claims allowed by the Bankruptcy Court,
the Company may be unable to obtain confirmation of a plan of
reorganization. The Company is actively negotiating with claimants to
achieve mutually acceptable dispositions of these claims. Since the
commencement of the bankruptcy proceeding, claims alleging administrative
expense priority totaling more than $153 million have been filed and an
additional claim of $14 million has been alleged. As of February 28, 1994,
$115 million of the filed claims have been allowed and settled for $50.2
million in the aggregate. The Company is currently negotiating the
resolution of the remaining $38 million filed administrative expense claim
(which relates to a rejected lease of a Boeing 737-300 aircraft) and the
$14 million alleged administrative expense claim (which relates to a
rejected lease of a Boeing 757-200 aircraft). Claims have been or may be
asserted against the Company for alleged administrative rent and/or breach
of return conditions (i.e. maintenance standards), guarantees and tax
indemnity agreements related to aircraft or engines abandoned or rejected
during the bankruptcy proceedings. Additional claims may be asserted
against the Company and allowed by the Bankruptcy Court. The amount of
such unidentified administrative claims may be material.

As part of its claims administration procedure, the Company is reviewing
potential claims that could arise as a result of the Company's rejection of
executory contracts. The Company's

plan of reorganization will provide for the status of any executory contract
not theretofore assumed by either affirming or rejecting such contracts.
The assumption or rejection of certain executory contracts could result in
additional claims against the Company.

Plan of Reorganization. Under the Bankruptcy Code, the Company's pre-
----------------------
petition liabilities are subject to settlement under a plan of
reorganization. Pursuant to an extension granted by the Bankruptcy Court
on February 2, 1994, the Company has the partially exclusive right, until
June 10, 1994 (unless extended by the Bankruptcy Court), to file a plan of
reorganization. Each of the official committees has also been approved to
submit a plan of reorganization. The exclusivity period may be extended by
the Bankruptcy Court upon a showing of cause after notice has been given
and a hearing has been held, although no assurance can be given that any
additional extensions will be granted if requested by the Company. The
Company has agreed not to seek additional extensions of the exclusivity
period without the advance consent of the Creditors' Committee and the
Equity Committee.

On December 8, 1993 and February 16, 1994, the Bankruptcy Court entered
certain orders which provided for a procedure pursuant to which interested
parties could submit proposals to participate in a plan of reorganization
for America West. The Bankruptcy Court also set February 24, 1994 as the
date for America West to select a "Lead Plan Proposal" from the proposals
submitted.

On February 24, 1994, America West selected as its Lead Plan Proposal an
investment proposal submitted by AmWest Partners, L.P., a limited
partnership ("AmWest"), which includes Air Partners II, L.P., Continental
Airlines, Inc., Mesa Airlines, Inc. and Fidelity Management Trust Company.
On March 11, 1994, the Company and AmWest entered into a revised investment
agreement which substantially incorporates the terms of the AmWest
investment proposal (the "Investment Agreement"). The Investment Agreement
provides that AmWest will purchase from America West equity securities
representing a 37.5 percent ownership interest in the Company for $120
million and $100 million in new senior unsecured debt securities. The
Investment Agreement also provides that, in addition to the 37.5 percent
ownership interest in the Company, AmWest would also obtain 72.9 percent of
the total voting interest in America West after the Company is reorganized.
The terms of the Investment Agreement will be incorporated into a plan of
reorganization to be filed with the Bankruptcy Court; however,
modifications to the Investment Agreement may occur prior to the submission
of a plan of reorganization and such modifications may be material. There
can be no assurance that a plan of reorganization based upon the Investment
Agreement will be accepted by the parties entitled to vote thereon or
confirmed by the Bankruptcy Court.

In addition to the interest in the reorganized America West that would
be acquired by AmWest pursuant to the Investment Agreement, the Investment
Agreement also provides for the following:

1. The D.I.P. financing would be repaid in full with cash on the
Reorganization Date.

value of the securities distributed to them has not provided them
with a full recovery under the Bankruptcy Code. In addition,
unsecured creditors would have the right to elect to receive cash
at $8.889 per share up to an aggregate maximum amount of $100
million, through a repurchase by AmWest of a portion of the shares
to be issued to unsecured creditors under a plan of reorganization.

3. Holders of equity interests would have the right to receive up to
10 percent of the new common equity of the Company, depending on
certain conditions principally involving a determination as to
whether the unsecured creditors had received a full recovery on
account of their claims. In addition, holders of equity interests
would have the right to purchase up to $15 million of the new
common equity in the Company for $8.296 per share from AmWest, and
would also receive warrants entitling them to purchase, together
with AmWest, up to five percent of the reorganized Company's common
stock, at a price to be set so that the warrants would have value
only after the unsecured creditors receive full recovery on their
claims.

4. In exchange for certain concessions principally arising from
cancellation of the right of GPA affiliates to put to America
West 10 Airbus A320 aircraft at fixed rates, GPA, or certain
affiliates thereof, would receive (i) 7.5 percent of the new common
equity in the reorganized Company, (ii) warrants to purchase up to
2.5 percent of the reorganized Company's common stock on the same
terms as the AmWest warrant, (iii) $3 million in new senior
unsecured debt securities, and (iv) the right to require the
Company to lease up to eight aircraft of types operated by the
Company from GPA prior to June 30, 1999 on terms which the Company
believes to be more favorable those currently applicable to the
put aircraft. For an additional discussion of the put rights,
see Item 2. Properties -- Aircraft, below.
------

5. Continental Airlines, Inc., Mesa Airlines, Inc. and America West
would enter into certain alliance agreements which would include
code-sharing, schedule coordination and certain other relationships
and agreements. A condition to proceeding with a plan of
reorganization based upon the Investment Agreement would be that
these agreements be in form and substance satisfactory to America
West, including the Company's reasonable satisfaction that such
alliance agreements, when fully implemented, will result in an
increase in pre-tax income to the Company of not less than $40
million per year.

6. The expansion of the Company's board of directors to 15 members.
Nine members would be designated by AmWest and other members
reasonably acceptable to AmWest would include four members
designated by representatives of the Company, the Equity Committee
and the Creditors' Committee and two members designated by GPA.

from all currently existing obligations arising under the Company's
stock purchase plan in consideration for the cancellation of the
shares of Company stock securing such obligations.

The Company has also entered into a Revised Interim Procedures Agreement
(the "Procedures Agreement") with AmWest. The Procedures Agreement is
subject to the approval of the Bankruptcy Court and sets forth terms and
conditions upon which the Company must operate prior to the effective date
of a confirmed plan of reorganization based upon the terms of the Investment
Agreement. The Procedures Agreement provides for the reimbursement of
AmWest's expenses (up to a maximum of $3.55 million) as well as a termination
fee of up to $8 million under certain conditions. As of March 29, 1994, the
Procedures Agreement had not received Bankruptcy Court approval, but a
hearing in this regard is scheduled for April 12, 1994.

The Company is currently developing with AmWest a plan of reorganization
based upon the foregoing terms. The Equity Committee has agreed to support
the plan. The Creditors' Committee has indicated that it does not support
the current terms of the Investment Agreement. Another group interested in
developing a plan of reorganization with the Company has proposed to
invest $155 million in equity securities and $65 million in new senior
unsecured debt securities. The proponent of this proposal would receive a
33.5 percent ownership interest in the reorganized Company, current equity
holders would receive a 4.0 percent ownership interest in the reorganized
Company and the unsecured creditors would receive a 62.5 percent ownership
interest in the reorganized Company.

Any plan of reorganization must be approved by the Bankruptcy Court and
by specified majorities of each class of creditors and equity holders whose
claims are impaired by the plan. Alternatively, absent the requisite
approvals, the Company may seek Bankruptcy Court approval of its
reorganization plan under Section 1129(b) of the Bankruptcy Code, assuming
certain tests are met. The Company cannot predict whether any plan
submitted by it will be approved.

The Company is currently unable to predict when it may file a plan of
reorganization based upon the Investment Agreement, but intends to do so as
soon as practicable. Once a plan with a disclosure statement is filed by
any party, the Bankruptcy Court will hold a hearing to determine the
adequacy of the information contained in such disclosure statement. Only
upon receiving an order from the Bankruptcy Court providing that the
disclosure statement accompanying any such plan contains adequate
information as required by Section 1125 of the Bankruptcy Code, may a party
solicit acceptances or rejections of any such plan of reorganization.
Following entry of an order approving the disclosure statement, the plan
will be sent to creditors and equity holders for voting pursuant to both
the Bankruptcy Code and orders that will be entered by the Bankruptcy
Court. Following submission of the plan to holders of claims and equity
interests, the Bankruptcy Court will hold a hearing to consider
confirmation of the plan pursuant to Section 1129 of the Bankruptcy Code.
Although the Bankruptcy Code provides for certain minimum time periods for
these events, the Company is unable to reasonably estimate when a plan
based on the Investment Agreement might be submitted for voting and
confirmation.

If at any time the Creditors' Committee, the Equity Committee or any
creditor of the Company or equity holder of the Company believes that the
Company is or will not be in a

position to sustain operations, such party can move in the Bankruptcy Court
to compel a liquidation of the Company's estate by conversion to Chapter 7
bankruptcy proceedings or otherwise. In the event that the Company is forced
to sell its assets and liquidate, it is unlikely that unsecured creditors or
equity holders will receive any value for their claims or interests.

See Item 3. Legal Proceedings, Item 7. Management's Discussion and
------ ------
Analysis of Financial Condition and Results of Operations and Item 8.
------
Financial Statements and Supplementary Data - Note 1 of Notes to Financial
Statements, for additional information concerning the bankruptcy process
and its impact on the Company.

Competition.
-----------

The airline industry is highly competitive and susceptible to price
discounting. Many of America West's competitors are carriers with
substantially greater financial resources. Overall industry profit margins
have traditionally been low and in the last three years, have been
substantially negative. Airlines compete in the areas of pricing,
scheduling (frequency and flight times), on-time performance, frequent
flyer programs and the automation of travel agents' reservation systems.
Price competition results primarily from the offering of discount or
promotional fares to passengers and, in the case of freight services, from
the offering of special commodity rates to shippers. Any such fares or
rates offered by one airline are normally matched by competing airlines.

Profit levels are highly sensitive to, and during the last three years
have been adversely impacted by, changes in fuel prices, average yield
(fare levels) and passenger demands. Passenger demand and yield have been
affected by, among other things, the general state of the economy and
actions taken by America West and its competitors.

United States air carriers are free to set their own domestic fares
without government regulation. In the spring of 1992, American Airlines
introduced a new fare structure followed by a deeply discounted summer
sale, steps that were generally matched by other U.S. airlines (including
America West), resulting in substantially depressed industry yields and
significant 1992 losses at most of the major U.S. airlines. American
Airlines and the rest of the domestic airline industry subsequently
abandoned that pricing structure and fare levels have since increased in
1993 from 1992 levels. Nonetheless, significant industry-wide discounts
could be re-implemented at any time, and the introduction of broadly-
available, deeply discounted fares by a major U.S. airline would likely
result in lower yields for the entire industry and could have a material
adverse effect on the Company's operating results.

Several of the Company's major markets, including those in New York
City, Texas and Southern California, as well as Washington D.C., Chicago
and Las Vegas, are served by other larger and more established carriers and
are highly competitive. On many routes, and in particular those routes
between Phoenix and California, fare competition has made it difficult for
the Company to raise fares except on a selective basis. Intense fare
competition with respect to certain markets has adversely affected
passenger yield and as a result profitability.

In recent years several new carriers have entered the industry,
typically with low cost structures. Aircraft, skilled labor and gates at
most airports continue to be available to start-up carriers. Currently,
any air carrier deemed fit by the Department of Transportation ("DOT")

is free to operate scheduled passenger service between any two points in the
United States and its possessions. The result, since deregulation, has
been the creation of a series of new entrant airlines. New entrant air
carriers have, other than low operating costs, relatively few competitive
advantages. To capitalize on the low cost advantage, new entrant airlines
seek to attract market share through price competition. In doing so, they
keep downward pressure on industry-wide fares. America West is subject to
these pricing actions. The Company has developed competitive strategies
in an effort to insulate itself from the impact of new entrant carriers;
but, these strategies cannot be completely effective.

Operating Strategy.
------------------

America West's operating strategy as a full service carrier consists of
(i) operating with low costs; (ii) offering its passengers competitive
fares; (iii) delivering quality air travel service; and (iv) providing
these services to cities which have the greatest demand for America West's
product mix and on routes which take advantage of the Company's hub-and-
spoke system. The Company has determined that it will not develop an
overseas international route network but may form strategic alliances with
foreign or other U.S. carriers who desire traffic from, and access to,
America West's travel markets.

The Company endeavors to establish and maintain routes and fares which
will build passenger volume sufficient to permit the Company to operate
profitably. The Company has selected routes which, in management's
opinion, had not been receiving the frequency and quality of air service
which such routes are capable of supporting.

During the first quarter of 1993, the Company entered into discussions
with American Airlines regarding possible joint marketing arrangements and
management service agreements; however, during the second quarter of 1993
these discussions were terminated when it was determined that proceeding
with such arrangements would not be in the best interest of either company.

During the bankruptcy, the Company has been able to eliminate or
renegotiate certain pre-petition debt. Steps taken by the Company since
filing for bankruptcy protection in June 1991, have included: (i) various
cost reduction programs, which included a wage freeze preceded by a 10
percent wage reduction for all employees and the consolidation of the
Company's leased facilities; (ii) rejecting leases of certain aircraft and
aircraft types which were deemed surplus to the Company's strategy of
focusing on domestic markets; (iii) adjustments to certain aircraft lease
rates and interest costs to reflect current market values; (iv) realigning
its routes to improve load factors and yields and enhancing its revenue
management system; and (v) the introduction of several code sharing
agreements which has enabled the Company to expand its scope of service and
attract a broader passenger base.

In addition, if a plan of reorganization based upon the current terms of
the Investment Agreement is confirmed, the Company anticipates the
formation of an alliance among itself, Continental Airlines, Inc. and Mesa
Airlines, Inc. which could include code-sharing, schedule coordination and
certain other relationships and agreements. See Bankruptcy And
Reorganization Events -- Plan of Reorganization, above.

Operations.
----------

Hub Operations. The Company has established major hub systems in
--------------
Phoenix and Las Vegas and a mini-hub in Columbus. The success of the
Company's hub systems depends on its ability to attract passengers
traveling to and from its hubs, as well as passengers traveling through the
hubs to the Company's other destinations. The Company schedules banks of
flights timed to arrive at the hub from one direction at approximately the
same time and to depart toward the opposite direction a short time later.

During 1993, the Company enplaned approximately 40 percent of all
Phoenix enplanements and had an average of 149 daily departures. Southwest
Airlines enplaned approximately 30 percent, and no other carrier accounted
for more than six percent of enplanements. During 1993, the Company
enplaned approximately 26 percent of the Las Vegas traffic and had an
average of 74 daily departures. Southwest enplaned approximately 29
percent, and no other carrier accounted for more than 10 percent of
enplanements.

The Company began service at Columbus, Ohio in December 1991 with nine
round-trip flights per day with nonstop service to Phoenix, Las Vegas,
Boston and Washington D.C. As of February 28, 1994, the Company provided
non-stop jet service to 11 destinations from Columbus, Ohio. During 1993,
the Company enplaned approximately 18 percent of the Columbus traffic and
had an average of 33 daily departures. USAir and Delta enplaned 21 percent
and 12 percent, respectively, and no other carrier accounted for more than
10 percent of enplanements.

Regional/Commuter Service. On October 1, 1992, America West entered
-------------------------
into a code-sharing agreement with Mesa Airlines to provide the Company
with service to 13 cities from its Phoenix hub. Under the terms of this
agreement, Mesa Airlines began operating in Phoenix under the name "America
West Express". The code-sharing agreement establishes Mesa Airlines as a
feeder carrier for the Company and provides for coordinated flight
schedules, passenger handling and computer reservations under the America
West flight designator code, allowing passengers to purchase one air fare
for their entire trip. Mesa Airlines has begun to incorporate the color
scheme and commercial logo of America West on aircraft utilized on America
West Express routes. America West Express services 13 destinations from
the Company's Phoenix hub operations with an average of 49 daily
departures. Pursuant to a second code-sharing agreement entered into in
December 1993, Mesa Airlines serves nine destinations from the Company's
Columbus hub operations with an average of 33 daily departures. The code
sharing agreements with Mesa Airlines are long term, but may be cancelled
by either party for cause upon 60 days notice. In certain instances, such
as the cessation of operations, the agreement may be immediately
terminated.

Marketing.
---------

America West's marketing efforts focus on both the frequent business as
well as discretionary travellers. The Company markets its services in
large part through travel agencies. The Company has also established an
international sales network to market its product to the growing number of
international passengers passing through such international gateways served
by America West as New York City, Boston, Baltimore, Washington D.C., Los
Angeles, San Francisco and Chicago. Marketing programs such as
"FlightFund", the Company's frequent

flyer program, and those initiated by America West Vacations, the Company's
tour packaging division, have increased America West's visibility and
improved its competitive position.

Travel Agents. A large percentage of the Company's services are
-------------
marketed through travel agencies. For the twelve months ended December 31,
1993, approximately 72 percent of the Company's passenger revenues were
generated through tickets written by travel agencies.
Travel agents and other airlines are able to book passenger flights and
generate tickets on America West through computer reservation systems which
have been developed and are controlled by other airlines. At present,
approximately 98 percent of all travel agencies in the United States
utilize these systems. Federal regulations have been promulgated that are
intended to diminish preferential schedule displays and other practices
with respect to these systems which place the Company and other similarly
situated system users at a competitive disadvantage to the airlines
controlling the systems.

Frequent Flyer Program. The Company established its frequent flyer
----------------------
program, FlightFund, in 1987. FlightFund members earn mileage credits for
flights on America West and certain other participating airlines, or by
utilizing services of other program participants such as bank credit cards,
hotels and car rental firms. In addition, the Company periodically offers
special short-term promotions which allow members to earn additional free
travel awards or mileage credits. The FlightFund member accumulates
mileage credits up to 20,000 miles at which time four mileage award
certificates of 5,000 miles each are issued. Mileage award certificates
automatically expire after two years if issued prior to April 1, 1993 and
three years for issues after that date. The mileage award certificates can
be redeemed for various travel awards including first class upgrades and
tickets on America West or other airlines participating in America West's
frequent flyer program. Travel is valid up to one year from the date of
ticketing. Most travel awards are subject to blackout dates and capacity
controlled seating.

FlightFund awards may also be redeemed for flights to certain
international destinations and Hawaii. America West is required to
purchase space on other airlines to accommodate such award redemption. In
addition, America West has entered into barter agreements with certain
hotel and rental car agencies which permit the Company to award FlightFund
members with discounts at such hotels and rental agencies in exchange for
providing air travel to such hotels and travel agencies.

The Company accounts for the FlightFund program under the incremental
cost method whereby travel awards are valued at the incremental cost of
carrying one additional passenger. Costs including passenger food,
beverages, supplies, fuel, liability insurance, purchased space on other
airlines and denied boarding compensation are accrued as frequent flyer
program participants accumulate mileage to their accounts. Such unit costs
are based upon expenses expected to be incurred on a per passenger basis.
No profit or overhead margin is included in the accrual for these
incremental costs.

FlightFund's current membership is approximately 1.6 million
participants. At December 31, 1993, 1992 and 1991, the Company estimated
that approximately 238,000, 238,000 and 235,000 travel awards were expected
to be redeemed. Correspondingly, the Company has an accrued liability of
$7.4 million, $7.3 million and $6.2 million for 1993, 1992 and 1991,
respectively. The accrual is based upon the Company's estimates of mileage
earned that will eventually be redeemed for a travel award.

The number of FlightFund travel awards redeemed for round-trip travel
for the years ended December 31, 1993, 1992 and 1991, was approximately
99,000, 106,000 and 160,000 respectively, representing 2.8 percent, 3.0
percent and 3.0 percent of total revenue passenger miles for each
respective period. The Company does not believe that the usage of free
travel awards results in any significant displacement of revenue passengers
due to the Company's ability to manage frequent flyer travel by use of
blackout dates and limited seat availability.

Travel Services. America West provides services designed to appeal to
---------------
frequent business and discretionary travellers. These services include:
assigned seating; participation in travel agent automated reservation
systems; interline ticketing and baggage transfer; large overhead bins for
carry-on luggage; complimentary copies of The Wall Street Journal;
-----------------------
sandwiches and snacks on most flights of over one hour and twenty minutes;
meal service on long distance flights; and first-class seating on certain
flights. At the Phoenix hub, the Company has two airport lounges which
provide members with a number of convenient services, such as a library,
private meeting rooms, personal computers, teleconferencing, reservations,
check-in and flight information.

America West Vacations. America West Vacations, the Company's tour
----------------------
packaging division, began operations in December 1987 and generated
approximately $100 million in gross revenues during the year ended December
31, 1993. America West Vacations arranges vacation packages which include
hotel accommodations, air fare and ground transportation in certain
markets. The marketing focus of America West Vacations is currently on
Nevada, with additional programs for Arizona, Florida and California being
developed. During the year ended December 31, 1993, America West Vacations
sold approximately 500,000 room nights and over 315,000 round-trip tickets.

Advertising and Promotions. America West concentrates its advertising
--------------------------
efforts on reaching a multi-targeted audience focusing on the business and
leisure traveler as well as the travel agent community. The message is
consistent in promoting the following concepts: America West's competitive
fares; quality customer service; one of the most modern aircraft fleets in
the sky; and superior on-time performance. Media are chosen for their
effectiveness in reaching the targeted audience. The primary medium
consists of newspaper advertisements focusing on fares as a primary
message, with supplementary advertising through radio in markets where
"drive-time" opportunities are present. Travel agent publications, and
communications with individual agents transmitted via facsimile, are used
to provide the critical frequency necessary in reaching the travel agent
community with late breaking news and fare information as well as editorial
pieces focusing on preserving competition in the airline industry. In
promoting America West Vacations, a consistent use of local market
newspapers along with selected print publications is used to advertise
products. FlightFund is promoted through the use of direct mail and
America West's inflight publications.

The arena that serves as the home of the Phoenix Suns professional
basketball team is named the "America West Arena". The Company pays an
annual fee as part of its advertising budget to maintain its association
with the arena and to have its name and logo appear throughout the
facility, including on the basketball court. Because of this association,
the Company receives media exposure at no additional expense during
national and local telecasts of the Phoenix Suns basketball games, as well
as during other events.

In 1993, America West became the preferred commercial air carrier of the
MGM Grand Hotel Casino and Theme Park ("MGM") in Las Vegas, Nevada.
Pursuant to an agreement with the MGM, America West will develop joint
marketing programs with the MGM focused on travel agents and consumers.
The association with MGM will provide America West with benefits not
available to other air carriers which management believes will enhance
America West's presence in the Las Vegas.

Employees.
---------

At December 31, 1993, the Company employed 8,102 full-time and 3,117
part-time employees, the equivalent of 10,544 full-time employees. During
1993, the Company had 1,630,400 available seat miles per full-time
equivalent employee and 1,064,200 revenue passenger miles per full-time
equivalent employee, based on the number of full-time equivalents at year
end. The Company's payroll and related costs, which amounted to 1.78 cents
per ASM for the year ended December 31, 1993, is below the industry
average.

Prior to the bankruptcy filing, employees of the Company participated in
stock option and stock purchase programs. Grants under the stock option
programs were suspended after the Company's Bankruptcy filing.
Participation in the Company stock purchase program was mandatory for most
of the Company's employees. Employees were also entitled to make voluntary
purchases under the program. In general, the stock purchase program
permitted employees to purchase Common Stock of the Company at 85 percent
of the fair market value of the Common Stock. Such purchases could be
financed by the employees through the Company and such financed amounts
were repaid through payroll deductions. Since the bankruptcy filing, the
Company has suspended the stock purchase program as well as all payroll
deductions for the financed purchases. As of December 31, 1993, the
aggregate principal balance of the full recourse promissory notes issued by
employees to the Company in accordance with the Company's stock purchase
plan was $17.6 million. The Investment Agreement provides for the release
of the Company's employees from all currently existing obligations arising
under the Company's stock purchase plan in consideration for the
cancellation of the shares of Company stock securing such obligations.

Such release may result in adverse tax implications for the affected
employees. See Item 8. Financial Statements and Supplementary Data -- Notes
------
6 and 9 of Notes to Financial Statements.

In February 1991, the Company reduced the wages of its officers and
other management personnel by as much as 25 percent. In August 1991, a
Company-wide 10 percent pay reduction was implemented and the wages of all
the Company's employees have been frozen since that time. In the second
quarter of 1993, the Company instituted a transition pay program which is
intended to restore a portion of the wage reduction to employees who
continue to be employed by the Company. The transition pay program is
scheduled to terminate after four quarters, unless terminated earlier as a
result of a confirmed plan of reorganization. On March 24, 1994, the
Company announced pay increases for all employees effective April 1, 1994.
See also Item 7. Management's Discussion and Analysis of Financial
------
Condition and Results of Operations for additional information concerning
the transition pay program.

The Association of Flight Attendants (AFA) is seeking certification as
the bargaining representative of America West's Inflight Customer Service
Representatives. On January 12, 1990, the National Mediation Board (NMB)
ordered a re-run election of an election originally

held in February 1989. The re-run election was delayed several years
pending resolution of a legal dispute. On July 7, 1993, the NMB informed
America West of its intent to resume its efforts to conduct a re-run
election. A date for the election has not yet been scheduled.

On October 26, 1993, the Air Line Pilots Association (ALPA) was certified
by the NMB as the bargaining representative of America West's pilots.
Negotiations with ALPA have not yet commenced, and no opening
proposals have been exchanged. Currently, none of the Company's other
employees are represented by a union or covered by a collective bargaining
agreement. The Company believes its relations with its employees are
satisfactory.

The Company provides benefits to all employees, such as vacations and
life, health and accident insurance. Employees may also participate in the
Company's 401(k) plan. In addition, the Company provides child care
services to its employees in Phoenix, Las Vegas and other locations.
America West has no post-employment or post-retirement benefit plans.

Airport Fees.
------------

In recent years, many airports have increased or sought to increase the
rates charged to airlines. The extent to which such charges are limited by
statute and the ability of airlines to contest such charges has been and
may continue to be subject to litigation. To the extent the limitations on
such charges are relaxed or the ability of airlines is restricted, the
rates charged by airports to airlines may increase substantially.
Management cannot predict the magnitude of any such increase.

Fuel.
----

One of America West's largest expenses is jet fuel, representing 13.8
percent of total operating expense during 1993. Since the resolution of
the Middle East crisis at the end the first quarter of 1991, fuel prices
have stabilized. However, substantial increases in fuel prices or the lack
of adequate supplies in the future will have a material adverse effect on
the operations of the Company. A one cent per gallon change in fuel price
would affect the Company's annual operating results by approximately $3
million at present consumption levels.

The Company purchases fuel on standard trade terms under master
agreements and has been able to obtain fuel sufficient to meet its
requirements at competitive prices. The Company does not hedge its fuel
costs. In August 1993, the United States government increased taxes on
fuel, including aircraft fuel, by 4.3 cents per gallon. Airlines are
exempt from this tax increase until October 1, 1995. When implemented,
this new tax will increase the Company's annual operating expenses by
approximately $13 million based upon its 1993 fuel consumption levels.

Aircraft Maintenance and Repairs.
--------------------------------

Technical Support Facility. The Company has a 660,000 square foot
--------------------------
Technical Support Facility at Phoenix Sky Harbor International Airport.
The facility includes four hangar bays, engine support service shops, an
aircraft paint bay, an upholstery shop, sheet metal shop and two flight
simulator bays. The facility provides the Company with increased
flexibility in its scheduling of aircraft maintenance and reduces the
Company's vulnerability to work stoppages and labor problems encountered at
the outside facilities. Substantially all required airframe

overhauls are performed at this facility based on the Company's Federal
Aviation Administration (the "FAA") approved phased maintenance programs.
Periodic overhauls of aircraft engines are performed by outside contractors,
and it is anticipated that such will continue to be the case. The Company
provides airframe maintenance and ground services to other air carriers on
a contract basis.

The Company's aircraft are maintained in accordance with FAA-approved
maintenance programs designed for each specific aircraft type. The
maintenance programs also require that each aircraft undergo a complete
inspection using non-destructive diagnostic equipment following the
completion of specified time periods and periodically go through complete
overhauls. The purpose of this detailed inspection is to detect and repair
any structural irregularities. Maintenance efforts are monitored by the
FAA, with FAA representatives operating on-site. The Company may amend its
maintenance programs in order to comply with future directives of the
government or the manufacturer.

The Company employs approximately 1,000 maintenance and support
personnel for the maintenance and repair of the Company's aircraft.

Pilot Training Facilities.
-------------------------

FAA regulations require initial and recurrent training for pilots. The
Company currently owns one Airbus A320 simulator, one Boeing 737-300/400
simulator and one Boeing 737-200 simulator. In addition, the Company
leases one Boeing 757-200 simulator and one Boeing 737-200 simulator. The
Boeing 757-200 simulator can also be used to train pilots for Boeing 767
aircraft. The Airbus A320 simulator and the Boeing 737-300/400 simulator
were certified by the FAA in 1993. All the simulators support the
Company's pilot training programs. America West also provides similar
training on a contract basis to FAA inspectors and several other air
carriers. The Company fully utilizes these flight simulators, operating
each one approximately twenty hours a day.

Government Regulation.
---------------------

General. The Company is subject to the Federal Aviation Act of 1958
-------
(the "Aviation Act"), as amended, under which the DOT and the FAA exercise
regulatory authority. This regulatory authority includes: the
determination and periodic review of the fitness (including financial
fitness) of air carriers; the certification and regulation of the flight
equipment; the approval of personnel who may engage in flight, maintenance
and operations activities; the approval of flight training activities; and
the enforcement of minimum air safety standards set forth in FAA
regulations. In accordance with the Airline Deregulation Act of 1978,
domestic airline fares and routes are no longer subject to significant
regulation. The DOT maintains authority over international aviation,
subject to the review of the President of the United States, and has
jurisdiction over consumer protection policies, computer reservation system
issues and unfair trade practices.

Noise Abatement. The Airport Noise and Capacity Act of 1990 provides,
---------------
with certain exceptions, that after December 31, 1999, no person may
operate certain large civilian turbo-jet aircraft in the United States that
do not comply with Stage 3 noise levels (Stage 3 is the FAA designation for
the quietest commercial jets). As of December 31, 1993, 73 percent of America

West's fleet was in compliance with these FAA noise abatement regulations
that will require carriers to gradually phase out their noisier jets
(such as the Boeing 737-200), either replacing them with quieter Stage
3 jets or equipping them with hush kits to comply with noise abatement
regulations. The implementation of the regulations are on the following
schedule: by December 31, 1994, each carrier must either reduce the number
of Stage 2 aircraft it operates by 25 percent or operate a fleet composed
of not less than 55 percent Stage 3 aircraft; by December 31, 1996, each
carrier must either reduce its Stage 2 aircraft by 50 percent or operate a
fleet composed of not less than 65 percent Stage 3 aircraft; by December
31, 1998 at least 75 percent of a carrier's Stage 2 aircraft must be
eliminated, or its overall fleet must be composed of 75 percent Stage 3
aircraft; and by December 31, 1999, 100 percent of the fleet must be
composed of Stage 3 aircraft, unless certain waivers are received.

Numerous airports, including those serving Boston, Denver, Los Angeles,
Minneapolis-St. Paul, New York City, San Diego, San Francisco, San Jose,
Orange County, New York, Washington D.C, Burbank and Long Beach have
imposed restrictions such as curfew, aircraft noise levels, mandatory
flight paths and runway restrictions, which limit the ability of air
carriers to increase service at such airports. The Port Authority of New
York and New Jersey is considering a phaseout of Stage 2 aircraft on a more
accelerated basis than that of the FAA requirement. The Company's Boeing
757-200s, 737-300s and Airbus A320s all comply with current FAA Stage 3
noise regulations, as well as the more stringent noise abatement
requirements of the airports listed above.

PFC Charges. During 1990, Congress enacted legislation to permit
-----------
airport authorities, with prior approval from the DOT, to impose passenger
facility charges ("PFCs") as a means of funding local airport projects.
These charges, which are intended to be collected by the airlines from
their passengers, are limited to $3.00 per enplanement, and to no more than
$12.00 per round trip. The legislation provides that the airlines will be
reimbursed for the cost of collecting these charges and remitting the funds
to the airport authorities. America West currently retains 12 cents
(reduced to eight cents in June 1994) from every PFC that it collects,
which in 1993, resulted in $630,000 in collection reimbursements. PFCs are
currently authorized at approximately 170 airports, with a total annual
estimated industry collection of about $1 billion. The airports serving
Phoenix, Boston, Baltimore, Washington, Newark, New York City, Las Vegas,
Columbus, Orlando and Tampa (which are markets served by the Company), have
imposed or announced their intention to impose PFCs. By the end of 1994,
the Company expects that most major airports will have imposed, or
announced their intent to impose PFCs. As a result of competitive
pressure, the Company and other airlines have been limited in their
abilities to pass on the cost of the PFCs to passengers through fare
increases.

Environmental Matters. The Company is subject to regulation under major
---------------------
environmental laws administered by state and federal agencies, including
the Clean Air Act, Clean Water Act and Comprehensive Environmental Response
Compensation and Liability Act of 1980. In some locations there are also
county and sanitary sewer district agencies which regulate the Company.
The Company has not been named as a potentially responsible party by the
Environmental Protection Agency.

Aging Aircraft Maintenance. The FAA issued several Airworthiness
--------------------------
Directives ("AD") in 1990 mandating changes to the older aircraft
maintenance programs. These ADs were issued to ensure that the oldest
portion of the nation's fleet remains airworthy. The FAA is requiring

that these aircraft undergo extensive structural modifications. These
modifications are required upon the accumulation of 20 years time in
service, prior to the accumulation of a designated number of flight cycles
or prior to 1994 deadlines established by the various ADs, whichever occurs
later. Six of the Company's 85 aircraft are currently affected by
these aging aircraft ADs. The Company constantly monitors it fleet of
aircraft to ensure safety levels which meet or exceed those mandated by the
FAA or the DOT.

Safety. America West is subject to the jurisdiction of the FAA with
------
respect to aircraft maintenance and operations, including equipment,
dispatch, communications, training, flight personnel and other matters
affecting air safety. The FAA has the authority to issue new or additional
regulations. To ensure compliance with its regulations, the FAA requires
the Company to obtain operating, airworthiness and other certificates which
are subject to suspension or revocation for cause. In addition, a
combination of FAA and Occupational and Health Administration regulations
on both federal and state levels apply to all of America West's ground-
based operations.

Slot Restrictions. At New York City's JFK and LaGuardia Airports,
-----------------
Chicago's O'Hare International Airport and Washington's National Airport,
which have been designated "High Density Airports" by the FAA, there are
restrictions on the number of aircraft that may land and take-off during
peak hours. In the future, these take-off and landing time slot
restrictions and other restrictions on the use of various airports and
their facilities may result in further curtailment of services by, and
increased operating costs for, individual airlines, including America West,
particularly in light of the increase in the number of airlines operating
at such airports. In general, the FAA rules relating to allocated slots at
the High Density Airports contain provisions requiring the relinquishment
of slots for nonuse and permits carriers, under certain circumstances, to
sell, lease or trade their slots to other carriers.

On January 1, 1993, the FAA implemented new slot use standards that
require that all slots must be used on 80 percent of the dates during each
two-month reporting period. Previously, slots were required to be used at
a 65 percent use rate. Failure to satisfy the 80 percent use rate will
result in loss of the slot. The slot would revert to the FAA and be
reassigned through a lottery arrangement.

The Company currently utilizes two slots at New York City's JFK airport,
four slots at New York City's LaGuardia airport, four slots Chicago's
O'Hare airport and six slots at Washington's National airport. Four of the
slots at Washington's National airport are temporary and the Company's
right to utilize such slots expires in September 1994; however, the Company
currently expects that its ability to utilize such slots will be renewed.
The average utilization rate by the Company of all the foregoing slots
range from 86 percent to 100 percent.

CRAF Program. In time of war or during a national emergency or civil
------------
defense emergency declared by the President or the Congress of the United
States, or in a situation short of this declared by the Director of the
Office of Emergency Preparedness, the Commander in Chief, Military Airlift
Command, or any official designated by the President to coordinate all
civil and defense mobilization activities, United States air carriers may
be required to provide airlift services to the Military Air Command under
the Civil Reserve Air Fleet Program (the "CRAF Program"). During the
Middle East conflict, two of America West's aircraft participated in the
CRAF Program.

Insurance.
---------

The Company has arranged a program of insurance of the types and in the
amounts it believes customary in the airline industry, including coverage
for public liability, passenger liability, property damage, aircraft loss
or damage, cargo liability and workers' compensation. The Company believes
such insurance is adequate as to both risks covered and coverage amounts.

Item 2. Properties.
------ ----------

Facilities.
----------

In February 1988, the Company opened its maintenance and technical
support facility at Phoenix Sky Harbor International Airport. The 660,000
square foot facility is comprised of four hangar bays, hangar shops, a
flight simulator building as well as warehouse and commissary facilities.

The Company owns the 68,000 square foot America West Corporate Center at
222 South Mill Avenue in Tempe, Arizona. At December 31, 1993, the Company
leased approximately 650,000 square feet of general office and other space
in Phoenix and Tempe, Arizona. As a result of the reduction in aircraft
fleet size in 1991 and 1992, a portion of the leased space became surplus
to the Company's operational requirements. Negotiations with lessors
occurred during 1993 with the assistance of a consulting firm in an effort
to develop a consolidation plan. Such plan was completed at the end of
1993 and its implementation commenced in the first quarter of 1994. The
consolidation plan generally provides for a reduction in leased space by
approximately 150,000 square feet.

In 1990, the Company's Phoenix passenger service facilities were
relocated to Terminal 4 of Phoenix Sky Harbor International Airport, where
the Company leases approximately 258,200 square feet at December 31, 1993.
The Company presently has 28 gates with 27 of such gates having enclosed
passenger loading bridges at its two concourse facilities located in
Terminal 4. The Company also leases approximately 25,000 square feet of
other space at the airport for administrative offices and pilot training.

At December 31, 1993, the Company leased approximately 106,000 square
feet of space at McCarran International Airport in Las Vegas, Nevada.
Included in this property at Terminal B are 13 gates (all equipped with
enclosed passenger boarding bridges) and adjoining holding room areas. In
February 1993, the Company vacated approximately 26,000 square feet at
Terminal B, including six gates.

At the Company's Columbus, Ohio mini-hub, the Company leased
approximately 30,000 square feet of space at December 31, 1993. The
Company also leased two gates from the Columbus airport authority and has
the ability to sublease additional gates from other airlines as the need
arises.

Space for ticket counters, gates and back offices has also been obtained
at each of the other airports served by the Company, either by lease from
the airport operator or by sublease

from another airline. Some of the Company's airport sublease agreements
include requirements that the Company purchase various ground services
at the airport from the lessor airline at rates in excess of what it would
cost the Company to provide those services itself.

Aircraft.
--------

At December 31, 1993, the Company's 85 aircraft fleet consisted of three
types of aircraft (56 Boeing 737s, 18 Airbus A320s and 11 Boeing 757s).
America West's fleet has an average aircraft age of 8.1 years.

The table below sets forth certain information regarding the Company's
aircraft fleet at December 31, 1993:

<TABLE>
<CAPTION>
Average
Aircraft Number of Average Remaining Lease
Type Status Aircraft Age (Yrs.) Term (Yrs.)
-------- ------ -------- ---------- -----------------
<C> <C> <C> <C> <C>
A320 Leased 18 3.9 16.6

737-100 Owned 1 24.3 --

737-200 Owned 5 14.8 --

737-200 Leased 17 14.0 5.9

737-300 Owned 11 5.2 --

737-300 Leased 22 6.6 8.8

757-200 Owned 2 4.3 --

757-200 Leased 9 7.8 11.0
--
Total 85 8.1
==
</TABLE>

Each of the aircraft that is designated as owned serves as collateral
for a loan pursuant to which the aircraft was acquired by the Company or
serves as collateral for a non-purchase money loan.

At December 31, 1993, the Company had on order a total of 93 aircraft of
the types currently comprising the Company's fleet, of which 51 are firm
and 42 are options. The table below details such deliveries.

<TABLE>
<CAPTION>
Firm Orders
------------------------------------------
Option
1994 1995 1996 1997 Thereafter Total Orders Total
---- ---- ---- ---- ---------- ----- ------ -----

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boeing: 737-300 - - 4 2 - 6 10 16

757-200 - 4 3 - - 7 10 17

Airbus: A320-200 9 5 2 8 14 38 22 60
-- -- -- -- -- -- -- --

Total: 9 9 9 10 14 51 42 93
== == == == == == == ==
</TABLE>

The current estimated aggregate cost for these firm commitments and
options is approximately $5.2 billion. Future aircraft deliveries are
planned in some instances for incremental additions to the Company's
existing aircraft fleet and in other instances as replacements for aircraft
with lease terminations occurring during this period. The purchase
agreement to acquire 24 Boeing 737-300 aircraft had been affirmed in the
Company's bankruptcy proceeding. With timely notice to the manufacturer,
all or some of these deliveries may be converted to Boeing 737-400
aircraft. As of December 31, 1993, eight Boeing 737 delivery positions had
been eliminated due to the lack of a required reconfirmation notice by the
Company to Boeing resulting in the 16 Boeing 737-300 aircraft total
reflected in the table above. The failure to reconfirm these delivery
positions exposes the Company to loss of pre-delivery deposits and other
claims which may be asserted by Boeing in the Bankruptcy proceeding. The
purchase agreements for the remaining aircraft types have not been assumed
and, the Company has not yet determined which of the other aircraft
purchase agreements, if any, will be affirmed or rejected.

As part of the Kawasaki Term Loan, the Company terminated an agreement
to lease 24 Airbus A320 aircraft from Kawasaki, and ultimately replaced it
with a put agreement to lease up to four such aircraft. Kawasaki is under
no obligation to lease such aircraft to the Company and has the right to
remarket these aircraft to other parties. Prior to its bankruptcy filing,
the Company also entered into a similar arrangement with GPA, whereby the
Company terminated its agreement to lease 10 Airbus A320 aircraft from GPA
and replaced it with a put agreement to lease up to 10 Airbus A320 aircraft
from GPA.

The put agreement with Kawasaki requires Kawasaki to notify the Company
prior to July 1, 1994 if it intends to require the Company to lease any of
its put aircraft. GPA's put agreement requires 180 days prior notice of
the delivery of a put aircraft. The agreement also provides that GPA may
not put more than five aircraft to the Company in any one calendar year.
No more than nine put aircraft (GPA and Kawasaki combined) may be put to
the Company in one calendar year. GPA's put right expires on December 31,
1996. The Kawasaki and the GPA put aircraft are reflected in the "Firm
Order" section of the table above.

The Investment Agreement provides that as partial consideration for the
cancellation of the GPA put rights, GPA will receive the right to require
the Company to lease up to eight aircraft of types operated by the Company
from GPA prior to June 30, 1999. See Item 1. Business -- Bankruptcy And
------
Reorganization Events -- Plan of Reorganization.

The Company does not have firm lease or debt financing commitments with
respect to the future scheduled aircraft deliveries (other than for the
Kawasaki put aircraft and the GPA put aircraft referred to above).

In addition to the aircraft set forth in the chart above, the Company
also has a pre-petition executory contract under which the Company holds
delivery positions for four Boeing 747-400 aircraft under firm orders and
another four under options. The contract allows the Company, with the
giving of adequate notice, to substitute other Boeing aircraft types for
the Boeing 747-400 in these delivery positions. As a result, the Company
is still evaluating its future fleet needs and is currently unable to
determine if it will substitute other aircraft types or reject this
agreement.

Over the next four years, leases are scheduled to terminate on eight
aircraft (six Boeing 737-200s and two Boeing 757-200s). In addition,
leases for two Airbus A320-200s are scheduled to terminate during 1994;
however, the Company has extended one lease for an additional twelve
months. The other Airbus A320 aircraft will be returned to the lessor at
the end of the lease term during 1994 and will be replaced by a Boeing 757
aircraft which has been leased for a term of three years. In addition,
certain of the aircraft lessors have the right to call their respective
aircraft upon (in most cases) 180 days prior notice to the Company. The
Company, in turn (with some exceptions), may retain such aircraft via a
right of first refusal by agreeing to the bona fide terms offered by a
third party interested in leasing or purchasing the aircraft. See also
Item 1. Business -- Bankruptcy And Reorganization Events -- Route Structure
------
and Fleet Reductions.

Item 3. Legal Proceedings.
------ -----------------

On June 27, 1991, the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona to reorganize under
Chapter 11 of Title 11 of the United States Bankruptcy Code. Since the
Bankruptcy filing, several entities have filed administrative claims
requesting that the Bankruptcy Court order the Company to reimburse or
compensate such entities for goods, taxes and services they allege that the
Company has received or collected, but for which they claim the Company has
not paid. Entities which have or may file administrative claims, include
aircraft maintenance organizations, municipal airports and certain
financial or governmental institutions. In addition, aircraft providers
whose aircraft were returned to them in connection with the Company's fleet
reduction and restructuring efforts in September 1991 and September 1992
may be entitled to general unsecured pre-petition claims and/or
administrative claims in the Bankruptcy case for damages arising from the
return of the aircraft. See also Item 1. Business -- Bankruptcy And
------
Reorganization Events.

In August 1991, the Securities and Exchange Commission ("SEC") informally
requested that the Company provide the SEC with certain information and
documentation underlying disclosures made by the Company in annual and
quarterly reports filed with the SEC by the Company in 1991. The Company
has cooperated with the SEC's informal inquiry. On March 29, 1994, the
Company's Board of Directors approved the submission of an offer of
settlement for the purpose of resolving the inquiry through the entry of a
consent decree pursuant to which the Company would, while neither admitting
nor denying any violation of the securities laws, agree to comply with its
future reporting obligations under Section 13 of the Securities Exchange
Act of 1934. The SEC has not yet acted on the Company's offer of settlement
and

there can be no assurance that such offer of settlement will be accepted
by the SEC. If the settlement is not accepted by the SEC, the offer will
be of no force and effect.

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

No matter was submitted to a vote of the stockholders during the fourth
quarter of the fiscal year ended December 31, 1993, through the
solicitation of proxies or otherwise.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
------ -------------------------------------------------------------
Matters.
-------

The Company's Common Stock has been publicly traded since February 25,
1983 and is currently listed on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol AWAQC. The
Common Stock has also been listed on the Pacific Stock Exchange since
December 20, 1988 under the symbol AWA. From February 14, 1984 to January
17, 1992, the Common Stock was listed on NASDAQ/National Market System
("NASDAQ/NMS"). Due to the bankruptcy filing and the Company's inability
to satisfy certain NASDAQ/NMS listing requirements, the Common Stock
listing was moved from NASDAQ/NMS to NASDAQ on January 20, 1992. The
following table sets forth the high and low bid quotations for the years
1992 and 1993 as reported by NASDAQ.

<TABLE>
<CAPTION>
Common Stock
------------
High Low
---- ---

1992

<S> <C> <C>
First Quarter 2-5/8 1/8

Second Quarter 17/32 1/4

Third Quarter 15/16 5/16

Fourth Quarter 15/32 3/16

1993

First Quarter 17/32 3/16

Second Quarter 7/8 7/16

Third Quarter 31/32 13/32

Fourth Quarter 1-25/32 25/32

</TABLE>

The number of record holders of the Company's Common Stock at
December 31, 1993 was approximately 18,728.

Cash dividends have never been paid on the Company's Common Stock.
Various credit agreements between the Company and its lenders restrict the
ability of the Company to pay cash dividends.

In April 1986, the Company redeemed all outstanding shares of its
Series A Preferred Stock. In September 1993, the holder of all the
Company's Series B Preferred Stock converted such stock into 1,164,596
shares of Common Stock. The Company's Series C Preferred Stock is the
only remaining outstanding class of preferred stock of the Company. A
discussion of the Company's Preferred Stock is contained on pages 14
through 16 of the Company's Form S-3 Registration Statement No. 33-27416,
incorporated herein by this reference. There is no public trading market
for the Preferred Stock.

The Company filed a motion with the Bankruptcy Court on February 10,
1994 to prohibit the sale or other transfers of any general unsecured
claims, the convertible subordinated debentures or shares of any class of
stock. The motion attempted to preserve the Company's tax assets as such
sales and transfers in sufficient numbers and amounts could, under current
tax law, jeopardize the preservation of the Company's net operating loss
and general business tax credit carryforwards. At the request of the
official committees, the Company withdrew its motion without prejudice on
February 16, 1994. On March 11, 1994, the Company again filed a motion
with the Bankruptcy Court to prohibit the sale or other transfer of shares
of any class of the Company's stock to or from five percent or more
shareholders. This motion is more limited in scope than the motion filed
on February 10, 1994 in that it seeks only to restrict transfers of stock
which could have an adverse effect on the Company's ability to fully
utilize its NOL carryforwards. On March 15, 1994, the Bankruptcy Court
ordered that this motion be converted to an adversary proceeding under the
Bankruptcy rules. As of March 29, 1994, no hearing on such proceeding has
been held. There can be no assurance that the Company will continue to
pursue this matter and, if the Company continues to pursue this matter,
that it will be successful. See Item 7. Management's Discussion and
------
Analysis of Financial Condition and Results of Operations -- Overview and
Item 8. Financial Statements and Supplementary Data -- Note 5 of Notes to
------
Financial Statements.

Item 6. Selected Financial Data.
------ -----------------------

SELECTED FINANCIAL DATA

(In thousands except per share amounts and ratio
of earnings to fixed charges)

The information set forth below should be read in conjunction with the
Financial Statements and related Notes to Financial Statements included
elsewhere herein.

Years Ended December 31,
----------------------------------------------------------------
Statements of Operations Date: 1993 1992 1991 1990 1989
---------- ---------- ---------- --------- ---------

<S> <C> <C> <C> <C> <C>
Operating Revenues $1,325,364 $1,294,140 $1,413,925 $1,315,804 $993,409

Operating Expenses 1,204,310 1,368,952 1,518,582 1,347,435 945,293

Operating Income (Loss) 121,054 (74,812) (104,657) (31,631) 48,116

Income (Loss) Before Income
Taxes and Extraordinary
Items 37,924 (131,761) (222,016) (76,695) 20,040

Income Taxes 759 -- -- -- 7,237

Income (Loss) Before
Extraordinary Items 37,165 (131,761) (222,016) (76,695) 12,803

Extraordinary Items (a) -- -- -- 2,024 7,215

Net Income (Loss) 37,165 (131,761) (222,016) (74,671) 20,018

Income (Loss) Per Common Share:
Before Extraordinary Items 1.50 (5.58) (10.39) (4.26) 0.61

Extraordinary Items (a) -- -- -- 0.11 0.39

Net Income (Loss) 1.50 (5.58) (10.39) (4.15) 1.00

Ratio of Earnings to Fixed
Charges (b) 1.28 -- -- -- 1.12

Weighted Average Number of Common
Shares Outstanding 27,525 23,914 21,534 18,396 20,626

Years Ended December 31,
-----------------------------------------------------------------
Balance Sheet Data: 1993 1992 1991 1990 1989
---------- ---------- ---------- --------- --------

<S> <C> <C> <C> <C> <C>
Working Capital Deficiency $ (124,375) $ (201,567) $ (51,158) $ (94,671) $(18,884)

Total Assets 1,016,743 1,036,441 1,111,144 1,165,256 835,885

Long-Term Debt and Capital
Lease Obligations, Less
Current Maturities 620,992 647,015 726,514 620,701 474,908

Total Stockholders' Equity
(Deficiency) (254,262) (294,613) (166,510) 21,141 87,203

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

(a) Includes extraordinary items of $2,024,000 in 1990 resulting from
the purchase and retirement of convertible subordinated debentures
and, in 1989, income tax benefits resulting from the utilization of
net operating loss carryforwards amounting to $7,215,000.

(b) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income (loss) before taxes and extraordinary
items plus fixed charges less capitalized interest. "Fixed charges"
consist of interest expense including amortization of debt expense,
capitalized interest and one-third of rent expense which is deemed
to be representative of an interest factor. For the years ended
December 31, 1992, 1991, and 1990, earnings were insufficient to
cover fixed charges by $131,761,000, $228,680,000 and $83,070,000,
respectively.

</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and
------ ---------------------------------------------------------------
Results of Operations.
---------------------

Overview
--------

On June 27, 1991 the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona (the "Bankruptcy
Court") to reorganize under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code"). The Company is currently operating as a debtor-
in-possession ("D.I.P.") under the supervision of the Bankruptcy Court. As
a debtor-in-possession, the Company is authorized to operate its business
but may not engage in transactions outside its ordinary course of business
without approval of the Bankruptcy Court.

The accompanying financial statements have been prepared on a going
concern basis which assumes continuity of operations and realization of
assets and liquidation of liabilities in the ordinary course of business.
As a result of the reorganization proceedings, there are uncertainties
relating to the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments that might be necessary
as a result of the outcome of the uncertainties discussed herein including
the effects of any plan of reorganization.

Due to the bankruptcy proceedings, current economic conditions and the
competitive nature of the airline industry, no measure of comparability can
be drawn from past results in order to measure those that may occur in the
future. Among the uncertainties which might adversely impact the Company's
future operations are: economic recession; changes in the cost of fuel,
labor, capital and other operating items; increased level of competition
resulting in significant discounting of fares; changes in capacity, load
factors and yields; or reduced levels of passenger traffic due to war or
terrorist activities.

In addition, the following significant bankruptcy related events
occurred during 1993.

D.I.P. Loan. The Bankruptcy Court approved an amendment to the D.I.P.
-----------
loan agreement extending the maturity date of the loan from September
30, 1993 to June 30, 1994. Concurrent with the extension of the
maturity date, $8.3 million of the principal balance was repaid to one
of the participants who did not agree to the amendment. The amended
D.I.P. loan agreement requires the payment of a facility fee of $627,000
and defers all principal payments to June 30, 1994 with the exception of
$5 million that will be due on March 31, 1994. An additional facility
fee equal to 1/4 percent of the then outstanding D.I.P. loan is required
to be paid on March 31, 1994.

The amended terms of the D.I.P. financing require the Company to notify
the D.I.P. lenders if the unrestricted cash balance of the Company
exceeds $125 million. Upon receipt of such notice, the D.I.P. lenders
may require the Company to prepay the D.I.P. financing by the amount of
such excess. During the first quarter of 1994, the Company notified the
D.I.P. lenders that the Company's unrestricted cash exceeded $125
million; however, to date, the D.I.P. lenders have not exercised their
prepayment rights. See Item 8. Financial Statements and Supplementary
------
Data -- Note 4 of Notes to Financial Statements.

Plan Proposals. On December 8, 1993 and February 16, 1994, the
--------------
Bankruptcy Court entered certain orders which provided for a procedure
pursuant to which interested parties could submit proposals to
participate in a plan of reorganization for America West. The
Bankruptcy Court also set February 24, 1994 as the date for America West
to select a "Lead Plan Proposal" from among the proposals submitted.

On February 24, 1994, America West selected as its Lead Plan Proposal an
investment proposal submitted by AmWest Partners, L.P., a limited
partnership ("AmWest"), which includes Air Partners II, L.P.,
Continental Airlines, Inc., Mesa Airlines, Inc. and Fidelity Management
Trust Company. On March 11, 1994, the Company and AmWest entered into
a revised investment agreement which substantially incorporates the
terms of the AmWest investment proposal (the "Investment Agreement").
The Investment Agreement provides that AmWest will purchase from America
West equity securities representing a 37.5 percent ownership interest in
the Company for $120 million and $100 million in new senior unsecured
debt securities. The Investment Agreement also provides that, in
addition to the 37.5 percent ownership interest in the Company, AmWest
would also obtain 72.9 percent of the total voting interest in America
West after the Company is reorganized. The terms of the Investment
Agreement will be incorporated into a plan of reorganization to be filed
with the Bankruptcy Court; however, modifications to the Investment
Agreement may occur prior to the submission of a plan of reorganization
and such modifications may be material. There can be no assurance that
a plan of reorganization based upon the Investment Agreement will be
accepted by the parties entitled to vote thereon or confirmed by the
Bankruptcy Court.

In addition to the interest in the reorganized America West that would
be acquired by AmWest pursuant to the Investment Agreement, the
Investment Agreement also provides for the following:

1. The D.I.P. financing would be repaid in full with cash on the
date a plan of reorganization is confirmed ("Reorganization Date").

2. On the Reorganization Date, unsecured creditors would receive 45
percent of the new common equity in the reorganized Company, with
the potential to receive up to 55 percent of such equity if within
one year after the Reorganization Date, the value of the securities
distributed to them has not provided them with a full recovery
under the Bankruptcy Code. In addition, unsecured creditors would
have the right to elect to receive cash at $8.889 per share up to
an aggregate maximum amount of $100 million, through a repurchase
by AmWest of a portion of the shares to be issued to unsecured
creditors under a plan of reorganization.

warrants would have value only after the unsecured creditors receive
full recovery on their claims.

4. In exchange for certain concessions principally arising from
cancellation of the right of GPA affiliates to "put" to America
West 10 Airbus A320 aircraft at fixed rates, GPA, or certain
affiliates thereof, would receive (i) 7.5 percent of the new common
equity in the reorganized Company, (ii) warrants to purchase up to
2.5 percent of the reorganized Company's common stock on the same
terms as the AmWest warrant, (iii) $3 million in new senior
unsecured debt securities, and (iv) the right to require the
Company to lease up to eight aircraft of types operated by the
Company from GPA prior to June 30, 1999 on terms which the Company
believes to be more favorable those currently applicable to the
"put" aircraft. For an additional discussion of the put rights,
see Item 2. Properties -- Aircraft, below.
------

7. The Investment Agreement also provides for many other matters,
including the disposition of the various types of claims asserted
against the Company, the adherence to the Company's aircraft lease
agreements, the amendment of the Company's aircraft purchase
agreements and release of the Company's employees from all
currently existing obligations arising under the Company's stock
purchase plan in consideration for the cancellation of the shares
of Company stock securing such obligations.

The Company has also entered into a Revised Interim Procedures Agreement
(the "Procedures Agreement") with AmWest. The Procedures Agreement is
subject to the approval of the Bankruptcy Court and sets forth terms and
conditions upon which the Company must operate prior to the effective
date of a confirmed plan of reorganization based upon the terms of the
Investment Agreement. The Procedures Agreement provides for the
reimbursement of expenses (up to a maximum of $3.55 million) as
well as a termination fee of up to $8 million under certain conditions.
As of March 29, 1994, the Procedures Agreement had not received
Bankruptcy Court approval, but a hearing in this regard is scheduled for
April 12, 1994.

The Company is currently developing with AmWest a plan of reorganization
based upon the foregoing terms. The Equity Committee has agreed to
support the plan. The Creditors' Committee has indicated that it does
not support the current terms of the Investment Agreement. Another
group interested in developing a plan of reorganization with the Company
has also proposed to invest $155 million in equity securities and $65
million in new senior unsecured debt securities. The proponent of this
proposal would receive a 33.5 percent ownership interest in the
reorganized Company, current equity holders would receive a 4.0 percent
ownership interest in the reorganized Company and the unsecured
creditors would receive a 62.5 percent ownership interest in the
reorganized Company.

Exclusivity Period. On February 2, 1994, the Bankruptcy Court approved
------------------
the Company's request to extend its exclusivity period to file a plan of
reorganization through June 10, 1994. In its motion, the Bankruptcy
Court confirmed the official committees' (Creditors' and Equity
Committees) right to also file a plan of reorganization during this
period of exclusivity.

Possible Limitation on NOL and Business Tax Credit Carryforwards. As of
----------------------------------------------------------------
December 31, 1993, the Company has a net operating loss ("NOL") and
general business tax credit carryforwards of approximately $530 million
and $12.7 million, respectively. Under Section 382 of the Internal
Revenue Code of 1986, if a loss corporation has an "ownership change"
within a designated testing period, its ability to use its NOL and
credit carryforwards are subject to certain limitations. The Company is
a loss corporation within the meaning of Section 382. To the best of
the Company's knowledge, the Company has not undergone an "ownership
change" that would result in any material limitation of the Company's
ability to use its NOL and business credit carryforwards in future tax
years, as of December 31, 1993. However, should an "ownership change"
occur prior to confirmation of a plan of reorganization, the Company's
ability to utilize such carryforwards would be significantly restricted.
Further, any "ownership change" as a result of the Company's
reorganization under the Bankruptcy Code may result in carryforward
usage limitations.

In this regard, the Company filed a motion with the Bankruptcy Court on
February 10, 1994 to prohibit the sale or other transfers of any general
unsecured claims, the convertible subordinated debentures or shares of
any class of stock. The motion attempted to preserve the Company's tax
assets as such sales and transfers in sufficient numbers and amounts
could, under current tax law, jeopardize the preservation of the
Company's net operating loss and general business tax credit
carryforwards. At the request of the official committees, the Company
withdrew its motion without prejudice on February 16, 1994. On March
11, 1994, the Company again filed a motion with the Bankruptcy Court to
prohibit the sale or other transfer of shares of any class of the
Company's stock to or from five percent or more shareholders. This
motion is more limited in scope than the motion filed on February 10,
1994 in that it seeks only to restrict transfers of stock which could
have an adverse effect on the Company's ability to fully utilize its NOL
carryforwards. On March 15, 1994, the Bankruptcy Court ordered that
this motion be converted to an adversary proceeding under the Bankruptcy
rules. As of March 29, 1994, no hearing on such proceeding has been held.
There can be no assurance that the Company will continue to pursue this
matter and, if the

Company continues to pursue this matter, that it will be successful. See
Item 8. Financial Statements and Supplementary Data -- Note 5 of Notes to
------
Financial Statements.

Results of Operations
---------------------

The Company realized net income of $37.2 million ($1.50 per common
share) for 1993 compared to net losses of $131.8 million ($5.58 per common
share) and $222 million ($10.39 per common share) for 1992 and 1991,
respectively. The results for 1993 include reorganization expenses of $25
million and losses aggregating $4.6 million primarily resulting from the
disposition of surplus spare aircraft parts and equipment. During 1992,
the Company recorded restructuring charges of $31.3 million, reorganization
expenses of $16.2 million and a gain of $15 million from the sale of its
Honolulu to Nagoya, Japan route, while the 1991 results were affected by
reorganization expenses of $58.4 million. The Company was only one of two
major U.S. airlines to report a profit in each quarter of 1993.

The Company began to realize significant improvement in its operating
results commencing the fourth quarter of 1992. During 1993, the level of
operating income improved each quarter as shown in the table below.

1993 Quarterly Results (unaudited)
(in millions)
-------------------------------------------
1st 2nd 3rd 4th Year
----- ----- ----- ----- ------

<S> <C> <C> <C> <C> <C>
Total Operating Revenues $316.6 $324.9 $335.1 $348.8 $1,325.4

Total Operating Expenses 299.4 299.7 302.1 303.1 1,204.3
----- ----- ----- ----- -------
Operating Income $ 17.2 $ 25.2 $ 33.0 $ 45.7 $ 121.1
===== ===== ===== ===== =======
</TABLE>

The improvement in operating results for 1993 compared to 1992 and 1991
is attributable to several factors, the most significant of which are noted
below.

* A gradually improving economic climate, and a more stable environment
relative to fare competition within the airline industry.

* The reduction in fleet size from 123 aircraft in July 1991 to the
current fleet of 85 aircraft has facilitated a better matching of
capacity to demand. In addition, the consolidation of the fleet from
five to three aircraft types has enabled the Company to further reduce
its level of costs including those related to maintenance, training and
inventories of parts.

* In addition to reducing or eliminating certain routes as part of the
aircraft fleet downsizing, the Company implemented certain enhancements
to its revenue management system in an effort to optimize the level of
passenger revenues generated on each flight. Such enhancements enable
the Company to more effectively allocate seats within various fare
categories.

* The implementation of numerous cost reduction programs since 1991
including a Company-wide pay reduction in August of 1991 and reductions
of aircraft lease rentals to fair market rates in the fall of 1992.

* The elimination of the Company's commuter operation and the introduction
of three code sharing agreements have enabled the Company to expand its
scope of service and attract a broader passenger base.

The effect of these programs and the other factors described above
resulted in operating income of $121.1 million for 1993 compared to
operating losses of $74.8 million and $104.7 million for 1992 and 1991,
respectively.

Total operating revenues were $1.3 billion in 1993, an increase of 2.4
percent compared to the prior year and 6.3 percent less than 1991 primarily
due to the significant reduction in capacity. On April 1, 1993, the
Company ceased service to Hawaii. Passenger revenues for 1993, 1992 and
1991 were $1.2 billion, $1.2 billion and $1.3 billion, respectively.
Summarized below are certain capacity and traffic statistics for the years
ended December 31, 1993, 1992 and 1991.

Percent Change To
-----------------
1993 1992 1991 1992 1991
---------- ---------- ---------- -------- -------

<S> <C> <C> <C> <C> <C>
Aircraft (End of Period) 85 87 101 (2.3) (15.8)

Available Seat Miles (000) 17,190,489 19,271,353 20,627,472 (10.8) (16.7)

Revenue Passenger Miles (000) 11,220,753 11,780,568 13,030,279 (4.8) (13.9)

Load Factor (%) 65.3 61.1 63.2 6.9 3.3

Passenger Enplanements (000) 14,740 15,173 16,907 (2.9) (12.8)

Average Journey Miles 970 990 962 (2.0) .8

Average Stage Length 645 631 598 2.2 7.9

Yield Per Revenue Pax Mile (cents) 11.11 10.31 10.22 7.8 8.7

Revenue Per Available Seat Mile:

Passenger (cents) 7.25 6.30 6.46 15.1 12.2

Total (cents) 7.71 6.72 6.85 14.7 12.6

</TABLE>

In spite of the significant decline in capacity in 1993 compared to the
two previous years, passenger revenues per available seat mile improved by
15.1 percent and 12.2 percent compared to 1992 and 1991, respectively.
This improvement was primarily attributable to the combination of the
following factors.

* An improved climate relative to the economy and industry fare
competition.

* The reduction in aircraft fleet size in conjunction with the
implementation of enhancements to the Company's revenue management
systems.

* The elimination of "fare simplification" in 1993 and 50 percent-off
sales that occurred on an industry-wide basis in the second and
third quarters of 1992.

* The 50 percent-off sale conducted by the Company on a system-wide
basis in February 1991.

Revenues from sources other than passenger fares decreased during 1993
to $78.8 million compared to $79.3 million and $81.7 million for 1992 and
1991, respectively. Freight and mail revenues comprised 51.0 percent, or
$40.2 million, of other revenues for 1993. This represents a decrease of
4.6 percent compared to 1992 and 8.0 percent compared to 1991. For the
years 1993, 1992 and 1991, the Company carried 110.7 million, 116.4 million
and 119.8 million pounds of freight and mail, respectively. The decline in
freight and mail revenues during the last three years is a direct result of
capacity reductions, the most significant of which relate to the cessation
of service to Hawaii and Nagoya, Japan. The balance of other revenues
includes revenues generated from: pilot training; contract services
provided to other airlines for maintenance and ground handling; reduced
rate fares; alcoholic beverage and headset sales; and service charges
assessed for refunds, reissues and prepaid ticket advices.

In spite of the significant reductions in capacity which have occurred
since the filing of protection under Chapter 11, operating expense per
available seat mile has declined to 7.01 cents for 1993 from 7.10 cents for
1992 and 7.36 cents for 1991. The table below sets forth the major
categories of operating expense per available seat mile for 1993, 1992 an
1991:

(in cents) Percent Change To
-----------------
1993 1992 1991 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Salaries and Related Costs 1.78 1.68 1.86 6.0 (4.3)

Rentals and Landing Fees 1.60 1.76 1.70 (9.1) (5.9)

Aircraft Fuel .97 .97 1.08 -- (10.2)

Agency Commissions .62 .55 .62 12.7 --

Aircraft Maintenance Materials
and Repairs .18 .20 .20 (10.0) (10.0)

Depreciation & Amortization .48 .45 .47 6.7 2.1

Restructuring Charges -- .16 -- -- --

Other 1.38 1.33 1.43 3.8 (3.5)
---- ---- ---- ---- -----

7.01 7.10 7.36 1.3 4.8
==== ==== ==== ==== ====
</TABLE>

The changes in the components of operating expense per available seat
mile should be considered in relation to the decline in available seat
miles of 10.8 percent and 16.7 percent from 1992 and 1991, respectively,
and are explained as follows:

* The 6.0 percent increase in salaries and related costs compared to 1992
is a result of the decline in capacity as well as the implementation of
a transition pay program in the second quarter of 1993. The transition
pay program was designed to restore a portion of the 10 percent wage
reduction that was effected company-wide on August 1, 1991 (officers and
other management personnel received wage reductions of 10 percent to 25
percent commencing in February 1991). All wages have been frozen at
such levels since 1991. The program, which is to be in effect for the
earlier of four fiscal quarters or until the confirmation of a plan of
reorganization, provides for the following payments on a quarterly
basis to all active employees during the quarter.

a. Commencing the second quarter of 1993, performance award
distributions have been made based upon the Company meeting or
exceeding its operating income target for a given quarter as
incorporated in its business plan. The aggregate award for 1993
amounted to approximately $6.5 million including applicable payroll
taxes.

b. Commencing the third quarter of 1993, employment award
distributions have been made based on the greater of .5 percent of
an employee's annual base wage, or $125, which ever is higher, on a
quarterly basis. The aggregate award for 1993 amounted to
approximately $2.6 million including applicable payroll taxes.

The favorable variance compared to the 1991 level was primarily
attributable to the reduction in payroll costs related to the decline in
capacity as well as overhead and the Company-wide wage reduction
instituted in August 1991.

* Rentals and landing fees decreased due to the reduction in fleet size to
85 aircraft as well as the reduction in rental rates to fair market for
certain aircraft commencing in August 1992 for a period of two years.

* Aircraft fuel decreased due to the decline in the average price per
gallon to 61.05 cents from 62.70 cents for 1992 and 67.10 cents for
1991.

* The increase in the level of agency commission expense is primarily due
to the significant increase in passenger revenue per available seat mile
from 6.30 cents and 6.46 cents for 1992 and 1991, respectively, to 7.25
cents for 1993.

* The decrease in aircraft maintenance materials and repairs is primarily
due to the change in the composition of the aircraft fleet.

* Restructuring charges incurred in 1992 consisted of the following:

<TABLE>
<CAPTION>
(in millions of dollars)

<S> <C>
Write-off for certain assets related to
station closures or route restructuring $ 9.5

Provision for spare parts for aircraft types 12.7
no longer in service

Provision for employee severance 2.3

Loss on return of aircraft 6.8
----

$31.3
====
</TABLE>

The restructuring charges were necessitated by aircraft fleet reductions
and other operational changes. The Company reduced its fleet to 87
aircraft at the end of 1992 as well as eliminated two of five aircraft
types it operated. Additionally, employee headcount was reduced by
approximately 1,500 employees and service was terminated to ten cities
through the end of 1992.

* The increase in depreciation and amortization is primarily attributable
to increased heavy engine overhauls.

* Other operating expenses increased 3.8 percent compared to 1992 but was
lower by 3.5 percent compared to 1991. The increase compared to the
prior year is primarily attributable to the 10.8 percent decline in
capacity.

Non-operating expenses (net of non-operating income) for 1993, 1992 and
1991 were $83.1 million, $56.9 million and $117.4 million, respectively.
Interest expense decreased to $54.2 million in 1993 from $55.8 million in
1992 and $61.9 million in 1991. In conformity with Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code", issued by the American Institute of Certified Public
Accountants, the Company has ceased accruing and paying interest on
unsecured pre-petition long-term debt. Had the Company continued to accrue
interest on such debt, interest expense for 1993, 1992 and 1991 would have
been $73.0 million, $73.9 million and $79.3 million, respectively. See
Item 8. Financial Statements and Supplementary Data -- Notes 3a and 4 of
------
Notes to Financial Statements.

The Company incurred expenses of $25 million in 1993, $16.2 million in
1992 and $58.4 million in 1991 in connection with its efforts to reorganize
under Chapter 11. Such expenses for 1993 include net charges aggregating
$18.2 million in accruals for unsecured claims and settlements of
administrative claims primarily relating to leased aircraft which were
returned to the lessors. Reorganization related expenses are expected to
significantly affect future results and to continue until such time as the
Company has obtained approval for its plan of reorganization.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 Accounting for Income Taxes, (SFAS 109).
---------------------------
Since there was no cumulative effect of this change in accounting, prior
year financial statements have not been restated.

Additionally, Statements of Financial Accounting Standards No. 106 Post
----
Retirement Benefits Other Than Pensions, (SFAS 106) became effective
---------------------------------------
January 1, 1993. The Company does not provide any post retirement
benefits, thus, the standard has no impact. Statement of Financial
Accounting Standard No. 112, Employer's Accounting for Post Employment
-----------------------------------------
Benefits, (SFAS 112) becomes effective January 1, 1994. This statement
--------
requires that post employment benefits be treated as part of compensation
provided to an employee in exchange for service. Previously, most
employers expensed the cost of these benefits as the benefits were
provided. The Company is still reviewing the impact of SFAS 112, but does
not believe it will have a material effect.

Liquidity And Capital Resources
-------------------------------

At December 31, 1993, the Company had a working capital deficiency of
$124.4 million and net shareholders' deficiency of $254.3 million. The
1993 working capital deficiency decreased from the 1992 deficiency of
$201.6 million primarily as result of principal repayments on obligations
and significantly improved operating results.

Cash and cash equivalents amounted to $99.6 million at December 31, 1993
compared to $74.4 million at December 31, 1992. Net cash provided by
operating activities increased to $153.4 million for 1993 compared to $76.7
million for 1992 and $19.9 million for 1991. During 1993, the Company
incurred capital expenditures of $54.3 million compared to $69.2 million in
1992. The capital expenditures for 1993 consisted largely of aircraft
modifications and heavy airframe and engine overhauls.

The Company's transition pay program which was implemented in the second
quarter of 1993 is scheduled to terminate in the second quarter of 1994.
The Company announced certain amendments to its compensation program on
March 24, 1994. Effective April 1, 1994, employee base wages will be
increased between two percent to eight percent depending on the employee's
length of service with the Company. Generally, each employee whose
anniversary date occurs between April and December 1994 will also receive
an additional increase on such date approximating 4% with certain
exceptions. The Chairman of the Board and the President will not
participate in the salary increase program. Due to the current collective
bargaining process with the representatives of the pilots, increases in
pilots' salaries will not be paid but will be accrued. The distribution of
such amounts will be determined through the collective bargaining
discussions. The Company is currently in the process of revising its
entire compensation program and anticipates implementing such program
effective January 1, 1995.

The Company has also announced that, effective April 1, 1994, matching
contributions by the Company under the America West 401(k) plan will be
increased from 25 percent to 50 percent of the first six percent
contributed by the employees, subject to certain limitations. This change
restores the Company's matching contribution to the level that existed
prior to the Chapter 11 filing.

The Company estimates that the implementation of the increases in pay
and the 401(k) matching contributions will result in increased costs of
approximately $18 million during the last nine months of 1994.

Under Delaware law, as well as the Company's D.I.P. loan agreement and
the bankruptcy process, the Company is precluded from paying dividends on
its outstanding preferred stock until such time as the total shareholders'
deficiency is eliminated. During 1993 the Series B 10.5 percent
convertible preferred stock (291,149 shares) with a liquidation preference
of $15 million was converted into 1,164,596 shares of common stock of the
Company.

In 1991, affiliates of Guinness Peat Aviation ("GPA"), Northwest
Airlines, Inc. ("Northwest") and Kawasaki Leasing International Inc.
("Kawasaki") provided $78 million in D.I.P. financing to the Company. In
September 1992, America West received an additional $53 million in D.I.P.
financing, bringing the total outstanding D.I.P. financing at December 31,
1992, to $110.8 million which consisted of $69.8 million from GPA, $23
million from Kawasaki, $10 million from Ansett Worldwide Aviation Services
("Ansett") and $8 million from several Arizona-based entities. The D.I.P.
financing is collateralized by substantially all of the Company's assets.

The financing provided by Northwest was repaid in full at the time of
the September 1992 D.I.P. financing. America West also reconstituted its
board of directors concurrent with the September 1992 D.I.P. financing.
In September 1993, the D.I.P. lenders extended the maturity date of the
D.I.P. financing from September 30, 1993 to June 30, 1994. At the time
of the September 1993 extension, the financing provided by Ansett was
repaid in full. The principal terms of the September 1993 extension are
discussed below.

Interest on all funds advanced under the D.I.P. financing accrues at 3.5
percent over the 90-day London Interbank Offered Rate ("LIBOR") and is
payable quarterly. Principal repayments in the amount of $5.54 million
were made on March 1993 and June 1993. As a result of the September 1993
extension of the D.I.P. financing maturity date, the Company is required to
repay $5 million of the D.I.P. financing on March 31, 1994. The remaining
outstanding balance will be due upon the earlier of June 30, 1994 or upon
the effective date of a confirmed Chapter 11 plan of reorganization (the
"Reorganization Date"). As a condition to extending the maturity date of
the D.I.P. financing in September 1993, the Company also agreed to pay a
facility fee of $627,000 to the D.I.P. lenders on September 30, 1993 and to
pay an additional facility fee equal to 1/4 percent of the then outstanding
balance of the D.I.P. financing on March 31, 1994. As of December 31,
1993, the outstanding amount due under the D.I.P. financing was
approximately $83.6 million. Presently, the Company does not possess
sufficient liquidity to satisfy the D.I.P. financing nor does it appear
that new equity capital will be obtained and a plan of reorganization
confirmed prior to June 30, 1994. Consequently, the Company will be
required to obtain alternative repayment terms from its current D.I.P.
lenders. Although there can be no assurance that alternative repayment
terms will be obtained, the Company believes that any required extension of
the D.I.P. financing would be for a short period of time and would be
concurrent with the implementation of a plan of reorganization. During
the first quarter of 1994, the Company notified the D.I.P. lenders
that the Company's unrestricted cash exceeded $125 million; however,
to date, the D.I.P. lenders have not exercised their prepayment rights.

As a condition to the closing of the September 1992 D.I.P. financing,
the Company was required to reduce its aircraft fleet to 86 aircraft and
the number of aircraft types from five to three. Consequently, the Company
reached certain agreements with third parties, which included the
following:

1. With the exception of four lessors (two of which participated in
the September 1992 D.I.P. financing), aircraft lessors whose
aircraft were retained in the fleet and whose payments were
deferred during July and August 1992, were required to waive any
default which occurred as a result of such non-payments and to
defer these payments without interest until the first calendar
quarter of 1993. In addition, effective August 1, 1992, the rental
rates on these retained aircraft were reduced to fair market rental
rates for a period of two years or longer. The August 1992
payments were deferred at the reduced interest rates.

Of the remaining two lessors, one accepted rental payment
reductions and the other agreed to a deferral of the rents from
July through October 1992. Repayment of this deferral is monthly
over seven years beginning November 1992 at level principal and
interest at 90 day LIBOR plus 3.5 percent.

2. The aircraft lessors who accepted rent reductions and agreed to
waive any administrative claims arising from the reductions
stipulated that, if prior to July 31, 1994, the Company defaults on
any of these leases and the aircraft are repossessed, the lessors
are entitled to fixed damages ranging from $500,000 to $2,000,000
(depending on the type of aircraft) as well as any other damages that
can be claimed for breach of their leases, all of which will be
afforded priority as administrative claims. Lessors of 12 aircraft
have the option, beginning August 1, 1994, to reset the rents to
the then current fair market rental rates (additionally, certain of
these leases call for multiple resets subsequent to the August 1,
1994 reset date). In February 1994, the Company commenced
negotiations with certain lessors with respect to determining the
requisite reset rates.

Lessors of 16 aircraft have call rights which generally provide for
the acceleration of the lease termination to the 180th day after
receipt by the Company of notice from the lessor that the lessor
has a bona fide written offer to lease the aircraft to an unrelated
third party. The Company in turn has a ten day right of first
refusal after receipt of such notice to match the written offer.
Lessors of 10 of aircraft also have the right to call their
aircraft during specified periods without having received a bona
fide offer to lease their aircraft and without offering the Company
a right of first refusal. The lessor of 11 aircraft has the right
to call its aircraft on 90 days notice after to the end of the
original lease term of the aircraft. If a lessor exercises its
call option, and 1991 deferred rents are still outstanding under
the terminated lease, repayment of this deferral is not
accelerated. Such deferral will continue to amortize over its
original term; however, at a reduced interest rate of 90 day LIBOR
plus 3.5 percent. See also Item 1. Business -- Bankruptcy And
------
Reorganization Events -- Route Structure and Aircraft Fleet
Reductions.

3. Certain principal and interest payments on owned aircraft due in
July 1992 were deferred without interest and were repaid by March
31, 1993. Additionally, certain other principal and interest
payments due from August 1992 through January 1993 were deferred
and are being repaid beginning February 1993 over terms of five to
nine years with interest at approximately 10.25 percent.

In lieu of payment deferrals, two aircraft lenders agreed to
interest rate reductions of approximately three percent on their
outstanding aircraft loans to the Company, resulting in interest
rates of approximately 7.25 percent.

4. Two of the current D.I.P. lenders, amended their existing rights to
put up to ten aircraft each to the Company such that a total of
fourteen aircraft may be put to the Company beginning in 1994
through 1996. Such aircraft would be put to the Company under
prearranged lease agreements. As of February 28, 1994, the Company
has not received any notification from the parties exercising any
of their put rights.

In September 1993, the D.I.P. loan agreement was amended and the
maturity date was extended from September 30, 1993 to June 30, 1994. The
principal financial terms of the amended D.I.P. loan agreement include the
following:

1. The repayment of $8.3 million to the loan participant who did not
agree to the maturity date extension.

2. The outstanding principal balance at September 30, 1993 becomes due
on June 30, 1994 or the confirmation of a plan of reorganization,
whichever occurs earlier, with the exception of a principal
repayment of $5 million on March 31, 1994.

3. The amended terms of the D.I.P. financing require the Company to
notify the D.I.P. lenders if the unrestricted cash balance of the
Company exceeds $125 million. Upon receipt of such notice, the
D.I.P. lenders may require the Company to prepay the D.I.P.
financing by the amount of such excess. During the first quarter
of 1994, the Company notified the D.I.P. lenders that the Company's
unrestricted cash exceeded $125 million; however, to date, the
D.I.P. lenders have not exercised their prepayment rights.

4. Certain of the financial covenants were revised which the Company
believes provide it with increased flexibility. In general, such
covenants relate to operating results, liquidity, capital
expenditures, collateral values and lease payments.

5. A facility fee of 3/4 percent of the outstanding balance, or
$627,000, was paid to the participants on September 30, 1993. In
addition, an additional 1/4 percent of the then outstanding balance
must be paid on March 31, 1994.

Presently, the Company does not possess sufficient liquidity to satisfy
its D.I.P. loan obligation nor does it appear that a plan of reorganization
could be confirmed prior to June 30, 1994. Consequently, the Company will
be required to obtain alternative repayment terms from its current D.I.P.
lenders, but there can be no assurances that such alternative repayment
terms will be agreed to by the D.I.P. lenders.

During 1993, the Company repaid approximately $18.4 million of scheduled
aircraft lease payments which were deferred in 1991 and 1992 as well as
$27.2 million of principal repayment related to the D.I.P. loan.

As a condition of the D.I.P. financing, the Company obtained from most
of its aircraft providers rent or principal and interest deferrals in
excess of $100 million for the six-month period of June through November
1991. In general, the deferred amounts accrue interest at 10.5 percent.
In December 1991, the Company began repaying such deferred amounts. See
Item 8. Financial Statements and Supplementary Data -- Note 11 of Notes to
------
Financial Statements.

Under the terms of the D.I.P. financing, Northwest acquired the
Company's Honolulu to Nagoya, Japan route for $15 million in 1992. Upon
the completion of the sale of the Nagoya route, $10 million of the proceeds
from the sale were paid to Northwest to reduce the Company's obligation to
Northwest under the D.I.P. financing. The balance of the proceeds from the
sale of the Nagoya route were added to the Company's working capital.

In connection with the D.I.P. financing provided by Kawasaki, the
Company agreed to convert advanced cash credits for 24 Airbus A320 aircraft
(the "Kawasaki Aircraft") previously advanced by Kawasaki into an unsecured
priority term loan (the "Kawasaki Term Loan"). At December 31, 1993, the
amount of the Kawasaki Term Loan was $68.4 million, including accrued
interest of $21.9 million. Until the Reorganization Date, the Kawasaki
Term Loan will accrue interest at 12 percent per annum and such
interest will be added to principal. On the Reorganization Date, 85
percent of the Kawasaki Term Loan will be converted into an eight-year term
loan which will accrue interest at 2 percent over 90-day LIBOR and will be
secured by substantially all the assets of the Company if the D.I.P.
financing is fully repaid. Principal on such loan will be due and payable
in equal quarterly installments, plus interest commencing after the
Reorganization Date. The Company has the right to prepay the Kawasaki Term
Loan if the D.I.P. financing is fully repaid. The remaining 15 percent of
the Kawasaki Term Loan will be treated as a general unsecured claim without
priority status under the Company's plan of reorganization. In the first
quarter of 1994, the Company received information that the Kawasaki Term
Loan was purchased by a third party.

The reorganization process is expected to result in the cancellation
and/or restructuring of substantial debt obligations of the Company. Under
the Bankruptcy Code, the Company's pre-petition liabilities are subject to
settlement under a plan of reorganization. The Bankruptcy Code also
requires that all administrative claims be paid on the effective date of a
plan of reorganization unless the respective claimants agree to different
treatment. There are differences between the amounts at which claims
liabilities are recorded in the financial statements and the

amounts claimed by the Company's creditors and such differences are material.
Significant litigation may be required to resolve any disputes.

Due to the uncertain nature of many of the potential claims, America
West is unable to project the magnitude of such claims with any degree of
certainty. However, the claims (pre-petition claims and administrative
claims) that have been filed against the Company are in excess of $2
billion. Such aggregate amount, includes claims of all character,
including, but not limited to, unsecured claims, secured claims, claims
that have been scheduled but not filed, duplicative claims, tax claims,
claims for leases that were assumed, and claims which the Company believes
to be without merit; however, claims filed for which an amount was not
stated, are not reflected in such amount. The Company is unable to estimate
the potential amount of such unstated claims; however, the amount of such
claims could be material.

The Company is in the process of reviewing the general unsecured claims
asserted against the Company. In many instances, such review process will
include the commencement of Bankruptcy Court proceedings in order to
determine the amount at which such claims should be allowed. The Company
has accrued its estimate of claims that will be allowed or the minimum
amount at which it believes the asserted general unsecured claims will be
allowed if there is no better estimate within the range of possible
outcome. However, the ultimate amount of allowed claims will be different
and such differences could be material. The Company is unable to estimate
the amount of such difference with any reasonable degree of certainty at
this time.

As part of its claims administration procedure, the Company is reviewing
potential claims that could arise as a result of the Company's rejection of
executory contracts. The Company's plan of reorganization will provide for
the status of any executory contract not theretofore assumed by either
affirming or rejecting such contracts. The assumption or rejection of
certain executory contracts could result in additional claims against the
Company.

At December 31, 1993, the Company had a total of 93 aircraft on order,
of which 51 are firm and 42 are options. The current estimated aggregate
cost for these firm commitments and options is approximately $5.2 billion.
Future aircraft deliveries are planned in some instances for incremental
additions to the Company's existing aircraft fleet and in other instances
as replacements for aircraft with lease terminations occurring during this
period. The purchase agreement to acquire 24 Boeing 737-300 aircraft had
been affirmed in the Company's bankruptcy proceeding. With timely notice
to the manufacturer, all or some of these deliveries may be converted to
Boeing 737-400 aircraft. As of December 31, 1993, eight Boeing 737
delivery positions had been eliminated due to the lack of a required
reconfirmation notice by the Company to Boeing. The failure to reconfirm
these delivery positions exposes the Company to loss of pre-delivery
deposits and other claims which may be asserted by Boeing in the
Bankruptcy proceeding. The purchase agreements for the remaining aircraft
types have not been assumed and, the Company has not yet determined which
of the other aircraft purchase agreements, if any, will be affirmed or
rejected. The Company also has a pre-petition executory contract under
which the Company holds delivery positions for four Boeing 747-400 aircraft
under firm orders and another four under options. The contract allows the
Company, with the giving of adequate notice, to substitute other Boeing
aircraft types for the Boeing 747-400 in these delivery positions. As a
result, the Company is still evaluating its future fleet needs and is
currently unable to determine if it will substitute other aircraft types or
reject this agreement. The Company believes it will be successful in
negotiating new aircraft purchase agreements that will meet its needs.
However, there can be no assurances that the Company will enter into such
agreements. As of December 31, 1993, the Company had deposits on aircraft
orders of approximately $52 million of which approximately $21 million were
financed.

During 1994, leases relating to four Boeing 737-200 aircraft, two Airbus
A320 aircraft and two Boeing 757 aircraft are scheduled to expire. The
Company has negotiated extensions of the leases for all but one of the
Airbus A320 aircraft for terms ranging from one to three years. The
Airbus A320 aircraft to be returned to the lessor will be replaced by a
Boeing 757 aircraft which has been leased for a term of three years. In
addition, up to nine Airbus A320 aircraft may be put to the Company should
GPA and/or Kawasaki elect to exercise its put options. As of February 28,
1994, none of the put options have been exercised. Lease agreements have
been arranged for such put aircraft for terms of five to eighteen years at
specified monthly lease rate factors.

Item 8. Financial Statements and Supplementary Data.
------ -------------------------------------------

Financial statements of the Company as of December 31, 1993 and 1992,
and for each of the years in the three-year period ended December 31, 1993,
together with the related notes and the Report of KPMG Peat Marwick,
independent certified public accountants, are set forth on the following
pages. Other required financial information and schedules are set forth
herein, as more fully described in Item 14 hereof.

Independent Auditors' Report
----------------------------

The Board of Directors and Stockholders
America West Airlines, Inc., D.I.P.:

We have audited the accompanying balance sheets of America West Airlines,
Inc., D.I.P. (the Company) as of December 31, 1993 and 1992, and the
related statements of operations, cash flows and stockholders' equity
(deficiency) for each of the years in the three-year period ended
December 31, 1993. In connection with our audits of the financial
statements, we also have audited the financial statement schedules V, VI,
VIII and X for each of the years in the three-year period ended
December 31, 1993. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of America West Airlines,
Inc., D.I.P. as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1993 in conformity with generally accepted
accounting principles. Also in our opinion, the financial statement
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
set forth therein.

The accompanying financial statements and financial statement schedules have
been prepared assuming that the Company will continue as a going concern.
As discussed in note 1 to the financial statements, on June 27, 1991 the
Company filed a voluntary petition seeking to reorganize under Chapter 11
of the federal bankruptcy laws. This event and circumstances relating to
this event, including the Company's significant losses, accumulated deficit
and highly leveraged capital structure, raise substantial doubt about its
ability to continue as a going concern. Although the Company is currently
operating as debtor-in-possession under the jurisdiction of the Bankruptcy
Court, the continuation of the business as a going concern is contingent
upon, among other things, the ability to (1) file a Plan of Reorganization
which will gain approval of the creditors and stockholders and confirmation
by the Bankruptcy Court, (2) maintain compliance with all debt covenants
under the debtor-in-possession financing agreements, (3) achieve
satisfactory levels of future operating results and cash flows and (4)
obtain additional debt and equity. Also, as discussed in note 1 to the
financial statements, as part of the Company's bankruptcy proceeding there
is uncertainty as to the amount of claims that will be allowed and as to a
number of disputed claims which are materially in excess of amounts reflected
in the accompanying financial statements. The accompanying financial
statements and financial statement schedules do not include any adjustments
that might result from the outcome of these uncertainties.

KPMG PEAT MARWICK

Phoenix, Arizona
March 18, 1994

F-1

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Balance Sheets
December 31, 1993 and 1992

<CAPTION>
Assets 1993 1992
------ ---------- ----------
(in thousands)
<S> <C> <C>
Current assets:

Cash and cash equivalents (note 4) $ 99,631 $ 74,383
Accounts receivable, less allowance for
doubtful accounts of $3,030,000 in
1993 and $2,542,000 in 1992 (note 11) 65,744 64,817
Expendable spare parts and supplies,
less allowance for obsolescence of
$7,231,000 in 1993 and $6,921,000 in 1992 28,111 34,431
Prepaid expenses 34,939 37,807
---------- ----------

Total current assets 228,425 211,438
---------- ----------

Property and equipment (notes 2, 4, 11 and 12):

Flight equipment 872,104 841,239
Other property and equipment 180,607 189,755
---------- ----------
1,052,711 1,030,994
Less accumulated depreciation and
amortization 385,776 328,870
---------- ----------
666,935 702,124
Equipment purchase deposits 51,836 52,431
---------- ----------
718,771 754,555
---------- ----------

Restricted cash (note 11) 46,296 40,612

Other assets (note 12) 23,251 29,836
---------- ----------

$1,016,743 $1,036,441
========== ==========

See accompanying notes to financial statements.

</TABLE>

F-2

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Balance Sheets
December 31, 1993 and 1992

Liabilities and Stockholders' Deficiency 1993 1992
---------------------------------------- ---------- ----------
(in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 4) $ 125,271 $ 156,656
Accounts payable (note 11) 62,957 90,629
Air traffic liability 118,479 107,496
Accrued compensation and vacation benefits 11,704 13,004
Accrued interest 8,295 15,647
Accrued taxes 14,114 15,765
Other accrued liabilities 11,980 13,808
---------- ----------

Total current liabilities 352,800 413,005
---------- ----------

Estimated liabilities subject to Chapter 11
proceedings (notes 2 and 4) 381,114 348,322

Long-term debt, less current maturities
(notes 4 and 11) 396,350 411,989
Manufacturers' and deferred credits (note 11) 73,592 84,694
Other liabilities (note 11) 67,149 73,044

Commitments, contingencies and subsequent events
(notes 1, 2, 4, 6, 7, 9, 11 and 12)

Stockholders' deficiency (notes 1, 4, 6, 7, 8,
9 and 12):
Preferred stock, $.25 par value. Authorized
50,000,000 shares:
Series B 10.5% convertible preferred stock,
issued and outstanding 291,149 shares in
1992; $5.41 per share cumulative dividend
(liquidation preference $15,000,000) - 73
Series C 9.75% convertible preferred stock
issued and outstanding 73,099 shares;
$1.33 per share cumulative dividend
(liquidation preference $1,000,000) 18 18
Common stock, $.25 par value. Authorized
90,000,000 shares; issued and outstanding
25,291,102 shares in 1993 and 23,967,663
shares in 1992 6,323 5,992
Additional paid-in capital 197,010 195,407
Accumulated deficit (438,626) (475,791)
---------- ----------
(235,275) (274,301)
Less deferred compensation and notes
receivable - employee stock purchase
plans (note 6) 18,987 20,312
Total stockholders' deficiency (254,262) (294,613)
---------- ----------

$1,016,743 $1,036,441
========== ==========

See accompanying notes to financial statements.

</TABLE>

F-3

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Statements of Operations
Years ended December 31, 1993, 1992 and 1991
(in thousands except per share amounts)

<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues:
Passenger $ 1,246,564 $ 1,214,816 $ 1,332,191
Cargo 40,161 42,077 43,651
Other 38,639 37,247 38,083
----------- ----------- -----------
Total operating revenues 1,325,364 1,294,140 1,413,925
----------- ----------- -----------
Operating expenses:
Salaries and related costs 305,429 324,255 383,833
Rentals and landing fees 274,708 338,391 349,563
Aircraft fuel 166,313 186,042 223,347
Agency commissions 106,368 106,661 128,134
Aircraft maintenance materials and repairs 31,000 38,366 41,649
Depreciation and amortization 81,894 86,981 97,803
Restructuring charges (note 13) - 31,316 -
Other 238,598 256,940 294,253
----------- ----------- -----------
Total operating expenses 1,204,310 1,368,952 1,518,582
----------- ----------- -----------
Operating income (loss) 121,054 (74,812) (104,657)
----------- ----------- -----------

Nonoperating income (expense):
Interest income 728 1,418 5,724
Interest expense (contractual interest of
$72,961, $73,931 and $79,271 for 1993,
1992 and 1991, respectively (note 4) (54,192) (55,826) (61,912)
Loss on disposition of property and
equipment (4,562) (1,283) (1,600)
Reorganization expense, net (note 2) (25,015) (16,216) (58,440)
Other, net (notes 4 and 11) (89) 14,958 (1,131)
----------- ----------- -----------
Total nonoperating expense, net (83,130) (56,949) (117,359)
----------- ----------- -----------
Income (loss) before income taxes 37,924 (131,761) (222,016)
----------- ----------- -----------
Income taxes (note 5) 759 - -
----------- ----------- -----------
Net income (loss) $ 37,165 $ (131,761) $ (222,016)
=========== =========== ===========
Earnings (loss) per share:
Primary $ 1.50 $ (5.58) $ (10.39)
=========== =========== ===========
Fully diluted $ 1.04 $ (5.58) $ (10.39)
=========== =========== ===========

Shares used for computation:
Primary 27,525 23,914 21,534
=========== =========== ===========
Fully diluted 41,509 23,914 21,534
=========== =========== ===========

See accompanying notes to financial statements.

</TABLE>
F-4

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
(in thousands of dollars)

1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 37,165 $ (131,761) $ (222,016)
Adjustments to reconcile net income
(loss) to cash provided by operating
activities:
Depreciation and amortization 81,894 86,981 97,803
Amortization of manufacturers' and
deferred credits (5,186) (5,869) (9,851)
Loss on disposition of property and
equipment 4,562 1,283 1,600
Restructuring charges - 31,316 -
Reorganization items 18,167 3,188 44,273
Other (554) 866 9,242
Changes in operating assets and liabilities:
Decrease in short-term investments - - 19,705
Decrease (increase) in accounts receivable,
net (927) 19,418 (13,945)
Decrease (increase) in spare parts and
supplies, net 6,320 (2,384) (3,227)
Decrease in prepaid expenses 2,627 812 3,208
Increase in other assets and restricted
cash (5,295) (1,141) (21,053)
Increase (decrease) in accounts payable 9,014 (8,473) 65,083
Increase (decrease) in air traffic
liability 8,749 30,723 (41,256)
Decrease in accrued compensation and vacation
benefits (1,300) (1,491) (909)
Increase in accrued interest 10,368 25,640 23,676
Increase (decrease) in accrued taxes (1,764) 2,968 (2,945)
Increase in other accrued liabilities 644 18,204 4,594
Increase (decrease) in other liabilities (11,126) 6,465 65,945
----------- ----------- -----------
Net cash provided by operating
activities 153,358 76,745 19,927

Cash flows from investing activities:
Purchases of property and equipment (54,324) (69,208) (96,803)
Decrease (increase) in equipment purchase
deposits - 14,425 (7,294)
Proceeds from disposition of property 3,715 383 275
Proceeds from manufacturers' credits - - 5,100
----------- ----------- -----------
Net cash used in investing
activities (50,609) (54,400) (98,722)

(Continued)

</TABLE>

F-5

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Statements of Cash Flows, Continued
Years ended December 31, 1993, 1992 and 1991
(in thousands of dollars)

<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of D.I.P. financing $ - $ 53,000 $ 78,000
Proceeds from issuance of debt - 22,804 -
Repayment of debt (77,501) (75,871) (44,939)
Proceeds from issuance of common stock - - 7,265
Preferred dividends paid - - (423)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (77,501) (67) 39,903
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 25,248 22,278 (38,892)
----------- ----------- -----------
Cash and cash equivalents at beginning
of year 74,383 52,105 90,997
----------- ----------- -----------
Cash and cash equivalents at end of year $ 99,631 $ 74,383 $ 52,105
=========== =========== ===========

See accompanying notes to financial statements.

</TABLE>

F-6

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Statements of Stockholders' Equity (Deficiency)

Years ended December 31, 1993, 1992, and 1991

(in thousands of dollars except per share amounts)

<CAPTION>
Notes Receivable
and Deferred
Convertible Additional Compensation
Preferred Common Paid-In Accumulated Employee Stock
Stock Stock Capital Deficit Purchase Plans Total
----------- ------ ---------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>

Balance at January 1, 1991 $ 91 $ 4,832 $ 156,573 $ (118,669) $ (21,686) $ 21,141

Issuance of 253,422 shares
of common stock sold at:
$5.50 per share, net of
expenses - 63 1,331 - - 1,394
Issuance of 2,755,938 shares
of common stock pursuant to
convertible subordinated
debentures - 689 28,084 - - 28,773
Issuance of 10,841 shares
of common stock pursuant
to exercise of stock
options and warrants - 3 38 - - 41
Repurchase of 1,356 shares
of common stock pursuant
to employee restricted
stock plan - - (8) - - (8)
Repurchase of 3,659 shares
of common stock pursuant
to employee stock
purchase plan - (1) (23) - - (24)
Employee restricted stock
deferred compensation - - (1) - 214 213
Employee stock purchase plan:
Issuance of 1,271,765
shares of common stock
at:
$.94-$7.50 per share - 318 4,601 - (889) 4,030
Deferred compensation - - 1,230 - 389 1,619
Preferred stock dividends
Series B: $5.41 per share - - - (1,575) - (1,575)
Series C: $1.33 per share - - - (98) - (98)
Net loss - - - (222,016) - (222,016)
---- ------- --------- ---------- --------- --------
Balance at December 31, 1991 91 5,904 191,825 (342,358) (21,972) (166,510)
---- ------- --------- ---------- --------- --------
Issuance of 346,661 shares
of common stock pursuant
to convertible subordinated
debentures - 86 3,599 - - 3,685
Employee restricted stock
deferred compensation - - - - 101 101
Employee stock purchase plan:
Issuance of 7,305 shares
of common stock at:
$.19-$2.63 per share - 2 (13) - 81 70
Deferred compensation - - (4) - 1,478 1,474
Preferred stock dividends
Series B: $5.41 per share - - - (1,575) - (1,575)
Series C: $1.33 per share - - - (97) - (97)
Net loss - - - (131,761) - (131,761)
---- ------- --------- ---------- --------- --------
Balance at December 31, 1992 91 5,992 195,407 (475,791) (20,312) (294,613)
---- ------- --------- ---------- --------- --------

(Continued)
</TABLE>
F-7

<TABLE>
AMERICA WEST AIRLINES, INC., D.I.P.

Statements of Stockholders' Equity (Deficiency), Continued

Years ended December 31, 1993, 1992, and 1991

(in thousands of dollars except per share amounts)
<CAPTION>

Notes Receivable
and Deferred
Convertible Additional Compensation
Preferred Common Paid-In Accumulated Employee Stock
Stock Stock Capital Deficit Purchase Plans Total
----------- ------ ---------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 91 $ 5,992 $ 195,407 $ (475,791) $ (20,312) $(294,613)
---- ------- --------- ---------- --------- ---------
Issuance of 170,173 shares
of common stock pursuant
to Series B convertible
subordinated debentures - 43 1,896 - - 1,939
Issuance of 1,164,596 shares
of common stock pursuant
to convertible preferred
stock (73) 291 (218) - - -
Employee restricted stock
deferred compensation - - - - 21 21
Employee stock purchase plan:
Cancellation of 11,330
shares of common stock at:
$.22-$1.59 per share - (3) (38) - 49 8
Deferred compensation - - (37) - 1,255 1,218
Net income - - - 37,165 - 37,165
---- ------- --------- ---------- --------- ---------
Balance at December 31, 1993 $ 18 $ 6,323 $ 197,010 $ (438,626) $ (18,987) $(254,262)
==== ======= ========= ========== ========= =========

See accompanying notes to financial statements.

</TABLE>
F-8

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements
December 31, 1993, 1992 and 1991

(1) Reorganization Under Chapter 11, Liquidity, Financial Condition and
-------------------------------------------------------------------
Subsequent Events
-----------------

On June 27, 1991, America West Airlines, Inc., D.I.P. (the "Company"
or "America West") filed a voluntary petition in the United States
Bankruptcy Court for the District of Arizona (the "Bankruptcy Court")
to reorganize under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code"). The Company is currently operating as a
debtor-in-possession ("D.I.P.") under the supervision of the
Bankruptcy Court. As a debtor-in-possession, the Company is
authorized to operate its business but may not engage in transactions
outside its ordinary course of business without the approval of the
Bankruptcy Court.

Subject to certain exceptions under the Bankruptcy Code, the Company's
filing for reorganization automatically enjoined the continuation of
any judicial or administrative proceedings against the Company. Any
creditor actions to obtain possession of property from the Company or
to create, perfect or enforce any lien against the property of the
Company are also enjoined. As a result, the creditors of the Company
are precluded from collecting pre-petition debts without the approval
of the Bankruptcy Court.

The Company had the exclusive right for 120 days after the Chapter 11
filing on June 27, 1991 to file a plan of reorganization and 60
additional days to obtain necessary acceptances of such plan. Such
periods may be extended at the discretion of the Bankruptcy Court, but
only on a showing of good cause, and extensions have been obtained
such that the Company has until June 10, 1994 to file its plan of
reorganization with the Court or obtain an additional extension.
Subject to certain exceptions set forth in the Bankruptcy Code,
acceptance of a plan of reorganization requires approval of the
Bankruptcy Court and the affirmative vote (i.e. 50% of the number and
66- 2/3% of the dollar amount) of each class of creditors and equity
holders whose claims are impaired by the plan.

Certain pre-petition liabilities have been paid after obtaining the
approval of the Bankruptcy Court, including certain wages and benefits
of employees, insurance costs, obligations to foreign vendors and
governmental agencies, travel agent commissions and ticket refunds.
The Company has also been allowed to honor all tickets sold prior to
the date it filed for reorganization. In addition, the Company is
authorized to pay pre-petition liabilities to essential suppliers of
fuel, food and beverages and to other vendors providing critical goods
and services. Subsequent to filing and with the approval of the
Bankruptcy Court, the Company assumed certain executory contracts of
essential suppliers.

Parties to executory contracts may, under certain circumstances, file
motions with the Bankruptcy Court to require the Company to assume or
reject such contracts. Unless otherwise agreed, the assumption of a
contract will require the Company to cure all prior defaults under the
related contract, including all pre-petition liabilities unless terms
can be negotiated. Unless otherwise agreed, the rejection of a
contract is deemed to constitute a breach of the agreement as of the
moment immediately preceding Chapter 11 filing, giving the other party
to the contract a right to assert a general unsecured claim for
damages arising out of the breach.

(Continued)
F-9

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

February 28, 1992 was set as the last date for the filing of proof of
claims under the Bankruptcy Code and the Company's creditors have
submitted claims for liabilities not paid and for damages incurred.
There may be differences between the amounts at which any such
liabilities are recorded in the financial statements and the amount
claimed by the Company's creditors. Significant litigation may be
required to resolve any such disputes.

The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these costs, which
are being expensed as incurred, is expected to significantly affect
results of operations.

As a result of its filing for protection under Chapter 11 of the
Bankruptcy Code, the Company is in default of substantially all of its
debt agreements. All outstanding pre-petition unsecured debt of the
Company has been presented in these financial statements within the
caption Estimated Liabilities Subject to Chapter 11 Proceedings.

Additional liabilities subject to the proceedings may arise in the
future as a result of the rejection of executory contracts, including
leases, and from the determination by the Bankruptcy Court (or
agreement by parties in interest) of allowed claims for contingencies
and other disputed amounts. Conversely, the assumption of executory
contracts and unexpired leases may convert liabilities shown as
subject to Chapter 11 proceedings to post-petition liabilities.

Substantially all of the aircraft, engines and spare parts in the
Company's fleet are subject to lease or secured financing agreements
that entitle the Company's aircraft lessors and secured creditors to
rights under Section 1110 of the Bankruptcy Code. Pursuant to
Section 1110, the Company had 60 days from the date of its Chapter 11
filing, or until August 26, 1991, to bring its obligations to these
aircraft lessors and secured creditors current and/or reach other mu-
tually satisfactory negotiated arrangements. In September 1991, as a
condition to the borrowings under the initial $55 million D.I.P.
facility, the Company arranged for rent, principal and interest
payment deferrals from a majority of its aircraft providers as a
condition to the assumption of the related lease or secured borrowing
by the Company. As a result of these arrangements, the Company was
able to assume the executory contracts associated with 83 aircraft in
its fleet without having to bring its obligations to these aircraft
providers current. In addition, as part of the initial D.I.P.
facility, the Company assumed and brought current lease agreements
for 16 Airbus A320 aircraft, three CFM engines, a Boeing 757-200 and
a Boeing 737-300. Twenty-two aircraft were deemed surplus to the
Company's needs and the associated executory contracts were rejected.
Included in 1991 reorganization costs is $35.2 million in write-offs
of leasehold improvements, security deposits, accrued maintenance,
accrued rents and other costs to return the aircraft which were
subject to the rejected aircraft agreements. In certain cases, final
agreements were reached with such aircraft providers and no further
claims by such providers will be pursued as a result of the
rejections. In other instances, the aircraft providers have filed
claims in the normal course of the bankruptcy and as of December 31,
1993 significant claims for rejected aircraft have not yet been
settled.

(Continued)
F-10

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

Due to the uncertain nature of many of the potential claims, the
Company is unable to project the magnitude of such claims with any
degree of certainty. However, the claims (pre-petition claims and
administrative claims) that have been filed against the Company are in
excess of $2 billion. Such aggregate amount includes claims of all
character, including, but not limited to, unsecured claims, secured
claims, claims that have been scheduled but not filed, duplicative
claims, tax claims, claims for leases that were assumed, and claims
which the Company believes to be without merit; however, claims filed
for which an amount was not stated, are not reflected in such amount.
The Company is unable to estimate the potential amount of such
unstated claims; however, the amount of such claims could be material.

The Company is in the process of reviewing the general unsecured
claims asserted against the Company. In many instances, such review
process will include the commencement of Bankruptcy Court proceedings
in order to determine the amount at which such claims should be
allowed. The Company has accrued its estimate of claims that will be
allowed or the minimum amount at which it believes the asserted
general unsecured claims will be allowed if there is no better
estimate within the range of possible outcomes. However, the
ultimate amount of allowed claims will be different and
such differences could be material. The Company is unable to estimate
the amount of such differences with any reasonable degree of certainty
at this time.

The Bankruptcy Code requires that all administrative claims be paid on
the effective date of a plan of reorganization unless the respective
claimants agreed to different treatment. Consequently, depending on
the ultimate amount of administrative claims allowed by the Bankruptcy
Court, the Company may be unable to obtain confirmation of a plan of
reorganization. The Company is actively negotiating with claimants to
achieve mutually acceptable dispositions of these claims. Since the
commencement of the bankruptcy proceeding, claims alleging
administrative expense priority totaling more than $153 million have
been filed and an additional claim of $14 million has been alleged.
As of February 28, 1994, $115 million of the filed claims have been
allowed and settled for $50.2 million in the aggregate. The Company
is currently negotiating the resolution of the remaining $38 million
filed administrative expense claim (which relates to a rejected lease
of a Boeing 737-300 aircraft) and the alleged $14 million
administrative claim (which relates to a rejected lease of a Boeing
757-200 aircraft). Claims have been or may be asserted against the
Company for alleged administrative rent and/or breach of return
conditions (i.e. maintenance standards), guarantees and tax
indemnity agreements related to aircraft or engines abandoned
or rejected during the bankruptcy proceedings. Additional
claims may be asserted against the Company and allowed by the
Bankruptcy Court. The amount of such unidentified administrative
claims may be material.

(Continued)
F-11

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

Plan of Reorganization
----------------------

Under the Bankruptcy Code, the Company's pre-petition liabilities are
subject to settlement under a plan of reorganization. Pursuant to an
extension granted by the Bankruptcy Court on February 2, 1994, the
Company has the partially exclusive right, until June 10, 1994 (unless
extended by the Bankruptcy Court), to file a plan of reorganization.
Each of the official committees has also been approved to submit a
plan of reorganization. The exclusivity period may be extended by the
Bankruptcy Court upon a showing of cause after notice has been given
and a hearing has been held, although no assurance can be given that
any additional extensions will be granted if requested by the Company.
The Company has agreed not to seek additional extensions of the
exclusivity period without the advance consent of the Creditors'
Committee and the Equity Committee.

On December 8, 1993 and February 16, 1994, the Bankruptcy Court
entered certain orders which provided for a procedure pursuant to
which interested parties could submit proposals to participate in a
plan of reorganization for America West. The Bankruptcy Court also
set February 24, 1994 as the date for America West to select a "Lead
Plan Proposal" from the proposals submitted.

On February 24, 1994, America West selected as its Lead Plan Proposal
an investment proposal submitted by AmWest Partners, L.P., a limited
partnership ("AmWest"), which includes Air Partners II, L.P.,
Continental Airlines, Inc., Mesa Airlines, Inc. and Fidelity
Management Trust Company. On March 11, 1994, the Company and AmWest
entered into a revised investment agreement which substantially
incorporates the terms of the AmWest investment proposal (the
"Investment Agreement"). The Investment Agreement provides that
AmWest will purchase from America West equity securities representing
a 37.5% ownership interest in the Company for $120 million and $100
million in new senior unsecured debt securities. The Investment
Agreement also provides that, in addition to the 37.5% ownership
interest in the Company, AmWest would also obtain 72.9% of the total
voting interest in America West after the Company is reorganized. The
terms of the Investment Agreement will be incorporated into a plan of
reorganization to be filed with the Bankruptcy Court; however,
modifications to the Investment Agreement may occur prior to the
submission of a plan of reorganization and such modifications may be
material. There can be no assurance that a plan of reorganization
based upon the Investment Agreement will be accepted by the parties
entitled to vote thereon or confirmed by the Bankruptcy Court.

In addition to the interest in the reorganized America West that would
be acquired by AmWest pursuant to the Investment Agreement, the
Investment Agreement also provides for the following:

1. The D.I.P. financing would be repaid in full with cash on the
date a plan of reorganization is confirmed ("Reorganization Date").

(Continued)
F-12

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

2. On the Reorganization Date, unsecured creditors would receive 45%
of the new common equity in the reorganized Company, with the
potential to receive up to 55% of such equity if within one year
after the Reorganization Date, the value of the securities dis-
tributed to them has not provided them with a full recovery under
the Bankruptcy Code. In addition, unsecured creditors would have
the right to elect to receive cash at $8.889 per share up to an
aggregate maximum amount of $100 million, through a repurchase by
AmWest of a portion of the shares to be issued to unsecured
creditors under a plan of reorganization.

3. Holders of equity interests would have the right to receive up to
10% of the new common equity of the Company, depending on certain
conditions principally involving a determination as to whether
the unsecured creditors had received a full recovery on account
of their claims. In addition, holders of equity interests would
have the right to purchase up to $15 million of the new common
equity in the Company for $8.296 per share from AmWest, and would
also receive warrants entitling them to purchase, together with
AmWest, up to 5% of the reorganized Company's common stock, at a
price to be set so that the warrants would have value only after
the unsecured creditors would have received full recovery on
their claims.

4. In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation ("GPA")
affiliates to put to America West 10 Airbus A320 aircraft at
fixed rates, GPA, or certain affiliates thereof, would receive
(i) 7.5% of the new common equity in the reorganized Company,
(ii) warrants to purchase up to 2.5% of the reorganized Company's
common stock on the same terms as the AmWest warrants, (iii) $3
million in new senior unsecured debt securities, and (iv) the
right to require the Company to lease up to eight aircraft of
types operated by the Company from GPA prior to June 30, 1999 on
terms which the Company believes to be more favorable than those
currently applicable to the put aircraft. See note 11 for an
additional discussion of the put rights.

5. Continental Airlines, Inc., Mesa Airlines, Inc. and America West
would enter into certain alliance agreements which would include
code-sharing, schedule coordination and certain other
relationships and agreements. A condition to proceeding with a
plan of reorganization based upon the Investment Agreement would
be that these agreements be in form and substance satisfactory to
America West, including the Company's reasonable satisfaction
that such alliance agreements when fully implemented will result
in an increase in pre-tax income of not less than $40 million per
year.

(Continued)
F-13

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

7. The Investment Agreement also provides for many other matters,
including the disposition of the various types of claims asserted
against the Company, the adherence to the Company's aircraft
lease agreements, the amendment of the Company's aircraft pur-
chase agreements and release of the Company's employees from all
currently existing obligations arising under the Company's stock
purchase plan in consideration for the cancellation of the shares
of Company stock securing such obligations.

The Company has also entered into a Revised Interim Procedures Agreement
(the "Procedures Agreement") with AmWest. The Procedures Agreement is
subject to the approval of the Bankrupty Court and sets forth terms
and conditions upon which the Company must operate prior to the
effective date of a confirmed plan of reorganization based upon the
terms of the Investment Agreement. The Procedures Agreement provides
for the reimbursement of AmWest's expenses (up to a maximum of $3.6
million) as well as a termination fee of up to $8 million under certain
conditions. The Procedures Agreement has not yet been approved by the
Bankruptcy Court.

The Company is currently developing with AmWest a plan of
reorganization based upon the foregoing terms. The Equity Committee
has agreed to support the plan. The Creditors' Committee has
indicated that it does not support the current terms of the Investment
Agreement. Another group interested in developing a plan of
reorganization with the Company has proposed to invest $155
million in equity securities and $65 million in new senior unsecured
debt securities. The proponent of this proposal would receive a 33.5%
ownership interest in the reorganized Company, current equity holders
would receive a 4% ownership interest in the reorganized Company and
the unsecured creditors would receive a 62.5% ownership interest in
the reorganized company.

Any plan of reorganization must be approved by the Bankruptcy Court
and by specified majorities of each class of creditors and equity
holders whose claims are impaired by the plan. Alternatively, absent
the requisite approvals, the Company may seek Bankruptcy Court
approval of its reorganization plan under Section 1129(b) of the
Bankruptcy Code, assuming certain tests are met. The Company cannot
predict whether any plan submitted by it will be approved.

The Company is currently unable to predict when it may file a plan of
reorganization based upon the Investment Agreement, but intends to do
so as soon as practicable. Once a plan with a disclosure statement is
filed by any party, the Bankruptcy Court will hold a hearing to
determine the adequacy of the information contained in such disclosure
statement. Only upon receiving an order from the Bankruptcy Court
providing that the disclosure statement accompanying any such plan
contains adequate information as required by Section 1125 of the
Bankruptcy Code, may a party solicit acceptances or rejections of any
such plan of reorganization. Following entry of an order approving
the disclosure statement, the plan will be sent to creditors and
equity holders for voting pursuant to both the Bankruptcy Code and
orders that will be entered by the Bankruptcy Court. Following
submission of the plan to holders of claims and equity interests, the
Bankruptcy Court will hold a hearing to consider confirmation of the
plan pursuant to Section 1129 of the Bankruptcy Code. Although the
Bankruptcy Code provides for certain minimum time periods for these
events, the Company is unable to reasonably estimate when a plan based
on the Investment Agreement might be submitted for voting and
confirmation.

(Continued)
F-14

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

If at any time the Creditors' Committee, the Equity Committee or any
creditor of the Company or equity holder of the Company believes that
the Company is or will not be in a position to sustain operations,
such party can move in the Bankruptcy Court to compel a liquidation of
the Company's estate by conversion to Chapter 7 bankruptcy proceedings
or otherwise. In the event that the Company is forced to sell its
assets and liquidate, it is unlikely that unsecured creditors or
equity holders will receive any value for their claims or interests.

The Company anticipates that the reorganization process will result in
the restructuring, cancellation and/or replacement of the interest of
its existing common and preferred stockholders. Because of the
"absolute priority rule" of Section 1129 of the Bankruptcy Code, which
requires that the Company's creditors be paid in full (or otherwise
consent) before equity holders can receive any value under a plan of
reorganization, the Company previously disclosed that it anticipated
that the reorganization process would result in the elimination of the
Company's existing equity interests. Due to recent events, including
sustained improvement in the Company's operating results as well as
general improvement in the condition of the United States' economy and
airline industry, some form of distribution to the equity interests
pursuant to Section 1129 may occur. However, there can be no
assurances in this regard.

The accompanying financial statements have been prepared on a going
concern basis which assumes continuity of operations and realization
of assets and liquidation of liabilities in the ordinary course of
business. As a result of the reorganization proceedings, there are
significant uncertainties relating to the ability of the Company to
continue as a going concern. The financial statements do not include
any adjustments that might be necessary as a result of the outcome of
the uncertainties discussed herein including the effects of any plan
of reorganization.

(2) Estimated Liabilities Subject to Chapter 11 Proceedings and
-----------------------------------------------------------
Reorganization Expense
----------------------

Under Chapter 11, certain claims against the Company in existence
prior to the filing of the petitions for relief under the Code are
stayed while the Company continues business operations as debtor-in-
possession. These pre-petition liabilities are expected to be settled
as part of the plan of reorganization and are classified as "Estimated
liabilities subject to Chapter 11 proceedings."

Estimated liabilities subject to Chapter 11 proceedings as of
December 31, 1993 and 1992 consists of the following:

<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(in thousands)
<S> <C> <C>
Long-term debt (including convertible
subordinated debentures of $138.9
million and $140.8 million at
December 31, 1993 and 1992,
respectively) (note 4) $224,642 $235,026
Accounts payable and accrued liabilities 113,945 73,488
Accrued interest 16,808 14,261
Accrued taxes 25,719 25,547
-------- --------
$381,114 $348,322
======== ========
</TABLE>
(Continued)
F-15

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

The debt balance included above consists of unsecured and secured
obligations and other obligations that have not been affirmed by the
Company through the Bankruptcy Court (note 4).

Reorganization expense is comprised of items of income, expense, gain
or loss that were realized or incurred by the Company as a result of
reorganization under Chapter 11 of the Federal Bankruptcy Code. Such
items consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in thousands)

<S> <C> <C> <C>
Provisions for pre-petition and
administrative claims $18,231 $ 1,748 $35,203
Professional fees 7,227 11,147 8,531
D.I.P. financing issuance costs 1,378 1,760 2,660
Write-off of debt issuance costs - - 2,773
Employee termination and furlough costs - 561 1,343
Facility closing costs - 2,776 6,796
Interest income (2,635) (2,030) (1,365)
Other 814 254 2,499
------- ------- -------
$25,015 $16,216 $58,440
======= ======= =======
</TABLE>

(3) Summary of Significant Accounting Policies
------------------------------------------

(a) Financial Reporting for Bankruptcy Proceedings
----------------------------------------------

On November 19, 1990, the American Institute of Certified Public
Accountants issued Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). SOP 90-7 provides guidance for financial
reporting by entities that have filed petitions with the
Bankruptcy Court and expect to reorganize under Chapter 11 of the
Code.

SOP 90-7 recommends that all such entities report consistently
while reorganizing under Chapter 11, with the objective of
reflecting their financial evolution. To achieve such
objectives, their financial statements should distinguish
transactions and events that are directly associated with the
reorganization from those of the operations of the ongoing
business as it evolves.

SOP 90-7 became effective for financial statements of enterprises
that filed petitions under the Code after December 31, 1990,
although earlier application was encouraged. The Company has
implemented the guidance provided by SOP 90-7 in the accompanying
financial statements.

Pursuant to SOP 90-7, pre-petition liabilities are reported on
the basis of the expected amounts of such allowed claims, as
opposed to the amounts for which those allowed claims may be
settled. Under an approved final plan of reorganization, those
claims may be settled at amounts substantially less than their
allowed amounts.

(Continued)
F-16

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(b) Cash Equivalents
----------------

Cash equivalents consist of all highly liquid debt instruments
purchased with original maturities of three months or less and
are carried at cost which approximates market.

Restricted cash includes cash held in Company accounts, but
pledged to an institution which processes credit card sales
transactions and cash deposits securing certain letters of
credit.

(d) Expendable Spare Parts and Supplies
-----------------------------------

Flight equipment expendable spare parts and supplies are valued
at average cost. Allowances for obsolescence are provided, over
the estimated useful life of the related aircraft and engines,
for spare parts expected to be on hand at the date the aircraft
are retired from service.

(e) Property and Equipment
----------------------

Property and equipment is stated at cost or, if acquired under
capital leases, at the lower of the present value of minimum
lease payments or fair market value at the inception of the
lease. Interest capitalized on advance payments for aircraft
acquisitions and on expenditures for aircraft improvements is
part of the cost. Property and equipment is depreciated and
amortized to residual values over the estimated useful lives or
the lease term using the straight-line method. The Company
discontinued capitalizing interest on June 27, 1991 due to the
Chapter 11 filing.

The estimated useful lives for the Company's property and equip-
ment range from three to twelve years for owned property and
equipment and to thirty years for the reservation and training
center and technical support facilities. The estimated useful
lives of the Company's owned aircraft, jet engines, flight
equipment and rotable parts range from eleven to twenty-two
years. Leasehold improvements relating to flight equipment and
other property on operating leases are amortized over the life of
the lease or the life of the asset, whichever is shorter.

Routine maintenance and repairs are charged to expense as
incurred. The cost of major scheduled airframe, engine and
certain component overhauls are capitalized and amortized over
the periods benefited and included in depreciation and
amortization expense. Additionally, a provision for the
estimated cost of scheduled airframe and engine overhauls
required to be performed on leased aircraft prior to their return
to the lessors has been provided.

(Continued)
F-17

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(f) Revenue Recognition
-------------------

Passenger revenue is recognized when the transportation is
provided. Ticket sales for transportation which has not yet been
provided are reflected in the financial statements as air traffic
liability.

(g) Passenger Traffic Commissions and Related Fees
----------------------------------------------

Passenger traffic commissions and related fees are expensed when
the transportation is provided and the related revenue is
recognized. Passenger traffic commissions and related fees not
yet recognized are included as a prepaid expense.

(h) Income Taxes
------------

Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.

As more fully discussed at note 5, adoption of the new standard
changes the Company's method of accounting for income taxes from
the deferred approach to an asset and liability approach.

As with the prior standard, the Company continues to account for
its investment tax credits and general business credits by use of
the flow-through method.

(i) Per Share Data
--------------

Primary earnings (loss) per share is based upon the weighted
average number of shares of common stock outstanding and dilutive
common stock equivalents (stock options and warrants). Primary
earnings per share reflect net income adjusted for interest on
borrowings effectively reduced by the proceeds from the assumed
conversion of common stock equivalents.

Fully diluted earnings per share in 1993 is based on the average
number of shares of common stock and dilutive common stock
equivalents outstanding adjusted for conversion of outstanding
convertible preferred stock and convertible debentures. Fully
diluted earnings per share reflects net income adjusted for
interest on borrowings effectively reduced by the proceeds from
the assumed conversion of common stock equivalents.

(Continued)
F-18

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(j) Frequent Flyer Awards
---------------------

The Company maintains a frequent travel award program known as
"FlightFund" that provides a variety of awards to program members
based on accumulated mileage. The estimated cost of providing
the free travel, using the incremental cost method as adjusted
for estimated redemption rates, is recognized as a liability and
charged to operations as program members accumulate mileage.

(k) Manufacturers' and Deferred Credits
-----------------------------------

In connection with the acquisition of certain aircraft and
engines, the Company receives various credits. Such
manufacturers' credits are deferred until the aircraft and
engines are delivered, at which time they are either applied as a
reduction of the cost of acquiring owned aircraft and engines,
resulting in a reduction of future depreciation expense, or
amortized as a reduction of rent expense for leased aircraft and
engines.

(l) Fair Value of Financial Instruments
-----------------------------------

The fair value estimates and assumptions used in developing the
estimates of the Company's financial instruments are as follows:

Cash and Cash Equivalents
-------------------------

The carrying amount approximates fair value because of the short
maturity of those instruments.

Accounts Receivable and Accounts Payable
----------------------------------------

The carrying amount of accounts receivable and accounts payable
approximates fair value as they are expected to be collected or
paid within 90 days of year-end.

Long-term Debt and Estimated Liabilities Subject to Chapter 11
--------------------------------------------------------------
Proceedings
-----------

The fair value of long-term debt and estimated liabilities
subject to Chapter 11 proceedings cannot readily be estimated as
quoted market prices are not available. Additionally, future
cash flows cannot be estimated as the repayment of these in-
struments is subject to disposition within the bankruptcy
proceedings.

(m) Reclassifications
-----------------

Certain prior year reclassifications have been made to conform to
the current year presentation.

(Continued)
F-19

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(4) Long-term Debt
--------------

Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(in thousands)

<S> <C> <C>
D.I.P. financing, secured by substantially
all Company assets (a) $ 83,577 $110,784

Note payable to aircraft provider for
advance credits (a) 68,356 60,732

Notes payable secured by aircraft (b) 306,837 327,267

Line of credit agreements (c) 18,589 24,979

Note from an aircraft engine provider (d) 7,191 12,392

Notes payable secured by flight simulators (e) 20,064 22,804

Notes payable to administrative claimants (f) 10,734 -

Other 6,273 9,687
-------- --------
521,621 568,645
Less current maturities (125,271) (156,656)
-------- --------

$396,350 $411,989
======== ========
</TABLE>

(Continued)
F-20

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

Long-term debt included in estimated liabilities subject to Chapter 11
proceedings consists of the following:

<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(in thousands)

<S> <C> <C>
7-3/4% convertible subordinated debentures
due 2010 (g) $ 30,477 $ 30,752

7-1/2% convertible subordinated debentures
due 2011 (h) 31,709 32,069

11-1/2% convertible subordinated debentures
due 2009 (i) 76,722 78,025

Note payable to an aircraft provider for
deferred pre-delivery payments (j) 21,126 21,126

Line of credit agreement (k) 9,854 11,000

Industrial development revenue bonds (l) 29,497 29,497

Letter of credit draws secured by rotable
parts (m) 22,967 23,113

Other 2,290 9,444
-------- --------
$224,642 $235,026
======== ========
</TABLE>

As part of the Chapter 11 reorganization process, the Company is
required to notify all known or potential claimants for the purpose of
identifying all pre-petition claims against the Company. Additional
bankruptcy claims and pre-petition liabilities may arise by termina-
tion of various contractual obligations and as certain contingent
and/or potentially disputed bankruptcy claims are allowed for amounts
which may differ from those shown on the balance sheet.

As discussed in note 1, payment of these liabilities, including
maturity of debt obligations, is stayed while the debtor continues to
operate as a debtor-in-possession. As a result, contractual terms
have been suspended with respect to debt subject to the Chapter 11
proceedings. The following paragraphs include discussion of the
original contractual terms of the long-term debt; however, the
maturity and terms of the long-term debt subsequent to the petition
date may differ as a result of negotiations that take place as part of
the plan of reorganization.

(Continued)
F-21

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

No principal or interest may be paid on pre-petition debt without the
approval of the Bankruptcy Court. The Company has continued to accrue
and pay interest on its long-term debt related to D.I.P. financing,
affirmed long-term debt and secured debt included in estimated
liabilities subject to Chapter 11 proceedings only to the extent that,
in the Company's opinion, the value of underlying collateral exceeds
the principal amount of the secured claim. The Company believes it is
probable such interest will be an allowed secured claim as part of the
bankruptcy proceeding. Except as otherwise stated above, the Company
ceased accruing interest on pre-petition debt as of June 27, 1991, due
to uncertainties relating to a final plan of reorganization.

(a) In September 1991, the Company completed arrangements for a $55
million D.I.P. credit facility. The D.I.P. credit facility is
secured by a first priority lien senior to all other liens on
substantially all existing assets of the Company, except that
such lien is junior in priority to Permitted First Liens (as such
term is defined in the D.I.P. credit facility documents) with
respect to the property encumbered thereby. In December 1991,
the Company completed arrangements for an additional $23 million
of D.I.P. financing under terms and conditions substantially the
same as those associated with the $55 million D.I.P. credit
facility. Quarterly interest payments for the D.I.P. financings
commenced in the quarter ending December 31, 1991 at the 90-day
London Interbank Offered Rate (LIBOR) plus 3.5% and quarterly
principal repayments of $3.9 million were to commence in
September 1992 with the balance due in September 1993, or earlier
upon confirmation of an approved plan of reorganization.

In connection with the $23 million of D.I.P. financing, the
Company agreed to convert advanced cash credits for 24 Airbus
A320 aircraft previously provided to the Company into an
unsecured priority term loan. At December 31, 1993, the amount
of the term loan was $68.4 million including accrued interest of
$21.9 million. Until the Reorganization Date, the term loan
will accrue interest at 12% per annum and such interest will be
added to the principal balance. On the Reorganization Date,
85% of the outstanding balance will be converted into an
eight-year term loan which will accrue interest at 2% over 90-day
LIBOR and will be secured by substantially all the assets of the
Company if the D.I.P. financing is fully repaid. Principal
payments will be made in equal quarterly installments, plus
interest, commencing after the Reorganization Date. The Company
has the right to prepay the loan if the D.I.P. financing is fully
repaid. The remaining 15% of the term loan will be treated as a
general unsecured claim without priority status under the Company's
plan of reorganization. In the first quarter of 1994, the Company
received information that the term loan was purchased by a third
party.

(Continued)
F-22

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

In connection with the D.I.P. financing, a D.I.P. lender agreed
to acquire the Company's Honolulu to Nagoya, Japan route for $15
million. The Nagoya route sale was finalized in March 1992,
resulting in a gain of $15 million, which is included in other
non-operating income in the accompanying statement of operations.
Upon the completion of the sale of the Nagoya route, $10 million
of the proceeds from the sale were paid to the lender to reduce
the Company's obligation to the lender under the D.I.P. fi-
nancing. The balance of the proceeds from the sale of the Nagoya
route were added to the Company's working capital. The remaining
D.I.P. balance was paid to this lender in connection with the
September 1992 D.I.P. Facility.

In September 1992, the Company completed arrangements to expand
its existing D.I.P. financing by an additional $53 million (the
"September 1992 D.I.P. Facility").

As a condition to the closing of the September 1992 D.I.P.
Facility, the Company was required to reduce its aircraft fleet
and the number of aircraft types from five to three pursuant to
certain agreements with third parties, including the following:

1. With the exception of four lessors (two of which
participated in the September 1992 D.I.P. Facility and did
not defer or reduce their lease payments), aircraft lessors
whose aircraft were retained in the fleet and who agreed to
payment deferrals during July and August 1992, were required
to waive any default which occurred as a result of such non-
payments and to defer these payments without interest until
the first calendar quarter of 1993. In addition, effective
August 1, 1992, the rental rates on these retained aircraft
were reduced to fair market lease rates for a two-year
period. The rental rates adjust to market rates effective
August 1, 1994.

Of the remaining two lessors, one accepted rental payment
reductions and the other agreed to a deferral of the rents
from July through October 1992. Repayment of this deferral
is monthly over seven years beginning November 1992 at level
principal and interest at 90-day LIBOR plus 3.5%.

(Continued)
F-23

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

The Company also agreed in certain cases that lessors could
call the aircraft upon 180 days notice if the lessor had a
better lease proposal from another party which the Company
was unwilling to match. During the period August 1, 1994
through July 31, 1995, certain of these lessors may call
their aircraft without first giving the Company the right to
match any competing offer. Call rights with a right of
first refusal affect 16 aircraft and call rights without a
right of first refusal affect 10 aircraft. In addition, in
order to induce several lessors to extend the lease terms of
their aircraft, the Company agreed that the aircraft could
be called by the lessors at the end of the original lease
term. One lessor of 11 aircraft has the right to terminate
each lease at the end of the original lease term of each
aircraft. Such lessor also has the right to call its
aircraft on 90 days notice at any time prior to the end of
the amended lease term. America West has no right of first
refusal with respect to such aircraft. To date, no lessor
has exercised its call rights.

3. Certain principal and interest payments relating to owned
aircraft due in July 1992 were deferred without interest and
were repaid by March 31, 1993. Additionally, certain other
principal and interest payments due from August 1992 through
January 1993 were deferred and repaid beginning
February 1993 over five to nine years with interest at
approximately 10.25%. In lieu of payment deferrals, two of
the aircraft lenders agreed to adjust the interest rates
based on 90-day LIBOR plus 3.5% per annum.

In September 1993, the Bankruptcy Court approved an amendment to
the D.I.P. loan agreement extending the maturity date of the loan
from September 30, 1993 to June 30, 1994. Concurrent with the
extension of the maturity date, $8.3 million of the principal
balance was repaid to one of the participants who did not agree
with the amendment. Interest on all funds advanced under the
D.I.P. facility accrues at 3.5% per annum, over 90-day LIBOR and
is payable quarterly. The amended D.I.P. loan agreement defers
all principal payments to the earlier of June 30, 1994 or
the effective date of a confirmed Chapter 11 plan of
reorganization with the exception of $5 million that will be
due on March 31, 1994. The amended terms of the D.I.P.
financing require the Company to notify the D.I.P. lenders
if the unrestricted cash balance of the Company exceeds
$125 million. Upon receipt of such notice, the D.I.P.
lenders may require the Company to prepay the D.I.P.
financing by the amount of such excess. Subsequent to
December 31, 1993, the Company notified the D.I.P. lenders
that the Company's unrestricted cash exceeded $125 million;
however, the D.I.P. lenders have not exercised their
prepayment rights. The D.I.P. financings contain a minimum
unencumbered cash balance requirement of $55 million at
December 31, 1993 and other financial covenants. At
December 31, 1993, the Company was in compliance with these
covenants.

(Continued)
F-24

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

As a condition to extending the maturity date of the D.I.P.
financing in September 1993, the Company also agreed to pay
a facility fee of $627,000 to the D.I.P. lenders on
September 30, 1993 and to pay an additional facility fee
equal to 1/4% of the then outstanding balance of the D.I.P.
financing on March 31, 1994. Consequently, the outstanding
balance of $83.6 million is classified as a current
liability as of December 31, 1993. Presently, the Company
does not possess sufficient liquidity to satisfy the D.I.P.
financing nor does it appear likely that new equity capital
will be obtained and a plan of reorganization confirmed
prior to June 30, 1994. Consequently, the Company will be
required to obtain alternative repayment terms from the
D.I.P. lenders. There can be no assurance that alternative
repayment terms will be obtained. The Company believes that
any extension of the D.I.P. financing will be for a short
period of time and would be concurrent with the
implementation of a plan of reorganization.

The D.I.P. financings contain a minimum unencumbered cash
balance requirement of $55 million at December 31, 1993 and
other financial covenants. At December 31, 1993, the Company
was in compliance with these covenants.

(b) These notes from financial institutions, secured by seventeen
aircraft with a net book value of $327.6 million, are payable in
semi-monthly, monthly, quarterly and semi-annual installments
ranging from $75,000 to $1,637,000 plus interest at 30-day LIBOR
plus 3.5% (6.88% at December 31, 1993) to 10.79%, with maturities
ranging from 1999 to 2008. Approximately $105.3 million of these
secured notes have provisions providing for the reset of interest
rates at various future dates based on fluctuations in indices
such as the Eurodollar rate. Additionally, interest rates and
principal payments for certain of these notes were modified, as
discussed above, in connection with the September 1992 D.I.P.
Facility.

(c) The Company has a $40 million line of credit that extends to
December 31, 1997 for which no borrowing can occur after
December 31, 1994. The purpose of the line is to provide for the
initial provisioning of spare parts for Airbus A320 aircraft.
The loan is repaid quarterly with level principal payments of
$970,000 each and interest at LIBOR plus 4%. At December 31,
1993 and 1992, the Company had borrowings outstanding of $15.5
million and $20.4 million, respectively, under this credit
facility. However, the lender will not make the unused credit of
$24.5 million available at December 31, 1993 as a result of the
Chapter 11 filing. This loan was affirmed in December 1991 by
the Bankruptcy Court under Section 1110 of the Bankruptcy Code.

The Company also has a $25 million line of credit that extends to
September 1997 under which no borrowing could occur after
September 1992. The credit line was used for spare engine parts
and has an interest rate of LIBOR plus 4%. At December 31, 1993
and 1992, the Company had borrowings outstanding of $3.1 million
and $4.6 million, respectively, under this credit facility. In
connection with the financing by this same lender of two aircraft
flight simulators in October 1992 (see (e)), this loan was
affirmed in the bankruptcy proceeding. Consequently, the
outstanding balance at December 31, 1993 is included in long-term
debt.

(Continued)
F-25

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(d) This note from an aircraft engine manufacturer was originally
made for $30 million in September 1990. The note is secured by
two aircraft, spare engine parts and other equipment. Interest
on the note began to accrue at its inception at 90-day LIBOR plus
2.0%, compounded quarterly, until September 1993 when all such
accrued interest, or approximately $6 million, was paid.
Interest is currently paid quarterly at the same interest rate.
In October 1992, this lender financed two new flight simulators
which were securing this note (see (e)), and this loan was
reduced by the amount of such financing, or approximately $22.8
million. Repayment of the balance of this loan is dependent on
the future delivery of certain firm ordered aircraft scheduled to
begin in November 1996 (however, the related aircraft purchase
agreement has been neither affirmed nor rejected at December 31,
1993). In connection with the above financing of the two flight
simulators, this note was affirmed in the bankruptcy proceedings,
and the outstanding balances at December 31, 1993 and 1992 are
included in long-term debt.

(e) In October 1992, the Company acquired two flight simulators and
executed two notes secured by the simulators. The notes are
payable in 84 equal monthly principal installments, plus accrued
interest at LIBOR plus 2%. However, the Company has the right,
upon the giving of notice to the lender, to fix the interest rate
at the greater of the then current LIBOR plus 2% or 6.375%. In
connection with this financing, the Company affirmed in the
bankruptcy proceedings the agreements for a certain note payable
(see (d) above) and a line of credit (see (c) above).

(f) In 1993, the Company settled three administrative claims with
three four-year promissory notes totaling $9.6 million with
quarterly principal payments and interest at 6%. At December 31,
1993, the outstanding balance of these promissory notes was $8.7
million.

Also in 1993, the Company renegotiated a note for certain ground
equipment for $2 million as part of an administrative claim
settlement which takes effect upon the confirmation of a plan of
reorganization. The Company is required to make adequate
protection payments of $8,000 per month from the settlement date
until plan confirmation, at which time, the note term is 5 years
with interest at 6%.

(g) The Company's 7-3/4% convertible subordinated debentures are
convertible into common stock at $13.50 per share. The
debentures are redeemable at prices ranging from 101.55% of the
principal amount at December 31, 1993 to 100% of the principal
amount in 1995 and thereafter. Annual sinking fund payments of
$1.5 million are required beginning in 1995.

(h) The Company's 7-1/2% convertible subordinated debentures are
convertible into common stock at $14.00 per share. The
debentures are redeemable at prices ranging from 102.25% of the
principal amount at December 31, 1993 to 100% of the principal
amount in 1996 and thereafter. Annual sinking fund payments of
$1.6 million are required beginning in 1996.

(Continued)
F-26

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(i) The Company's 11-1/2% convertible subordinated debentures are
convertible into common stock at $10.50 per share. The
debentures are redeemable at prices ranging from 105.75% of the
principal amount from January 1, 1994 to 100% of the principal
amount in 1999 and thereafter. Annual sinking fund payments of
$5.8 million are required beginning in 1999.

During 1991, certain bondholders converted $22.1 million of the
11-1/2% convertible subordinated debentures into common stock.
The conversion of the 11-1/2% subordinated debentures resulted in
a charge to other non-operating expense of $875,000 for
incremental shares issued upon conversion. Certain bondholders
converted $1.4 million of the 7-1/2% convertible subordinated
debentures and $4.4 million of the 7-3/4% convertible
subordinated debentures into common stock.

During 1992, certain bondholders converted $95,000 of the 7-1/2%
convertible subordinated debentures, $100,000 of the 7-3/4%
convertible subordinated debentures and $3.5 million of the
11-1/2% convertible subordinated debentures into common stock.

During 1993, certain bondholders converted $360,000 of the 7-1/2%
convertible subordinated debentures, $275,000 of the 7-3/4%
convertible subordinated debentures and $1.3 million of the
11-1/2% convertible subordinated debentures into common stock.

All of the convertible subordinated debenture interests will be
subject to settlement of their stated amounts in a plan of
reorganization, thereby eliminating the need for continued
deferral of the debt issuance costs. Therefore, the unamortized
debt issuance costs of $2.8 million for these convertible
subordinated debentures were charged to operations as
reorganization expense in 1991. The Company ceased accruing
interest on all of these debentures as of June 27, 1991 in
accordance with SOP 90-7.

(j) This note from an aircraft manufacturer for deferred pre-delivery
payments was required under a purchase agreement entered into in
1990. The deferred pre-delivery payments will accrue interest at
one year LIBOR plus 4% with both principal and interest due upon
delivery of the aircraft. The Company has ceased accruing
interest on the outstanding balance in accordance with SOP 90-7.
The acquisition of the aircraft associated with these deferred
pre-delivery payments is subject to the affirmation or rejection
of the respective aircraft purchase agreement by the Company in
the reorganization proceeding.

(Continued)
F-27

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(k) The Company has a $20 million secured revolving credit facility
with a group of financial institutions that expired on April 17,
1993. Borrowings under this credit facility were either made
i) at the federal funds rate plus 1%, ii) based on a CD rate or
iii) 90-day LIBOR two business days prior to the first day of the
interest period. The borrowings are secured by certain assets.
The Company is obligated to pay a commitment fee equal to 1/4%
per annum on the average daily amount by which the aggregate
commitments exceed the applicable borrowing base and 1/2% per
annum on the average daily amount by which the lower of the
aggregate commitments or applicable borrowing base exceeds the
aggregate principal amount on all outstanding loans. At
December 31, 1993 and 1992, the Company had an outstanding
balance of $9.9 million and $11 million, respectively, under the
revolving credit agreement. Proceeds from sales of assets
securing the loan were used to prepay the loan during 1993. The
Company ceased accruing interest on the outstanding balance as of
June 27, 1991 in accordance with SOP 90-7.

(l) The holders of industrial development revenue bonds have the
right to put the bonds back to the Company at various times. If
such a put occurs, the Company has an agreement with the
underwriters to remarket the bonds. Any bonds not remarketed
will be retired utilizing a letter of credit. Any funding under
the letter of credit will be in the form of a two-year term loan
at prime plus 2%. During the first quarter of 1991, the Company
redeemed $14.5 million of the $44 million of industrial develop-
ment revenue bonds issued and outstanding and agreed to a seven-
year amortization schedule for the redemption of the remaining
balance. In July and August 1991, $29.5 million in the aggregate
was drawn against the letter of credit facility that supported
these bonds. The Company intends to remarket the bonds in the
future. Such draws were made on behalf of holders of such bonds
who exercised their right to put the bonds back to the Company
for purchase. The bonds are currently held in trust for the
benefit of the Company. These bonds were issued in connection
with the Company's technical support facility.

(m) These draws on a letter of credit from a financial institution,
secured by spare rotable parts with a net book value of $35.8
million, are payable in quarterly installments of $1.3 million
plus interest at prime plus 4.5%. The Company has ceased
accruing interest as of June 27, 1991 on the outstanding balance
in accordance with SOP 90-7.

Maturities of long-term debt, excluding $225 million included in
estimated liabilities subject to Chapter 11 proceedings, for the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
(in thousands)
<C> <C>

1994 $ 125,271
1995 41,949
1996 44,957
1997 39,544
1998 32,916
Thereafter 236,984

</TABLE>

(Continued)
F-28

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(5) Income Taxes
------------

Adoption of New Accounting Standard
-----------------------------------

As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 is a fundamental change in the manner used to account for
income taxes in that the deferred method has been replaced with an
asset and liability approach. Under SFAS 109, deferred tax assets
(subject to a possible valuation allowance) and liabilities are
recognized for the expected future tax consequences of events that are
reflected in the Company's financial statements or tax returns.

In the year of adoption, SFAS 109 permits an enterprise to record in
its current year financial statements, the cumulative effect (if any)
of the change in accounting principle. Upon adoption, the Company did
not need to record a cumulative effect adjustment.

Income Tax Expense
------------------

For the year ended December 31, 1993, the Company recorded income tax
expense as follows:

<TABLE>
<S> <C>
Current taxes:
Federal $ 675
State 84
-----

$ 759
=====

Deferred taxes $ -
=====
</TABLE>

For the year ended December 31, 1993, income tax expense is solely
attributable to income from continuing operations. The difference in
income taxes at the federal statutory rate ("expected taxes") to those
reflected in the financial statements (the "effective rate") results
from the effect of the benefit of net operating loss carryforwards of
$12.6 million and state income tax expense, net of federal tax
benefit of $55,000, for an effective tax rate of 2%. In 1992 and 1991,
the tax benefits at the federal statutory rate of 34% were offset
by the generation of net operating loss carryforwards.

At December 31, 1993, the Company has available net operating loss,
business tax credit and alternative minimum tax credit carryforwards
for federal income tax purposes of $530.3 million, $12.7 million and
$700,000, respectively. The net operating loss carryforwards expire
during the years 1999 through 2007 while the business credit
carryforwards expire during the years 1997 through 2006. However,
such carryforwards are not fully available to offset federal (and, in
certain circumstances, state) alternative minimum taxable income.
Accordingly, income tax expense recognized for the year ended
December 31, 1993, is attributable to the Company's expected net
current liability for federal and various state alternative minimum
taxes. The alternative minimum tax credit carryforward does not
expire and is available to reduce future income tax payable.

(Continued)
F-29

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

As of December 31, 1993, to the best of the Company's knowledge, it
has not undergone a statutory "ownership change" (as defined in Section
382 of the Internal Revenue Code) that would result in any material
limitation of the Company's ability to use its net operating loss and
business tax credit carryforwards in future tax years. Should an
"ownership change" occur prior to confirmation of a plan of reor-
ganization, the Company's ability to utilize said carryforwards would
be significantly restricted. Further, the net operating loss and
business tax credit carryforwards may be limited as a result of the
Company's reorganization under the United States Bankruptcy Code.

Composition of Deferred Tax Items
---------------------------------

The Company has not recognized any net deferred tax items for the year
ended December 31, 1993. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of December 31, 1993
are a result of the temporary differences related to the items
described as follows:

<TABLE>
<CAPTION>
Net Deferred Items
------------------
(in thousands)

<S> <C>
Deferred income tax liabilities:
Property and equipment, principally
depreciation differences $(105,242)
---------

Deferred income tax assets:
Aircraft leases 20,594
Frequent flyer accrual 3,721
Reorganization expenses 16,527
Net operating loss carryforwards 212,124
Tax credit carryforwards 12,706
Other 5,986
---------
Total deferred income tax assets 271,658

Valuation allowance (166,416)
---------

Net deferred items $ -
=========
</TABLE>

SFAS 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. Given the
Company's history of losses for income tax purposes, the volatility of
the industry within which the Company operates and certain other
factors, the Company has established a valuation allowance for the
portion of its net operating loss carryforwards that may not be
available due to expirations after considering the net reversals of
future taxable and deductible differences occurring in the same
periods. In this context, the Company has taken into account prudent
and feasible tax planning strategies. After application of the
valuation allowance, the Company's net deferred tax assets and
liabilities are zero.

(Continued)
F-30

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(6) Employee Stock Purchase Plans and Other Employee Benefit Programs
-----------------------------------------------------------------

The Company has a stock purchase plan covering its directors, officers
and employees and certain other persons providing service to the
Company, as well as a separate plan covering its California resident
employees. At December 31, 1993, the number of shares authorized
under the plans is 10,450,000. Each participating employee is
required to purchase a number of shares having an aggregate purchase
price equivalent to 20% of such employee's annual base wage or salary
on the date of purchase. Each participating employee has the option
of simultaneously purchasing additional shares having an aggregate
purchase price not exceeding 20% of such wage or salary. California
resident employees electing to participate in the plan may purchase a
number of shares having an aggregate purchase price not exceeding 40%
of their annual base wage or salary on the date of purchase at a
specified price.

Participating employees can elect to finance their purchase through
the Company for up to 20% of their annual base wage or salary over a
five-year period at an interest rate of 9.5%. Employee notes
receivable of $17.6 million existed at December 31, 1993 and were
classified in the stockholders' deficiency section. Shares issued
under the plans cannot be sold, transferred, assigned, pledged or
encumbered in any way for a period of two years from the date such
shares are paid for and delivered to participating employees. The
employees' purchase price is 85% of the market price on the date of
purchase. The difference between the employees' purchase price and
the market price is recorded as deferred compensation and is amortized
over five years.

The plans provide for the purchase of additional shares of common
stock up to 10% of the employee's annual base wage during the first
year of employment and 20% of the employee's annual base wage during
each subsequent calendar year. Such purchases may be financed through
the Company at the same terms as indicated above, as long as total
outstanding amounts previously financed do not exceed 10% of the
employee's annual base compensation.

Effective August 1, 1991, the Company suspended the mandatory portion
of the Employee Stock Purchase Plan for 60 days. Subsequent to the
expiration of the 60-day period, the Company indefinitely suspended
the Employee Stock Purchase Plan. The Company also suspended payroll
deductions related to the Employee Stock Purchase Plan as a result of
a 10% across the board reduction in wages which commenced August 1,
1991 for all employees whose wages had not been previously reduced.
The unpaid employee stock purchase notes continue to accrue interest.
The Company anticipates that the reorganization process will result in
the restructuring, cancellation and/or replacement of the interests of
its existing common and preferred stockholders.

(Continued)
F-31

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

The Bankruptcy process has caused the suspension of the Company's
profit sharing plan which covers all personnel. The plan provided
for the distribution of 15% of annual pre-tax profits to employees
based on each individual's base wage. The Company made no
distributions under the plan in 1993, 1992 or 1991.

The Company implemented a 401(k) defined contribution plan on
January 1, 1989, covering essentially all employees of the Company.
Participants may contribute from 1% to 10% of their pre-tax earnings
to a maximum of $8,994. The Company will match 25% of a participant's
contributions up to 6% of the participant's annual pre-tax earnings.
The Company's contribution expense to the plan totaled $2.1 million,
$2 million and $4.9 million in 1993, 1992 and 1991, respectively.

The Company provides no post-retirement benefits to its former
employees other than the continuation of flight benefits on a stand-
by, non-revenue basis; the cost of which is not material.
Additionally, no material post-employment benefits are provided.

(7) Convertible Preferred Stock
---------------------------

Annual dividends of $5.41 per share are payable quarterly on the
291,149 shares of voting Series B 10.5% convertible preferred stock.
Each preferred share is entitled to four votes and may be converted
into four shares of common stock subject to certain anti-dilution
provisions. The preferred shares are redeemable at the Company's
election, if the price of common stock is at least $19.32 per share,
at $51.52 per share plus unpaid accrued dividends plus a redemption
premium starting at 3% during 1991 and decreasing 1% per year to zero
during and after 1994. During 1993, the Series B convertible
preferred stock was converted into 1,164,596 shares of common stock.

Annual dividends of $1.33 per share are payable quarterly on the
73,099 shares of voting Series C 9.75% convertible preferred stock.
Such shares may be converted into an equal number of shares of common
stock subject to certain anti-dilution provisions. The preferred
shares are redeemable at the Company's election at $13.68 per share
plus unpaid accrued dividends plus a redemption premium starting at
4% during 1991 and decreasing 1% per year to zero during and after
1995.

Under Delaware law, the Company is precluded from paying dividends on
its outstanding preferred stock until such time as the Company's
stockholder deficiency has been eliminated.

At December 31, 1993, the Company was delinquent in the payment of
its sixth consecutive dividends on the Preferred Stock. See note 1
for a discussion of the potential effects of the Company's
reorganization upon preferred stock.

(Continued)
F-32

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(8) Common Stock
------------

Certain "Rights" have been distributed to certain shareholders of
record on August 25, 1986. The Rights, which entitle the holder to
purchase one one-hundredth (1/100th) of a share of Series D
Participating Preferred Stock at a price of $200, are not exercisable
unless certain conditions relating to a possible attempt to acquire
the Company are met. In the event of an acquisition or merger, the
Rights will entitle the holder of a Right to purchase that number of
common shares of the acquiring or surviving entity having twice the
market value of the exercise price of each Right. The Rights expire
on August 24, 1996 and are redeemable at a price of $.03 per Right
under certain conditions.

The Board of Directors has authorized the purchase of up to 700,000
shares of the Company's common stock from time to time in open market
transactions. The Company has purchased and retired 348,410 shares as
of December 31, 1993 at an average per share price of $8.31.

(9) Stock Options and Warrants
--------------------------

The Company has an Incentive Stock Option Plan and has reserved
13,225,000 shares of common stock for issuance upon the exercise of
stock options granted under the plan. Of the total shares reserved,
10,350,000 shares are restricted for issuance to employees other than
certain management employees. Options are granted at fair market
value on the date of grant and generally become exercisable over a
five-year period, and ultimately lapse if unexercised at the end of
ten years.

Activity under the Incentive Stock Option Plan is as follows:

<TABLE>
<CAPTION>
Incentive Stock Option Plan
----------------------------------------
Number of Options
----------------------
Key Other Option Price
Management Employees Per Share
---------- --------- ------------
<S> <C> <C> <C>

Outstanding January 1, 1991 1,721,326 5,215,028 $2.50 - $13.06
Granted 52,000 2,434,880 $0.94 - $ 7.50
Canceled (254,025) (535,116) $1.38 - $12.81
Exercised (8,981) (1,860) $2.50 - $ 9.13
--------- --------- --------------
Outstanding December 31, 1991 1,510,320 7,112,932 $0.94 - $13.06
Granted - 414,060 $1.13 - $ 2.63
Canceled (183,700) (791,199) $0.27 - $13.06
--------- --------- --------------
Outstanding December 31, 1992 1,326,620 6,735,793 $0.94 - $13.06
Canceled (284,990) (1,005,192) $0.94 - $12.81
--------- ---------- --------------
Outstanding December 31, 1993 1,041,630 5,730,601 $0.94 - $13.06
========= ========== ==============

</TABLE>

(Continued)
F-33

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

At December 31, 1993, options to purchase 3,731,608 shares were
exercisable at prices ranging from $0.94 to $13.06 per share under the
Incentive Stock Option Plan. Effective March 13, 1992, additional grants
under the Plan were suspended.

The Company has a Nonstatutory Stock Option Plan under which options
to purchase 3,785,880 shares of common stock at prices ranging from
$5.06 to $10.25 per share (fair market value on date of grant) have
been granted, of which 1,961,410 stock options are outstanding as of
December 31, 1993. During 1991, 40,000 options were granted at $6.00
per share. During 1993, 1992 and 1991, no options were exercised. At
December 31, 1993, all options were exercisable. Options expire 10
years from date of grant.

The Company had granted warrants and options to purchase 227,500
shares of common stock to members of the Board of Directors who are
not employees of the Company. At December 31, 1993, 110,000 options
are outstanding and exercisable through February 4, 1996 at prices of
$6.00 to $9.00 per share (fair market value at date of grant). No
warrants or options were granted or exercised during 1993, 1992 or
1991.

The Company has adopted a Restricted Stock Plan and has reserved
250,000 shares of common stock for issuance at no cost to key
employees. Grants that are issued will vest over a three to five-year
period. As of December 31, 1993, the Company granted 93,870 shares
and the related unamortized deferred compensation was $5,320. In
1991, the operation of the Restricted Stock Plan was suspended due to
the Company's reorganization.

(10) Supplemental Information to Statements of Cash Flows
----------------------------------------------------

Cash paid for interest, net of amounts capitalized, during the years
ended December 31, 1993, 1992 and 1991 was approximately $44 million,
$46 million and $33 million, respectively.

Cash paid for income taxes during the year ended December 31, 1993 was
$537,000.

Cash flows from reorganization items in connection with the Chapter 11
proceedings during the years ended December 31, 1993, 1992 and 1991
were as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in thousands)
<S> <C> <C> <C>

Interest received on cash accumulations $ 2,635 $ 2,030 $ 1,365
Professional fees paid for services
rendered (7,372) (11,346) (6,913)
D.I.P. financing issuance costs paid (1,378) (1,760) (2,660)

</TABLE>

(Continued)
F-34

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

In addition, during the years ended December 31, 1993, 1992 and 1991,
the Company had the following non-cash financing and investing
activities:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in thousands)

<S> <C> <C> <C>
Conversion of long-term debt to
common stock $ 1,938 $ 3,685 $ 27,898
======= ======= ========

Draws taken by third parties on letters
of credit $ - $11,201 $ 42,415
======= ======= ========

Equipment acquired through capital
leases $ 709 $ 437 $ 10,028
======= ======= ========

Notes payable issued to equipment
seller $ 818 $22,804 $106,510
======= ======= ========

Notes payable issued for administrative
claim settlements $11,597 $ - $ -
======= ======= ========

Preferred stock dividends declared
but unpaid $ - $ 1,672 $ 1,250
======= ======= ========

Accrued interest reclassified to
long-term debt $15,137 $16,443 $ 19,311
======= ======= ========
</TABLE>

(11) Commitments and Contingencies
-----------------------------

(a) Leases
------

During 1991, the Company restructured its lease commitment for
Airbus A320 aircraft with the lessors. As a result of the
restructuring, the Company's obligation to lease ten A320
aircraft was canceled and the basic rental rate for twelve
aircraft was revised to provide for the repayment to the lessor
over a ten-year period of certain advanced credits received by
the Company which relate to the ten canceled aircraft.

(Continued)
F-35

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

In the third quarter of 1991, the Company requested a deferral of
rent and other periodic payments from its aircraft providers.
The deferral was requested in an effort to conserve cash and
improve the Company's liquidity position. As a condition of
securing the $78 million D.I.P. financing, the Company was
required to obtain from most aircraft providers rent, principal
and interest payment deferrals in excess of $100 million covering
the six-month period of June through November 1991. These
deferrals will generally be repaid with interest at 10.5% over
the remaining term of the lease or secured borrowing with
repayment commencing December 1991. At December 31, 1993 and
1992, the remaining unpaid deferrals are reported as follows:

<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(in thousands)
<S> <C> <C>

Accounts payable $ 7,567 $20,672
Other liabilities 31,425 28,196
Long-term debt 18,671 20,769
------- -------
$57,663 $69,637
======= =======
</TABLE>

In the third quarter of 1992, the Company requested an additional
deferral of rent and other periodic payments from its aircraft
providers. The deferral was requested to assure sufficient
liquidity to sustain operations while additional debtor-in-
possession financing was obtained (note 4). The 1992 deferrals
will generally be repaid either without interest during the first
quarter of 1993 or with interest over a period of seven years.
At December 31, 1993 and 1992, the remaining unpaid deferrals are
reported as follows:

<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(in thousands)

<S> <C> <C>
Accounts payable $ 9,650 $17,528
Long-term debt 21,539 25,346
------- -------

$31,189 $42,874
======= =======

</TABLE>

(Continued)
F-36

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

As of December 31, 1993, the Company had 66 aircraft under
operating leases with remaining terms ranging from four months to
20 years. The Company has options to purchase most of the
aircraft at fair market value at the end of the lease term.
Certain of the agreements require security deposits and
maintenance reserve payments. The Company also leases certain
terminal space, ground facilities and computer and other
equipment under noncancelable operating leases.

Future minimum rental payments for years ending December 31 under
noncancelable operating leases with initial terms of more than
one year are as follows:

<TABLE>
<CAPTION>
(in thousands)

<C> <C>
1994 $ 191,606
1995 182,236
1996 179,110
1997 169,797
1998 160,759
Thereafter 1,333,187
----------
$2,216,695
==========
</TABLE>

Collectively, the operating lease agreements require security de-
posits with lessors of $8.1 million and bank letters of credit of
$17.7 million. The letters of credit are collateralized by
certain spare rotable parts with a net book value of $35.8
million and $17.6 million in restricted cash.

Rent expense (excluding landing fees) was approximately $245
million in 1993, $307 million in 1992 and $319 million in 1991.

(b) Revenue Bonds
-------------

Special facility revenue bonds have been issued by a municipality
used for leasehold improvements at the airport which have been
leased by the Company. Under the operating lease agreements,
which commenced in 1990, the Company is required to make rental
payments sufficient to pay principal and interest when due on the
bonds. The Company ceased rental payments in June 1991. The
principal amount of such bonds outstanding at December 31, 1992
and 1991 was $40.7 million. In October 1993, the Company and the
bondholder agreed to reduce the outstanding balance of the bonds
to $22.5 million and adjust the related operating lease
payments sufficient to pay principal and interest on the
reduced amount effective upon the confirmation of a plan of
reorganization. The remaining principal balance of $18.2 million
will be accorded the same treatment under the plan of
reorganization as a pre-petition unsecured claim. The Company
also agreed to make adequate protection payments in the amount of
$150,000 per month from August 1993 to plan confirmation.

(Continued)
F-37

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

At December 31, 1993, the Company had on order a total of 93
aircraft of the types currently comprising the Company's fleet,
of which 51 are firm and 42 are options. The table below details
such deliveries.

<TABLE>
<CAPTION>
Firm Orders
------------------------------------
Option
1994 1995 1996 1997 Thereafter Total Orders Total
---- ---- ---- ---- ---------- ----- ------ -----

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boeing: 737-300 - - 4 2 - 6 10 16

757-200 - 4 3 - - 7 10 17

Airbus: A320-200 9 5 2 8 14 38 22 60
- - - -- -- -- -- --

Total: 9 9 9 10 14 51 42 93
= = = == == == == ==
</TABLE>

The current estimated aggregate cost for these firm commitments
and options is approximately $5.2 billion. Future aircraft
deliveries are planned in some instances for incremental
additions to the Company's existing aircraft fleet and in other
instances as replacements for aircraft with lease terminations
occurring during this period. The purchase agreements to acquire
24 Boeing 737-300 aircraft had been affirmed in the Company's
bankruptcy proceeding. With timely notice to the manufacturer,
all or some of these deliveries may be converted to Boeing
737-400 aircraft. At December 31, 1993, eight Boeing 737
delivery positions had been eliminated due to the lack of a
required reconfirmation notice by the Company to Boeing leaving
16 delivery positions as reflected above. The failure to
reconfirm such delivery positions exposes the Company to loss of
pre-delivery deposits and other claims which may be asserted by
Boeing in the bankruptcy proceeding. The purchase agreements for
the remaining aircraft types have not been assumed, and the
Company has not yet determined which of the other aircraft pur-
chase agreements, if any, will be affirmed or rejected.

As part of the $68.4 million term loan (see note 4(a)), the
Company terminated an agreement to lease 24 Airbus A320 aircraft
and ultimately replaced it with a put agreement to lease up to
four such aircraft. The lessor is under no obligation to lease
such aircraft to the Company and has the right to remarket these
aircraft to other parties. Prior to its bankruptcy filing, the
Company also entered into a similar arrangement with another
lessor, whereby the Company terminated its agreement to lease 10
Airbus A320 aircraft and replaced it with a put agreement to
lease up to 10 Airbus A320 aircraft.

The put agreement related to the term loan requires the lessor to
notify the Company prior to July 1, 1994 if it intends to
require the Company to lease any of its put aircraft. The other
put agreement requires 180 days prior notice of the delivery of a
put aircraft. The agreement also provides that the lessor may
not put more than five aircraft to the Company in any one
calendar year. This put right expires on December 31, 1996. No
more than nine put aircraft (from both lessors combined) may be
put to the Company in one calendar year. The put aircraft are
reflected in the "Firm Orders" section of the table above.

(Continued)
F-38

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

The Investment Agreement provides that as partial consideration
for the cancellation of certain put rights, the lessor will
receive the right to require the Company to lease up to eight
aircraft prior to June 30, 1999.

The Company does not have firm lease or debt financing
commitments with respect to the future scheduled aircraft
deliveries (other than for the put aircraft referred to above).

In addition to the aircraft set forth in the chart above, the
Company also has a pre-petition executory contract under which
the Company holds delivery positions for four Boeing 747-400
aircraft under firm orders and another four under options. The
contract allows the Company, with the giving of adequate notice,
to substitute other Boeing aircraft types for the Boeing 747-400
in these delivery positions. As a result, the Company is still
evaluating its future fleet needs and is currently unable to
determine if it will substitute other aircraft types or reject
this agreement.

(d) Concentration of Credit Risk
----------------------------

The Company does not believe it is subject to any significant
concentration of credit risk. At December 31, 1993,
approximately 82% of the Company's receivables related to tickets
sold to individual passengers through the use of major credit
cards or to tickets sold by other airlines and used by passengers
on America West. These receivables are short-term,
generally being settled shortly after sale or in the month
following usage. Bad debt losses, which have been minimal in the
past, have been considered in establishing allowances for
doubtful accounts.

(12) Related Party Transactions
--------------------------

During 1989, the Company sold 486,219 shares of common stock at $6.31
and $9.79 to the stockholder that purchased 3,029,235 shares of common
stock at $10.50 in 1987 and $1 million of the Series C preferred stock
in 1985. This stockholder has the right to maintain a 20% voting
interest through the purchase of common stock from the Company at a
price per share which is the average market price per share for the
preceding six months. In 1990, the stockholder made direct purchases
on the open market to maintain its 20% voting interest. On
February 15, 1991, the stockholder purchased 253,422 shares of common
stock from the Company at $5.50 per share. No such purchases
occurred in 1993 or 1992.

The Company has entered into various aircraft acquisition and leasing
agreements with this stockholder at terms comparable to those obtained
from third parties for similar transactions. The Company leases 11
aircraft from this stockholder and the rental payments for such leases
amounted to $33.7 million in 1993, $33.8 million in 1992 and $18.1
million in 1991. At December 31, 1993, the Company was obligated to
pay $232 million under these leases through August 2003 unless
terminated earlier at the stockholder's option. In 1991, the
stockholder drew upon a $7.5 million letter of credit which had been
issued in its favor in lieu of a cash reserve for periodic heavy
maintenance overhauls. This cash deposit is included in other assets
at December 31, 1993 and 1992.

(Continued)
F-39

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

In addition, the stockholder participated as a lender in the
September 1992 D.I.P. Facility and advanced $10 million of the $53
million in total D.I.P. financing. In September 1993, the stockholder
was repaid the then outstanding balance of $8.3 million as a result of
not participating in the extension of the maturity date of the debt
financing.

In order to assist the Chairman of the Board with certain costs
associated with his service as chairman, the Company pays an office
overhead allowance of $4,167 per month to a company owned by the
chairman. During 1993 and 1992, such payments totaled approximately
$50,000 and $16,000, respectively.

Additionally, a former member of the Board of Directors provided
consulting services to the Company during 1993 and 1992 for which he
received fees of approximately $39,000 and $47,000, respectively.

(13) Restructuring Charges
---------------------

Restructuring charges consist of the following:

<TABLE>
<CAPTION>
1992
----
(in thousands)
<S> <C>
Write-off for certain assets related to station
closures or route restructuring $ 9,529
Provision for spare parts for aircraft types
no longer in service 12,651
Provision for employee severance 2,284
Loss on return of aircraft 6,852
-------

$31,316
=======
</TABLE>

The restructuring charges were necessitated by aircraft fleet
reductions and other operational changes. The Company has reduced its
fleet to 85 aircraft and has reduced the number of aircraft types in
the fleet from five to three.

(Continued)
F-40

AMERICA WEST AIRLINES, INC., D.I.P.

Notes to Financial Statements

(14) Quarterly Financial Data (Unaudited)
------------------------------------

Summarized quarterly financial data for 1993 and 1992 are as follows
(in thousands of dollars except per share amounts):

<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total operating revenues:
1993 $316,605 $324,910 $335,113 $348,736
1992 $337,050 $333,511 $321,590 $301,989
Operating income (loss):
1993 $ 17,168 $ 25,179 $ 32,981 $ 45,726
1992 (a) $ (7,974) $(15,979) $(48,534) $ (2,325)
Nonoperating expense, net
1993 $(14,990) $(14,710) $(18,285) $(35,145)
1992 (b) $ (2,010) $(17,390) $(22,230) $(15,319)
Income tax expense
1993 $ (44) $ (209) $ (293) $ (213)
1992 $ - $ - $ - $ -
Net income (loss)
1993 $ 2,134 $ 10,260 $ 14,403 $ 10,368
1992 $ (9,984) $(33,369) $(70,764) $(17,644)
Earnings (loss) per share
1993:
Primary $ .09 $ .41 $ .56 $ .40
Fully diluted $ .09 $ .28 $ .38 $ .28
1992:
Primary $ (0.44) $ (1.41) $ (2.97) $ (0.75)

</TABLE>

(a) During the third quarter of 1992, restructuring charges for
employee separation costs, losses related to returning aircraft
to lessors, write-off of assets related to the restructuring and
a loss provision related to spare parts expected to be sold
amounting to $31.3 million was recorded.

(b) During the first quarter of 1992, a gain of $15 million was
recorded for the transfer of the Honolulu/Nagoya route to another
carrier.

F-41

Item 9 Changes in and Disagreements with Accountants on Accounting and
------ ---------------------------------------------------------------
Financial Disclosure.
--------------------

During the last two fiscal years, the Company has not filed a Form 8-K
to report a change in accountants because of a disagreement over accounting
principles or procedures, financial statement disclosure, or otherwise.

PART III

Item 10. Directors and Executive Officers of the Registrant.
------- --------------------------------------------------

Information respecting the names, ages, terms, positions with the
Company and business experience of the executive officers and the directors
of the Company as of February 28, 1994, is set forth below. Each director
has served continuously with the Company since his first election.

Director Term
Name Age Position Since Expires (3)
---- --- -------- -------- -----------

<S> <C> <C> <C> <C>
William A. Franke 57 Chairman of the 1992 1994
Board And Chief
Executive Officer

A. Maurice Myers 53 President, Chief 1994 1994
Operating Officer
and Director

Thomas P. Burns 52 Senior Vice N/A N/A
President-Sales and
Marketing Programs

Alphonse E. Frei 55 Senior Vice N/A N/A
President-Finance;
Chief Financial
Officer

Martin J. Whalen 53 Senior Vice N/A N/A
President-
Administration and
General Counsel
Frederick W. Bradley,
Jr.(1)(2) 67 Director 1992 1992

O. Mark
De Michele(2) 60 Director 1986 1993

Samuel L.
Eichenfield(2) 57 Director 1992 1992

Richard C.
Kraemer(1) 49 Director 1992 1993

James T.
McMillan(1)(2) 68 Director 1993 1993

John R. Norton
III(1) 64 Director 1992 1992

John Tierney(1) 48 Director 1993 1993

Declan Treacy(2) 37 Director 1993 1994

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

(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) The Company has not held a meeting of its stockholders in since May
1991 to elect directors. Accordingly, each director, including
those directors with terms expiring in 1992, 1993 and 1994, shall
serve until either their resignation or the later of (i) his term
expiration or (ii) such time as his successor is duly elected and
qualified.

</TABLE>

William A. Franke was named Chairman of the Board of Directors in
-----------------
September 1992. On December 31, 1993, Mr. Franke was elected to also serve
as the Company's Chief Executive Officer. In addition to his
responsibilities at America West, Mr. Franke serves as president of the
financial services firm, Franke & Co., a company he has owned since May
1987. From November 1989 until June 1990, Mr. Franke served as the
Chairman of Circle K Corporation's executive committee with the
responsibility for Circle K Corporations's restructure. In May 1990, the
Circle K Corporation filed a voluntary petition to reorganize under Chapter
11 of the Bankruptcy Code. From June 1990 until August 1993, Mr. Franke
served as the chairman of a special committee of directors overseeing the
reorganization of the Circle K Corporation. Mr. Franke has also served in
various other capacities at Circle K Corporation since 1990. Mr. Franke
was also involved in the restructuring of the Valley National Bank of
Arizona (now Bank One Arizona). Mr. Franke also serves as a director of
Phelps Dodge Corp. and Central Newspapers Inc.

A. Maurice Myers was named president and chief operating officer on
----------------
December 31, 1993 and was named to the Board of Director in 1994. Prior to
joining America West, Mr. Myers was the president and chief executive
officer of Aloha Airgroup, Inc. an aviation services corporation which owns
and operates Aloha Airlines and Aloha IslandAir. Mr. Myers joined Aloha in
1983 as vice president of marketing and became its president and chief
executive officer in June 1985. Mr. Myers is a member of the boards of
directors of Air Transport Association of America and Hawaiian Electric
Industries.

Thomas P. Burns has served as Senior Vice President-Sales and Marketing
---------------
since August 1987. Mr. Burns joined the Company in April 1985 as Vice
President-Sales. Mr. Burns was employed for 25 years by Continental
Airlines in various sales and passenger service positions. From 1982 to
1983, he was employed as North American Manager of Sales for UTA, a French
airline. Mr. Burns returned to Continental from 1983 through March 1985,
where he served as Director of International Sales prior to joining the
Company.

Alphonse E. Frei has been Senior Vice President-Finance and Chief
----------------
Financial Officer since April 1985. He joined the Company in April 1983 as
Vice President-Controller. Prior to that time he had 23 years of experience
at Continental Airlines where he held a variety of management positions in
finance and data processing. Mr. Frei served as a member of the Company's
Board of Directors from 1986 to 1992. Mr. Frei is also a member of the
board of directors of Swift Transportation Co., Inc.

Martin J. Whalen has been Senior Vice President-Administration and
----------------
General Counsel of the Company since July 1986. From 1980 until July 1986,
Mr. Whalen was employed by McDonnell Douglas Helicopter Company and its
predecessors, most recently as Vice President of Administration. He also
held positions in labor relations, personnel and legal affairs at Hughes
Airwest and Eastern Airlines.

Frederick W. Bradley, Jr. has served as a member of the Board of
-------------------------
Directors since September 1992. Immediately prior to joining the Board of
Directors, Mr. Bradley was a senior advisor with Simat, Helliesen &
Eichner, Inc. Mr. Bradley formerly served as senior vice president of
Citibank/Citicorp's Global Airline and Aerospace business. Mr. Bradley
joined Citibank/Citicorp in 1958. In addition, Mr. Bradley serves as a
member of the board of directors of Shuttle, Inc. (USAir Shuttle) and the
Institute of Air Transport, Paris, France. Mr. Bradley also serves as
chairman of the board of directors of Aircraft Lease Portfolio

Securitization 92-1 Ltd. and as President of IATA's International Airline
Training Fund of the United States.

O. Mark De Michele has served as a member of the Board of Directors
------------------
since 1986 and is president, chief executive officer and a director of
Arizona Public Service Company. Mr. De Michele joined Arizona Public
Service Company in 1978 as vice president of corporate relations, and also
served as its chief operating officer and an executive vice president. Mr.
De Michele is also a member of the board of directors of the Pinnacle West
Capital Corporation.

Samuel L. Eichenfield has served as a member of the Board of Directors
---------------------
since September 1992 and is chairman of the board of directors and chief
executive officer of GFC Financial Corporation. Mr. Eichenfield has also
served as chief executive officer of Greyhound Financial Corporation, a
subsidiary of GFC Financial Corporation, since joining GFC in 1987.

Richard C. Kraemer has served as a member of the Board of Directors
------------------
since September 1992 and is president and chief operating officer of UDC
Homes, Inc. Mr. Kraemer is also a member of the UDC Homes, Inc. board of
directors. Prior to joining UDC Homes, Inc. in 1975, Mr. Kraemer held a
variety of positions at American Cyanamid Company.

James T. McMillan has served as a member of the Board of Directors since
-----------------
December 1993. Mr. McMillan joined McDonnell Douglas Finance Corporation
as its president in 1968 and retired as its chairman of the board in 1991.
Mr. McMillan also served in various capacities for the McDonnell Douglas
Corporation from August 1954 until August 1990, most recently as a Senior
Vice President and Group Executive.

John R. Norton III has served as a member of the Board of Directors
------------------
since September 1992 and was former Deputy Secretary of the United States
Department of Agriculture from 1985 to 1986. Mr. Norton is currently a
principal of J.R. Norton Company, an agricultural and real estate. Mr.
Norton is also a member of the board of directors of Aztar Corp., Pinnacle
West Capital Corporation, Arizona Public Service Company and Terra
Industries, Inc.

John F. Tierney has served as a member of the Board of Directors since
---------------
December 1993. Mr. Tierney is the Assistant Chief Executive and Finance
Director of GPA Group plc, an Irish aircraft leasing concern, and has
served GPA Group plc in various such capacity since 1981. See Certain
Relationships and Related Transactions.

Declan Treacy has served as a member of the Board of Directors since
-------------
December 1993. Mr. Tierney is the General Manager - Corporate Finance of
GPA Group plc, an Irish aircraft leasing concern, and has served GPA Group
plc in various such capacity since 1988. See Certain Relationships and
Related Transactions.

In February 1993, the Company and its debtor-in -possession lenders
amended the terms of D.I.P. financing and in connection therewith the
Company and certain of such lenders entered into an Amended and Restated
Management Letter Agreement pursuant to which such lenders shall have a
right to approve the membership of the Company's Board of Directors. Under
the terms of such letter agreement GPA has the right to appoint two members
to the Board of Directors, the remaining D.I.P. lenders (except Kawasaki)
have the right to appoint five members to the Board of Directors, one
member of the Board must be a member of America West management and two
members must be independent.

The Compensation Committee of the Board of Directors, which met ten
times during 1993 reviews all aspects of compensation of executive officers
of the Company and makes recommendations on such matters to the full Board
of Directors. In addition, the Compensation Committee reviews and approves
all compensation and employee benefit plans, the Company's organizational
structure and plans for the development of successors to corporate officers
and other key members of management.

The Audit Committee, which met nine times during 1993, makes
recommendations to the Board concerning the selection of outside auditors,
reviews the financial statements of the Company and considers such other
matters in relation to the internal and external audit of the financial
affairs of the Company as may be necessary or appropriate in order to
facilitate accurate and timely financial reporting. The Company does not
maintain a standing nominating committee or other committee performing
similar functions.

During the fiscal year ended December 31, 1993, the Board of Directors
of the Company met on twenty-nine occasions. During the period in which he
served as director, each of the directors attended 75 percent or more of
the meetings of the Board of Directors and of the meetings held by
committees of the Board on which he served.

Item 11. Executive Compensation.
------- ----------------------

The table below sets forth information concerning the annual and long-
term compensation for services in all capacities to the corporation for the
fiscal years ended December 31, 1993, 1992 and 1991, of those persons who
were, at December 31, 1993 (i) the chief executive officer and (ii) the
other four most highly compensated executive officers of the Corporation
(the "Named Officers"):

<TABLE>
SUMMARY COMPENSATION TABLE

<CAPTION>
Annual Compensation
--------------------

Other All
Annual Other
Compen- Compen-
Name and Principal Position Year Salary sation(2) sation(3)
--------------------------- ---- -------- --------- ---------

<S> <C> <C> <C> <C>
William A. Franke(1) 1993 $450,000 -0- -0-
Chairman of the Board and Chief 1992 $131,250 -0- -0-
Executive Officer 1991 N/A N/A N/A

Thomas P. Burns 1993 $123,200 $4,004 $2,182
Senior Vice President-Sales and 1992 $123,200 -0- $2,182
Marketing 1991 $125,767 -0- N/A

Alphonse E. Frei 1993 $156,800 $5,096 $2,182
Senior Vice President-Finance and 1992 $156,800 -0- $2,182
Chief Financial Officer 1991 $160,067 -0- N/A

Don Monteath(4) 1993 $156,800 $5,096 $2,182
Senior Vice President- 1992 $156,800 -0- $2,182
Operations 1991 $160,067 -0- N/A

Martin J. Whalen 1993 $134,000 $4,368 $2,016
Senior Vice President- 1992 $134,000 -0- $2,016
Administration and General Counsel 1991 $137,200 -0- N/A

Michael J. Conway(5) 1993 $432,000 $8,250 $2,182
Former Chief Executive Officer and 1992 $432,000 -0- $2,182
President 1991 $444,000 -0- N/A

----------------
(1) Mr. Franke was elected Chairman of the Board on September 17, 1992
and was elected Chief Executive Officer on December 31, 1993.

(2) Represents amount paid pursuant to the Company's transition pay
program.

(3) Consists of Company contributions to the Company's 401(k) Plan on
behalf of the Named Officer.

(4) Mr. Monteath resigned as Senior Vice President-Operations in
February 1994.

(5) Mr. Conway was replaced as the President and Chief Executive
Officer on December 31, 1993.

</TABLE>

Option Plan Information
-----------------------

During the fiscal year ended December 31, 1993, none of the Named
Officers exercised any options. All options held by the Named Officers
have exercise prices greater than the fair market value of the Common Stock
on December 31, 1993.

The following table sets forth information with respect to the Company's
Restated Nonstatutory Stock Option Plan ("NSOP") and Incentive Stock Option
Plan ("ISO") as of the fiscal year ended December 31, 1993 with respect to
the Named Officers.

<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND
OPTION/SAR VALUE AS OF DECEMBER 31, 1993

<CAPTION>
Number of Unexercised
Options at Fiscal Year End
---------------------------
Name Plan Exercisable Unexercisable
---- ---- ----------- -------------

<S> <C> <C> <C>
William A. Franke NSOP -0- -0-
ISO -0- -0-

Thomas P. Burns NSOP 109,640 -0-
ISO 17,300 -0-

Alphonse E. Frei NSOP 191,560 -0-
ISO 20,000 -0-

Don Monteath NSOP 206,560 -0-
ISO 21,000 -0-

Martin J. Whalen NSOP 143,480 -0-
ISO 12,033 -0-

Michael J. Conway NSOP 717,400 -0-
ISO 28,000 -0-

</TABLE>

Termination of Employment Arrangements
--------------------------------------

The Company has made certain Termination of Employment Arrangements
in keeping with its practice under its July 26, 1991 Termination of
Employment Guidelines, as amended:

In connection with the termination of employment of Mr. Michael J.
Conway as an officer of the Company, the Company agreed to pay Mr.
Conway $503,000 in termination allowances, payable as an initial
severance payment in the amount of $304,200, an additional $163,800
in six monthly installments of $27,300 each, and a $35,000 transition
expense allowance. The Company also agreed to continue the payment
until December 31, 1994, of premiums aggregating about $33,000 on
certain life insurance policies owned by Mr. Conway. The foregoing
payments were in addition to continuation of medical insurance benefits
and certain other fringe benefit arrangements.

In connection with the termination of employment of Mr. Don Monteath
as an officer of the Company, the Company agreed to pay Mr. Monteath a
severance payment of $168,862. This payment was in addition to
continuation of medical insurance benefits and certain other fringe
benefit arrangements.

Director Compensation
---------------------

Each non-employee director at December 31, 1993, is compensated as
follows: an annual retainer of $25,000 plus $1,000 for each Board meeting
attended, $1,000 for each committee meeting attended and reimbursement for
expenses incurred in attending the meetings. Directors are also entitled to
certain air travel benefits.

Other Agreements
----------------

Mr. Franke, Chairman of the Board of Directors, is also the president of
the financial services firm, Franke & Co. In order to assist Mr. Franke
with certain costs associated with his service as Chairman and Chief
Executive Officer, the Company pays Franke & Co. an office overhead
allowance of $4,167 per month.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
------- --------------------------------------------------------------

The following table sets forth information, as of March 15, 1994,
concerning the capital stock beneficially owned by each director of the
Company, by each of the named executive officers, by the directors and
executive officers of the Company as a group, and by each Stockholder known
by the Company to be the beneficial owner of more than five percent of the
Common Stock or Preferred Stock.

Shares
Beneficially Owned(1) Percent of Class(1)
--------------------- -------------------
Name Common Preferred Common Preferred
------------------------- ------ --------- ------ ---------

<S> <C> <C> <C> <C>
William A. Franke -0- *

A. Maurice Myers -0- *

Thomas P. Burns 168,810

Alphonse E. Frei 214,171 *

Don Monteath 227,560 *

Martin J. Whalen 155,571 *

Frederick W. Bradley, Jr. -0- *

Michael J. Conway(2) 826,518 3.2%

O. Mark De Michele 20,200 *

Samuel L. Eichenfield -0- *

Richard C. Kraemer -0- *

James T. McMillan -0- *

John R. Norton, III -0- *

John F. Tierney -0- *

Declan Treacy -0- *

Transpacific Enterprises,
Inc.(3)
Common Stock 3,527,876 12.2%
Series C Preferred Stock 73,099 100%

</TABLE>

<TABLE>
<CAPTION>
Shares
Beneficially Owned(1) Percent of Class(1)
--------------------- -------------------
Name Common Preferred Common Preferred
------------------------- ------ --------- ------ ---------

<S> <C> <C> <C> <C>
Merrill Lynch Asset
Management, Inc.(4)
Debentures 3,604,496 12.5%

Continental Assurance
Company(5)
Debentures 1,428,571 5.3%

Lehman Brothers Inc.(6)
Common Stock 1,463,025 6.0%
Debentures 3,147,172 11.1%

All executive officers and
directors as a group
(17 persons) 1,826,680 6.8%

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

* Less than 1%.

(1) Except where specifically indicated, assumes the conversion of the
Company's 7 3/4% Convertible Subordinated Debentures Due 2010,
7 1/2% Convertible Subordinated Debentures Due 2011 and 11 1/2%
Convertible Subordinated Debentures Due 2009 (collectively the
"Debentures"), and the exercise of all outstanding options and
warrants. As of March 15, 1993, the exercise price of all the
options and warrants held by the officers and directors exceeded
the fair market value of the Common Stock. The following directors
and executive officers of the Company hold exercisable options
and/or warrants to purchase, and Debentures convertible into, the
number of shares of Common Stock set forth in parentheses: Mr.
Burns (126,940), Mr. Frei (211,560), Mr. Monteath (227,560), Mr.
Whalen (155,513), Mr. Conway (745,400) and Mr. De Michele (15,000).
All officers and directors as a group hold Debentures convertible
into and exercisable options and/or warrants to purchase 1,697,992
shares of Common Stock.

(2) Represents America West's estimates. Mr. Conway was replaced as
the Company's President and Chief Executive Officer on December 31,
1993 and resigned as a member of the Board of Directors effective
January 31, 1994.

(3) Address: 110-110th Avenue North East, Suite 509, Bellevue,
Washington 98004. The foregoing are amounts as reported on a
Schedule 13D dated February 15, 1994 filed with the Commission.
Shares beneficially owned, include shares of Common Stock owned by
Transpacific and by its affiliates. Not included in the amount set
forth above are 128,000 shares of Common Stock owned by a
subsidiary of a Transpacific affiliate. The shares of Preferred
Stock held by Transpacific are convertible into an equal number of
shares of Common Stock. Had such Preferred Stock been converted at
March 15, 1994, Transpacific would have held approximately 12.5
percent of the issued and outstanding Common Stock. Pursuant to an
agreement with the Company, Transpacific has a right

to maintain a 20 percent voting interest in the Company. As of
March 15, 1994, Transpacific had a 12.5 percent voting interest
in the Company.

(4) Address: 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
Assumes the conversion of $49.6 million of Debentures into Common
Stock. The foregoing are amounts as reported on a Schedule 13G
dated March 11, 1988, filed with the Commission.

(5) Address: CNA Plaza, Chicago, Illinois 60685. Assumes the
conversion of $15 million of Debentures into Common Stock. The
foregoing are amounts as reported on a Schedule 13G dated
February 14, 1991, filed with the Commission.

(6) Address: 3 World Financial Center, New York, New York 10285. The
foregoing are amounts as reported on a Schedule 13G dated March 9,
1994 (the "Lehman 13G"). The Lehman 13G does not set forth their
specific Debenture and Common Stock holdings set forth herein.
However, the Company has independently verified the Debenture and
Common Stock holdings set forth above as of February 28, 1994. The
Lehman 13G also lists Lehman Brothers Holdings and America Express
Company as having beneficial ownership of the America West
securities disclosed in the Lehman 13G. American Express Company
disclaims such beneficial ownership.

</TABLE>

Item 13. Certain Relationships and Related Transactions.
------- ----------------------------------------------

Transpacific Enterprises, Inc., an affiliate of Ansett Airlines of
Australia ("Ansett Airlines"), holds all the Company's Series C Preferred
Stock and certain shares of Common Stock. Pursuant to the terms of an
agreement between the Company and Transpacific, Transpacific has the right
to maintain a 20 percent voting interest in the Company through the
purchase of Common Stock from the Company. See Item 12. Security Ownership
-------
of Certain Beneficial Owners and Management. The Company presently leases
or subleases a total of eleven Boeing 737 aircraft from Ansett Airlines or
its affiliates for terms expiring at various dates through August 2003
(unless terminated earlier at Ansett's option). All of these leases were
renegotiated in 1992 resulting in reduced rents and extended terms (Ansett
may upon 90 days notice to the Company terminate any lease during the
extension periods). As of December 31, 1993, the Company was obligated to
pay approximately $232 million over the respective terms of these aircraft
leases.

Ansett Worldwide Aviation U.S.A. ("Ansett"), an affiliate of
Transpacific and Ansett, provided the Company with $10 million of the
September 1992 D.I.P. financing. In connection with such loan, Ansett
received the right to designate one member to the Company's Board of
Directors. Ansett was repaid in full in September 1993 and Tibor Sallay,
Ansett's designated director, resigned from the Company's Board of
Directors concurrent with such repayment.

Affiliates of GPA Group, plc ("GPA") have loaned the Company
approximately $70 million of D.I.P. financing. Under the terms of the
D.I.P. financing documents, GPA has the right to designate two members to
the Company's board of directors. John F. Tierney and Declan Treacy
currently serve as GPA's designated directors. The Company presently
leases or subleases a total of sixteen Airbus A320 aircraft from GPA or its
affiliates for terms expiring at various dates through July 2013. As of
December 31, 1993, the Company was obligated to pay approximately $1.136
billion over the respective terms of these aircraft leases.

Effective January 1, 1994, Mr. A. Maurice Myers left his position as
President and Chief Executive Officer of Aloha Airlines, Inc. to join the
Company as President and Chief Operating Officer. The Employment Agreement
between the Company and Mr. Myers provides an initial two year term at a
base salary of $375,000 per year. Mr. Myers also received a $100,000
transition allowance. The Company has agreed to assist Mr. Myers in
purchasing a residence in Phoenix, Arizona by a loan of up to $200,000 and
to loan to Myers up to $500,000 if he elects to exercise options to acquire
stock of Aloha Airlines, Inc. The loans would be nonrecourse to Mr. Myers
but would be secured by such residence and stock. Upon confirmation of a
plan of reorganization during the term of Mr. Myers' employment, the Company
has agreed to seek Bankruptcy Court approval of payment to Mr. Myers of a
reorganization success bonus, and grant, pursuant to the plan of
reorganization, options to acquire shares of common stock in the reorganized
Company. The Company has also agreed to provide to Mr. Myers certain
retirement benefits, reduced for vested accrued benefits payable under
plans maintained by his former employer. If Mr. Myers' employment with
the Company is terminated or his responsibilities are materially altered
following a change in control, he is entitled to receive a severance payment
equal to 200% of his base salary and, for a period of 12 months, medical and
life insurance coverages as provided immediately prior to such termination.
Mr. Myers is entitled to participate in any incentive plans or other fringe
benefits provided by the Company to other key employees.

The Board of Directors has discussed and continues to discuss change of
control severance arrangements and a reorganization success bonus with Mr.
William A. Franke. It also has discussed and continues to discuss
reorganization success bonuses for other key employees of the Company.

It is the policy of the Company that transactions with affiliates be on
terms no less favorable to the Company than those obtainable from
unaffiliated third parties.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
------- ---------------------------------------------------------------

(a) Financial Statements.
--------------------

(1) Report of KPMG Peat Marwick

(2) Financial Statements and Notes to Financial Statements of the
Company, including Balance Sheets as of December 31, 1993 and
1992 and related Statements of Operations, Cash Flows and
Stockholders' Equity (Deficiency) for each of the years in the
three-year period ended December 31, 1993

(b) Financial Statement Schedules.
-----------------------------

(1) Schedule V. Property, Plant and Equipment

(2) Schedule VI. Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment

(3) Schedule VIII. Valuation and Qualifying Accounts

(4) Schedule X. Supplementary Income Statement Information

Schedules not listed above and columns within certain Schedules have been
omitted because of the absence of conditions under which they are required
or because the required material information is included in the Financial
Statements or Notes to the Financial Statements included herein.

Exhibit
Number Description and Method of Filing
------ --------------------------------

3-A(1) Restated Certificate of Incorporation of the Company, dated May
19, 1988 - Incorporated by reference to Exhibit 3-A to the
Company's Schedule 13E-4 Issuer Tender Offer Statement (SEC File
No. 5-34444 ("13E-4")

3-A(2) Amendment to Restated Certificate of Incorporation of the Company
- Incorporated by reference to Exhibit 3-A(2) to the Company's
Report on Form 10-K for the year ended December 31, 1989 (the
"1989 10-K")

3-B Restated Bylaws of the Company, as amended through December 31,
1993 - Filed herewith
--------------

4-A(1) Certificate of Designation, Voting Powers, Preferences and Rights
of the Series of Preferred Stock of the Company, Designated
Series B Convertible Preferred Stock, dated March 15, 1984 -
Incorporated by reference to Exhibit 3-D of the Company's Form
S-1 Registration Statement (SEC File No. 2-89212)

4-B(1) Certificate of Designation, Voting Powers, Preferences and Rights
of the Series of Preferred Stock of the Company Designated Series
C 9.75% Convertible Preferred Stock, dated October 8, 1985 -
Incorporated by reference to Exhibit 3-E(1) of the Company's Form
S-1 Registration Statement (SEC File No. 33-3800) ("S-1 No.
33-3800")

4-B(2) Series C 9.75% Convertible Preferred Stock Certificate No. 1 for
73,099 Shares issued to Transpacific Enterprises, Inc., dated
October 9, 1985 - Incorporated by reference to Exhibit 3-E(2) to
S-1 No. 33-3800

4-C Form of Certificate of Designation, Voting Powers, Preferences
and Rights of the Series of Preferred Stock of the Company's
Designated Series D Participating Preferred Stock, dated July 23,
1986 - Incorporated by reference to Exhibit 1 of the Company's
Form 8-A Registration Statement (SEC File No. 0-12337) ("Form 8-A
No. 0-12337")

4-D Indenture dated as of August 1, 1985, between the Company and
First Interstate Bank of Arizona, N.A., as Trustee, including
form of 7 3/4% Convertible Subordinated Debenture due 2010 -
Incorporated by reference to Exhibit 4 to the Company's Form S-1
Registration Statement (SEC File No. 2-99206)

Exhibit
Number Description and Method of Filing
------ --------------------------------

4-E Form of Indenture dated as of March 15, 1986, between the
Company and First Interstate Bank of Arizona, N.A., as Trustee,
including form of 7-1/2% Convertible Subordinated Debenture due
2011 - Incorporated by reference to Exhibit 4-B to S-1 No.
33-3800

4-F Form of Indenture, dated as of December 15, 1988, between the
Company and First Interstate Bank of Arizona, N.A., as Trustee,
including form of 11 1/2% Convertible Subordinated Debenture due
2009 - Incorporated by reference to Exhibit T3C to the Company's
Form T-3 Application for Qualification of Indenture Under Trust
Indenture Act of 1939 (SEC File No. 22-19024)

4-G Amended and Restated Rights Agreement, effective as of July 23,
1986 and dated as of June 17, 1988, between the Company and First
Interstate Bank of Arizona, N.A., as Rights Agent - Incorporated
by reference to Exhibit 2 to Amendment No. 1 to Form 8-A filed on
Form 8 (SEC File No. 0-12337)

10-A(1)* America West Airlines, Inc. Stock Purchase Plan, as amended
through February 26, 1991 - Incorporated by reference to Exhibit
10-A(1) to the Company's Report on Form 10-K for the year ended
December 31, 1990 (the "1990 10-K")

10-A(2)* America West Airlines, Inc. Stock Purchase Plan for California
and Alberta Resident Employees, as amended through February 26,
1991 - Incorporated by reference to Exhibit 10-A(2) to the 1990
Form 10-K

10-A(3)* America West Airlines, Inc. Incentive Stock Option Plan, as
amended through February 27, 1990 - Incorporated by reference to
Exhibit 10-A(3) to the 1989 Form 10-K

10-A(4)* Restated Nonstatutory Stock Option Plan, as of February 27, 1990
- Incorporated by reference to Exhibit 10-A(4) to the 1989 Form
10-K

10-A(5)* Non-Employee Directors Stock Option Plan, as of June 27, 1989 -
Incorporated by reference to Exhibit 10-A(5) to the 1989 Form
10-K

10-A(6)* Restricted Stock Plan - Incorporated by reference to Exhibit
10-A(6) to the 1989 Form 10-K

10-A(7)* 1991 Incentive Stock Option Plan - Incorporated by reference to
Exhibit 10-A(7) to the 1990 Form 10-K

10-C(1)* Stock Purchase and Sale Agreement dated October 9, 1985, between
the Company and Transpacific Enterprises, Inc. - Incorporated by
reference to Exhibit 10-H to S-1 No. 33-3800

Exhibit
Number Description and Method of Filing
------- --------------------------------

10-C(2)* Stock Purchase and Sale Agreement dated July 31, 1987, between
the Company and Transpacific Enterprises, Inc. - Incorporated by
reference to Exhibit 10-E(2) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987

10-D(1) Second Restated and Amended Letter of Credit Reimbursement
Agreement, dated as of April 27, 1990 among the Company, the
Industrial Bank of Japan, Participating Banks and Bank of America
National Trust and Savings Association - Incorporated by
reference to Exhibit 10-D(3) to the 1990 Form 10-K

10-D(2) Third Amendment to Second Restated and Amended Letter of Credit
Reimbursement Agreement - Incorporated by reference to Exhibit
10-D(4) to the 1990 Form 10-K

10-E Official Statement dated August 11, 1986 for the $54,000,000
Variable Rate Airport Facility Revenue Bonds - Incorporated by
reference to Exhibit 10.e to the Company's Report on Form 10-Q
for the quarter ended September 30, 1986

10-F(1) Trust Indenture dated July 1, 1989 between The Industrial
Development Authority of the City of Phoenix, Arizona and First
Interstate Bank of Arizona, N.A. - Incorporated by Reference to
Exhibit 10-D(8) to 1989 Form 10-K

10-F(2) Airport Use Agreement dated as of July 1, 1989 among the City of
Phoenix, The Industrial Development Authority of the City of
Phoenix, Arizona and the Company - Incorporated by reference to
Exhibit 10-D(9) to 1989 Form 10-K

10-F(3) First Amendment dated as of August 1, 1990 to Airport Use
Agreement dated as of July 1, 1989 among the City of Phoenix and
the Industrial Development Authority of the City of Phoenix,
Arizona and the Company - Incorporated by reference to Exhibit
10-(D)(9) to the Company's Report on Form 10-Q for the quarter
ended September 30, 1990 (the "9/30/90 10-Q")

10-G(1) Revolving Loan Agreement dated as of April 17, 1990, by and among
the Company, the Bank signatories thereto, and Bank of America
National Trust and Savings Association, as Agent for the Banks
(the "Revolving Loan Agreement") - Incorporated by reference to
Exhibit 10-1 to Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990

10-G(2) First Amendment dated as of April 17, 1990 to Revolving Loan
Agreement - Incorporated by reference to Exhibit 10-(D)(10) to
the 9/30/90 10-Q

Exhibit
Number Description and Method of Filing
------- --------------------------------

10-G(3) Second Amendment dated as of September 28, 1990 to Revolving Loan
Agreement - Incorporated by reference to Exhibit 10-(D)(11) to
the 9/30/90 10-Q

10-G(4) Third Amendment dated as of January 14, 1991 to Revolving Loan
Agreement - Incorporated by reference to Exhibit 10-D(13) to the
1990 Form 10-K

10-H Airbus A320 Purchase Agreement (including exhibits thereto),
dated as of September 28, 1990 between AVSA, S.A.R.L. ("AVSA")
and the Company, together with Letter Agreement Nos. 1-10,
inclusive - Incorporated by reference to Exhibit 10-(D)(1) to the
9/30/90 10-Q

10-I Loan Agreement, dated as of September 28, 1990, among the
Company, AVSA and AVSA, as agent - Incorporated by reference to
Exhibit 10-(D)(2) to the 9/30/90 10-Q

10-J V2500 Support Contract Between the Company and IAE International
Aero Engines AG ("IAE"), dated as of September 28, 1990, together
with Side Letters Nos. 1-4, inclusive - Incorporated by reference
to Exhibit 10-(D)(3) to the 9/30/90 10-Q

10-K Spares Credit Agreement, dated as of September 28, 1990, Between
the Company and IAE - Incorporated by reference to Exhibit
10-(D)(4) to the 9/30/90 10-Q

10-L Master Credit Modification Agreement, dated as of October 1,
1992, among the Company, IAE International Aero Engines AG,
Intlaero (Phoenix A320) Inc., Intlaero (Phoenix B737) Inc., CAE
Electronics Ltd., and Hughes Rediffusion Simulation Limited -
Incorporated by reference to Exhibit 10-L to the Company's Report
on Form 10-K for the year ended December 31, 1992 (the "1992
10-K")

10-M(1) Credit Agreement, dated as of September 28, 1990 Between the
Company and IAE - Incorporated by reference to Exhibit 10-(D)(5)
to the 9/30/90 10-Q

10-M(2) Amendment No. 1 to Credit Agreement, dated March 1, 1991 -
Incorporated by reference to Exhibit 10-M(2) to the Company's
1992 10-K

10-M(3) Amendment No. 2 to Credit Agreement, dated May 15, 1991 -
Incorporated by reference to Exhibit 10-M(3) to the Company's
1992 10-K

10-M(4) Amendment No. 3 to Credit Agreement, dated October 1, 1992 -
Incorporated by reference to Exhibit 10-M(4) to the Company's
1992 10-K

Exhibit
Number Description and Method of Filing
------- --------------------------------

10-N(1) Form of Third Amended and Restated Credit Agreement dated as of
September 30, 1993, among the Company, various lenders, and
BT Commercial Corp. as Administrative Agent (without exhibits)
- Filed herewith
--------------

10-N(2) Form of Amended and Restated Management Letter Agreement,
dated as of September 30, 1993 from the Company to the
Lenders - Filed herewith
--------------

10-N(3) Form of Amendment to Amended and Restated Management Letter
Agreement; Consent to Amendment of Bylaws dated February 8,
1994 from the Company to the Lenders - Filed herewith
--------------

10-0(1) Cash Management Agreement, dated September 28, 1991, among the
Company, BT and First Interstate of Arizona, N.A. - Incorporated
by reference to Exhibit 10-D(21) to the 1991 10-K

10-O(2) First Amendment to Cash Management Agreement, dated December 1,
1991, among the Company, BT and First Interstate of Arizona, N.A.
- Incorporated by reference to Exhibit 10-D(22) to the 1991 10-K

10-O(3) Second Amendment to Cash Management Agreement, dated September 1,
1992, among the Company, BT, and First Interstate Bank of
Arizona, N.A. - Incorporated by reference to Exhibit 10-O(3) to
the Company's 1992 10-K

10-P Loan Restructuring Agreement, dated as of December 1, 1991
between the Company and Kawasaki - Incorporated by reference to
Exhibit 10-D(23) to the 1991 10-K

10-Q Restructuring Agreement, dated as of December 1, 1991 between the
Company and Kawasaki - Incorporated by reference to Exhibit 10-
D(24) to the 1991 10-K

10-R(1) A320 Put Agreement, dated as of December 1, 1991 between the
Company and Kawasaki - Incorporated by reference to Exhibit 10-
D(25) to the 1991 10-K

10-R(2) First Amendment to A320 Put Agreement, dated September 1, 1992 -
Incorporated by reference to Exhibit 10-R(2) to the Company's
1992 10-K

10-S(1) A320 Put Agreement, dated as of June 25, 1991 between the Company
and GPA Group plc - Incorporated by reference to Exhibit 10-D(26)
to the 1991 10-K

10-S(2) First Amendment to Put Agreement, dated as of September 1, 1992 -
Incorporated by reference to Exhibit 10-S(2) to the Company's
1992 10-K

Exhibit
Number Description and Method of Filing
------- --------------------------------

10-T Restructuring Agreement, dated as of June 25, 1991 among GPA
Group, plc, GPA Leasing USA I, Inc., GPA Leasing USA Sub I, Inc.
and the Company - Incorporated by reference to Exhibit 10-D(27)
to the 1991 10-K

10-U Form of Interim Procedures Agreement dated as of March 11, 1994
between America West Airlines and AmWest Partners, L.P. -
Filed herewith
--------------

10-V For of Investment Agreement dated as of March 11, 1994 between
America West Airlines and AmWest Partners, L.P. - Filed herewith
--------------

11 Statement re: computation of net income (loss) per common share -
Filed herewith
--------------

12 Statement re: computation of ratio of earnings to fixed charges -
Filed herewith
--------------

23 Consent of KPMG Peat Marwick (regarding Form S-8 Registration
Statements) - Filed herewith
--------------

24 Powers of Attorney - See Signature Page

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

* Indicates management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form.

(d) Reports on Form 8-K
-------------------

1. The Company filed with the Securities and Exchange Commission
a Form 8-K dated October 6, 1993 reporting information
concerning the extension of the D.I.P Financing to June 30,
1994 and the resignation of board members.

2. On October 26, 1993, the Company filed with the Securities and
Exchange Commission a Form 8-K reporting information that the
pilots voted in favor of being represented by the Air Line
Pilots Associations (ALPA).

Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

AMERICA WEST AIRLINES, INC.

Date: March 30, 1994 By /s/ A. E. Frei
---------------------------------------
Alphonse E. Frei
Senior Vice President - Finance

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William A. Franke, A. Maurice Myers and
Alphonse E. Frei, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and
all amendments to this Form 10-K Annual Report, and to file the same, with
all exhibits thereto, and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as he might or
could do in person hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ William A. Franke Chairman of the Board of March 30, 1994
--------------------------- Director and Chief
William A. Franke Executive Officer

/s/ A. Maurice Myers President, Chief March 30, 1994
--------------------------- Operating Officer and
A. Maurice Myers Director

Signature Title Date
--------- ----- ----

/s/ A. E. Frei Senior Vice President-- March 30, 1994
--------------------------- Finance (Principal
Alphonse E. Frei Financial and Accounting
Officer)

/s/ O. Mark De Michele Director March 30, 1994
---------------------------
O. Mark De Michele

/s/ Frederick W. Bradley Director March 30, 1994
---------------------------
Frederick W. Bradley

/s/ Samuel L. Eichenfield Director March 30, 1994
---------------------------
Samuel L. Eichenfield

/s/ Richard C. Kraemer Director March 30, 1994
---------------------------
Richard C. Kraemer

/s/ James T. McMillan Director March 30, 1994
---------------------------
James T. McMillan

/s/ John R. Norton Director March 30, 1994
---------------------------
John R. Norton

/s/ John F. Tierney Director March 30, 1994
---------------------------
John F. Tierney

/s/ Declan Treacy Director March 30, 1994
---------------------------
Declan Treacy

<PAGE>
<TABLE>
AMERICA WEST AIRLINES, INC.
Schedule V -- Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
(in thousands of dollars)

<CAPTION>
Balance at Balance

beginning Additions at end
Classification of period at cost Retirements Transfers of period
- -------------- ---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>

1993
- ----

Building and improvements. . . . . . . . . . $ 72,917 $ 71 $ (3,340) $ 1,482 $ 71,130
Flight equipment owned . . . . . . . . . . . 767,080 45,082 (19,922) 26,602 818,842
Leasehold improvements--Flight equipment . . 36,550 31 (1,183) 5,428 40,826
Ground property and equipment. . . . . . . . 111,131 1,303 (9,654) 2,111 104,891
Construction in progress . . . . . . . . . . 43,316 9,367 (38) (35,623) 17,022
---------- --------- ----------- --------- ----------
$1,030,994 $ 55,854 $ (34,137) $ - $1,052,711
========== ========= =========== ========= ==========

1992
- ----
Building and improvements. . . . . . . . . . $ 83,596 $ 341 $ (11,967) $ 947 $ 72,917
Flight equipment owned . . . . . . . . . . . 759,579 39,876 (33,192) 817 767,080
Leasehold improvements--Flight equipment . . 40,604 (63) (8,234) 4,243 36,550
Ground property and equipment. . . . . . . . 117,408 1,950 (9,083) 856 111,131

Construction in progress . . . . . . . . . . 23,955 28,034 (1,810) (6,863) 43,316

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

$1,025,142 $ 70,138 $ (64,286) $ - $1,030,994
========== ========= =========== ======== ==========

1991
- ----
Building and improvements. . . . . . . . . . $ 87,287 $ 330 $ (9,863) $ 5,842 $ 83,596
Flight equipment owned . . . . . . . . . . . 768,728 86,033 (104,964) 9,782 759,579

Leasehold improvements--Flight equipment . . 35,516 2,547 (14,678) 17,219 40,604
Ground property and equipment. . . . . . . . 103,979 6,551 (936) 7,814 117,408
Construction in progress . . . . . . . . . . 27,139 42,351 (4,878) (40,657) 23,955
---------- --------- ----------- --------- ----------
$1,022,649 $ 137,812 $ (135,319) $ - $1,025,142
========== ========= =========== ========= ==========
</TABLE>
<PAGE>
<TABLE>
AMERICA WEST AIRLINES, INC.
Schedule VI - Accumulated Depreciation,
Depletion and Amortization of Property, Plant, and Equipment
Years ended December 31, 1993, 1992 and 1991
(in thousands of dollars)

<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end of
Classification of period expenses Retirements period
-------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>

1993
- ----
Building and improvements. . . . . . . . . . $ 18,163 $ 4,237 $ (1,309) $ 21,091
Flight equipment . . . . . . . . . . . . . . 226,972 59,896 (14,717) 272,151
Leasehold improvements - Flight equipment. . 16,493 4,137 (1,096) 19,534
Ground property and equipment. . . . . . . . 67,242 13,624 (7,866) 73,000
---------- ---------- ----------- ---------
$ 328,870 $ 81,894 $ (24,988) $ 385,776
========== ========== =========== =========

1992
- ----
Building and improvements. . . . . . . . . . $ 17,790 $ 4,763 $ (4,390) $ 18,163
Flight equipment . . . . . . . . . . . . . . 174,235 72,523 (19,786) 226,972
Leasehold improvements - Flight equipment. . 14,262 4,184 (1,953) 16,493
Ground property and equipment. . . . . . . . 55,466 16,202 (4,426) 67,242
---------- ---------- ----------- ---------
$ 261,753 $ 97,672 $ (30,555) $ 328,870
========== ========== =========== =========

1991
- ----
Building and improvements. . . . . . . . . . $ 15,418 $ 5,626 $ (3,254) $ 17,790
Flight equipment . . . . . . . . . . . . . . 133,526 67,750 (27,041) 174,235
Leasehold improvements - Flight equipment. . 15,542 6,073 (7,353) 14,262
Ground property and equipment. . . . . . . . 37,660 18,354 (548) 55,466
---------- ---------- ----------- ---------
$ 202,146 $ 97,803 $ (38,196) $ 261,753
========== ========== =========== =========
</TABLE>
<PAGE>
<TABLE>
AMERICA WEST AIRLINES, INC.
Schedule VIII - Valuation and Qualifying Accounts
Years ended December 31, 1993, 1992, 1991
(in thousands of dollars)

<CAPTION>
Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Deductions period
----------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables:
Years ended:

December 31, 1993. . . . . . . . . $2,542 $5,474 $ - $4,986 $3,030
====== ====== ====== ====== ======

December 31, 1992. . . . . . . . . $3,603 $3,800 $ - $4,861 $2,542
====== ====== ====== ====== ======

December 31, 1991. . . . . . . . . $1,203 $5,300 $ - $2,900 $3,603
====== ====== ====== ====== ======

Reserve for obsolescence:
Years ended:

December 31, 1993. . . . . . . . . $6,921 $ 902 $ - $ 592 $7,231
====== ====== ====== ====== ======

December 31, 1992. . . . . . . . . $3,638 $3,283 $ - $ - $6,921
====== ====== ====== ====== ======

December 31, 1991. . . . . . . . . $2,296 $1,342 $ - $ - $3,638
====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
AMERICA WEST AIRLINES, INC.
Schedule X - Supplementary Income Statement Information
Years ended December 31, 1993, 1992, 1991
(in thousands of dollars)

ITEM 1993 1992 1991
- ---- ------- ------- -------

<S> <C> <C> <C>
Advertising costs. . . . . . . . . . . . . . . $25,118 $25,007 $29,821
======= ======= =======

Aircraft maintenance materials and repairs . . $31,000 $38,366 $41,649
Amortization of deferred overhauls included
in depreciation and amortization. . . . . . 29,870 31,482 27,453
------- ------- -------
Maintenance and repairs. . . . . . . . . $60,870 $69,848 $69,102
======= ======= =======

Other items are not listed because they are either shown in the
financial statements or the amounts are less than 1% of revenues
for all periods.

</TABLE>

RESTATED

BYLAWS

AMERICA WEST AIRLINES, INC.

(as Amended through and effective on December 31, 1993)

1. OFFICES.
-------

1.01 Offices. In addition to its registered office in the
-------
State of Delaware, the Corporation shall have a general office at
Maricopa County, Arizona, and such other offices, either within
or without the State of Delaware, at such locations as the Board
of Directors may from time to time determine or the business of
the Corporation may require.

2. SEAL.
----

2.01 Seal. The Corporation shall have a seal, which shall
----
have inscribed thereon its name and year of incorporation and the
words, "Corporate Seal Delaware."

2.02 The seal shall be kept in safe custody by the
Secretary of the Corporation. It shall be affixed by the
Chairman of the Board, the President, any Vice President, the
Secretary or any Assistant Secretary, or the Treasurer to any
corporate instrument or document requiring it, by practice or by
law, and when so affixed, it may be attested by the signature of
the officer so affixing it.

3. MEETINGS OF STOCKHOLDERS.
------------------------

3.01 Place of Meetings. All meetings of stockholders of
-----------------
the Corporation shall be held at the general office of the
Corporation in Maricopa County, State of Arizona, unless
otherwise specified in the notice calling any such meeting.

3.02 (a) Annual Meetings. The annual meeting of
---------------
Stockholders for 1984 shall be held at the Corporate offices on
Friday, May 18, 1984, at 10:00 a.m. or at such other time, date
and place as shall be determined by the Board of Directors,
complying with Section 3.04(b) of the Bylaws of the Corporation.
All subsequent annual meetings of Stockholders, beginning with
the annual meeting to be held in 1985, shall be held on the first
Tuesday of May, if not a legal holiday, and if a legal holiday,

then on the next business day following, or at such other time,
date and place as shall be determined by the Board of Directors,
complying with Section 3.04(b) of the Bylaws of the Corporation.

(b) At each annual meeting the stockholders shall
elect, by plurality of the votes cast, one class of Directors as
provided in Section 4.03 of these Bylaws and shall transact such
other business as may properly be brought before them.

(c) The Board of Directors may, in advance of any
annual or special meeting of the stockholders, adopt an agenda
for such meeting, adherence to which the Chairman of the Board
may enforce.

3.03 Special Meetings. Special meetings of the
----------------
stockholders of the Corporation, for any purpose or purposes,
unless otherwise prescribed herein or by statute, may be called
by the Chairman of the Board and shall be called by the Secretary
at the written request, or by resolution adopted by the
affirmative vote, of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed
meeting. Stockholders of the Corporation shall not be entitled
to request a special meeting of the stockholders.

3.04 (a) Notices of Meetings. Notices of meetings of
-------------------
stockholders shall be in writing and shall state the place (which
may be within or without the State of Delaware), date and hour of
the meeting, and, in the case of a special meeting, the purpose
or purposes for which a meeting is called. No business other
than that specified in the notice thereof shall be transacted at
any special meeting.

(b) Such notice shall either be delivered personally
or mailed, postage prepaid, to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60)
days before the date of the meeting. If mailed, the notice shall
be directed to the stockholder at his address as it appears on
the records of the Corporation. Personal delivery of any such
notice to any officer of a corporation or association or to any
member of a partnership shall constitute delivery of such notice
to such corporation, association or partnership.

3.05 Adjourned Meetings. When a meeting is adjourned to
------------------
another time or place, unless otherwise provided by these Bylaws,
notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the stockholders
may transact any business which might have been transacted at the
original meeting. If an adjournment is for more than thirty (30)
days or if after an adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder entitled to vote at the meeting.

3.06 Quorum and Adjournment. Except as otherwise provided
----------------------
by law, by the Certificate of Incorporation of this Corporation
or by these Bylaws, the presence, in person or by proxy, of the
holders of a majority of the stock issued and outstanding and
entitled to vote thereat, shall be requisite and shall constitute
a quorum for the transaction of business at all meetings of
stockholders. If, however, such majority shall not be present or
represented at any meeting of stockholders, the holders of a
majority of the stock entitled to vote, present in person or by
proxy, shall have the power to adjourn the meeting.

3.07 Majority Vote Required. When a quorum is present at
----------------------
any meeting of stockholders, the affirmative vote of the majority
of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall
constitute the act of the stockholders, unless by express
provision of law or of the Certificate of Incorporation or of
these Bylaws a different vote is required, in which case such
express provision shall govern and control.

3.08 Manner of Voting. At each meeting of stockholders,
----------------
every stockholder having the right to vote shall be entitled to
vote in person or by proxy. Proxies need not be filed with the
Secretary of the Corporation until the meeting is called to
order, but shall be filed before being voted. Each stockholder
shall have one vote for each share of stock having voting power
registered in his name on the books of the Corporation on the
record date fixed as provided in Section 6.04 of these Bylaws,
for the determination of stockholders entitled to vote at such
meeting. All elections of directors shall be by written ballot.

3.09 (a) Proxies. At any meeting of stockholders, any
-------
stockholder may be represented and vote by proxy or proxies
appointed by a written form of proxy. In the event that any form
of proxy shall designate two or more persons to act as proxies, a
majority of such persons present at the meeting or, if only one
shall be present, then that one shall have and may exercise all
of the powers conferred by the form of proxy upon all of the
persons so designated unless the form of proxy shall otherwise
provide.

(b) The Board of Directors may, in advance of any
annual or special meeting of the stockholders, prescribe
additional regulations concerning the manner of execution and
filing of proxies and the validation of the same, which are
intended to be voted at any such meeting.

3.10 Organization. At each meeting of stockholders, the
------------
Chairman of the Board shall preside and the Secretary shall act
as Secretary of the meeting.

4. DIRECTORS.
---------

4.01 Powers. The Board of Directors shall exercise all of
------
the power of the Corporation except such as are by law, or by the
Certificate of Incorporation of this Corporation or by these
Bylaws conferred upon or reserved to the stockholders of any
class or classes.

4.02 (a) Number. The number of Directors of this
------
Corporation shall be a minimum of five (5) and a maximum of
thirteen (13) persons. The Board of Directors shall have sole
authority to determine the number of Directors, within the limits
set forth herein, and may increase or decrease the exact number
of Directors from time to time by resolution duly adopted by such
Board. No decrease in the number of Directors shall have the
effect of shortening the term of any incumbent Director. The
exact number of Directors shall be eleven (11) until so increased
or decreased; provided however, that so long as the Amended and
Restated Management Letter Agreement between America West
Airlines, Inc. and the lenders party thereto dated as of
September 30, 1993 (such Amended and Restated Management Letter
of Agreement, as supplemented and amended from time to time,
being hereinafter referred to as the "Management Agreement")
shall remain in force and effect, the exact number of directors
shall be as prescribed in the Management Agreement.

(b) At all times the composition of the Board of
Directors shall comply in all respects with the U.S. citizenship
requirements of the Federal Aviation Act of 1958, as amended.

4.03 (a) Classification of Board. From and after the
-----------------------
first annual meeting of stockholders, the Board of Directors
shall be divided into three classes, in respect to term of
office, each class to contain as nearly as may be one third (1/3)
of the whole number of the Board. Of the Board of Directors
elected at the first annual meeting of the stockholders, the
members of the first class shall serve until the annual meeting
of stockholders held in 1983; the members of the second class
shall serve until the annual meeting of stockholders held in
1984; and the members of the third class shall serve until the
annual meeting of stockholders held in 1985.

(b) At each annual meeting after the first annual
meeting, the stockholders shall elect, by a plurality of the
votes cast, one class of Directors to serve until the annual
meeting of stockholders held three (3) years next following,
provided, however, that in each case Directors shall continue to
serve until their successors shall be elected and shall qualify.

4.04 Nominations. No person shall be elected to the Board
-----------
of Directors of this Corporation at an annual meeting of the
stockholders, or at a special meeting called for that purpose,

unless a written nomination of such person to the Board of
Directors by a stockholder of the Corporation shall be received
by the Secretary of the Corporation at least thirty (30) days
prior to such meeting.

4.05 Resignations. Any Director may resign at any time by
------------
giving written notice to the Board of Directors or the Secretary.
Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein. Acceptance of
such resignation shall not be necessary to make it effective.

4.06 (a) Removal. At any special meeting of the
-------
stockholders duly called as provided heretofore, any or all of
the Directors may, by a vote of the holders of a majority of all
the shares of stock issued and outstanding and entitled to vote
thereat, be removed from office for cause, and the successor or
successors of the Director or Directors so removed may be elected
at such meeting. In the absence of such an election, any vacancy
or vacancies may be filled as provided herein.

(b) As used herein, "cause" for the removal of a
Director shall be deemed to exist if (i) there has been a finding
by not less than two-thirds (2/3) of the entire Board of
Directors that cause exists and the Directors have recommended
removal to the stockholders, or (ii) any other cause defined by
law.

4.07 (a) Vacancies. In case any vacancy shall occur on
---------
the Board of Directors because of death, resignation, retirement,
disqualification, removal, an increase in the authorized number
of Directors or any other cause, the Board of Directors may, at
any meeting, by resolution adopted by the affirmative vote of
two-thirds (2/3) of the Directors then in office, though less
than a quorum, elect a Director or Directors to fill such vacancy
or vacancies until the next election of the class for which such
Director or Directors shall have been chosen; provided however,
that so long as the Management Agreement shall remain in force
and effect, any vacancy on the Board of Directors shall be filled
in accordance with the provisions of the Management Agreement.

(b) If, as a result of a disaster or emergency (as
determined in good faith by the then remaining Directors), it
becomes impossible to ascertain whether or not vacancies exist on
the Board of Directors, and a person is or persons are elected by
Directors, who in good faith believe themselves to be a majority
of the remaining Directors, to fill a vacancy or vacancies that
said remaining Directors in good faith believe exists, then the
acts of such person or persons who are so elected as Directors
shall be valid and binding upon the Corporation and the
stockholders, although it may subsequently develop that at the
time of the election (i) there was in fact no vacancy or
vacancies existing on the Board of Directors, or (ii) the

Directors who so elected such person or persons did not in fact
constitute a majority of the remaining Directors.

4.08 Organization. At each meeting of the Board of
------------
Directors, the Chairman of the Board shall preside, and the
Secretary shall act as Secretary of the meeting.

4.09 Annual Meetings. The Board of Directors shall meet
---------------
each year following the annual meeting of stockholders, at the
place where such meeting of stockholders has been held, for the
purpose of organization, election of officers, and consideration
of such other business as may properly be brought before the
meeting, and no notice of any kind to either old or new members
of the Board of Directors of such annual meeting shall be
necessary.

4.10 Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held monthly. Such meetings may be held
without notice at such times and places, within or without the
State of Delaware, as shall from time to time be determined by
the Board of Directors. In the absence of any such
determination, such meetings shall be held at such times and
places, within or without the State of Delaware, as shall be
designated by the Chairman of the Board on not less than three
(3) days' notice to each Director, given either personally, by
telephone, by facsimile transmission, by mail, by telegram or by
telex.

4.11 Special Meetings. Special meetings of the Board of
----------------
Directors shall be held at the call of the Chairman of the Board
at such times and places, within or without the State of
Delaware, as he shall designate, on not less than three (3) days'
notice to each Director, given either personally, by telephone,
by facsimile transmission, by mail, by telegram or by telex.
Special meetings shall be called by the Secretary on like notice
at the written request of a majority of the Directors.

4.12 Quorum and Powers of a Majority. At all meetings of
-------------------------------
the Board of Directors and of each committee thereof, a majority
of the members shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is
present shall be the act of the Board of Directors or such
committee, unless by express provision of law or of the
Certificate of Incorporation or of these Bylaws, a different vote
is required, in which case such express provision shall govern
and control. In the absence of a quorum, a majority of the
members present may, without notice other than announcement at
the meeting, adjourn a meeting from time to time until a quorum
be present.

4.13 Waiver of Notice. Notice of any meeting of the Board
----------------

of Directors, or any committee thereof, need not be given to any
member if waived by him in writing, whether before or after such
meeting is held, or if he shall sign the minutes or if he shall
attend the meeting.

4.14 (a) Manner of Acting. Members of the Board of
----------------
Directors, or any committee thereof, may participate in any
meeting of the Board of Directors or such committee by means of
conference telephone or similar communications equipment by means
of which all persons participating therein can hear each other,
and participation in a meeting by such means shall constitute
presence in person at such meeting.

(b) Any action required or permitted to be taken at
any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such
committee.

4.15 (a) Compensation. The Board of Directors, by a
------------
resolution or resolutions may fix, and from time to time change,
the compensation of Directors.

(b) Each Director shall be entitled to reimbursement
from the Corporation for his or her reasonable expenses incurred
in attending meetings of the Board of Directors or any committee
thereof.

(c) Nothing contained in these Bylaws shall be
construed to preclude any Director from serving the Corporation
in any other capacity and from receiving compensation from the
Corporation for service rendered to it in such other capacity.

4.16 [Reserved.]

4.17 Committees. The Board of Directors may, by resolution
----------
or resolutions adopted by the affirmative vote of a majority of
the whole Board of Directors, designate one or more committees,
each committee to consist of two or more Directors, which to the
extent provided in said resolution or resolutions shall have and
may exercise the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation.
Such committee or committees shall have such name or names as may
be determined from time to time by resolutions adopted by the
Board of Directors.

4.18 (a) Committees in General. Except as otherwise
---------------------
provided by these Bylaws, each committee shall adopt its own
rules governing the time, place and method of holding its
meetings and the conduct of its proceedings and shall meet as

provided by such rules or by resolution of the Board of
Directors. Unless otherwise provided by these Bylaws or any such
rules or resolutions, notice of the time and place of each
meeting of a committee shall be given to each member of such
committee as provided in Section 4.10 of these Bylaws with
respect to notices of special meetings of the Board of Directors.

(b) Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when
required.

(c) Any member of any committee, other than a member
thereof serving ex officio, may be removed from such committee
----------
either with or without cause, any time, by resolution adopted by
the affirmative vote of a majority of the whole Board of
Directors at any meeting thereof. Any vacancy in any committee
shall be filled by the Board of Directors in the manner
prescribed by these Bylaws for the original appointment of the
members of such committee.

5. OFFICERS.
--------

5.01 (a) Number. The officers of the Corporation shall be a
------
President, one or more Vice Presidents (including one or more
Executive Vice Presidents and one or more Senior Vice Presidents
if deemed appropriate by the Board of Directors), a Secretary and
a Treasurer. The Board of Directors may also elect a Chairman of
the Board; provided that, so long as the Management Agreement
shall remain in force and effect, the Board of Directors shall
elect a Chairman of the Board in compliance with the terms and
conditions of the Management Agreement. The Board of Directors
may also elect such other officers as the Board of Directors may
from time to time deem appropriate or necessary. Except for the
Chairman of the Board (if one shall be elected), none of the
officers of the Corporation need be a director of the
Corporation. Any two or more offices may be held by the same
person.

(b) The Chairman of the Board (if one shall be elected)
shall be the Chief Executive Officer unless the Board of
Directors, by resolution adopted by the affirmative vote of not
less than two-thirds (2/3) of the Directors then in office,
designates the President as Chief Executive Officer. The
President shall be the Chief Operating Officer. If at any time
the office of the Chairman of the Board shall not be filled, the
President shall also be the Chief Executive Officer.

(c) The Board of Directors may delegate to the Chief
Executive Officer the power to appoint one or more employees of
the corporation as divisional or departmental vice presidents and
fix their duties as such appointees. However, no such divisional

or departmental vice president shall be considered as an officer
of the Corporation, the officers of the Corporation being limited
to those officers elected by the Board of Directors.

5.02 Election of Officers, Qualification and Term. The
--------------------------------------------
officers of the Corporation to be elected by the Board of
Directors shall be elected annually at the first meeting of the
Board of Directors held after each annual meeting of the
stockholders. Each such officer shall hold office for one (1)
year and until his successor shall have been duly elected and
shall qualify in his stead unless the Board of Directors shall
have provided by contract or otherwise in any particular case, or
until he shall have resigned and his resignation shall have
become effective, or until he shall have been removed in the
manner hereinafter provided. Notwithstanding anything in this
Section 5.02 to the contrary, the Chairman of the Board may be
elected only by the vote of two-thirds (2/3) of the Directors
then in office (who may include the Director who is or is to be
the Chairman of the Board).

5.03 Removal. Except as otherwise expressly provided in a
-------
contract duly authorized by the Board of Directors, any officer
elected by the Board of Directors may be removed, either with or
without cause, at any time by resolution adopted by the
affirmative vote of a majority of the whole Board of Directors at
any meeting thereof; provided that the Chairman of the Board may
be removed only by the vote of two-thirds (2/3) of the Directors
then in office (excluding the Director who is the Chairman of the
Board), and provided further that so long as the Management
Agreement shall remain in force and effect, the Chairman of the
Board may not be removed except in compliance with the terms and
conditions of the Management Agreement.

5.04 Resignations. Any officer of the Corporation may
------------
resign at any time by giving written notice to the Board of
Directors or the Chairman of the Board. Such resignation shall
take effect at the date of the receipt of such notice or at any
later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be
necessary to make it effective.

5.05 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause may be
filled for the unexpired portion of the term by election by the
Board of Directors at any meeting thereof; provided that so long
as the Management Agreement shall remain in effect, any vacancy
in the office of Chairman of the Board shall be filled in
accordance with the provisions of the Management Agreement.

5.06 Salaries. The salaries of all officers of the
--------
Corporation shall be fixed by the Board of Directors from time to
time, and no officer shall be prevented from receiving such

salary by reason of the fact that he is also a Director of the
Corporation.

5.07 (a) The Chairman of the Board. The Chairman of the
-------------------------
Board (if one shall be elected) shall have the powers and duties
customarily and usually associated with the office of the
Chairman of the Board. He shall preside at meetings of the
stockholders and of the Board of Directors. In the event of his
temporary absence or disability and the absence or disability of
the President, the Chairman of the Board shall have the power to
designate any Director to preside at any or all meetings of the
stockholders and of the Board of Directors.

(b) If at any time the office of President shall not
be filled, or in the event of the disability of the President,
the Chairman of the Board (if one shall be elected) shall have
the duties and powers of the President. The Chairman of the
Board shall have such other powers and perform such other duties
as may be delegated to him by the Board of Directors.

5.08 The President. In the event of the disability of the
-------------
Chairman of the Board, the President shall have the powers and
duties of the Chairman of the Board. The President shall have
such other powers and perform such other duties as may be
delegated to him by the Board of Directors or the Chairman of the
Board (if one shall be elected).

5.09 [Reserved.]

5.10 The Vice Presidents. The Vice Presidents shall have
--------------------
such powers and perform such duties as may from time to time be
assigned to them by the Board of Directors, the Chairman of the
Board or the President.

5.11 The Secretary and the Assistant Secretary. (a) The
-----------------------------------------
Secretary shall attend meetings of the Board of Directors and
meetings of the Stockholders and record all votes and minutes of
all such proceedings in a book kept for the purpose and shall
perform like duties for the committees of Directors as provided
for in these Bylaws when required. He shall give, or cause to be
given, notice of all meetings of Stockholders and of the Board of
Directors, and shall have such other powers and perform such
other duties as may from time to time be assigned to him by the
Board of Directors or the Chairman of the Board.

(b) The Assistant Secretaries shall have such powers
and perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board or the
Secretary. In case of the absence or disability of the
Secretary, the Assistant Secretary designated by the Secretary
(or, in the absence of such designation, the senior Assistant
Secretary) shall perform the duties and exercise the powers of

the Secretary.

5.12 (a) The Treasurer and the Assistant Treasurer. The
-----------------------------------------
Treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be
designated by the Board of Directors.

(b) The Treasurer shall disburse funds of the
Corporation as may from time to time be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and
render to the Board of Directors, the Chairman of the Board and
President whenever they may require it, an account of all his
transactions as Treasurer and of the financial conditions of the
Corporation.

(c) The Treasurer shall also maintain adequate
records of all assets, liabilities and transactions of the
Corporation and shall see that adequate audits thereof are
currently and regularly made. He shall have such other powers
and perform such other duties as may from time to time be
assigned to him by the Board of Directors, the Chairman of the
Board or the President.

(d) The Assistant Treasurers shall have such powers and
perform such duties as may from time to time be assigned to them
by the Board of Directors, the Chairman of the Board, the
President or the Treasurer. In case of the absence or disability
of the Treasurer, the Assistant Treasurer designated by the
Treasurer (or, in the absence of such designation, the senior
Assistant Treasurer) shall perform the duties and exercise the
powers of the Treasurer.

5.13 Treasurer's Bond. If required by the Board of
----------------
Directors, the Treasurer or any Assistant Treasurer shall give
the Corporation a bond in such sum and with such surety or
sureties as are satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the Corporation.

5.14 Chief Executive Officer. The Chief Executive Officer
-----------------------
shall have, subject to the supervision, direction and control of
the Board of Directors, the general powers and duties of
supervision, direction and management of the affairs and business
of the Corporation usually vested in the chief executive officer
of a corporation, including, without limitation, all powers
necessary to direct and control the organizational and reporting

relationships within the Corporation. If at any time the office
of Chairman of the Board shall not be filled, the Chief Executive
Officer shall have the powers and duties of the Chairman of the
Board.

5.15 Chief Operating Officer. The Chief Operating Officer
-----------------------
shall, subject to the supervision, direction and control of the
Chief Executive Officer, manage the day-to-day operations of the
Corporation and, in general, shall assist the Chief Executive
Officer.

6. STOCK.
-----

6.01 Certificates. Certificates of shares of the stock of
------------
the Corporation shall be issued under the seal of the
Corporation, or facsimile thereof, and shall be numbered and
shall be entered in the books of the Corporation as they are
issued. Each certificate shall bear a serial number, shall
exhibit the holder's name and the number of shares evidenced
thereby, and shall be signed by the Chairman of the Board, the
President or any vice president of the Corporation and the
Secretary or the Treasurer. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect
as if such person or entity were such officer, transfer agent or
registrar at the date of issue.

6.02 Transfers. Transfers of stock of the Corporation
---------
shall be made on the books of the Corporation only upon surrender
to the Corporation of a certificate for the shares duly endorsed
or accompanied by proper evidence of succession, assignment or
authority to transfer. Thereupon, the Corporation shall issue a
new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.

6.03 Lost, Stolen or Destroyed Certificates. Any person
--------------------------------------
claiming a certificate of stock to be lost, stolen or destroyed
shall make an affidavit or an affirmation of that fact, and shall
give the Corporation a bond of indemnity in satisfactory from and
with one or more satisfactory sureties, whereupon a new
certificate may be issued of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed.

6.04 Record Date. In order that the Corporation may
-----------
determine the stockholders entitled to notice of or to vote at
any meeting of the stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other

distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of
Directors shall fix, in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any
other action, except that the record date for the first annual
meeting of stockholders is fixed by these Bylaws as of the close
of business on November 16, 1981.

6.05 Registered Stockholders. The Corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered
on its books as the owner of shares to receive dividends, and to
vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in any such shares on the
part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by
the laws of the State of Delaware.

6.06 (a) Powers of the Board. The Board of Directors
-------------------
shall have power and authority to make all such rules and
regulations as it shall deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of
the Corporation.

(b) The Board of Directors may appoint and remove
transfer agents and registrars of transfers, and may require all
stock certificates to bear the signature of any such transfer
agent and/or any such registrar of transfers.

(c) The Board of Directors shall have power and
authority to create and issue (whether or not in connection with
the issue and sale of any stock or other securities of the
Corporation) warrants, rights or options entitling the holders
thereof to purchase from the Corporation any shares of any class
or classes or any other securities of the Corporation. Such
warrants, rights or options shall be evidenced by such instrument
or instruments as shall be approved by the Board of Directors.

(d) The terms upon which, the time or times (which
may be limited or unlimited in duration) at or within which, and
the price or prices at which any such shares or other securities
may be purchased from the Corporation upon the exercise of any
such warrant, right or option shall be such as shall be fixed and
stated in a resolution or resolutions of the Board of Directors
providing for the creation and issue of such warrants, rights or
options. The Board of Directors is hereby authorized to create
and issue any such warrants, rights or options from time to time
for such consideration and to such persons, firms or corporations
as the Board of Directors, in its sole discretion, may determine
setting aside from the authorized but unissued stock of the
Corporation the requisite number of shares for issuance upon the

exercise of such warrants, rights or options.

7.0 MISCELLANEOUS.
-------------

7.01 (a) Place and Inspection of Books. The books of the
-----------------------------
Corporation other than such books as are required by law to be
kept within the State of Delaware, shall be kept at such place or
places either within or without the State of Delaware as the
Board of Directors may from time to time determine.

(b) At least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing
the address of each stockholder and the number of shares
registered in the name of each stockholder shall be prepared.
Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.

(c) The Board of Directors shall determine from time
to time whether, and if allowed, when and under what conditions
and regulations the accounts and books of the Corporation (except
such as may be by law specifically open to inspection or as
otherwise provided by these Bylaws) or any of them shall be open
to the inspection of the stockholders, and the stockholders'
rights in this respect are and shall be restricted and limited
accordingly.

7.02 (a) Indemnification of Directors, Officers, Employees
-------------------------------------------------
and Agents. The Corporation shall indemnify any person who was
----------
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason
of the fact that he is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid or owed in settlement actually and reasonably paid or
incurred by him or rendered or levied against him in connection
with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any

criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, in itself,
---------------
create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.

(b) The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise,
against expenses, including attorneys' fees, actually and
reasonably paid or incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation; provided, however, that no
indemnification shall be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that,
despite the adjudication of liability but in view of all
circumstances of the case, such person fairly and equitably
merits indemnification.

(c) To the extent that a person who may be entitled
to indemnification by the Corporation under this section is or
has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses, including attorney's fees,
actually and reasonably paid or incurred by him in connection
therewith.

(d) Any indemnification under subsections (a) and (b)
shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of
conduct set forth in subsection (a) or (b). Such determination
shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested
Directors so directs, by independent legal counsel in a written
opinion, (iii) the stockholders, or (iv) in any case in which

applicable law makes court approval a prerequisite to
indemnification, by the court in which such action, suit or
proceeding was brought or another court of competent
jurisdiction.

(e) Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the Director, officer, employee or agent to repay such amount
if it shall ultimately be determined that he is not entitled to
be indemnified by the Corporation as authorized in this section.

(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of the
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office.

(g) The provisions of this section shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the estate, executors,
administrators, heirs, legatees or devisees of a person entitled
to indemnification hereunder and the term "person," where used in
the section shall include the estate, executors, administrators,
heirs, legatees or devisees of such person.

(h) For the purposes of this Section 7.02, (i)
"employee benefit plan" and "fiduciary" shall be deemed to
include, but not be limited to, the meanings set forth,
respectively, in Sections 3(3) and 21(A) of the Employee
Retirement Income Security Act of 1974, as amended, (ii)
references to the judgments, fines and amounts paid or owed in
settlement or rendered or levied shall be deemed to encompass and
include excise taxes required to be paid pursuant to applicable
law in respect of any transaction involving an employee benefit
plan, and (iii) references to the Corporation shall be deemed to
include any predecessor corporation and any constituent
corporation absorbed in a merger, consolidation or other
reorganization of or by the Corporation which, if its separate
existence had continued, would have had power and authority to
indemnify its directors, officer, employees, agents or
fiduciaries so that any person who was a director, officer,
employee, agent or fiduciary of such predecessor or constituent
corporation, or served at the request of such predecessor or
constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Section 7.02 with

respect to the Corporation as such person would have with respect
to such predecessor or constituent corporation if its separate
existence had continued.

7.03 (a) Dividends. Dividends may be declared at the
---------
discretion of the Board of Directors at any meeting thereof.

(b) Dividends may be paid to stockholders from the
Corporation's surplus, as computed in accordance with the laws of
the State of Delaware, or in case there shall be no surplus, out
of its net profits for the fiscal year then current and/or the
preceding fiscal year, but not otherwise. When the Directors
shall so determine, dividends may be paid in stock. A Director
shall be fully protected in relying in good faith upon the books
of account of the Corporation or statements prepared by any of
its officers as to the value and amount of the assets,
liabilities or net profits of the Corporation, or any other facts
pertinent to the existence and amount of surplus or other funds
from which dividends might properly be declared.

(c) Before payment of any dividend or any
distribution of profits, there may be set aside out of the said
surplus of the Corporation such sum or sums as the Board of
Directors from time to time, in its discretion thinks proper as a
reserve fund to meet contingencies, or for equalizing dividends,
or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation and the Board of
Directors may abolish any such reserve in the manner in which it
was created.

7.04 Execution of Deeds, Contracts, Etc. Subject always to
-----------------------------------
the specific directions of the Board of Directors, all deeds,
mortgages and bonds made by the Corporation and all other written
contracts and agreements to which the Corporation shall be a
party shall be executed in its name by the Chairman of the Board,
the President, or a Vice President, or such other person or
persons as may be authorized by any such officer.

7.05 Checks. All checks, drafts, acceptances, notes and
------
other orders, demands or instruments in respect to the payment of
money may be signed or endorsed on behalf of the Corporation by
such officer or officers or by such agent or agents as the Board
of Directors may from time to time designate.

7.06 Voting Shares in Other Corporations. The Corporation
-----------------------------------
may vote any and all shares held by it in any other corporation
or corporations by the Chairman of the Board.

7.07 Fiscal Year. The fiscal year of the Corporation shall
-----------
correspond with the calendar year.

7.08 Gender/Number. As used in this instrument, the
-------------

masculine, feminine or neuter gender, and the singular or plural
number, shall each include the others whenever context so
indicates.

7.09 Paragraph Titles. The titles of the paragraphs have
----------------
been inserted as a matter of convenience of reference only and
shall not control or affect the meaning or construction of any of
the terms and provisions hereof.

8. LIMITATIONS OF OWNERSHIP BY NON-CITIZENS.
----------------------------------------

8.01 Definitions.
-----------

(a) "Act" shall mean The Federal Aviation Act of
1958, as amended (Title 49 United States Code) or as the same may
be from time to time amended.

(b) "Foreign Stock Record" shall have the meaning set
forth at Section 8.03 hereof.

(c) "Non-Citizen" shall mean any person or entity who
is not a "citizen of the United States" as defined in Section 101
of the Act, including any agent, trustee or representative of a
Non-Citizen.

(d) "Own or Control" or "Owned or Controlled" shall
mean (i) ownership of record, (ii) beneficial ownership or (iii)
the power to direct, by agreement, agency or in any other manner,
the voting of Stock. Any determination by the Board of Directors
as to whether Stock is Owned or Controlled by a Non-Citizen shall
be final.

(e) "Permitted Percentage" shall mean 25 percent of
the voting power of the Stock.

(f) "Stock" shall mean the outstanding capital stock
of the Corporation entitled to vote; provided, however, that for
the purpose of determining the voting power of Stock that shall
at any time constitute the Permitted Percentage, the voting power
of Stock outstanding shall not be adjusted downward solely
because shares of Stock may not be entitled to vote by reason of
any provision of this Section 8.

8.02 Policy. It is the policy of the Corporation that,
------
consistent with the requirements of Section 101 of the Act, Non-
Citizens shall not Own or Control more than the Permitted
Percentage and, if Non-Citizens nonetheless at any time Own or
Control more than the Permitted Percentage, the voting rights of
the Stock in excess of the Permitted Percentage shall be
automatically suspended in accordance with Sections 8.03 and 8.04
below.

8.03 Foreign Stock Record. The Corporation or any transfer
--------------------
agent designated by it shall maintain a separate stock record
(the "Foreign Stock Record") in which shall be registered Stock
known to the Corporation to be Owned or Controlled by Non-
Citizens. The Foreign Stock Record shall include (i) the name
and nationality of each such Non-Citizen, (ii) the number of
shares of Stock Owned or Controlled by such Non-Citizen and (iii)
the date of registration of such shares in the Foreign Stock
Record. In no event shall shares in excess of the Permitted
Percentage be entered on the Foreign Stock Record. In the event
that the Corporation shall determine that Stock registered on the
Foreign Stock Record exceeds the Permitted Percentage, sufficient
shares shall be removed from the Foreign Stock Record so that the
number of shares entered therein does not exceed the Permitted
Percentage. Stock shall be removed from the Foreign Stock Record
in reverse chronological order based upon the date of
registration therein.

8.04 Suspension of Voting Rights. If at any time the
---------------------------
number of shares of Stock known to the Corporation to be Owned or
Controlled by Non-Citizens exceeds the Permitted Percentage, the
voting rights of Stock Owned or Controlled by Non-Citizens and
not registered on the Foreign Stock Record at the time of any
vote or action of the stockholders of the Corporation shall,
without further action by the Corporation, be suspended. Such
suspension of voting rights shall automatically terminate upon
the earlier of the (i) transfer of such shares to a person or
entity who is not a Non-Citizen, or (ii) registration of such
shares on the Foreign Stock Record, subject to the final sentence
of Section 8.03.

9. AMENDMENT.
---------

9.01 Amendment. These Bylaws may be altered, amended or
---------
repealed by the affirmative vote of the holders of a majority of
the stock issued and outstanding and entitled to vote at any
meeting of stockholders or by resolution adopted by the
affirmative vote of not less than a majority of the Directors in
office at any annual or regular meeting of the Board of Directors
or at any special meeting of the Board of Directors if notice of
the proposed alteration, amendment or repeal be contained in the
notice of such special meeting.

$83,616,597.27

THIRD AMENDED AND RESTATED

CREDIT AGREEMENT

among

AMERICA WEST AIRLINES, INC.

VARIOUS LENDERS

and

BT COMMERCIAL CORP.

as ADMINISTRATIVE AGENT

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

Dated as of September 30, 1993

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

<PAGE>
TABLE OF CONTENTS Page
----

SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . 3
1.01 Defined Terms . . . . . . . . . . . . . . . 3
1.02 Other Definitional Provisions . . . . . . . 26

SECTION 2. LOANS . . . . . . . . . . . . . . . . . . . 26
2.01 Commitments and Loans . . . . . . . . . . . 26
2.02 [Reserved] . . . . . . . . . . . . . . . . . 27
2.03 [Reserved] . . . . . . . . . . . . . . . . . 27
2.04 [Reserved] . . . . . . . . . . . . . . . . . 27
2.05 Notes . . . . . . . . . . . . . . . . . . . 27
2.06 [Reserved] . . . . . . . . . . . . . . . . . 27
2.07 Interest . . . . . . . . . . . . . . . . . . 27
2.08 Principal Repayments . . . . . . . . . . . . 28
2.09 Interest Period Indemnification . . . . . . 28
2.10 Taxes . . . . . . . . . . . . . . . . . . . 29
2.11 Cost Indemnities . . . . . . . . . . . . . . 32
2.12 Distribution of Proceeds . . . . . . . . . . 34

SECTION 3. FEES . . . . . . . . . . . . . . . . . . . 37
3.01 Facility Fee . . . . . . . . . . . . . . . . 37
3.02 Fees of Administrative Agent and Collateral
Agent . . . . . . . . . . . . . . . . . . . 37

SECTION 4. PREPAYMENTS; PAYMENTS . . . . . . . . . . . 37
4.01 Voluntary Prepayments . . . . . . . . . . . 37
4.02 Mandatory Prepayments . . . . . . . . . . . 38
4.03 Method and Place of Payment . . . . . . . . 40
4.04 Net Payments . . . . . . . . . . . . . . . . 40

SECTION 5. CONDITIONS PRECEDENT AND RELATED PROVISIONS 40
5.01 Conditions to the Effective Date . . . . . . 40
5.02 Conditions to All Loans . . . . . . . . . . 46
5.03 Conditions Precedent to Amendment Effective
Date . . . . . . . . . . . . . . . . . . . 48
5.04 Conditions Precedent to Second Amendment
Effective Date . . . . . . . . . . . . . . 53
5.05 Conditions Precedent to Third Amendment
Effective Date . . . . . . . . . . . . . . 61

SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS 65
6.01 Corporate Status . . . . . . . . . . . . . . 66
6.02 Corporate Power and Authority . . . . . . . 66
6.03 No Violation . . . . . . . . . . . . . . . . 66
6.04 Governmental Approvals . . . . . . . . . . . 67
6.05 Priority; Security Interests . . . . . . . . 67
6.06 Financial Statements; Financial Condition;
Undisclosed Liabilities; etc . . . . . . . 67
6.07 Litigation . . . . . . . . . . . . . . . . . 69

-i-

Page
----

6.08 True and Complete Disclosure . . . . . . . . 69
6.09 Use of Proceeds; Margin Regulations . . . . 69
6.10 Tax Returns and Payments . . . . . . . . . . 70
6.11 Compliance with ERISA . . . . . . . . . . . 70
6.12 Subsidiaries . . . . . . . . . . . . . . . . 71
6.13 Compliance with Statutes, etc . . . . . . . 71
6.14 Investment Company Act . . . . . . . . . . . 72
6.15 Public Utility Holding Company Act . . . . . 72
6.16 End of Fiscal Year; Fiscal Quarters . . . . 73
6.17 The Orders . . . . . . . . . . . . . . . . . 73
6.18 Operations . . . . . . . . . . . . . . . . . 73
6.19 GPA Agreements/Kawasaki Agreements . . . . . 74

SECTION 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . 74
7.01 Information Covenants . . . . . . . . . . . 75
7.02 Books, Records and Inspections . . . . . . . 80
7.03 Maintenance of Property; Insurance . . . . . 80
7.04 Corporate Franchises . . . . . . . . . . . . 81
7.05 Compliance with Statutes, etc . . . . . . . 81
7.06 End of Fiscal Years; Fiscal Quarters . . . . 81
7.07 Performance of Obligations . . . . . . . . . 82
7.08 Minimum Designated Collateral Balances . . . 82
7.09 Hazardous Materials . . . . . . . . . . . . 85
7.10 Cash Management . . . . . . . . . . . . . . 85
7.11 Further Assurances . . . . . . . . . . . . . 88

SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . 90
8.01 Liens . . . . . . . . . . . . . . . . . . . 90
8.02 Consolidation, Merger, Sale of Assets, etc . 93
8.03 Distributions . . . . . . . . . . . . . . . 94
8.04 Leases . . . . . . . . . . . . . . . . . . . 95
8.05 Indebtedness . . . . . . . . . . . . . . . . 95
8.06 Advances, Investments and Loans . . . . . . 96
8.07 Capital Expenditures . . . . . . . . . . . . 97
8.08 Limitation on Repayments, etc . . . . . . . 98
8.09 Transactions with Affiliates . . . . . . . . 102
8.10 Subsidiaries . . . . . . . . . . . . . . . . 102
8.11 Chapter 11 Claims . . . . . . . . . . . . . 102
8.12 Final Extension Loan Order . . . . . . . . . 102
8.13 Conversion to Chapter 7 . . . . . . . . . . 102
8.14 Operation of Specified Aircraft/Engines. . 103
8.15 Operating Plan Covenants . . . . . . . . . . 103
8.16 Slots and Routes . . . . . . . . . . . . . . 105
8.17 Seizures . . . . . . . . . . . . . . . . . . 106
8.18 ERISA . . . . . . . . . . . . . . . . . . . 106

SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . 107
9.01 Payments . . . . . . . . . . . . . . . . . . 107

-ii-

Page
----

9.02 Representations, etc . . . . . . . . . . . . 107
9.03 Covenants . . . . . . . . . . . . . . . . . 107
9.04 The Case, etc . . . . . . . . . . . . . . . 107
9.05 Credit Documents and Kawasaki Credit
Agreement . . . . . . . . . . . . . . . . . 108
9.06 Judgments . . . . . . . . . . . . . . . . . 108
9.07 GPA Agreements/Kawasaki Agreements . . . . . 109
9.08 Governance . . . . . . . . . . . . . . . . . 110
9.09 Casualties . . . . . . . . . . . . . . . . . 110
9.10 ERISA . . . . . . . . . . . . . . . . . . . 110
9.11 Other Indebtedness . . . . . . . . . . . . . 111
9.12 Change of Control . . . . . . . . . . . . . 111

SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . 113
10.01 Payment of Expenses, etc . . . . . . . . . 113
10.02 Survival . . . . . . . . . . . . . . . . . 115
10.03 Notices . . . . . . . . . . . . . . . . . . 115
10.04 Benefit of Agreement . . . . . . . . . . . 115
10.05 No Waiver; Remedies Cumulative . . . . . . 117
10.06 Payments Pro Rata . . . . . . . . . . . . . 117
10.07 Calculations; Computations . . . . . . . . 118
10.08 GOVERNING LAW . . . . . . . . . . . . . . . 118
10.09 Counterparts . . . . . . . . . . . . . . . 118
10.10 Headings Descriptive . . . . . . . . . . . 118
10.11 Amendment or Waiver . . . . . . . . . . . . 118
10.12 Domicile of Loans . . . . . . . . . . . . . 120
10.13 Confidentiality . . . . . . . . . . . . . . 120
10.14 Set-Off . . . . . . . . . . . . . . . . . . 121
10.15 WAIVER OF JURY TRIAL . . . . . . . . . . . 122
10.16 Time of the Essence . . . . . . . . . . . . 122
10.17 Specified Lien Releases . . . . . . . . . . 122
10.18 Administrative Agent; Collateral Agent . . 123
10.19 Dating and Effectiveness . . . . . . . . . 123
10.20 Participation by Commerce and Economic
Development Commission . . . . . . . . . . 123
10.21 Covenants Do Not Preclude Negotiation of a
Plan of Reorganization . . . . . . . . . . 124
10.22 Certain Consents . . . . . . . . . . . . . 124
10.23 Certain Waivers . . . . . . . . . . . . . . 124

-iii-

Page
----

ANNEX

Annex 1 Lenders' Commitments and Addresses

SCHEDULES

Schedule 1 A320 Leases
Schedule 2 Designated Collateral
Schedule 3 [Reserved]
Schedule 4 [Reserved]
Schedule 5 Deferral Aircraft
Schedule 6 Designated Aircraft Leases
Schedule 7 Engine Leases
Schedule 8 Real Property
Schedule 9 Liabilities and Obligations
Schedule 10 Litigation
Schedule 11 Slots, Routes and Domestic Schedule Gates
Schedule 12 Insurance Policies and Programs
Schedule 13 [Reserved]
Schedule 14 Permitted First Liens
Schedule 15 Existing Debt
Schedule 16 Existing Investments
Schedule 17 Kawasaki Leases
Schedule 18 Stipulations
Schedule 19 Aircraft Rental and Loan Reductions and
Deferrals
Schedule 20 [Reserved]
Schedule 21 [Reserved]

EXHIBITS

Exhibit A Promissory Note
Exhibit B [Reserved]
Exhibit C Officer's Certificate
Exhibit D-1 Interim Order
Exhibit D-2 Final Order
Exhibit D-3 GPA Order
Exhibit D-4 Northwest Order
Exhibit D-5 Additional Loan Order and Kawasaki Order
Exhibit D-6 Second Additional Loan Order
Exhibit D-7 Interim Extension Loan Order
Exhibit D-8 Final Extension Loan Order
Exhibit E Action Plan Summary
Exhibit F Security Agreement
Exhibit G Aircraft/Engine Mortgage
Exhibit H Parts Mortgage
Exhibit I Initial Cash Management Agreement

-iv-

Page
----

Exhibit J-1 Real Property Mortgage
Exhibit J-2 Lessor Consent Agreement
Exhibit J-3 Senior Lender Agreement
Exhibit J-4 Assignment of Gate Leases
Exhibit K Slot Deed of Conveyance
Exhibit L Slot Lease Agreement
Exhibit M Collateral Certificate
Exhibit N Agency Agreement
Exhibit O Daily Cash Management Report
Exhibit P By-Law Letter Agreement
Exhibit Q Officer's Certificate
Exhibit R First Amendment to Cash Management
Agreement
Exhibit S First Amendment to Agency Agreement
Exhibit T First Amendments to Deeds of Trust
Exhibit U Amendment No. 1 to Assignment of Gate
Leases
Exhibit V-1 First Amendment to Consent of the City of
Phoenix (Hangar)
Exhibit V-2 First Amendment to Consent of the City of
Phoenix (11 acre parcel)
Exhibit W Consent of First Interstate Bank of
Arizona, N.A.
Exhibit X Kawasaki Letter Regarding Intercreditor
Agreements
Exhibit Y Officer's Certificate
Exhibit Z Second Amendment to Cash Management
Agreement
Exhibit AA Second Amendment to Agency Agreement
Exhibit BB Second Amendments to Deeds of Trust
Exhibit CC Assignment of Gate Leases Amendment No. 2
Exhibit DD-1 Second Amendment to Consent of the City of
Phoenix (Hangar)
Exhibit DD-2 Second Amendment to Consent of the City of
Phoenix (11 acre parcel)
Exhibit EE Consent of First Interstate Bank of
Arizona N.A.
Exhibit FF Letter Regarding Intercreditor Agreements
Exhibit GG First Amendment to Security Agreement
Exhibit HH Amendment No. 3 to Aircraft/Engine Mortgage
Exhibit II Amendment No. 1 to Parts Mortgage
Exhibit JJ First Amendment to Slot Lease Agreement
Exhibit KK Management Letter Agreement
Exhibit LL Northwest Release and Termination
Exhibit MM Third Amendments to Deeds of Trust
Exhibit NN Assignment of Gate Leases Amendment No. 3
Exhibit OO Third Amendments to Consents of the City of
Phoenix

-v-

Page
----

Exhibit PP Second Amendment to Slot Lease Agreement
Exhibit QQ Ansett Release and Termination
Exhibit RR Amended and Restated Management Letter
Agreement
Exhibit SS Amendment No. 2 to Parts Mortgage

-vi-

THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of September 30, 1993, is entered into among
AMERICA WEST AIRLINES, INC. (the "Borrower"), a Delaware
--------
corporation, as debtor and debtor-in-possession under
Chapter 11 of Title 11 of the United States Code entitled
"Bankruptcy" (the "Bankruptcy Code"), the Lenders, and BT
---------------
COMMERCIAL CORP., acting in the manner and to the extent
described in the Agency Agreement (in such capacity, the
"Administrative Agent"), and, subject to the terms and
--------------------
conditions set forth herein, amends and restates in its
entirety the Credit Agreement, dated as of August 26, 1991,
among the Borrower, the Existing Lenders (other than
Kawasaki) and the Administrative Agent (the "Original Credit
---------------
Agreement"), as heretofore amended and restated by the
---------
Amended and Restated Credit Agreement, dated as of December
1, 1991, among the Borrower, the Existing Lenders, Northwest
and the Administrative Agent (such Amended and Restated
Credit Agreement being referred to herein as the "First
-----
Amended and Restated Credit Agreement"), and as heretofore
--------------------------------------
further amended and restated by the Second Amended and
Restated Credit Agreement, dated as of September 1, 1992,
among the Borrower, the Existing Lenders, Ansett, the Second
Amendment Lenders and the Administrative Agent (such Second
Amended and Restated Credit Agreement being referred to
herein as the "Second Amended and Restated Credit
----------------------------------
Agreement", and the Second Amended and Restated Credit
---------
Agreement, as amended and restated hereby, and as further
amended, modified or supplemented from time to time, being
referred to herein as this "Agreement").
---------

R E C I T A L S:

WHEREAS, all capitalized terms used herein shall
have the meanings provided in Section 1 below;

WHEREAS, on June 27, 1991, the Borrower filed a
voluntary petition with the Bankruptcy Court initiating the
Case and has continued in the possession of its assets and
in the management of its business pursuant to Sections 1107
and 1108 of the Bankruptcy Code;

WHEREAS, pursuant to and subject to the terms and
conditions of the Original Credit Agreement, the Existing
Lenders (other than Kawasaki) and Northwest agreed to make
Loans to the Borrower in an aggregate principal amount not
to exceed $55,000,000;

WHEREAS, pursuant to the First Amended and
Restated Credit Agreement, the Original Credit Agreement was
amended and restated to, among other things, provide for the

NY1-53665.4

<PAGE>

making of an additional Loan by Kawasaki to the Borrower in
the principal amount of $23,000,000;

WHEREAS, pursuant to the Second Amended and
Restated Credit Agreement, the First Amended and Restated
Credit Agreement was amended and restated to, among other
things, provide for the making of additional Loans by GPA
Sub and the Second Amendment Lenders to the Borrower in the
principal amount of $53,000,000;

WHEREAS, simultaneously with the making of such
additional Loans by GPA Sub and the Second Amendment
Lenders, the Borrower prepaid from the proceeds of such
additional Loans all of the Loans made by Northwest under
the Original Credit Agreement and outstanding under the
First Amended and Restated Credit Agreement in an aggregate
principal amount of $9,876,364;

WHEREAS, after giving effect to the making of such
additional Loans by GPA Sub and the Second Amendment Lenders
and the prepayment of the Loans made by Northwest under the
Original Credit Agreement, on the Second Amendment Effective
Date, there were Loans outstanding under the Second Amended
and Restated Credit Agreement in an aggregate principal
amount of $110,783,636.00;

WHEREAS, after giving effect to the making by the
Borrower of scheduled payments and mandatory prepayments of
Loans pursuant to and in accordance with the Second Amended
and Restated Credit Agreement (including, without
limitation, the waiving by the Lenders of certain mandatory
prepayments), on the date hereof, there are Loans
outstanding under the Second Amended and Restated Credit
Agreement in an aggregate principal amount of $91,913,239.20
(of which $8,296,641.93 are Ansett Loans);

WHEREAS, the Borrower has requested the Lenders to
extend the maturity of the Loans to the Maturity Date (as
hereinafter defined);

WHEREAS, all of the Lenders are willing to extend
the maturity of the Loans to the Maturity Date (as
hereinafter defined), but Ansett desires that the Ansett
Loans mature and be paid in full on September 30, 1993;

WHEREAS, after giving effect to the foregoing
extension of the maturity of the Loans to the Maturity Date
(as hereinafter defined) and the foregoing payment of the
Ansett Loans, there will be Loans outstanding under the
Second Amended and Restated Credit Agreement in an aggregate
principal amount of $83,616,597.27;

NY1-53665.4 -2-

WHEREAS, subject to the terms and conditions set
forth herein, the Borrower, the Lenders and the
Administrative Agent desire that the Second Amended and
Restated Credit Agreement be amended and restated in its
entirety to provide (among other things) for the foregoing
extension of the maturity of the Loans to the Maturity Date
(as hereinafter defined) and the foregoing payment of the
Ansett Loans;

NOW, THEREFORE, THE PARTIES HERETO AGREE THAT THE
AMENDED AND RESTATED CREDIT AGREEMENT IS AMENDED AND
RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:

SECTION 1. DEFINITIONS.
-----------

1.01 Defined Terms. As used in this Agreement,
-------------
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):

"A320 Leases" shall mean those certain Aircraft
-----------
Sublease Agreements listed on Schedule 1 hereto, as the same
may be amended, supplemented or otherwise modified.

"Additional Credit" shall have the meaning
-----------------
provided in Section 5.02(c).

"Additional Loan Order" shall mean an order of the
---------------------
Bankruptcy Court in the form of Exhibit D-5 (as such form
may be modified in a manner acceptable to each of the
Lenders, in their sole and absolute discretion) to the
extent, and only to the extent, such order does not
constitute the "Kawasaki Order" (as such term is defined
herein).

"Administrative Agent" shall have the meaning
--------------------
provided in the first paragraph of this Agreement and
includes any successor in such capacity.

"Affiliate" shall mean, with respect to any
---------
Person, any other Person (i) directly or indirectly con-
trolling (including, but not limited to, all directors and
officers of such Person), controlled by, or under direct or
indirect common control with, such Person or (ii) that
directly or indirectly owns more than 25% of the voting
securities of such Person; provided, however, in no event
-------- -------
shall any of the GPA Entities, Kawasaki, Kawasaki
Enterprises Inc., Kawasaki Steel Corporation or any other
Lender be considered an Affiliate of the Borrower. A Person
shall be deemed to control a corporation if such Person

NY1-53665.4 -3-

possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.

"Agency Agreement" shall mean the Agency Agreement
----------------
among the Borrower, the Administrative Agent, the Collateral
Agent and the Lenders in the form of Exhibit N hereto, as
modified, supplemented or amended from time to time.

"Agreement" shall mean this Third Amended and
---------
Restated Credit Agreement, as modified, supplemented or
amended from time to time.

"Aircraft/Engine Mortgage" shall mean,
------------------------
collectively, the Aircraft and Engine Chattel Mortgage and
Security Agreement in the form of Exhibit G hereto, and the
Spare Parts Chattel Mortgage and Security Agreement in the
form of Exhibit H hereto, as same may be amended, modified
or supplemented from time to time.

"Aircraft Finance Agreement" shall mean the
--------------------------
Aircraft Finance Agreement, dated as of September 28, 1990,
between the Borrower and Kawasaki, as amended and restated
in its entirety by the Kawasaki Restructuring Agreement, the
Kawasaki Put Agreement and the Kawasaki Credit Agreement,
and as further amended, supplemented or modified from time
to time.

"Amended and Restated Management Letter Agreement"
------------------------------------------------
shall mean a letter agreement in the form of Exhibit RR
hereto, as the same may be amended, modified or supplemented
from time to time.

"Amendment Effective Date" shall have the meaning
------------------------
specified in Section 5.03.

"Ansett" shall mean Ansett Worldwide Aviation,
------
U.S.A., a Nevada partnership, and its successors and
assigns.

"Ansett Loans" shall mean all of the loans made by
------------
Ansett under the Second Amended and Restated Credit
Agreement and outstanding immediately prior to the Third
Amendment Effective Date in an aggregate principal amount of
$8,296,641.93.

"Asset Sale" shall mean the sale, transfer or
----------
other disposition to any Person after the Filing Date of any
property or other assets of the Borrower; provided, however,
-------- -------
Asset Sale shall not include the sale, transfer or other

NY1-53665.4 -4-

disposition of property or other assets referred to in
Section 8.02(i) to the extent that the aggregate Net
Proceeds in any one fiscal year of the Borrower from the
sale, transfer or other disposition of all such property or
other assets do not exceed $1,000,000.

"Assignment of Gate Leases" shall mean an
-------------------------
Assignment of Gate Leases in the form of Exhibit J-4 hereto,
as same may be amended, modified or supplemented from time
to time.

"Authorized Officer" shall mean and include the
------------------
Chief Executive Officer, the Chief Operating Officer, a
Senior Vice President, an Executive Vice President, the
Treasurer, an Assistant Treasurer, or the Vice President and
Controller of the Borrower.

"Aviation Act" shall mean the Federal Aviation Act
------------
of 1958, as amended from time to time, or any similar legis-
lation of the United States enacted in substitution or
replacement thereof.

"Bankruptcy Code" shall have the meaning provided
---------------
in the first paragraph of this Agreement.

"Bankruptcy Court" shall mean the United States
----------------
Bankruptcy Court, District of Arizona, or such other court
having jurisdiction over the Case from time to time.

"Borrower" shall have the meaning specified in the
--------
first paragraph of this Agreement.

"Business Day" shall mean any day except Saturday,
------------
Sunday and any other day which shall be in New York City a
legal holiday or a day on which banking institutions are
authorized by law or other government action to close and,
when used with respect to a Loan or interest thereon, shall
include a London Business Day.

"By-Law Letter Agreement" shall mean a letter
-----------------------
agreement in the form of Exhibit P hereto, as same may be
amended, modified or supplemented from time to time.

"Capital Expenditures" shall have the meaning
--------------------
provided in Section 8.07.

"Case" shall mean the Chapter 11 case of the
----
Borrower pending in the Bankruptcy Court.

"Cash Covenant Amount" shall have the meaning
--------------------
provided in Section 8.15(d).

NY1-53665.4 -5-

"Cash Equivalents" shall mean, as to any Person,
----------------
(i) securities issued or directly and fully guaranteed or
insured by the United States or any agency or instrumental-
ity thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having matur-
ities of not more than six months from the date of acqui-
sition, (ii) domestic time deposits and certificates of
deposit of any commercial bank incorporated in the United
States of recognized standing having capital and surplus in
excess of $500,000,000 and having unsecured debt rated at
least A or the equivalent thereof from Standard & Poor's
Corporation (an "Eligible Bank") on the date of making of
-------------
the deposit with maturities of not more than six months from
the date of acquisition by such Person, (iii) repurchase
obligations entered into with an Eligible Bank with a term
of not more than seven days for underlying securities of the
types described in clause (i) above, (iv) commercial paper
issued by the parent corporation of any Eligible Bank on the
date of the acquisition of the commercial paper (provided
that the parent corporation and the bank are both incorpor-
ated in the United States) and commercial paper issued by
any Person incorporated in the United States rated, on the
date of the acquisition of the commercial paper, at least
A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., and in each case maturing
not more than six months after the date of acquisition by
such Person and (v) shares or interests in any money market
mutual fund substantially all of the assets of which are
required to be invested in securities of the type described
in clause (i) above and which is rated AAA or the equivalent
by Standard & Poor's Corporation and P-1 or the equivalent
by Moody's Investors Service, Inc.

"Code" shall mean the Internal Revenue Code of
----
1986, as amended from time to time. Section references to
the Code are to the Code, as in effect at the date of this
Agreement, and to any subsequent provisions of the Code
amendatory thereof, supplemental thereto or substituted
therefor.

"Collateral" shall mean all "Collateral" under,
----------
and as defined in, the Orders or any Security Document.

"Collateral Agent" shall mean the Administrative
----------------
Agent acting as collateral agent, or any Person engaged or
otherwise designated by the Administrative Agent to act as
collateral agent, pursuant to the Agency Agreement and the
Security Documents.

NY1-53665.4 -6-

"Commitment" shall mean, with respect to each
----------
Lender, (i) at any time on or prior to the Second Amendment
Effective Date, the amount of such Lender's aggregate
commitment to make loans under the Original Credit
Agreement, the First Amended and Restated Credit Agreement
and/or the Second Amended and Restated Credit Agreement, as
set forth opposite such Lender's name in Annex I thereto
directly below the column entitled "Commitment", and (ii) at
any time after the Second Amendment Effective Date, the
loans of such Lender outstanding under the Second Amended
and Restated Credit Agreement and this Agreement.

"Concentration Account" shall have the meaning
---------------------
provided in the Initial Cash Management Agreement or any
other cash management arrangements entered into by the
Borrower at the request of the Required Lenders pursuant to
Section 7.10.

"Confidential Material" shall have the meaning
---------------------
provided in Section 10.13.

"Contingent Obligation" shall mean, as to any
---------------------
Person, any obligation of such Person guaranteeing any
indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner, whether directly or indirectly,
-------
including, without limitation, any obligation of such
Person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of any such primary obliga-
tion or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (iii) to purchase prop-
erty, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such
primary obligation, or (iv) otherwise to assure or hold
harmless or give "comfort" to the holder of such primary
obligation against loss in respect thereof; provided,
--------
however, that the term Contingent Obligation shall not
-------
include endorsements of instruments for deposit or collec-
tion in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal
to the stated or determinable amount of the primary obliga-
tion in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by
such Person in good faith.

NY1-53665.4 -7-

"Controlled Group" shall mean all members of a
----------------
controlled group of corporations and all trades or
businesses (whether or not incorporated) under common
control which, together with and including the Borrower, are
treated as a single employer under Section 414(b) or 414(c)
of the Code.

"Credit Documents" shall mean this Agreement, each
----------------
Note, the Agency Agreement, each Security Document, each
certificate delivered hereunder or thereunder and each other
document designated as such.

"Customary Permitted Liens" shall mean
-------------------------

(i) Liens (other than Environmental Liens
and any Lien imposed under ERISA) for taxes, assess-
ments or charges of any Governmental Authority or claim
not yet due or which are being contested in good faith
by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are
being maintained;

(ii) Liens perfected after the Filing Date
under Section 546 of the Bankruptcy Code, statutory
Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens (other
than any Lien imposed under ERISA) imposed by law
created in the ordinary course of business for amounts
not yet due or which are being contested in good faith
by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are
being maintained;

(iii) Liens (other than any Lien imposed under
ERISA) incurred or deposits made in the ordinary course
of business (including, without limitation, surety
bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of
social security benefits or to secure the performance
of tenders, bids, contracts (other than for the repay-
ment of Indebtedness or with respect to leases of real
or personal property), statutory obligations and other
similar obligations or arising as a result of progress
payments under government contracts;

(iv) easements (including, without limita-
tion, reciprocal easement agreements and utility
agreements), rights-of-way and land use covenants
(whether or not recorded), which do not interfere
materially with the ordinary conduct of the business of
the Borrower and which do not materially detract from

NY1-53665.4 -8-

the value or transferability of the property to which
they attach or impair the use thereof to the Borrower
or as Collateral;

(v) rights of tenants, subtenants,
franchisees or parties in possession (other than a
debtor in possession, trustee in bankruptcy or receiver
of the Borrower of Real Property owned or leased by the
Borrower), or options or rights of first refusal,
whether pursuant to leases, subleases, franchise
agreements, other occupancy agreements or otherwise,
with respect to real property owned by the Borrower, if
such rights were vested on the Filing Date or created
thereafter in the ordinary course of business in
transactions permitted under this Agreement;

(vi) extensions, renewals or replacements of
any Lien referred to in paragraphs (i) through (iv)
above, provided, that the principal amount of the
--------
obligation secured thereby is not increased and that
any such extension, renewal or replacement is limited
to the property originally encumbered thereby;

(vii) building restrictions, zoning laws and
other statutes, laws, rules, regulations, ordinances
and restrictions related to the use of Real Property,
and any amendments thereto, now or at any time
hereafter adopted by any Governmental Authority having
jurisdiction; and

(viii) pooling, interchange and other similar
arrangements customary in the ordinary course of the
Borrower's business as and to the extent permitted
under the Permitted First Liens and the Security
Documents.

"Default" shall mean any event, act or condition
-------
which with notice or lapse of time, or both, would
constitute an Event of Default.

"Deferral Aircraft" shall mean the aircraft
-----------------
described on Schedule 5 hereto.

"Designated Aircraft Leases" shall mean those
--------------------------
certain Aircraft Lease Agreements listed on Schedule 6
hereto, as the same may be amended, supplemented or
otherwise modified from time to time.

"Designated Collateral" shall mean the Collateral
---------------------
described in Schedule 2.

NY1-53665.4 -9-

"Distribution", with respect to any Person, shall
------------
mean that such Person has declared or paid any dividend or
returned any capital to, its stockholders or authorized or
made any other distribution, payment or delivery of property
or cash to its stockholders as such, or redeemed, retired,
purchased, or otherwise acquired, directly or indirectly,
for consideration, any shares of any class of its capital
stock (or any options or warrants issued by such Person with
respect to its capital stock), or set aside any funds for
any of the foregoing purposes, or shall have permitted any
of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock
of such Person (or any options or warrants issued by such
Person with respect to its capital stock), or shall have
paid or made provision for payment of any profit sharing
arrangement. Without limiting the foregoing,
"Distributions" with respect to any Person shall also
include all payments made or required to be made by such
Person with respect to any stock appreciation rights plans,
equity incentive or achievement plans or any similar plans
or the setting aside of any funds for the foregoing
purposes.

"Dollars" and the sign "$" shall each mean freely
------- -
transferable lawful money of the United States (expressed in
dollars).

"Domestic Gates" shall mean each landing gate
--------------
located at an airport within the United States.

"DOT" shall mean the United States Department of
---
Transportation or similar regulatory authority established
in replacement thereof.

"Effective Date" shall have the meaning provided
--------------
in Section 5.01.

"1110 Indebtedness" shall mean any Indebtedness
-----------------
secured by a Lien described in Section 1110 of the
Bankruptcy Code.

"Eligible Receivable" shall mean, at the time of
-------------------
any determination thereof, any Receivable (as defined in the
Security Agreement) of the Borrower which meets the follow-
ing standards of eligibility:

(i) the Borrower has lawful and absolute title to
such Receivable;

(ii) such Receivable is a valid, binding and
legally enforceable obligation of the Account

NY1-53665.4 -10-

Debtor (as defined in the Security Agreement)
who is obligated under such Receivable;

(iii) such Receivable is not subject to any
litigation, or other proceeding, dispute,
setoff, counterclaim or other claim or
defense on the part of the Account Debtor
denying liability under such Receivable in
whole or in part;

(iv) the Borrower has the full and unqualified
right to assign and grant Liens in such
Receivable to the Collateral Agent as
security for the Obligations;

(v) such Receivable is not subject to any Lien in
favor of any other Person;

(vi) such Receivable is a bona fide Receivable
---- ----
consisting of a proper and accurate amount
due from the Account Debtor arising from the
sale of goods or the rendering of services in
the ordinary course of the Borrower's
business and which does not consist of a
prepaid expense, warranty payment or claim
against any manufacturer, vendor, supplier or
other Person or an adjustment for unreported
sales or any other travel agency adjustment,
except that 75% of the amount of an
adjustment for unreported sales or any other
travel agency adjustment may constitute an
Eligible Receivable;

(vii) with respect to such Receivable, no Account
Debtor is

(a) incorporated in or primarily conducting
business in any jurisdiction located
outside the United States;

(b) an Affiliate of the Borrower;

(d) the subject of any reorganization,
bankruptcy, receivership, custodianship,
insolvency, or other like condition,
except an Account Debtor that is an
airline whose Receivable is through the
Airline Clearing House;

NY1-53665.4 -11-

(e) an agency, department, or instrumental-
ity of the United States or any state or
local governmental authority in the
United States unless the requirements of
the Assignment of Claims Act of 1940, as
amended, and any similar state or local
legislation shall have been satisfied in
respect thereof and the Required Lenders
are satisfied as to the absence of set-
offs, counterclaims and other defenses
to payment on the part of the United
States or such state or local govern-
mental authority; or

(f) a Person as to which the Borrower has
modified its standard terms of payment
as a result of concerns about the
creditworthiness of such Account Debtor
(e.g., by requiring prepayment or cash
----
on delivery);

(viii) such Receivable is not outstanding more than
180 days;

(ix) such Receivable is not a Receivable owing by
an Account Debtor which, at the time of any
determination of Eligible Receivables, owes
any amount with respect to any Receivable
that has been outstanding more than 180 days;

(x) with respect to the Account Debtor under such
Receivable, the Borrower is not indebted to
such Account Debtor for any goods provided or
services rendered by such Account Debtor or
otherwise, except an Account Debtor that is
an airline whose Receivable is through the
Airline Clearing House;

(xi) such Receivable is not payable in any
consideration other than cash and in U.S.
Dollars; and

(xii) such Receivable is evidenced by an invoice or
other writing, if any, customary and
appropriate in the air transportation
business, and is not evidenced by any
instrument or chattel paper.

A Receivable which is at any time an Eligible Receivable,
but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible

NY1-53665.4 -12-

Receivable until such time as it once again meets all of the
foregoing requirements. Notwithstanding the provisions of
the preceding clause (iii), a Receivable which is at any
time subject to a dispute on the part of the Account Debtor
denying liability under such Receivable in part shall
constitute an Eligible Receivable to the extent of the
portion thereof which is not in dispute (so long as such
Receivable otherwise satisfies all of the foregoing
requirements). In addition, any such Receivable which is in
dispute as to a portion thereof shall not preclude another
Receivable of the same Account Debtor from constituting an
Eligible Receivable pursuant to the provisions of the
preceding clause (ix).

"Engine Collateral" shall mean the three CFM 56-3B
-----------------
engines of the Borrower bearing manufacturer's serial
numbers 720601, 720772 and 720867.

"Engine Leases" shall mean those certain Engine
-------------
Sublease Agreements listed on Schedule 7 hereto, as the same
may be amended, supplemented or otherwise modified.

"Environmental Lien" shall mean a Lien in favor of
------------------
any Governmental Authority for (i) any liability under
Hazardous Materials Laws or (ii) damages arising from or
costs incurred by such Governmental Authority in response to
a release or threatened release of Hazardous Materials.

"ERISA" shall mean the Employees Retirement Income
-----
Security Act of 1974, as amended from time to time. Section
references to ERISA, are to ERISA, as in effect at the date
of this Agreement, and to any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or
substituted therefor.

"Event of Default" shall have the meaning provided
----------------
in Section 9.

"Event of Default Collateralization Amount" shall
-----------------------------------------
have the meaning provided in Section 7.10(b).

"Existing Debt" shall have the meaning provided in
-------------
Section 8.05.

"Existing Lenders" shall mean GPA Leasing USA I,
----------------
Inc., GPA Sub and Kawasaki Leasing International Inc.

"Existing Secured Debt" shall mean all Indebted-
---------------------
ness of the Borrower secured on the Filing Date by Permitted
First Liens.

NY1-53665.4 -13-

"FAA" shall mean the Federal Aviation Adminis-
---
tration or similar regulatory authority established in
replacement thereof.

"Facility Fee" shall have the meaning provided in
------------
Section 3.01.

"Fees" shall mean all amounts payable pursuant to
----
or referred to in Section 3.01.

"Filing Date" shall have the meaning provided in
-----------
the second Whereas clause of this Agreement.

"Final Extension Loan Order" shall mean an order
--------------------------
of the Bankruptcy Court in the form of Exhibit D-8 (as such
form may be modified pursuant to Section 7.10(a) in a manner
acceptable to the Required Lenders, in their sole and
absolute discretion, and as such form may otherwise be
modified in a manner acceptable to each of the Lenders, in
its sole and absolute discretion).

"Final Order" shall have the meaning provided in
-----------
Section 5.02(c).

"First Amended and Restated Credit Agreement"
-------------------------------------------
shall have the meaning specified in the first paragraph of
this Agreement.

"Foreign Lender" shall have the meaning provided
--------------
in Section 2.10(a).

"Governmental Actions" shall mean any regulations,
--------------------
authorizations, applications, approvals, consents, exemp-
tions, filings, licenses, notices, registrations, orders,
rulings, decrees, judgments, permits, guidance, policy or
program and other requirements of, to or with any
Governmental Authority.

"Governmental Authority" shall mean any government
----------------------
(federal, foreign, state, local or other) and any
governmental or quasi-governmental, regulatory, judicial or
public authority, board, body, commission, bureau, agency or
the like.

"GPA Agreements" shall mean, collectively, the
--------------
A320 Leases, the Engine Leases, the Put Agreement and the
Designated Aircraft Leases.

"GPA Entity" shall mean GPA Group plc or any
----------
Subsidiary thereof, and their successors and assigns.

NY1-53665.4 -14-

"GPA Order" shall have the meaning provided in
---------
Section 5.01(h).

"GPA Sub" shall mean GPA Leasing USA Sub I, Inc.,
-------
a Connecticut corporation, and its successors and assigns.

"Hazardous Materials" shall mean (i) any oil,
-------------------
flammable substance, explosives, radioactive materials,
hazardous wastes or substances, toxic wastes or substances,
asbestos or any other materials or pollutants which because
of characteristics of flammability, ignitibility, corros-
sivity or reactivity, or because they exist in such quantity
or manner, are required by a Governmental Authority to be
reported or remediated; (ii) any chemical, material sub-
stance or constituent defined as or included in the defini-
tion of "hazardous pollutants" (under Section 112 of the
Clean Air Act, as it may be amended from time to time),
"hazardous substance," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted
hazardous waste," or "toxic substances" or words of similar
import under any applicable local, state or federal law or
under the regulations adopted, or publications promulgated
pursuant thereto, including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
--
seq.; the Hazardous Materials Transportation Act, as
---
amended, 49 U.S.C. Section 1801, et seq.; the Resource
-- ---
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901,
et seq.; the Clean Water Act, as amended, 33 U.S.C. Section 1251,
-- ---
et seq.; Toxic Substances Control Act, 15 U.S.C.
-- ---
Section 2601-2629; Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 136-136y; or similar state statutes; and
(iii) any other chemical, material or substance, release or
discharge of which or exposure to which is prohibited,
limited or regulated by any Governmental Authority or may or
could pose a hazard to the health and safety of the
occupants of any of the properties of the Borrower or the
owners and/or occupants of property under, adjacent to or
surrounding any such property. References herein to
Collateral in respect of Hazardous Materials also include
all property on (including but not limited to buildings,
improvements, soils or ground waters) or under the surface
thereof or adjacent thereto or surrounding the property on
or under which the Collateral is located.

"Hazardous Materials Claims" shall mean any and
--------------------------
all enforcement, remediation, clean-up, removal or other
Governmental Actions instituted or completed by any Person
pursuant to any Hazardous Materials Laws, or any written
notice of any enforcement, clean-up, removal or other
Governmental Actions or orders pursuant to any Hazardous

NY1-53665.4 -15-

Materials Laws, together with all claims made by any third
party against the Borrower or any of its properties relating
to damage, contribution, cost recovery, compensation, loss
or injury resulting from any Hazardous Materials.

"Hazardous Materials Laws" shall mean any and all
------------------------
federal, state or local laws, ordinances, rules, regula-
tions, or other enforceable requirements now or hereafter
existing or enacted relating to the environment, health and
safety, and Hazardous Materials (including, without limita-
tion, the use, handling, transfer, consolidation, transpor-
tation, production, disposal, discharge or storage thereof)
or to industrial hygiene or the environmental conditions on,
under or about any of the property of the Borrower,
including, without limitation, soil and groundwater
conditions.

"High Density Airport" shall mean and include each
--------------------
of John F. Kennedy, Washington National, Newark and O'Hare
Airports.

"Indebtedness" shall mean, as to any Person, with-
------------
out duplication, (i) all indebtedness (including principal,
interest, fees and charges) of such Person for borrowed
money or for the deferred purchase price of property or
services, (ii) the face amount of all letters of credit
issued for the account of such Person and all drafts drawn
thereunder, (iii) all liabilities of the types described in
clauses (i), (ii), (iv), (v), (vi) and (vii) of this
definition and secured by any Lien on any property
(including, without limitation, a leasehold interest) owned
by such Person, whether or not such liabilities have been
assumed by such Person, (iv) the aggregate amount required
to be capitalized under leases under which such Person is
the lessee, (v) all Contingent Obligations of such Person,
(vi) all obligations of such Person under "take-or-pay" or
other similar arrangements and (vii) all obligations of such
Person under interest rate or currency exchange protection
or other similar agreements, provided that Indebtedness
--------
shall not include trade payables and accrued expenses, in
each case arising in the ordinary course of business, or the
Permitted Expenses.

"Initial Cash Management Agreement" shall mean the
---------------------------------
Cash Management Agreement among the Local Bank, the
Collateral Agent and the Borrower in the form of Exhibit I
hereto, as modified, supplemented or amended from time to
time.

"Inter-Creditor Agreement" means the Inter-
------------------------
Creditor Agreement dated as of August 26, 1991 between the

NY1-53665.4 -16-

Collateral Agent, the Lenders and First Interstate Bank of
Arizona, N.A., as same may be amended, modified or
supplemented from time to time.

"Interest Payment Date" shall have the meaning
---------------------
provided in Section 2.07(c).

"Interest Period" shall mean, with respect to each
---------------
Loan, the period from the date of the disbursement of such
Loan to the first Interest Payment Date and each period
thereafter beginning and ending on successive Interest
Payment Dates; provided, however, that in the event that any
-------- -------
amount is not paid when due, "Interest Period" shall mean
such period consisting of one Business Day, one week, one
month or three months as the Administrative Agent may select
in its sole and absolute discretion. The Administrative
Agent shall notify the Lenders and the Borrower of any such
selection.

"Interim Extension Loan Order" shall mean an order
----------------------------
of the Bankruptcy Court in the form of Exhibit D-7 (as such
form may be modified in a manner acceptable to each of the
Lenders, in its sole and absolute discretion).

"Interim Order" shall have the meaning provided in
-------------
Section 5.02(c).

"Investment Account" shall have the meaning
------------------
provided in the Initial Cash Management Agreement or any
other cash management arrangements entered into by the
Borrower at the request of the Required Lenders pursuant to
Section 7.10.

"Investment Account Minimum" shall have the
--------------------------
meaning provided in Section 8.15(e).

"Kawasaki" shall mean Kawasaki Leasing
--------
International Inc., a Delaware corporation.

"Kawasaki Agreements" shall mean and include
-------------------
(i) the Aircraft Finance Agreement, (ii) the Kawasaki
Leases, (iii) the Kawasaki Credit Agreement, (iv) the
Kawasaki Restructuring Agreement, (v) the Kawasaki Put
Agreement, and (vi) all leases and subleases entered into
from time to time under and pursuant to the Kawasaki Put
Agreement.

"Kawasaki Credit Agreement" shall mean the Loan
-------------------------
Restructuring Agreement, dated as of December 1, 1991,
between the Borrower and Kawasaki, as amended, supplemented
or modified from time to time.

NY1-53665.4 -17-

"Kawasaki Leases" shall mean those certain
---------------
agreements listed on Schedule 17 hereto, as the same may be
amended, supplemented or modified from time to time.

"Kawasaki Order" shall mean an order of the
--------------
Bankruptcy Court in the form of Exhibit D-5 (as such form
may be modified in a manner acceptable to Kawasaki, in its
sole and absolute discretion) to the extent, and only to the
extent, such order relates to the Kawasaki Agreements (and
the authorization of the Borrower to enter into and perform
its obligations under the Kawasaki Agreements) and affords
administrative priority to the obligations of the Borrower
under the Kawasaki Credit Agreement.

"Kawasaki Put Agreement" shall mean the Put
----------------------
Agreement, dated as of December 1, 1991, between the
Borrower and Kawasaki, as amended, supplemented or modified
from time to time.

"Kawasaki Restructuring Agreement" shall mean the
--------------------------------
Restructuring Agreement, dated as of December 1, 1991,
between the Borrower and Kawasaki, as amended, supplemented
or modified from time to time.

"Kawasaki Stipulations" shall mean and include
---------------------
(i) the Joint Stipulation with Respect to Bankruptcy Code
Section 1110 . . . [N160AW], (ii) the Joint Stipulation with
Respect to Bankruptcy Code Section 1110 . . . [N910AW], and
(iii) the Joint Stipulation with Respect to Bankruptcy Code
Section 1110 . . . [720-601, 720-772, 720-867].

"Lender" shall mean each institution listed in
------
Annex I, as well as any Person that becomes a "Lender"
hereunder pursuant to Section 10.04.

"Lessor Lenders" shall mean (i) GPA Leasing USA I,
--------------
Inc., GPA Sub and each other Subsidiary of GPA Group plc
which is or hereafter becomes a Lender, and (ii) Kawasaki
and each Subsidiary of Kawasaki Enterprises, Inc. which is
or hereafter becomes a Lender; provided that each such
--------
Person shall only be a "Lessor Lender" at such times as it
is a Lender hereunder.

"LIBOR" shall mean for each Interest Period:
-----

(i) the rate of interest determined by the
Administrative Agent as follows:

(y) On the second London Business Day prior
to the first day of an Interest Period (a "LIBOR
-----
Determination Date"), the Administrative Agent will
------------------

NY1-53665.4 -18-

determine the arithmetic mean of the offered rates for
deposits in United States dollars for the period in its
good faith judgment comparable to the Interest Period
which appear on the Reuters Screen LIBO Page at
approximately 11:00 A.M., London time, on such LIBOR
Determination Date. "Reuters Screen LIBO Page" means
------------------------
the display designated as Page "LIBO" on the Reuters
Monitor Money Rate Service (or such other page as may
replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major
banks). If only one such rate is quoted, then LIBOR
shall mean such quoted rate; or

(z) If no offered rates appear on the
Reuters Screen LIBO Page, the Administrative Agent will
request the principal London offices of each of four
major banks in the London interbank market, as selected
by the Administrative Agent, to provide the Adminis-
trative Agent with its offered quotations, or the rate
at which it would offer, for deposits in United States
dollars for a period comparable to the Interest Period
to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR
Determination Date and in a principal amount equal to
an amount of not less than U.S. $1 million that is
representative of a single transaction in such market
at such time, and LIBOR will be the arithmetic mean of
all such quotations provided or, if only one quotation
is provided, such quotation; in either case divided by
-------

(ii) an amount equal to one minus the
aggregate (but without duplication) weighted average of
the maximum rates (expressed as a decimal) of reserve
requirements in effect from time to time (including,
without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect
thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such
Board) as in effect from time to time or offshore
Dollar liabilities which are required to be maintained
by a member bank of such System (such rate to be
adjusted to the next higher 1/100 of 1%).

"Lien" shall mean any mortgage, pledge, hypothe-
----
cation, encumbrance, lien (statutory or other), or other
security agreement of any kind or nature whatsoever (includ-
ing, without limitation, any conditional sale or other title
retention agreement and any lease having substantially the

NY1-53665.4 -19-

same effect as any of the foregoing and any assignment or
deposit arrangement in the nature of a security device).

"Lien Termination Date" shall have the meaning
---------------------
provided in Section 10.17.

"Loan" shall mean a loan by a Lender to the
----
Borrower under and pursuant to the Original Credit
Agreement, the First Amended and Restated Credit Agreement
and/or the Second Amended and Restated Credit Agreement.

"Local Bank" shall have the meaning provided in
----------
the Initial Cash Management Agreement.

"London Business Day" shall mean any day on which
-------------------
dealings in deposits in United States dollars are transacted
in the London interbank market.

"Margin Stock" shall have the meaning provided in
------------
Regulation U of the Board of Governors of the Federal
Reserve System.

"Management Letter Agreement" shall mean a letter
---------------------------
agreement in the form of Exhibit KK hereto, as the same may
be amended, modified or supplemented from time to time.

"Maturity Date" shall mean the earliest of
-------------
(x) June 30, 1994, (y) the effective date of a confirmed
plan of reorganization for the Borrower under Chapter 11 of
the Bankruptcy Code and (z) the date of substantial
consummation (as such term is defined in Section 1101 of the
Bankruptcy Code) of a plan of reorganization for the
Borrower under Chapter 11 of the Bankruptcy Code.

"Merchant Agreement Supplement" shall mean an
-----------------------------
amendment to the Supplement to Merchant Agreement, dated as
of March 15, 1991, between the Borrower and First Interstate
Bank of Arizona, N.A., as modified, supplemented or amended
from time to time with the prior written consent of the
Required Lenders.

"Mortgage" shall mean the Mortgages in the forms
--------
of Exhibit J-1 hereto, as same may be amended, modified or
supplemented from time to time.

"Mortgaged Property" shall have the meaning
------------------
provided in Section 5.01(f).

"Multiemployer Plan" shall mean a "multiemployer
------------------
plan" as defined in Section 4001(a)(3) of ERISA.

NY1-53665.4 -20-

"Net Proceeds" shall mean for each Asset Sale the
------------
proceeds (net of expenses actually paid by the Borrower as a
result thereof) received by the Borrower from such Asset
Sale less any Existing Secured Debt or any Indebtedness
secured by a Permitted First Lien, including, without
limitation, interest period breakage or make-whole premiums
payable in connection therewith, of the Borrower required,
as permitted by the Bankruptcy Court, to be repaid with such
proceeds.

"Northwest" shall mean Northwest Airlines, Inc., a
---------
Minnesota corporation.

"Northwest Order" shall have the meaning provided
---------------
in Section 5.01(h).

"Note" shall have the meaning provided in Section
----
2.05(a).

"Notice Office" shall mean the office of the
-------------
Administrative Agent shown opposite its name on the signa-
ture pages hereof, or such other office as the Administra-
tive Agent may hereafter designate in writing as such to the
other parties hereto.

"Obligations" and "Credit Agreement Obligations"
----------- ----------------------------
shall mean all amounts payable at any time or from time to
time and all other liabilities and obligations of the
Borrower owing to the Administrative Agent, the Collateral
Agent or any Lender pursuant to the terms of this Agreement
or any other Credit Document.

"Official Committee" shall mean any official
------------------
committee appointed in the Case with the approval of the
Bankruptcy Court.

"Operating Plan" shall mean the Borrower's Summary
--------------
Pro Forma Financial Statements, Plan Revision No. 9, June
1993 through December 1994, dated July 15, 1993, a certified
copy of which has been delivered to the Administrative Agent
and each Lender, as the same has been amended, supplemented
and modified by the Borrower's Plan Revision No. 9
Amendments, dated September 21, 1993, a certified copy of
which has been delivered to the Administrative Agent and
each Lender, and as the same may be further amended,
supplemented or otherwise modified with the consent of the
Required Lenders.

"Operating Route" shall mean any Route which is
---------------
being operated such that it is not likely to be deemed
"dormant" by the DOT.

NY1-53665.4 -21-

"Orders" shall mean and include the Interim Order,
------
the Final Order, the Additional Loan Order, the Second
Additional Loan Order, the Interim Extension Loan Order and
the Final Extension Loan Order.

"Original Credit Agreement" shall have the meaning
-------------------------
specified in the first paragraph of this Agreement.

"Payment Office" shall mean the account of the
--------------
Administrative Agent located at One Bankers Trust Plaza, New
York, New York 10006, or such other account as the Adminis-
trative Agent may hereafter designate in writing as such to
the other parties hereto.

"PBGC" shall mean the Pension Benefit Guaranty
----
Corporation established pursuant to Section 4002 of ERISA or
any successor thereto.

"Pension Plan" shall mean any employee benefit
------------
plan which is subject to the provisions of Title IV of ERISA
and which is maintained for employees of the Borrower or any
member of the Controlled Group, other than a Multiemployer
Plan.

"Percentage" shall mean, for each Lender, a
----------
fraction (expressed as a percentage), the numerator of which
is the outstanding principal amount of the Loans of such
Lender, as in effect at the time of determination, and the
denominator of which is the outstanding principal amount of
the Loans of all of the Lenders, as in effect at such time.

"Permitted Expenses" shall mean all fees and
------------------
expenses of professionals retained pursuant to Section 327
of the Bankruptcy Code by the Borrower or by an Official
Committee, and expenses of members of an Official Committee,
and all compensation awarded under Sections 503(b)(2)
through 503(b)(6) of the Bankruptcy Code, as such may be
allowed by the Bankruptcy Court and paid by the Borrower
from time to time, provided, however, that upon the
-------- -------
occurrence of an Event of Default, then, from and after such
event, Permitted Expenses shall mean the sum of (i) all
amounts previously paid by the Borrower to professionals
retained by the Borrower or an Official Committee, or
Official Committee members' expenses, and all compensation
awarded under Sections 503(b)(2) through 503(b)(6) of the
Bankruptcy Code, as of the date of such Event of Default,
and (ii) $1,000,000 of such expenses if such date occurs
prior to January 1, 1992 and $2,000,000 of such expenses if
such date occurs after December 31, 1991, and, provided,
--------
further, however, that Permitted Expenses shall not include
------- -------
expenses incurred in connection with any objection to the

NY1-53665.4 -22-

validity, priority or extent of any Lien or priority status
granted to the Lenders hereunder or pursuant to any of the
Orders or to the enforceability of any rights granted
hereunder or under the other Credit Documents, the GPA
Agreements or the Kawasaki Agreements or any of the Orders
or the GPA Order or the Kawasaki Order.

"Permitted First Liens" shall mean the Liens
---------------------
described in clauses (i), (v), (viii) and (ix) of Section
8.01.

"Person" shall mean any individual, partnership,
------
joint venture, firm, corporation, association, trust or
other enterprise or Governmental Authority.

"Projections" shall have the meaning provided in
-----------
Section 6.06(e).

"Put Agreement" shall mean that certain A320 Put
-------------
Agreement, dated as of June 25, 1991, between GPA Group plc
and the Borrower, as the same may be amended, supplemented
or otherwise modified from time to time.

"Real Property" shall mean all of the right, title
-------------
and interest of the Borrower in and to land, improvements
and fixtures, including leaseholds and Domestic Gates.

"Required Lenders" at any time shall mean Lenders
----------------
the principal amount of whose Loans outstanding exceed 75%
of the total principal amount of Loans outstanding (it being
understood that the use of the term "Required Lenders" shall
be subject to the provisions of the first sentence of
Section 10.11, which provisions may require the consent of
or other action by Lenders whose Loans exceed a greater
percentage than the percentage stated in this definition).

"Routes" shall mean international route
------
authorities held by the Borrower.

"SEC" shall have the meaning provided in Section
---
7.01(e).

"Second Additional Loan Order" shall mean an order
----------------------------
of the Bankruptcy Court in the form of Exhibit D-6 (as such
form may be modified pursuant to Section 7.10(a) in a manner
acceptable to the Required Lenders, in their sole and
absolute discretion, and as such form may otherwise be
modified in a manner acceptable to all of the Lenders, in
their sole and absolute discretion).

NY1-53665.4 -23-

"Second Amended and Restated Credit Agreement"
--------------------------------------------
shall have the meaning specified in the first paragraph of
this Agreement.

"Second Amendment Effective Date" shall have the
-------------------------------
meaning specified in Section 5.04.

"Second Amendment Lender" shall mean Ansett and
-----------------------
each Lender (other than an Existing Lender) that became a
Lender and made a Loan on the Second Amendment Effective
Date.

"Section 7.10(c) Amount" shall have the meaning
----------------------
provided in Section 7.10(c).

"Secured Creditors" shall mean each of the
-----------------
Lenders, the Collateral Agent and the Administrative Agent.

"Security Agreement" shall mean a Security
------------------
Agreement in the form of Exhibit F hereto, as the same may
be amended, modified or supplemented from time to time.

"Security Documents" shall mean and include the
------------------
Orders, the Security Agreement, the Inter-Creditor
Agreement, the Mortgage, the Assignment of Gate Leases, the
Aircraft/Engine Mortgage, the Slot Deed of Conveyance, the
Slot Lease, the Initial Cash Management Agreement and the
other agreements related to the Concentration Account and/or
the Investment Account, and any ancillary documentation
which is required or otherwise executed to evidence and/or
perfect the liens and security interests and other rights
granted to the Collateral Agent on behalf of the Lenders
pursuant to this Agreement, the Orders, the Security
Agreement, the Inter-Creditor Agreement, the Mortgage, the
Aircraft/Engine Mortgage, the Slot Deed of Conveyance, the
Slot Leases, the Initial Cash Management Agreement and the
other agreements related to the Concentration Account and/or
the Investment Account.

"Slot" shall mean all of the rights, titles,
----
interest and privileges of an air carrier in and to the
primary operating authority granted by the FAA pursuant to
Title 14, to conduct one Instrument Flight Rule (as defined
under the Aviation Act) take-off or landing in a specified
one-hour or half-hour period at a High Density Airport. The
term "Slot" as used herein shall include all Slots created
after the date hereof pursuant to Title 14.

"Slot Collateral" means the Slots of the Borrower
---------------
at O'Hare Airport and John F. Kennedy Airport.

NY1-53665.4 -24-

"Slot Deed of Conveyance" shall mean the Deed of
-----------------------
Conveyance and Assignment of Allocated Instrument Flight
Rules Operations Times of the Slots made by the Borrower in
favor of the Collateral Agent in the form of Exhibit K, as
modified, supplemented or amended from time to time.

"Slot Lease" shall mean, collectively, the Slot
----------
Lease Agreement with respect to the Slots made by the
Collateral Agent to the Borrower in form attached hereto as
Exhibit L, as modified, supplemented or amended from time to
time.

"Specified Aircraft and Engines" shall mean and
------------------------------
include the Aircraft and Engines described on Part A of
Schedule 1 to the Aircraft and Engine Chattel Mortgage and
Security Agreement in the form of Exhibit G hereto, as such
Schedule may be modified, supplemented or amended from time
to time.

"Subsidiary" shall mean, as to any Person, (i) any
----------
corporation more than 50% of whose stock of any class or
classes having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might
have voting power by reason of the happening of any
contingency) is at the time owned by such Person and/or one
or more subsidiaries of such Person and (ii) any partner-
ship, association, joint venture or other entity in which
such Person and/or one or more subsidiaries of such Person
has more than a 50% equity interest at the time. Unless
otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of the Borrower.

"Successor Merchant Bank Arrangement" shall have
-----------------------------------
the meaning provided in Section 7.10(a).

"Taxes" shall have the meaning provided in Section
-----
2.10(a).

"Termination Event" shall mean (i) a "Reportable
-----------------
Event" described in Section 4043 of ERISA and the
regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for 30-day notice to the
PBGC under such regulations), (ii) the withdrawal of the
Borrower or any member of the Controlled Group from a
Pension Plan during a plan year in which it was a
"substantial employer", as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as
a termination under Section 4041 of ERISA, (iv) the insti-

NY1-53665.4 -25-

tution of proceedings to terminate a Pension Plan by the
PBGC, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Pension Plan.

"Third Amendment Effective Date" shall have the
------------------------------
meaning specified in Section 5.05.

"Title 14" shall mean Title 14 of the Code of
--------
Federal Regulations, Part 93, Subparts K and S, as amended
from time to time or any recodification thereof.

"UCC" shall mean the Uniform Commercial Code as
---
from time to time in effect in the relevant jurisdiction.

"United States" and "U.S." shall each mean the
------------- ----
United States of America.

"Written" or "in writing" shall mean any form of
------- ----------
written communication or a communication by means of telex,
telecopier or facsimile device, telegraph or cable.

1.02 Other Definitional Provisions. References
-----------------------------
herein to "Sections", "Exhibits" and "Schedules" shall be to
Sections of, and Exhibits or Schedules attached to, this
Agreement unless otherwise specifically provided. Refer-
ences herein to "this Agreement", "herein", "hereof" or
"hereunder" shall be to this Agreement, as amended, supple-
mented or otherwise modified from time to time in accordance
with Section 10.11. Except as otherwise expressly provided
herein, references to other agreements or instruments shall
mean such agreements or instruments as the same may be
amended, supplemented or modified from time to time.

SECTION 2. LOANS.
-----

2.01 Commitments and Loans.
---------------------

(a) Subject to and upon the terms and conditions
set forth in the Original Credit Agreement, the First
Amended and Restated Credit Agreement and/or the Second
Amended and Restated Credit Agreement, each Lender honored
its Commitment and made its Loans (it being acknowledged and
agreed that on and as of the date hereof the Loans of each
Lender are outstanding in the aggregate principal amount set
forth opposite such Lender's name in Annex I to this
Agreement).

NY1-53665.4 -26-

(b) Amounts prepaid or repaid under the Original
Credit Agreement, the First Amended and Restated Credit
Agreement, the Second Amended and Restated Credit Agreement
and this Agreement may not be reborrowed (it being
acknowledged and agreed that the Lenders are not obligated
to make any further or additional loans under this
Agreement).

2.02 [Reserved].
----------

2.03 [Reserved].
----------

2.04 [Reserved].
----------

2.05 Notes.
-----

(a) The Borrower's obligation to pay the prin-
cipal of, and interest on, all Loans made by each Lender is
evidenced in part by a promissory note duly executed and
delivered to such Lender by the Borrower substantially in
the form of Exhibit A hereto (each a "Note" and collectively
----
the "Notes").
-----

(b) Each Note issued to each Lender (i) is
payable to the order of such Lender and is dated the
Effective Date or such later date on which such Lender
acquired or increased its Commitment, (ii) is in a stated
principal amount equal to the Commitment of such Lender as
in effect on the date of issuance thereof or the increase in
the Commitment of such Lender on the date of issuance
thereof and is payable in the outstanding principal amount
of the Loans evidenced thereby from time to time, (iii)
matures on the Maturity Date, (iv) bears interest as
provided in Section 2.07 in respect of the Loans evidenced
thereby and (v) is entitled to the benefits of this
Agreement and all other Credit Documents.

(c) Each Lender will note on its internal records
the amount of each Loan made by it and each payment in
respect thereof and will, prior to any transfer, record the
outstanding principal amount of Loans evidenced thereby.
Failure to make any such notation shall not affect any of
the Borrower's obligations in respect of such Loans.

2.06 [Reserved].
----------

2.07 Interest.
--------

(a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Loan from the
date the proceeds thereof are made available to the Borrower

NY1-53665.4 -27-

until maturity thereof (whether by acceleration or other-
wise) at a rate per annum which shall be 3-1/2% in excess of
the applicable LIBOR in effect from time to time.

(b) Overdue principal and overdue interest in
respect of each Loan and all other amounts not paid when due
under the Credit Documents shall bear interest at a rate per
annum which shall be 5-1/2% in excess of the applicable
LIBOR for the Interest Period selected by the Administrative
Agent in effect from time to time. Interest which accrues
under this Section 2.07(b) shall be payable on demand.

(c) Except as provided in Section 2.07(b),
accrued (and theretofore unpaid) interest shall be payable
in respect of each Loan in arrears (i) on the last Business
Day of each calendar quarter, (ii) at maturity (whether by
acceleration or otherwise) and (iii) after such maturity, on
demand. Each date described in clauses (i), (ii) and (iii)
of the preceding sentence of this Section 2.07(c) is
referred to herein as an "Interest Payment Date".
---------------------

2.08 Principal Repayments. The Borrower shall
--------------------
repay the principal amount of the Loans outstanding in
installments in the following amounts and on the following
dates: (i) on March 31, 1994, in a principal amount equal
to $5,000,000.00; and (ii) on June 30, 1994, in a principal
amount equal to $78,616,597.27 or such lesser principal
amount of the Loans as is then outstanding. Notwithstanding
anything herein to the contrary, (i) if on or prior to
October 8, 1993, the Final Extension Loan Order shall not
have been entered or, if entered, shall have been stayed,
reversed, vacated, rescinded, modified or amended in any
respect (other than modifications or amendments acceptable
to each of the Lenders, in its sole and absolute
discretion), on October 8, 1993, the aggregate unpaid
balance of all principal of and all accrued and unpaid
interest (including, without limitation, accrued and unpaid
interest at the rate specified in Section 2.07(b) for each
day subsequent to September 30, 1993 and prior to the date
of payment) on the Loans and all other amounts due hereunder
or under any other Credit Document shall be due and payable
in full, and (ii) if not theretofore paid as provided in the
preceding clause (i), on the Maturity Date, the aggregate
unpaid balance of all principal and all accrued and unpaid
interest on the Loans and all other amounts due hereunder or
under any other Credit Document shall be due and payable in
full.

2.09 Interest Period Indemnification. Without
-------------------------------
limiting Section 2.11 hereof, the Borrower agrees to
indemnify each Lender and to hold each Lender harmless from

NY1-53665.4 -28-

any loss or expense, including, without limitation, any such
loss or expense arising from interest, fees or indemnities
payable by such Lender to lenders of funds obtained by it in
order to maintain its Loans hereunder and any such loss or
expense (including, without limitation, loss of anticipated
profit) incurred in liquidating or reemploying swaps, loans
or deposits from which such funds were obtained or priced,
which such Lender may sustain or incur as a consequence of
(i) default by the Borrower in the payment when due of the
principal of or interest on any Loan hereunder, (ii) failure
or default by the Borrower to repay or prepay after the
Borrower has given a notice of repayment or prepayment or is
required to make a prepayment pursuant to Section 4, and
(iii) the making of any repayment or prepayment of a Loan or
payment of interest in respect thereof (including, without
limitation, pursuant to Sections 4.01 or 4.02) on a day
which is not the last day of an applicable Interest Period.
The Borrower shall pay to each Lender any amounts owing to
such Lender pursuant to this Section 2.09 within five (5)
Business Days after it receives the Lender's certificate
certifying in reasonable detail the amount of such loss or
expense, which certificate shall be conclusive in the
absence of manifest error. Such Lender shall deliver a copy
of any such certificate to the Administrative Agent at the
same time such certificate is delivered to the Borrower.

2.10 Taxes.
-----

(a) The Borrower shall pay all amounts payable
hereunder or under the Credit Documents to the Adminis-
trative Agent and each Lender free and clear of, and without
deduction or withholding for or on account of, any present
and future taxes, levies, imposts, duties, fees, assess-
ments, deductions, withholdings or other charges imposed by
any country, jurisdiction or any political subdivision or
taxing authority thereof or therein, excluding (i) net
income and franchise taxes (including minimum, net worth or
capital taxes) imposed on such Person by any taxing
authority of the United States of America (or the principal
country of tax residence of the ultimate parent corporation
of such Person pursuant to this Agreement) or political
subdivision thereof or by any country, jurisdiction or any
political subdivision or taxing authority thereof or therein
in which the lending office with respect to the Loans of
such Lender hereunder or principal office of such Person is
located and (ii) withholding taxes described in the second
paragraph of this Section 2.10(a) (all such nonexcluded
taxes, levies, imposts, duties, fees, assessments, deduc-
tions, withholdings and other charges being hereinafter
referred to as "Taxes"). If any Taxes shall be required by
-----
law to be deducted or withheld from any payment of an amount

NY1-53665.4 -29-

payable hereunder or under the other Credit Documents by the
Borrower or the Administrative Agent (other than the with-
holding taxes described in the next paragraph), the Borrower
shall increase the amount paid so that the Administrative
Agent or such Lender receives when due (and is entitled to
retain), after deduction or withholding for or on account of
such Taxes (including, without limitation, any taxes,
levies, imposts, duties, fees, deductions, withholdings
(other than withholdings permitted pursuant to the next
paragraph), assessments or other charges applicable to
additional amounts payable under this Section), the full
amount of the payment provided for herein or in the other
Credit Documents. In the event the Borrower is required by
a Lender to pay any additional amount to such Lender
pursuant to this Section 2.10, such Lender will designate a
different lending office if such designation will avoid the
need for, or reduce, such additional amount and will not be
otherwise disadvantageous to such Lender in its sole and
absolute judgment.

The Borrower or the Administrative Agent may
properly as required by law deduct any withholding taxes
from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent and such withholdings
shall not be subject to indemnification (i) if any Lender
which is organized under the laws of a jurisdiction outside
of the United States (a "Foreign Lender") fails or is unable
--------------
to furnish to the Borrower or the Administrative Agent a
statement (for example, an Internal Revenue Service Form
1001 or Form 4224) when reasonably requested by the Borrower
or the Administrative Agent which, had it been furnished,
would have provided the Borrower or the Administrative Agent
a complete exemption from any duty to withhold, (ii) if a
Foreign Lender furnishes to the Borrower or Administrative
Agent a statement of the type described in preceding clause
(i), but only to the extent such statement does not provide
the basis for a complete exemption from withholding, (iii)
if a Foreign Lender notifies the Borrower or the
Administrative Agent that circumstances on which such an
exemption was based no longer exist or (iv) if the taxation
authority notifies the Borrower or the Administrative Agent
that the Borrower or the Administrative Agent, as the case
may be, may not rely on such a statement, that such an
exemption is not available, or that withholding is required.
Each Foreign Lender further agrees to furnish to the
Borrower and the Administrative Agent annually and before
the first payment is made by the Borrower to or for the
benefit of such Foreign Lender, an appropriate statement in
duplicate that the income it receives hereunder, is, or is
expected to be, either effectively connected with a United
States trade or business or exempt from withholding pursuant

NY1-53665.4 -30-

to the terms of an income tax treaty (for example, an
Internal Revenue Service Form 1001 or Form 4224) or other-
wise is exempt from withholding tax. In addition, if (x)
any Lender fails to provide its employer identification
number (or otherwise qualify for exemption from back-up
withholding), (y) there is a notified payee underreporting,
or (z) there has been a payee certification failure, the
Borrower or the Administrative Agent may properly treat
itself as required by law to deduct any back-up withholding
taxes for or in respect of any sum payable hereunder to any
Lender or the Administrative Agent and such withholding
taxes shall not be subject to indemnification hereunder.

(b) The Borrower shall pay on or prior to the due
date and in accordance with applicable law (i) all past,
present and future Taxes imposed with respect to payments by
the Borrower or amounts payable or deemed payable by the
Borrower under the Credit Documents or the execution,
delivery, acquisition, recordation, filing, registration, or
enforcement of any Credit Document, (ii) all past, present
and future stamp, documentary, transfer, recording, property
(real or personal and including intangible personal
property)), excise or other similar Taxes, levies, imposts,
duties, fees, assessments and other charges imposed by any
jurisdiction with respect to any payment by the Borrower
under a Credit Document or the execution, delivery, acqui-
sition, recordation, filing, registration, or enforcement of
any Credit Document, (iii) all past, present and future
Taxes, levies, imposts, duties, fees, assessments and other
charges imposed by any jurisdiction with respect to any
payment or reimbursement by the Borrower pursuant to this
Section 2.10, and (iv) any interest, penalties, or additions
to tax or other charges or expenses incurred in connection
with any amount required to be paid under this Section 2.10,
unless such interest, penalties or additions to tax are the
result of the gross negligence of the applicable Lender or
the Administrative Agent.

(c) The Administrative Agent or any Lender may
pay, but shall not be obligated to pay, any amount which is
to be paid by the Borrower pursuant to this Section 2.10.
The Administrative Agent or such Lender shall, to the extent
practicable, give prior notice to the Borrower of the pay-
ment of any such amount (and, if practicable, the method of
calculating such Tax), or, if not practicable to give prior
notice, shall give notice to the Borrower of the payment of
any such amount (and, if practicable, the method of
calculating such Tax) promptly thereafter. The Borrower
shall, within five (5) Business Days after demand of the
Administrative Agent or any Lender and whether or not such
amount shall have been correctly or legally asserted or

NY1-53665.4 -31-

imposed, reimburse the Administrative Agent or such Lender
for such amount together with interest thereon at the rate
for defaults on payments then in effect from and including
the date paid by the Administrative Agent or such Lender to
and excluding the date on which the Administrative Agent or
such Lender is reimbursed by the Borrower in full. The
Borrower shall also reimburse the Administrative Agent or
any Lender for any and all Taxes and interest, penalties and
expenses thereon or with regard thereto within five (5)
Business Days after demand therefor. The Borrower may
contest with the relevant taxing authorities, at the
Borrower's expense, any Taxes (whether or not paid by the
Administrative Agent or the Lender) that, in the Borrower's
reasonable opinion, have been incorrectly calculated or
imposed, provided, that the Borrower shall pay all amounts
--------
owing to the Administrative Agent or respective Lenders as
provided above and shall not be permitted to await the
outcome of the respective contest. The Administrative Agent
or such Lender shall cooperate with the Borrower in any such
tax contest. In the event that any amount paid by the
Administrative Agent or any Lender pursuant to this Section
2.10 is found not to be owed by the Borrower and is repaid
or reimbursed to the Administrative Agent or such Lender,
the Administrative Agent or such Lender shall promptly
reimburse such amount (and any additional related amounts
paid by the Borrower to such Lender or the Administrative
Agent pursuant to Section 2.10(a) hereof) to the Borrower.

(d) Upon request of the Administrative Agent or
any Lender, the Borrower shall provide to the Administrative
Agent or such Lender original tax receipts, or notarized
copies thereof, evidencing payment of all applicable Taxes
(whether on interest, fees or other amounts) to the
appropriate Governmental Authority within 10 Business Days
of the earlier of the date on which any such payment is due
or the date of such request of the Administrative Agent or
such Lender.

2.11 Cost Indemnities. Within five (5) Business
----------------
Days after demand therefor, the Borrower agrees to pay for,
reimburse and indemnify and hold each Lender harmless from
and against any and all losses, costs, expenses, claims,
charges and indemnities of any type whatsoever which are
directly related to the Loans of such Lender (including by
any reasonable attribution or allocation) which are payable
by, charged to or asserted against such Lender by any
provider of funds to such Lender or provider of an interest
or currency exchange agreement to such Lender, as a result
of any increased costs or decreased rate of return
applicable to such provider of funds or as a result of a
Default or Event of Default hereunder, including, without

NY1-53665.4 -32-

limitation, make whole premiums, increased costs, capital
adequacy charges, reserve charges, or withholding taxes. In
addition, with respect to each Lender, the Borrower agrees
to pay the following (without duplication):

(a) Increased Costs. If any applicable law, rule
---------------
or regulation or any change in any law, rule or regulation
or in the interpretation or administration thereof by any
Governmental Authority (including, without limitation, any
central bank or comparable agency charged with the interpre-
tation or administration thereof) or compliance by any
Lender (or its lending office) with any request or directive
of any such Governmental Authority, whether or not having
the force of law:

(i) shall subject any Lender (or its lending
office) to any tax, duty or other charge with respect
to its obligation to make Loans or its Loans or shall
change the basis of taxation of payments to any Lender
(or its lending office) of the principal of or interest
with respect to its Loans or any other amounts due in
respect of its Loans or in respect of its obligation to
make Loans (except for changes in the rate of tax on
the overall net income of such Lender or its lending
office imposed by the jurisdiction in which such
Lender's principal office or lending office is
located); or

(ii) shall impose, modify or deem applicable
any reserve (including, without limitation, any imposed
by the Board of Governors of the Federal Reserve
System), special deposit, compulsory loan, capital
adequacy or similar requirement against assets of, or
deposits or other liabilities with or for the account
of, or credit or credit commitments extended by, or any
acquisition of funds by or for the account of, any
Lender (or its lending office) or shall impose on any
Lender (or its lending office) or the applicable
interbank market any other condition affecting its
Loans, or its obligations to make or continue Loans;

and the result of any of the foregoing is to increase the
cost to such Lender (or its lending office) of (x) being
obligated to make, (y) making or (z) maintaining its Loans,
or reduce the amount of any sum received or receivable by
such Lender (or its lending office) under this Agreement, by
an amount deemed by such Lender to be material, then, within
five (5) Business Days after demand by such Lender, which
demand shall be delivered in writing to the Borrower, with a
copy to the Administrative Agent, the Borrower will pay to
such Lender such additional amount or amounts as will

NY1-53665.4 -33-

compensate such Lender for such increased cost or reduction
for so long as such Lender is subject to such increased cost
or reduction. Such Lender will designate a different
lending office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not be
otherwise disadvantageous to such Lender in its sole and
absolute judgment. A certificate of such Lender setting
forth in reasonable detail such additional amount or amounts
necessary to compensate such Lender shall be conclusive in
the absence of manifest error. In determining such amount,
such Lender may use any reasonable averaging or attribution
methods.

(b) Capital Adequacy. If any Lender shall have
----------------
determined that compliance with any applicable law, rule or
regulation regarding capital adequacy or any interpretation
or administration thereof, of any Governmental Authority
(including, without limitation, any central bank or compar-
able agency charged with the interpretation or administra-
tion thereof), or compliance by any Lender (or its lending
office) or any corporation controlling such Lender with any
request or directive regarding capital adequacy whether or
not having the force of law of any such Governmental
Authority, has or would have the effect of increasing the
amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and
that the amount of such capital is increased by or based
upon the existence of such Lender's obligations hereunder
(including, without limitation, its Loans) or under other
obligations of such type or otherwise have the effect of
reducing the rate of return on such Lender's or any such
controlling corporation's capital as a consequence of its
obligations hereunder (including, without limitation, its
Loans) or under other obligations of such type, then from
time to time, within five (5) Business Days after demand by
such Lender (with a copy to the Administrative Agent), the
Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such corporation
in such circumstances, to the extent such Lender determines
such increase in capital or reduction is allocable to such
Lender's obligations (including, without limitation, its
Loans) hereunder. A certificate of any Lender claiming
compensation under this Section and setting forth in
reasonable detail the additional amount or amounts to be
paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may
use any reasonable averaging and attribution methods.

2.12 Distribution of Proceeds. Upon and after
------------------------
the occurrence and during the continuance of an Event of
Default, if the Administrative Agent, the Collateral Agent

NY1-53665.4 -34-

or a Secured Creditor receives funds in respect of any sale,
disposition, set-off or other realization on or with respect
to the Collateral, the Administrative Agent, the Collateral
Agent or such Secured Creditor shall distribute and each
Secured Creditor shall apply such funds in the following
order of priority:

(i) first, to pay all fees, expenses and
-----
other amounts due the Administrative Agent or the
Collateral Agent under the Credit Documents;

(ii) second, to pay all accrued and unpaid
------
interest on the Loans, pro rata, in accordance with the
outstanding principal amounts of the Loans;

(iii) third, to pay all principal of the
-----
Loans, pro rata, in accordance with the outstanding
principal amounts of the Loans; and

(iv) fourth, to pay all other Obligations,
------
pro rata, in accordance with the respective amounts of
such Obligations which are then due and payable to each
Secured Creditor.

Notwithstanding anything to the contrary in this
Section 2.12:

(i) if at the time of receipt by the
Administrative Agent, the Collateral Agent or a Secured
Creditor of funds in respect of any sale, disposition,
set-off or other realization on or with respect to the
Slot Collateral (or any part or portion thereof) any
Loans held by the GPA Entities or any accrued interest
thereon remains unpaid, the first $10 million of such
funds shall be applied to pay Loans held by the GPA
Entities and any accrued interest thereon to the
holders thereof in such proportion or priority as they
may agree among themselves or, in the absence of any
such agreement, as may be directed by GPA Sub, and the
balance of such funds shall be applied to pay all other
Obligations in the order of priority set forth in the
first paragraph of this Section 2.12; and

(ii) if funds in respect of any sale,
disposition, set-off or other realization on or with
respect to any Collateral other than the Slot
Collateral shall be distributed to the Secured
Creditors pursuant to this Section 2.12 prior to the
distribution to the Secured Creditors pursuant to this
Section 2.12 of funds in respect of the sale,
disposition, set-off or other realization on or with

NY1-53665.4 -35-

respect to the Slot Collateral (or any portion
thereof), then, promptly after the final distribution
to the Secured Creditors pursuant to this Section 2.12
of funds in respect of the final sale, disposition,
set-off or other realization on or with respect to all
of the Slot Collateral, GPA Sub shall pay to each other
Lender an amount which, when added to the aggregate
amount of funds theretofore received by such Lender
pursuant to this Section 2.12, shall result in such
Lender having received an aggregate amount of funds
equal to the amount of funds such Lender would have
received pursuant to this Section 2.12 had all of the
proceeds of the sale, disposition, set-off or other
realization on or with respect to all of the Slot
Collateral (in the amount actually realized) been
distributed to the Secured Creditors pursuant to this
Section 2.12 prior to the distribution to the Secured
Creditors pursuant to this Section 2.12 of any funds in
respect of any sale, disposition, set-off or other
realization on or with respect to any other Collateral.

Any Secured Creditor may allocate internally
amounts received hereunder in a different order, although
for purposes of making subsequent distributions pursuant to
this Section 2.12 all such amounts shall be deemed applied
in the order required above, and any such different
allocation shall have no effect on the rights or obligations
of the Borrower, the Administrative Agent, the Collateral
Agent or the other Secured Creditors hereunder. In making
distributions hereunder, the Collateral Agent shall be
entitled to conclusively rely on statements received by it
from the respective Secured Creditors as to the respective
amounts owing to them pursuant to, or as described in, the
relevant provisions of this Section 2.12. Furthermore, the
Collateral Agent shall be entitled to wait for its receipt
of any such information before making a distribution in
accordance with this Section 2.12. The parties expressly
acknowledge and agree that the proceeds of any sale,
disposition, set-off or other realization on or with respect
to any Collateral that are referred to in this Section 2.12
shall not, and shall not be construed to, include any such
proceeds that are received by a Secured Creditor in its
capacity as the holder of a Permitted First Lien on such
Collateral.

NY1-53665.4 -36-

SECTION 3. FEES.
----

3.01 Facility Fee.
------------

The Borrower shall pay to the Administrative Agent
(i) on the Third Amendment Effective Date, for the account
of and distribution to each Lender, a fee in an amount equal
to 0.75% of the principal amount of the Loans of such Lender
outstanding on the Third Amendment Effective Date, and (ii)
on March 31, 1994 (but only if all or any portion of the
Loans are then outstanding), for the account of and
distribution to each Lender, a fee in an amount equal to
0.25% of the principal amount of the Loans of such Lender
outstanding on the Third Amendment Effective Date (the fees
described in the preceding clauses (i) and (ii) being
referred to, collectively, as the "Facility Fee").
------------

3.02 Fees of Administrative Agent and Collateral
-------------------------------------------
Agent.
-----

The Borrower shall pay to the Administrative Agent
and to the Collateral Agent, for their respective own
accounts, or shall reimburse the Lenders for payment of,
such fees as the Administrative Agent or the Collateral
Agent (including, without limitation, their respective
successors and assigns), as the case may be, and the
Borrower have agreed separately for performance of the
services of the Administrative Agent and the Collateral
Agent hereunder and under the other Credit Documents;
provided, however, that the Borrower and the Administrative
-------- -------
Agent or the Collateral Agent, as the case may be, shall
obtain the prior written consent of the Required Lenders to
such fees.

SECTION 4. PREPAYMENTS; PAYMENTS.
---------------------

4.01 Voluntary Prepayments. The Borrower shall
---------------------
have the right to prepay the Loans, without premium or
penalty (except as provided in Section 2.09 or 2.11), in
whole or in part from time to time on the following terms
and conditions: (i) the Borrower shall give the
Administrative Agent irrevocable notice in writing of its
intent to make a prepayment at its Notice Office at least
one Business Day prior to the date of such prepayment, which
notice in each case shall indicate the amount of such
prepayment and which notice the Administrative Agent shall
promptly transmit to each of the Lenders; and (ii) each
partial prepayment shall be in an aggregate principal amount
of at least $1 million. Each prepayment pursuant to this
Section 4.01 in respect of the Loans shall be applied pro

NY1-53665.4 -37-

rata to the Loans of each Lender and shall reduce the
aggregate installment repayments of Loans required by
Section 2.08 in inverse order of their maturity.

4.02 Mandatory Prepayments. If on any date
---------------------

(i) the required amounts of rotables,
equipment or receivables described in Section 7.08 are
less in any category than as required in Section 7.08,
the Borrower shall repay on such date that principal
amount of Loans as is equal to such deficiency,
provided that in lieu of prepayment of Loans by reason
--------
of each deficiency in the required amounts of rotables
specified in Section 7.08, the Investment Account
Minimum shall be increased, effective as of the 20th
day next following the last day of the month to which
such deficiency relates, by an amount equal to the
amount of such deficiency (as the amount of such
deficiency is determined on the basis of the report
delivered pursuant to Section 7.01(h) and the amount of
such increase is set forth in the report delivered
pursuant to Section 7.01(o)); or

(ii) an Asset Sale is consummated, the
Borrower shall repay on the last Business Day of the
month in which such Asset Sale is consummated the Loans
in an amount equal to the Net Proceeds of such Asset
Sale; provided, however, that in the event no Default
-------- -------
or Event of Default has occurred and is continuing or
would result therefrom and such Asset Sale is of
property or other assets of the Borrower which is not
Designated Collateral, Slot Collateral or Engine
Collateral, the Collateral Agent or the Lenders shall
release 30% of the Net Proceeds to the Borrower to be
used as working capital and the remaining 70% of the
Net Proceeds shall be used to prepay the Loans as
aforesaid; and provided further, however, if the
-------- ------- -------
property which is the subject of the Asset Sale is Slot
Collateral (or any part or portion thereof), the first
$10 million of the Net Proceeds from such Asset Sale
shall be used to repay the Loans (subject to and in
accordance with clause (v) of this Section 4.02) and
the balance of such Net Proceeds shall be deposited in
the Investment Account; and provided further, however,
-------- ------- -------
if the property which is the subject of the Asset Sale
is Engine Collateral (or any part or portion thereof),
the Net Proceeds from such Asset Sale shall be
deposited in the Investment Account; or

(iii) an Event of Loss (as defined in the
Aircraft/Engine Mortgage or the Slot Lease) or other

NY1-53665.4 -38-

casualty or any condemnation, taking or requisition
with respect to any Collateral occurs and (x) the
property which is the subject of the loss is not
repaired or replaced so as to be of at least equal
value and utility as was the property subject thereto
prior to the applicable Event of Loss, casualty,
condemnation, taking or requisition (assuming it was in
the condition required under the Credit Documents) and
subjected to the Lien in favor of the Collateral Agent
in the priority contemplated hereunder within the time
period specified in and in accordance with the
provisions of the applicable Security Document or, if
no time is specified, within sixty (60) days of such
casualty, the Borrower shall repay on such date the
Loans in an amount equal to the greater of the value
attributed to such Collateral on the most recent
collateral certificate delivered pursuant to Section
7.01(h) or the proceeds of any insurance with respect
thereto (after payment of any Existing Secured Debt of
the Borrower or any Indebtedness secured by a Permitted
First Lien required to be repaid with such proceeds) or
(y) the property is so repaired or replaced, the
Borrower shall repay the Loans in an amount equal to
any insurance proceeds remaining after repair or
replacement of the Collateral as above provided;
provided, however, that if the Event of Loss is with
-------- -------
respect to the Slot Collateral (or any part or portion
thereof), the repayment of Loans shall be applied as if
resulting from a sale of such Slot Collateral (or such
part or portion thereof) in accordance with clause (v)
of this Section 4.02; and provided further, however, if
-------- ------- -------
the Event of Loss is with respect to the Engine
Collateral (or any part or portion thereof), in lieu of
repaying Loans as provided in this clause (iii), the
Borrower shall deposit in the Investment Account an
amount of moneys equal to the principal amount of Loans
which would otherwise be required to be repaid as
provided in this clause (iii); or

(iv) the amount of "net available cash" (as
such term is defined in Section 8.15(d)) exceeds
$125,000,000, the Borrower shall give prompt written
notice of such excess to the Lenders in accordance with
Section 7.01(n) and, if requested by the Required
Lenders, the Borrower shall repay on such date as is
specified by the Required Lenders the Loans in an
amount equal to the amount of such excess or such
lesser amount as may be specified by the Required
Lenders; or

NY1-53665.4 -39-

(v) Each prepayment pursuant to this Section
4.02 in respect of the Loans shall be applied pro rata
to the Loans of each Lender; provided, however, that
-------- -------
the first $10 million of Net Proceeds of any sale or
other disposition of the Slot Collateral (or any part
or portion thereof) shall be used to repay Loans held
by the GPA Entities to the holders thereof in such
proportion or priority as such holders may agree among
themselves or, in the absence of any such agreement, as
may be directed by GPA Sub. After Loans held by the
GPA Entities have been repaid as provided in the
immediately preceding sentence, all remaining Net
Proceeds of any sale or other disposition of the Slot
Collateral (or any part or portion thereof) shall be
deposited in the Investment Account. Each payment of
Loans pursuant to this Section 4.02 shall be applied to
reduce the aggregate installment payments of Loans
required to be paid pursuant to Section 2.08 in the
inverse order of their maturity. The foregoing shall
not be construed as a waiver of any of the provisions
of this Agreement or the other Credit Documents.

4.03 Method and Place of Payment. Except as
---------------------------
otherwise specifically provided herein, all payments under
this Agreement or any Note shall be made to the Adminis-
trative Agent for the account of the Lender or Lenders
entitled thereto not later than 12:00 Noon (New York time)
on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office of the
Administrative Agent. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable
at the applicable rate during such extension.

4.04 Net Payments. All payments made by the
------------
Borrower hereunder, under any Note or under any other Credit
Document will be made without setoff, counterclaim or other
defense.

SECTION 5. CONDITIONS PRECEDENT AND RELATED
--------------------------------
PROVISIONS.
----------

5.01 Conditions to the Effective Date. The
--------------------------------
obligation of the Lenders (such term and all other
capitalized terms used in this Section 5.01 having the
respective meanings stated or ascribed in the Original
Credit Agreement and references in this Section 5.01 to
"hereof" and "this Agreement" being references to the

NY1-53665.4 -40-

Original Credit Agreement) to make Loans under this
Agreement became effective on the date (the "Effective
---------
Date") on which each of the following conditions was
----
satisfied:

(a) Execution of Agreement; Notes. (i) The
-----------------------------
Borrower, the Administrative Agent and each institution then
a Lender hereunder shall have executed a counterpart hereof
(whether the same or different counterpart) and shall have
delivered the same to the Administrative Agent at its Notice
Office or, in the case of the Lenders, shall have given to
the Administrative Agent written notice (actually received)
at such office that the same has been signed and mailed to
it and (ii) there shall have been delivered to the
Administrative Agent for the account of each of the Lenders
the appropriate Note executed by the Borrower in the amount,
maturity and as otherwise provided herein.

(b) Corporate Documents; Proceedings; Officer's
-------------------------------------------
Certificates. The Lenders shall have received from the
------------
Borrower a certificate, dated the Effective Date, signed by
the President and Chief Operating Officer, Senior Vice
President-Finance or the Vice President and Controller of
the Borrower and attested to by the Secretary or any
Assistant Secretary of the Borrower in the form of Exhibit C
with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws of the Borrower and
the resolutions of the Borrower referred to in such
certificate, together with such other certificate or
certificates pertaining to the subject matter of the By-Law
Letter Agreement as any Initial Lender shall have requested,
and the foregoing shall be satisfactory to all of the
Lenders.

(c) Opinions of Counsel. The Lenders shall have
-------------------
received opinions, addressed to the Administrative Agent and
each of the Lenders and dated the Effective Date, from
(i) Daugherty, Bradford & Fowler, covering the filing,
perfection and priority of the Aircraft/Engine Mortgages,
(ii) from Streich Lang covering the due authority, legality,
enforceability and other matters related to the Credit
Documents and the requirements hereof, (iii) from Faegre &
Benson covering the entry of the Interim Order, the Final
Order, the GPA Order, the Northwest Order, the taking of any
appeals therefrom and Liens on the property or other assets
of the Borrower approved by the Bankruptcy Court, if any,
and (iv) from Winthrop, Stimson, Putnam & Roberts covering
the United States citizenship of the Borrower, the Slot
Lease and other matters involving the DOT and FAA, and such
other opinions with respect to other matters incident to
transactions contemplated herein, as any Initial Lender may

NY1-53665.4 -41-

request and as are acceptable to all of the Lenders in their
sole and absolute discretion.

(d) Slots. Title to the Slots described on
-----
Annex A to the Slot Deed of Conveyance shall have been
transferred to the Collateral Agent pursuant to the Slot
Deed of Conveyance and the Borrower shall have duly
authorized, executed and delivered the Slot Lease, which
Slot Lease shall be in full force and effect.

(e) Security Agreement. The Borrower shall have
------------------
duly authorized, executed and delivered the Security
Agreement, which shall be in full force and effect covering
all of the "Collateral" referred to therein, together with:

(i) proper Form UCC-1 financing statements
and such other proper documents for filing or recording
in the appropriate offices;

(ii) certified copies of Requests for
Information or Copies (Form UCC-11) or equivalent
reports listing all effective financing statements or
other recordations that name the Borrower as debtor
that are filed in Arizona, Nevada, California, Hawaii
and New York, together with copies of such other
financing statements or other recordations (none of
which shall cover the Collateral referred to in the
Security Agreement except to the extent evidencing
Permitted First Liens);

(iii) evidence that all other actions
necessary or, in the opinion of any Initial Lender,
desirable to perfect and protect the security interests
created by the Security Agreement have been taken; and

(iv) any other documents, instruments or
chattel paper required under the Security Agreement.

(f) Mortgage. The Borrower shall have (i) duly
--------
authorized, executed, delivered and filed with the
appropriate Governmental Authorities (a) the Mortgage, which
Mortgage shall cover all of the Real Property owned or
leased by the Borrower as listed in Schedule 8 (each, a
"Mortgaged Property" and collectively the "Mortgaged
------------------ ---------
Properties"), and (b) the Assignment of Gate Leases, (ii)
----------
obtained the consent of any landlord with respect to any
Real Property leased to the Borrower by such landlord, which
consent shall be substantially in the form of Exhibit J-2
hereto, and (iii) obtained the consent of any holder of a
Permitted First Lien on such Real Property in substantially
the form of Exhibit J-3 hereto and shall have provided to

NY1-53665.4 -42-

the Lenders A.L.T.A. surveys and title reports in form and
substance, and showing title vested in the Borrower and the
absence of Liens other than Permitted First Liens and
Customary Permitted Liens which (except as described in
clauses (iv) and (vii) of the definition thereof) are junior
and subordinate to the Lien of the Mortgage, in form and
substance acceptable to all of the Lenders in their sole and
absolute discretion with respect to all of the Mortgaged
Properties.

(g) Aircraft/Engine Mortgage. The Borrower shall
------------------------
have duly authorized, executed and delivered the
Aircraft/Engine Mortgage covering all aircraft, engines and
spare parts then owned by the Borrower (other than any
thereof the exclusion of which shall have been consented to
by each Initial Lender acting in its sole and absolute
discretion), together with evidence of filing for recording
with the FAA of such Aircraft/Engine Mortgage and with the
priority contemplated hereby and thereby, in form and
substance acceptable to all of the Lenders in their sole and
absolute discretion.

(h) GPA Agreements/Northwest Agreements. The
-----------------------------------
Bankruptcy Court shall have issued an order in the form of
Exhibit D-3 hereto (as such form may be modified in a manner
acceptable to each of the GPA Entities, in their sole and
absolute discretion, the "GPA Order") authorizing the
---------
Borrower to assume each of the GPA Agreements pursuant to
Section 365 of the Bankruptcy Code, and the Bankruptcy Court
shall have issued a final order in the form of Exhibit D-4
hereto (as such form may be modified in a manner acceptable
to Northwest in its sole and absolute discretion, the
"Northwest Order") authorizing the Borrower to enter into
---------------
and perform its obligations under each of the Northwest
Agreements pursuant to applicable provisions of the
Bankruptcy Code and each such Order shall be in full force
and effect and not subject to any appeal, stay or
injunction. The Borrower shall have (x) paid in full all
payment obligations then due (after giving effect to the
rent deferrals in the case of the Designated Aircraft
Leases) under each of the GPA Agreements, and by doing so
shall have satisfied the Borrower's obligations with respect
thereto under Section 365 of the Bankruptcy Code and (y)
executed and delivered each of the Northwest Agreements,
each of which shall be in full force and effect.

(i) Payment of Fees, etc. The Borrower shall
---------------------
have paid all costs, fees and expenses owing in connection
with the Credit Documents and due to the Administrative
Agent, the Collateral Agent or any Lender on or before the

NY1-53665.4 -43-

Effective Date (including, without limitation, legal fees
and expenses).

(j) Specified Aircraft. Immediately prior to the
------------------
effectiveness of the filing of the Aircraft/Engines Mortgage
with the FAA the Specified Aircraft and Engines shall be
located in the United States of America.

(k) Operating Plan. The Board of Directors of
--------------
the Borrower shall have adopted the Operating Plan (as
defined in the Credit Agreement) and the Borrower shall have
provided evidence satisfactory to all of the Lenders in
their sole and absolute discretion that the "Action Plan
Summary" terms set forth on Exhibit E have been implemented
and are in full force and effect and the Borrower is in
compliance therewith.

(l) Inter-Creditor Agreement. The Borrower and
------------------------
First Interstate Bank of Arizona shall have entered into the
Merchant Agreement Supplement and the Collateral Agent, the
Lenders and First Interstate Bank of Arizona, N.A. shall
have entered into the Inter-Creditor Agreement, in each
case, relating to and providing for the relative priorities
of the Liens of First Interstate Bank of Arizona, N.A. and
the Collateral Agent on certain of the Collateral, and the
Bankruptcy Court shall have issued an order in substantially
the form of Exhibit C to the Merchant Agreement Supplement
authorizing the amendments effected by the Merchant
Agreement Supplement; and the Merchant Agreement Supplement,
the Inter-Creditor Agreement and such order shall be in form
and substance acceptable to all of the Lenders in their sole
and absolute discretion.

(m) Lease Amendments. The A320 Leases and the
----------------
Engine Leases shall have been amended in form and substance
reasonably satisfactory to the GPA Entities party thereto to
provide for the elimination of the "net worth" covenant
during the Case and the reinstitution of a comparable "net
worth" covenant upon the effective date of a confirmed plan
of reorganization for the Borrower under Chapter 11 of the
Bankruptcy Code.

(n) Other Funds. The Borrower shall have
-----------
received binding commitments or such other assurances, in
each case as may be acceptable to all of the Lenders in
their sole and absolute discretion, for the provision of
additional funds to the Borrower, consisting of Indebtedness
or equity or proceeds from the sale of the Nagoya Route, in
an aggregate amount not less than $40 million, which, if
Indebtedness, shall be (i) unsecured, but up to $30 million
of which Indebtedness may have administrative priority under

NY1-53665.4 -44-

Section 364(c)(1) of the Bankruptcy Code which is pari passu
---- -----
with, but not senior to, the Obligations, or (ii) secured
for an amount of up to $30 million subject to and in
accordance with Section 8.01(vi) (and without the benefit of
any administrative priority described in the preceding
clause (i) of this paragraph), and in each case on terms and
conditions acceptable to the Lenders in their sole and
absolute discretion.

(o) By-Laws and Related Actions. The Lenders
---------------------------
(which did not include Kawasaki) shall have received
evidence, satisfactory in form and substance to them, that
all actions described in the By-Law Letter Agreement to be
taken on or prior to the Effective Date shall have been
taken, including, without limitation, the adoption of
requisite resolutions of the Board of Directors of the
Borrower with respect thereto, which resolutions shall be in
full force and effect on and as of the Effective Date.

(p) Initial Cash Management Arrangements. The
------------------------------------
Borrower, the Collateral Agent and the Local Bank shall have
duly authorized, executed and delivered the Initial Cash
Management Agreement and the Borrower shall have otherwise
established an accounts receivables collection system
(including, without limitation, lock box accounts) and cash
concentration and management system, and entered into
agreements related thereto, satisfactory to the Required
Lenders in their sole and absolute discretion whereby the
Investment Account has been established with the Collateral
Agent in the name of the Collateral Agent for the benefit of
the Secured Creditors and the Concentration Account has been
established with the Local Bank in the name of the
Collateral Agent for the benefit of the Secured Creditors to
which all cash received by, or deposited by, or paid to the
Borrower at accounts (including lock box accounts in the
name of the Collateral Agent for the benefit of the Secured
Creditors) at the Local Bank and all other financial insti-
tutions or otherwise are transferred on a daily basis, all
of which accounts shall be subject to a first priority
perfected security interest in favor of the Collateral Agent
under the Security Agreement and the Orders, and which
arrangements shall provide for minimum required balances in
the Investment Account as set forth in Section 7.10.

(q) Insurance Certificates and Opinions. The
-----------------------------------
Borrower shall have provided the Lenders with all insurance
certificates, opinions and schedules referred to in Section
7.03 and under the Security Documents.

(r) Consents. The Borrower shall have provided
--------
to the Lenders the confirmation by the FAA of the transfer

NY1-53665.4 -45-

of the Slots as contemplated by Section 5.01(d), the notices
to the Japanese lessors under all applicable Japanese
leveraged leases, the filing under the Assignment of Claims
Act of 1940 necessary or advisable to perfect the Borrower's
assignment of claims against the United States Government
and all other notices, consents, approvals, licenses or
other action as may be necessary or advisable in the opinion
of any Lender to provide the Secured Creditors with the
benefits of the Collateral, in each case in form and
substance acceptable to all of the Lenders in their sole and
absolute discretion.

5.02 Conditions to All Loans. The obligation of
-----------------------
each Lender to make any Loans was subject, at the time of
the making of such Loans and after giving effect thereto, to
the satisfaction of the following conditions (other than, in
the case of the Loans made on the Second Amendment Effective
Date, the condition set forth in the following paragraph
(f)):

(a) No Default. There shall exist no Default or
----------
Event of Default.

(b) Representations and Warranties. All
------------------------------
representations and warranties of or on behalf of the
Borrower herein and in the other Credit Documents shall be
true and correct in all material respects with the same
effect as though such representations and warranties had
been made on and as of the date of the making of such Loans.

(c) Orders. The Lenders shall have received a
------
certified copy of an order of the Bankruptcy Court in the
form of Exhibit D-1 (as such form may be modified in a
manner acceptable to each of the Lenders, in their sole and
absolute discretion, the "Interim Order"), and the Interim
-------------
Order shall be in full force and effect and shall not have
been stayed, reversed, vacated, rescinded, modified or
amended in any respect (other than modifications acceptable
to each of the Lenders, in their sole and absolute
discretion), provided that upon the earlier of (i)
--------
September 25, 1991 and (ii) the making of any Loan the
aggregate amount of which, when added to the sum of the
principal amount of all Loans then outstanding would exceed
the credit availability amount authorized by the Bankruptcy
Court in the Interim Order (collectively, the "Additional
----------
Credit"), each of the Lenders shall have received a
------
certified copy of an order of the Bankruptcy Court in the
form of Exhibit D-2, or as otherwise acceptable to each of
the Lenders (the "Final Order"), and at the time of the
-----------
extension of any Additional Credit the Final Order shall be
in full force and effect, and shall not have been stayed,

NY1-53665.4 -46-

reversed, vacated, rescinded, modified or amended in any
respect (other than modifications acceptable to each of the
Lenders, in their sole and absolute discretion); and if
either the Interim Order or the Final Order is the subject
of a pending appeal in any respect, neither the making of
the Loans nor the performance by the Borrower of any of its
obligations under any of the Credit Documents or any other
document or instrument referred to herein shall be the
subject of a presently effective stay pending appeal.
Neither the GPA Order nor the Northwest Order shall have
been appealed, amended, stayed, vacated or rescinded.

(d) Effective Date. The Effective Date shall
--------------
have occurred.

(e) Collateral Certificate. The Administrative
----------------------
Agent shall have received a certificate substantially in the
form of Exhibit M executed by the Chief Financial Officer,
Senior Vice President-Finance, Treasurer or Vice President
and Controller of the Borrower of the description, value and
location of the Collateral as of the date of the making of
such Loans, the value of which Collateral shall, among other
things, be equal to or in excess of the applicable value set
forth in Section 7.08.

(f) Deferrals. The Borrower shall have provided
---------
evidence in form and substance acceptable to the Required
Lenders in their sole and absolute discretion that the
Borrower has obtained from the lessors and debt holders in
respect of the Deferral Aircraft rental and principal and
interest moratoriums (or rebates with respect to such
obligations to adjust for such obligations with respect to
leases or debt for which rental or principal or interest, as
the case may be, is not payable during such period) in an
aggregate amount of not less than $100,000,000 (or such
lesser amount as the Required Lenders shall approve in their
sole and absolute discretion) and as are necessary to
provide the Borrower with the minimum number of aircraft
required under the Operating Plan; and the terms and
conditions of such moratoriums shall be in full force and
effect (without any unfulfilled conditions to the
effectiveness thereof or subject only to such conditions to
the effectiveness thereof as the Required Lenders shall
approve in their sole and absolute discretion) and provide
for repayment of the deferred amounts with an interest rate
of not more than 10.5% per annum over a term of not less
than four years commencing December 1991 or as otherwise
approved by the Required Lenders in their sole and absolute
discretion; and the terms of the stipulations with respect
to, and the documentation evidencing, such moratoriums (or

NY1-53665.4 -47-

rebates) shall be satisfactory in form and substance to the
Required Lenders in their sole and absolute discretion.

(g) Governmental Action. No Governmental Action
-------------------
shall purport to, and no Governmental Action or other action
or proceedings shall have been filed, instituted, threatened
or issued which seeks to, enjoin or restrain or otherwise
adversely affect the making of such Loans or the proposed
use of the proceeds of any Loan or the Borrower's compliance
with the terms of the Credit Documents.

(h) Additional Corporate Documents. All
------------------------------
corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated
in this Agreement and the other Credit Documents shall be
satisfactory in form and substance to the Required Lenders,
and the Lenders shall have received all information and
copies of all documents and papers, including records of
corporate proceedings and governmental approvals, if any,
and such additional certificates and opinions, which any
Lender reasonably may have requested in connection
therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.

The request by the Borrower for the making of each Loan and
the acceptance by the Borrower of each Loan constituted a
representation and warranty by the Borrower to each of the
Lenders making such Loan that all the representations and
warranties in Section 6 of the Original Credit Agreement,
the First Amended and Restated Credit Agreement or the
Second Amended and Restated Credit Agreement, as applicable,
were true and correct on and as of the date of such Loan as
though repeated thereon, that after giving effect to such
Loan no Default or Event of Default was in existence and
that applicable conditions specified in Section 5 of the
Original Credit Agreement, the First Amended and Restated
Credit Agreement or the Second Amended and Restated Credit
Agreement, as applicable, were satisfied or waived in
writing as of that time.

5.03 Conditions Precedent to Amendment Effective
-------------------------------------------
Date. The amendment and restatement of the Original Credit
----
Agreement (such term and all other capitalized terms used in
this Section 5.03 having the respective meanings stated or

NY1-53665.4 -48-

ascribed in the First Amended and Restated Credit Agreement
and references in this Section 5.03 to "hereof" and "this
Agreement" being references to the First Amended and
Restated Credit Agreement) pursuant to the First Amended and
Restated Credit Agreement, and the obligation of each Lender
under the First Amended and Restated Credit Agreement
(including, without limitation, Kawasaki) to make Loans
under the First Amended and Restated Credit Agreement
(subject to the terms and conditions thereof), became
effective on December 13, 1991 (the "Amendment Effective
-------------------
Date"), the date on which each of the following conditions
----
was satisfied or waived in writing by all of the Lenders in
their sole and absolute discretion:

(a) Execution of Agreement; Note. (i) The
----------------------------
Borrower, the Administrative Agent and the Lenders shall
have executed a counterpart hereof (whether the same or
different counterpart) and shall have delivered the same to
the Administrative Agent at its Notice Office or, in the
case of the Lenders, shall have given to the Administrative
Agent written notice (actually received) at such office that
the same has been signed and mailed to it and (ii) there
shall have been delivered to the Administrative Agent for
the account of Kawasaki a Note executed by the Borrower in
the amount, maturity and as otherwise provided in this
Agreement.

(b) Corporate Documents; Proceedings; Officer's
-------------------------------------------
Certificate. The Lenders shall have received from the
-----------
Borrower a certificate, dated the Amendment Effective Date,
signed by the President and Chief Executive Officer, Senior
Vice President-Finance or the Vice President and Controller
of the Borrower and attested to by the Secretary or any
Assistant Secretary of the Borrower in the form of Exhibit Q
with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws of the Borrower and
the resolutions of the Borrower referred to in such certifi-
cate, and the foregoing shall be satisfactory to all of the
Lenders.

(c) Opinions of Counsel. The Lenders shall have
-------------------
received opinions, addressed to the Administrative Agent and
each of the Lenders and dated the Amendment Effective Date,
from (i) Streich Lang covering the due authority, legality,
enforceability and other matters related to this Agreement
and the other Credit Documents and the requirements hereof
and thereof, and (ii) Faegre & Benson covering the entry of
the Additional Loan Order and the Kawasaki Order and the
taking of any appeals therefrom and Liens on the property or
other assets of the Borrower approved by the Bankruptcy
Court, and such other opinions with respect to other matters

NY1-53665.4 -49-

incident to transactions contemplated herein, as any Lender
may request and as are acceptable to all of the Lenders in
their sole and absolute discretion; and Kawasaki shall have
received letters from Daugherty, Bradford & Fowler and from
Winthrop, Stimson, Putnam & Roberts entitling Kawasaki to
rely on the opinions delivered by such counsel pursuant to
Section 5.01(c) of this Agreement.

(d) Cash Management Agreement. The Borrower, the
-------------------------
Collateral Agent and the Local Bank shall have duly
authorized, executed and delivered the First Amendment to
Cash Management Agreement in substantially the form of
Exhibit R, amending the Initial Cash Management Agreement.

(e) Agency Agreement. Each of the Borrower, the
----------------
Administrative Agent, the Collateral Agent and the Lenders
shall have authorized, executed and delivered the First
Amendment to Agency Agreement in substantially the form of
Exhibit S, amending the Agency Agreement.

(f) Mortgage and Assignment of Gate Leases. The
--------------------------------------
Borrower shall have (i) duly authorized, executed and
delivered and filed with the appropriate Governmental
Authorities (a) the First Amendments to Deeds of Trust in
substantially the forms of Exhibits T-1, T-2 and T-3,
amending each Mortgage encumbering the Mortgaged Properties,
and (b) the First Amendment to Assignment of Gate Leases in
substantially the form of Exhibit U, amending the Assignment
of Gate Leases, and (ii) provided to the Lenders title
reports in form and substance satisfactory to the Lenders,
and showing title vested in the Borrower and the absence of
Liens other than Liens shown on the title reports delivered
on the Effective Date.

(g) Mortgage Consents. The City of Phoenix, as
-----------------
landlord, and the Collateral Agent shall have duly
authorized, executed and delivered the First Amendments to
Consent Agreement in substantially the forms of Exhibits V-1
and V-2. First Interstate Bank of Arizona, N.A., as first
mortgagee, shall have duly authorized, executed and
delivered the consent letter in substantially the form of
Exhibit W.

(h) Additional Loan Order and Kawasaki Order.
----------------------------------------
The Lenders shall have received a certified copy of an order
of the Bankruptcy Court in the form of Exhibit D-5, and such
order shall be in full force and effect and shall not have
been stayed, reversed, vacated, rescinded, modified or
amended in any respect (other than modifications acceptable
to each of the Lenders, in their sole and absolute
discretion).

NY1-53665.4 -50-

(i) Kawasaki Agreements and Kawasaki
--------------------------------
Stipulations. The Borrower and Kawasaki shall have executed
------------
and delivered each of the Kawasaki Agreements and each of
the Kawasaki Agreements shall be acceptable in form and
substance to each of the Lenders, in their sole and absolute
discretion. Pursuant to the Kawasaki Credit Agreement, all
of the credit advances payable under the Aircraft Finance
Agreement shall have been restructured into the Loan (as
defined in the Kawasaki Credit Agreement). Stipulations
amending the Kawasaki Stipulations to permit Kawasaki to
terminate the lease or financing which is the subject of
each such Stipulation upon three months' notice, exercisable
after December 15, 1991, and to permit rent payments and
debt service thereunder to be brought current shall have
been executed and delivered by the respective parties
thereto and approved by the Bankruptcy Court. The Borrower
shall have paid in full all payment obligations then due
under each of the Kawasaki Agreements.

(j) Intercreditor Agreements. Kawasaki shall
------------------------
have executed and delivered a letter in substantially the
form of Exhibit X pursuant to which Kawasaki agrees to be
bound by the provisions of the intercreditor agreements
listed on Schedule 1 to such letter.

(k) Consent of Certain Lessors. The lessors
--------------------------
party to the stipulations with the Borrower listed on
Schedule 18 hereto shall have consented to the lien of the
Lenders pursuant to the Security Agreement on the Borrower's
right, title and interest in and to the aircraft leases
identified in such stipulations.

(l) Insurance. The Borrower shall have provided
---------
to the Lenders all insurance certificates, opinions and
schedules required by Section 7.03 and the Security
Documents to be provided to the Lenders on the Effective
Date (as if references therein to the Effective Date were to
the Amendment Effective Date).

(m) Operating Plan. The Operating Plan, in the
--------------
form and with the content approved by each of the Lenders,
acting in its sole and absolute discretion, shall have been
adopted by the management of the Borrower; and the Borrower
shall have provided evidence satisfactory to all of the
Lenders in their sole and absolute discretion that the
Borrower is in compliance with the Operating Plan
(including, without limitation, the implementation of all
plans and programs required by the terms of the Operating
Plan to be implemented on or prior to the Amendment
Effective Date).

NY1-53665.4 -51-

(n) Credit Documents. The Borrower shall have
----------------
provided to Kawasaki (i) copies of each of the Credit
Documents (including, without limitation, the Security
Documents), certified by an appropriate officer of the
Borrower as being true, correct and complete and in full
force and effect on and as of the Amendment Effective Date
and (ii) evidence, reasonably satisfactory to Kawasaki, in
its sole and absolute discretion, that all actions described
in Section 5.01 of the Credit Agreement and all other
actions which, in the reasonable opinion of Kawasaki, are
necessary or desirable to perfect and protect the Liens
created by the Security Documents have been taken.

(o) Payment of Fees, etc. The Borrower shall
---------------------
have paid all costs, fees and expenses owing in connection
with this Agreement, the other Credit Documents and the
documents referred to herein and therein and due to the
Administrative Agent, the Collateral Agent and each Lender
on or before the Amendment Effective Date (including,
without limitation, legal fees and expenses).

(p) Representations and Warranties. All
------------------------------
representations and warranties of or on behalf of the
Borrower in this Agreement and all the other Credit
Documents shall be true and correct in all material respects
with the same effect as though such representations and
warranties had been made on and as of the Amendment
Effective Date.

(q) Other Action. There shall have been taken
------------
such other actions, and the Lenders shall have received such
other documents, instruments, opinions, reliance letters,
certifications and copies of governmental consents, permits,
licenses and approvals, as any Lender shall have reasonably
requested and which are acceptable to all of the Lenders in
their sole and absolute discretion.

On the Amendment Effective Date, Kawasaki became a Lender
under the First Amended and Restated Credit Agreement, with
a Commitment equal to the amount set forth opposite its name
on Annex I attached thereto. The Borrower and each of the
Existing Lenders acknowledged that, pursuant to the Original
Credit Agreement and the By-Law Letter Agreement, the
Borrower granted to each Existing Lender certain rights of
approval with respect to members of the Board of Directors
of the Borrower and the Executive Committee of such Board of
Directors. The Borrower and each Existing Lender further
acknowledged that Kawasaki was not then, and had not at any
time been, a party to the Original Credit Agreement or to
the By-Law Letter Agreement, and that the Borrower did not
at any time grant to Kawasaki any rights of approval with

NY1-53665.4 -52-

respect to members of the Board of Directors of the Borrower
or the Executive Committee of such Board of Directors. The
Lenders, the Borrower and Kawasaki agreed that neither
Kawasaki nor any of its officers, directors or advisors
would be liable or responsible to any Person for any
exercise of the rights of any Existing Lender under the
Original Credit Agreement or the By-Law Letter Agreement or
for any act or omission of any Director of the Borrower
approved by any Existing Lender. The Borrower, each
Existing Lender and Kawasaki agreed and acknowledged that no
agency relationship has existed or was intended to be
created by the First Amended and Restated Credit Agreement
between Kawasaki on the one hand and any Existing Lender or
any Director approved by such Existing Lender on the other
hand. On the Amendment Effective Date, the By-Law Letter
Agreement was terminated and became of no further force or
effect.

Subject to and upon the terms and conditions set forth in
the First Amended and Restated Credit Agreement (including,
without limitation, Section 5.02 thereof), on the Amendment
Effective Date, each Lender made the Loan provided by clause
(c) of Section 2.02 thereof to be made by such Lender on the
Amendment Effective Date. All of such Loans were made
simultaneously by the Lenders following acknowledgement and
agreement by the Lenders that the Amendment Effective Date
had occurred.

Notwithstanding the amendment and restatement of the
Original Credit Agreement by the First Amended and Restated
Credit Agreement, all of the Obligations continued to be
secured by the Collateral (as defined in the First Amended
and Restated Credit Agreement) and the Borrower acknowledged
and agreed that the Collateral (as defined in the Original
Credit Agreement) remained subject to a lien and security
interest in favor of the Collateral Agent for the benefit of
the Lenders and Northwest. The First Amended and Restated
Credit Agreement was intended as a substitution of, and not
as payment of, the Obligations of the Borrower under the
Original Credit Agreement and all amounts outstanding and
owing by the Borrower under the Original Credit Agreement
were deemed to be outstanding and owing by the Borrower
under the First Amended and Restated Credit Agreement.

5.04 Conditions Precedent to Second Amendment
----------------------------------------
Effective Date. The amendment and restatement of the First
--------------
Amended and Restated Credit Agreement pursuant to the Second
Amended and Restated Credit Agreement, and the obligation of
GPA Sub and each Second Amendment Lender under the Second
Amended and Restated Credit Agreement to make Loans referred
to in clause (d) of Section 2.02 of the Second Amended and

NY1-53665.4 -53-

Restated Credit Agreement (subject to the terms and
conditions of the Second Amended and Restated Credit
Agreement), became effective on September 17, 1992 (the
"Second Amendment Effective Date"), the date on which each
-------------------------------
of the following conditions was satisfied or waived in
writing by all of the Lenders in their sole and absolute
discretion (it being understood that all capitalized terms
used in this Section 5.04 and defined in the Second Amended
and Restated Credit Agreement have the meanings defined in
the Second Amended and Restated Credit Agreement and that
all references in this Section 5.04 to "hereof" and "this
Agreement" are references to the Second Amended and Restated
Credit Agreement):

(a) Execution of Agreement; Notes. (i) The
-----------------------------
Borrower, the Administrative Agent and each Lender shall
have executed a counterpart hereof (whether the same or a
different counterpart) and shall have delivered the same to
the Administrative Agent at its Notice Office or, in the
case of the Lenders, shall have given to the Administrative
Agent written notice (actually received) at such office that
the same has been signed and mailed to it and (ii) there
shall have been delivered to the Administrative Agent for
the account of GPA Sub and each Second Amendment Lender
Notes for such Lenders executed by the Borrower in the
amounts, maturity and as otherwise provided in this
Agreement.

(b) Corporate Documents; Proceedings; Officer's
-------------------------------------------
Certificate. The Lenders shall have received from the
-----------
Borrower a certificate, dated the Second Amendment Effective
Date, signed by the President and Chief Executive Officer,
Senior Vice President-Finance or the Vice President and
Controller of the Borrower and attested to by the Secretary
or any Assistant Secretary of the Borrower in the form of
Exhibit Y with appropriate insertions, together with copies
of the Certificate of Incorporation and By-Laws of the
Borrower and the resolutions of the Borrower referred to in
such certificate, and the foregoing shall be satisfactory to
all of the Lenders in their sole and absolute discretion.

(c) Opinions of Counsel. The Lenders shall have
-------------------
received opinions, addressed to the Administrative Agent and
each of the Lenders and dated the Second Amendment Effective
Date, from (i) Streich Lang covering the due authority,
legality, enforceability and other matters related to this
Agreement and the other Credit Documents and the require-
ments hereof and thereof, (ii) Faegre & Benson covering the
entry of the Second Additional Loan Order and the taking of
any appeals therefrom and Liens on the property or other
assets of the Borrower approved by the Bankruptcy Court,

NY1-53665.4 -54-

(iii) Daugherty, Fowler & Peregrin, covering the filing,
perfection and priority of the Aircraft/Engine Mortgage (and
amendments thereto), and (iv) Winthrop, Stimson, Putnam &
Roberts covering the United States citizenship of the
Borrower, the Slot Lease (and amendments thereto) and other
matters involving the DOT and the FAA, and such other
opinions with respect to other matters incident to
transactions contemplated herein, as any Lender may request
and as are acceptable to all of the Lenders in their sole
and absolute discretion.

(d) Cash Management Agreement. The Borrower, the
-------------------------
Collateral Agent and the Local Bank shall have duly autho-
rized, executed and delivered the Second Amendment to Cash
Management Agreement in substantially the form of Exhibit Z,
amending the Initial Cash Management Agreement.

(e) Agency Agreement. Each of the Borrower, the
----------------
Administrative Agent, the Collateral Agent and the Lenders
shall have authorized, executed and delivered the Second
Amendment to Agency Agreement in substantially the form of
Exhibit AA, amending the Agency Agreement.

(f) Mortgage and Assignment of Gate Leases. The
--------------------------------------
Borrower shall have (i) duly authorized, executed and deliv-
ered and filed with the appropriate Governmental Authorities
(a) the Second Amendments to Deeds of Trust in substantially
the forms of Exhibits BB-1, BB-2 and BB-3, amending each
Mortgage encumbering the Mortgaged Properties, and (b) the
Second Amendment to Assignment of Gate Leases in substan-
tially the form of Exhibit CC, amending the Assignment of
Gate Leases, and (ii) provided to the Lenders title reports
in form and substance satisfactory to all of the Lenders in
their sole and absolute discretion, and showing title vested
in the Borrower and the absence of Liens other than Liens
shown on the title reports delivered on the Effective Date.

(g) Mortgage Consents. The City of Phoenix, as
-----------------
landlord, and the Collateral Agent shall have duly autho-
rized, executed and delivered the Second Amendments to
Consent Agreement in substantially the forms of Exhibits
DD-1 and DD-2. First Interstate Bank of Arizona, N.A., as
first mortgagee, shall have duly authorized, executed and
delivered the consent letter in substantially the form of
Exhibit EE.

(h) Second Additional Loan Order. The Lenders
----------------------------
shall have received a certified copy of the Second
Additional Loan Order, and the Second Additional Loan Order
shall be entered by the Court and in full force and effect
and shall not have been stayed, reversed, vacated,

NY1-53665.4 -55-

rescinded, modified or amended in any respect (other than
modifications acceptable to all of the Lenders, in their
sole and absolute discretion), and no appeal shall been
taken from the Second Additional Loan Order and the time to
take any such appeal shall have expired.

(i) Intercreditor Agreements. Each of the
------------------------
Lenders shall have executed and delivered a letter in
substantially the form of Exhibit FF pursuant to which each
Lender affirms or reaffirms, as the case may be, that it
shall be bound by the provisions of the intercreditor
agreements listed on Schedule 1 to such letter.

(j) Consent of Certain Lessors. The lessors
--------------------------
party to the stipulations with the Borrower listed on
Schedule 18 hereto shall have consented to the lien of the
Lenders pursuant to the Security Agreement on the Borrower's
right, title and interest in and to the aircraft leases
identified in such stipulations.

(k) Insurance. The Borrower shall have provided
---------
to the Lenders all insurance certificates, opinions and
schedules required by Section 7.03 and the Security Docu-
ments to be provided to the Lenders on the Effective Date
(as if references therein to the Effective Date were to the
Second Amendment Effective Date).

(l) Operating Plan and Consultant's Report. The
--------------------------------------
Operating Plan and the report thereon of Simat, Helliesen &
Eichner, Inc., the Borrower's consultant, shall be
satisfactory in form and content to all of the Lenders,
acting in their sole and absolute discretion, and the
Operating Plan shall have been adopted by the management and
the Board of Directors of the Borrower; and the Borrower
shall have provided evidence satisfactory to all of the
Lenders in their sole and absolute discretion that the
Borrower is in compliance with the Operating Plan (includ-
ing, without limitation, the achievement and implementation
of all actions required by, and the further cost reductions
outlined in, the Operating Plan to be achieved or
implemented on or prior to the Second Amendment Effective
Date).

(m) Security Agreement. The Borrower and the
------------------
Collateral Agent shall have duly authorized, executed and
delivered the First Amendment to Security Agreement in
substantially the form of Exhibit GG, amending the Security
Agreement.

(n) Aircraft/Engine Mortgage and Spare Parts
----------------------------------------
Mortgage. The Borrower and the Collateral Agent shall have
--------

NY1-53665.4 -56-

duly authorized, executed and delivered (i) Amendment No. 3
to Aircraft/Engine Mortgage in substantially the form of
Exhibit HH, amending the Aircraft/Engine Mortgage, and
(ii) Amendment No. 1 to the Spare Parts Mortgage in
substantially the form of Exhibit II, amending the Spare
Parts Mortgage, together with evidence of filing for
recording with the FAA of such amendments and with the
priority contemplated hereby and thereby.

(o) Slots. The Borrower and the Collateral Agent
-----
shall have duly authorized, executed and delivered the First
Amendment to Slot Lease Agreement in substantially the form
of Exhibit JJ, amending the Slot Lease Agreement, and all
matters involving the DOT and the FAA relating to the Slots
shall be acceptable to all of the Lenders in their sole and
absolute discretion.

(p) Financial Accommodations. The Borrower shall
------------------------
have received from third parties a minimum of $11 million in
financial accommodations on terms acceptable to all of the
Lenders in their sole and absolute discretion, including,
without limitation, the financial accommodations set forth
on Schedule 20 hereto; and the Borrower shall have provided
evidence thereof in form and substance satisfactory to all
of the Lenders in their sole and absolute discretion.

(q) Prepayment of Northwest Loans and Release and
---------------------------------------------
Termination by Northwest. Simultaneously with the
------------------------
effectiveness of this Agreement and the funding by GPA Sub
and the Second Amendment Lenders of the Loans referred to in
clause (d) of Section 2.02 hereof, (i) all of the Loans made
by Northwest under the Original Credit Agreement and
outstanding under the Credit Agreement shall be prepaid in
full, together with accrued and unpaid interest thereon, as
provided in Section 2.04, and (ii) Northwest shall have duly
authorized, executed and delivered a Release and Termination
in substantially the form of Exhibit LL releasing all of its
right, title and interest in and to the Collateral, the
Loans and the Credit Documents.

(r) Aircraft Rental and Loan Reductions and
---------------------------------------
Deferrals. The Borrower shall have provided evidence in
---------
form and substance acceptable to all of the Lenders in their
sole and absolute discretion that the Borrower shall have
received from aircraft providers (other than the GPA
Entities) rental and interest rate reductions, rental and
principal payment deferrals and aircraft fleet reductions in
the amounts, for the periods and otherwise as set forth in
Schedule 19 (or on such other terms as all of the Lenders
shall approve in their sole and absolute discretion); and
the terms and conditions of such rental and interest rate

NY1-53665.4 -57-

reductions, rental and principal payment deferrals and
aircraft fleet reductions shall be in full force and effect
(without any unfulfilled conditions to the effectiveness
thereof or subject only to such conditions to the
effectiveness thereof as all of the Lenders shall approve in
their sole and absolute discretion); and the terms of the
stipulations with respect to, and the documentation
evidencing, such interest rate reductions, rental and
principal payment deferrals and aircraft fleet reductions
shall be satisfactory in form and substance to all of the
Lenders in their sole and absolute discretion.

(s) Corporate Governance and Related Actions.
----------------------------------------
The Borrower shall have duly authorized, executed and
delivered the Management Letter Agreement substantially in
the form of Exhibit KK and the Lenders (other than Kawasaki)
shall have received evidence, satisfactory in form and
substance to all of the Lenders (other than Kawasaki) in
their sole and absolute discretion, that all actions
described in the Management Letter Agreement to be taken on
or prior to the Second Amendment Effective Date shall have
been taken to the satisfaction of all of the Lenders (other
than Kawasaki) in their sole and absolute discretion.

(t) A320 Put Agreements. Pursuant to
-------------------
documentation, satisfactory in form and substance to all of
the Lenders in their sole and absolute discretion, (i) each
of Kawasaki and GPA Group plc shall have cancelled its right
to put A320 aircraft to the Borrower pursuant to the
Kawasaki Put Agreement and the Put Agreement, respectively,
on or prior to December 31, 1993, (ii) the Borrower shall
have agreed that, if in the discretion of its management,
the Borrower increases its fleet of A320 aircraft on or
after January 1, 1993 and on or prior to December 31, 1993,
then (in lieu of taking A320 aircraft from other sources and
subject to availability from Kawasaki and the GPA Entities)
the Borrower will take A320 aircraft first from Kawasaki and
then from the GPA Entities on the same terms and conditions
as would have been applicable under the Kawasaki Put
Agreement and the Put Agreement, respectively, had the put
options thereunder not been so cancelled, and (iii) the
Borrower shall have granted to Kawasaki the right to put
four A320 aircraft (each of which shall have fewer than 100
flight hours of commercial operation) to the Borrower during
the period January 1, 1994 through December 31, 1994 on the
terms provided in the Kawasaki Put Agreement.

(u) Directors' and Officers' Liability Insurance.
--------------------------------------------
The Borrower shall have provided the Lenders with evidence
satisfactory to all of the Lenders in their sole and
absolute discretion that the Borrower has in effect on the

NY1-53665.4 -58-

Second Amendment Effective Date (i) directors' and officers'
liability insurance, and (ii) corporate indemnification of
directors, in each case, sufficient to facilitate and
support the changes in the corporate governance of the
Borrower contemplated by the Management Letter Agreement.

(v) No Material Adverse Change. In the opinion
--------------------------
of the Lenders, no material adverse change shall have
occurred since August 18, 1992 in (i) the financial
condition, business or prospects of the Borrower or (ii) the
airline industry.

(w) Credit Documents. The Borrower shall have
----------------
provided to each of the Second Amendment Lenders (i) copies
of each of the Credit Documents (including, without limita-
tion, all amendments thereto), certified by an appropriate
officer of the Borrower as being true, correct and complete
and in full force and effect on and as of the Second Amend-
ment Effective Date and (ii) evidence, reasonably satisfac-
tory to all of the Second Amendment Lenders, in their sole
and absolute discretion, that all actions described in
Section 5.01 of the Credit Agreement have been taken.

(x) Payment of Fees, etc. The Borrower shall
---------------------
have paid all costs, fees and expenses owing in connection
with this Agreement, the other Credit Documents and the
documents referred to herein and therein and due to the
Administrative Agent, the Collateral Agent and each Lender
on or before the Second Amendment Effective Date (including,
without limitation, legal fees and expenses).

(y) Representations and Warranties. All repre-
------------------------------
sentations and warranties of or on behalf of the Borrower in
this Agreement and all the other Credit Documents shall be
true and correct in all material respects on and as of the
Second Amendment Effective Date with the same effect as
though such representations and warranties had been made on
and as of the Second Amendment Effective Date.

(z) Retention of Consultant. The Lenders shall
-----------------------
have received evidence, satisfactory to all of the Lenders
in their sole and absolute discretion, that Simat, Helliesen
& Eichner, Inc. has been retained by the Borrower as a
consultant to advise and assist the Borrower with respect to
the implementation of the Operating Plan.

(aa) Other Action. There shall have been taken
------------
such other actions, and all of the Lenders shall have
received such other documents, instruments, opinions,
reliance letters, certifications and copies of governmental
consents, permits, licenses and approvals, as any Lender

NY1-53665.4 -59-

shall have reasonably requested and which are acceptable to
all of the Lenders in their sole and absolute discretion.

On the Second Amendment Effective Date, each Second
Amendment Lender became a Lender under the Second Amended
and Restated Credit Agreement, with a Commitment equal to
the amount set forth opposite its name on Annex I attached
to the Second Amended and Restated Credit Agreement and the
Commitment of GPA Sub was increased to the amount set forth
opposite its name on Annex I to the Second Amended and
Restated Credit Agreement. The Borrower and each of the
Lenders (other than Kawasaki) acknowledged that, pursuant to
the Second Amended and Restated Credit Agreement and the
Management Letter Agreement, the Borrower granted to each
Lender (other than Kawasaki) certain rights of approval with
respect to members of the Board of Directors of the Borrower
and the Executive Committee of such Board of Directors. The
Borrower and each Lender (other than Kawasaki) further
acknowledged that Kawasaki is not a party to the Management
Letter Agreement, and that the Borrower did not grant to
Kawasaki any rights of approval with respect to members of
the Board of Directors of the Borrower or the Executive
Committee of such Board of Directors. The Lenders, the
Borrower and Kawasaki agreed that neither Kawasaki nor any
of its officers, directors or advisors would be liable or
responsible to any Person for any exercise of the rights of
any other Lender under the Management Letter Agreement or
for any act or omission of any Director of the Borrower
approved by any such Lender. The Borrower and each Lender
(including Kawasaki) agreed and acknowledged that no agency
relationship has existed or was intended to be created by
the Second Amended and Restated Credit Agreement, between
Kawasaki on the one hand and any other Lender or any
Director approved by such Lender on the other hand.

Subject to and upon the terms and conditions set forth in
the Second Amended and Restated Credit Agreement (including,
without limitation, Section 5.02 thereof), on the Second
Amendment Effective Date, GPA Sub and each Second Amendment
Lender made the Loan provided by clause (d) of Section 2.02
of the Second Amended and Restated Credit Agreement to be
made by such Lender on the Second Amendment Effective Date.
All of such Loans were made simultaneously by GPA Sub and
the Second Amendment Lenders following acknowledgement and
agreement by GPA Sub and the Second Amendment Lenders that
the Second Amendment Effective Date had occurred.

Notwithstanding the amendment and restatement of the First
Amended and Restated Credit Agreement by the Second Amended
and Restated Credit Agreement, all of the Obligations
continued to be secured by the Collateral (as defined in the

NY1-53665.4 -60-

First Amended and Restated Credit Agreement) and the
Borrower acknowledged and agreed that the Collateral (as
defined in the First Amended and Restated Credit Agreement)
remained subject to a lien and security interest in favor of
the Collateral Agent for the benefit of the Secured Cred-
itors. The Second Amended and Restated Credit Agreement was
intended as a substitution of, and not as payment of, the
Obligations of the Borrower under the First Amended and
Restated Credit Agreement and all amounts outstanding and
owing by the Borrower under the First Amended Credit
Agreement were deemed to be outstanding and owing by the
Borrower under the Second Amended and Restated Credit
Agreement.

5.05 Conditions Precedent to Third Amendment
---------------------------------------
Effective Date. The amendment and restatement of the Second
--------------
Amended and Restated Credit Agreement pursuant to this
Agreement, and the agreement of each Lender to extend the
maturity of the Loans of such Lender to the Maturity Date
(as defined in this Agreement) shall become effective on the
date (the "Third Amendment Effective Date"), which date must
------------------------------
occur not later than September 30, 1993, on which each of
the following conditions is satisfied unless waived in
writing by all of the Lenders in their sole and absolute
discretion:

(a) Execution of Agreement. The Borrower, the
----------------------
Administrative Agent and each Lender shall have executed a
counterpart hereof (whether the same or a different counter-
part) and shall have delivered the same to the Administra-
tive Agent at its Notice Office or, in the case of the
Lenders, shall have given to the Administrative Agent
written notice (actually received) at such office that the
same has been signed and mailed to it.

(b) Corporate Documents; Proceedings; Officer's
-------------------------------------------
Certificate. The Lenders shall have received from the
-----------
Borrower a certificate, dated the Third Amendment Effective
Date, signed by the Chairman of the Board of Directors, the
President and Chief Executive Officer, the Senior Vice
President-Finance or the Vice President and Controller of
the Borrower and attested to by the Secretary or any
Assistant Secretary of the Borrower in substantially the
form of Exhibit Y with appropriate insertions, together with
copies of the Certificate of Incorporation and By-Laws of
the Borrower and the resolutions of the Borrower referred to
in such certificate, and the foregoing shall be satisfactory
to all of the Lenders in their sole and absolute discretion.

(c) Opinions of Counsel. The Lenders shall have
-------------------
received opinions, addressed to the Administrative Agent and

NY1-53665.4 -61-

each of the Lenders and dated the Third Amendment Effective
Date, from (i) Andrews & Kurth L.L.P. and Martin J. Whalen
covering the due authority, legality, enforceability and
other matters related to this Agreement and the other Credit
Documents and the requirements hereof and thereof,
(ii) Faegre & Benson covering the entry of the Interim
Extension Loan Order and the taking of any appeals therefrom
and Liens on the property or other assets of the Borrower
approved by the Bankruptcy Court, and (iii) Winthrop,
Stimson, Putnam & Roberts covering the United States
citizenship of the Borrower and other matters involving the
DOT and the FAA, and such other opinions with respect to
other matters incident to transactions contemplated herein,
as any Lender may request and as are acceptable to all of
the Lenders in their sole and absolute discretion.

(d) Mortgage and Assignment of Gate Leases. The
--------------------------------------
Borrower shall have (i) duly authorized, executed and deliv-
ered and filed with the appropriate Governmental Authorities
(a) the Third Amendments to Deeds of Trust in substantially
the forms of Exhibits MM-1, MM-2 and MM-3, amending each
Mortgage encumbering the Mortgaged Properties, and (b) the
Third Amendment to Assignment of Gate Leases in substan-
tially the form of Exhibit NN, amending the Assignment of
Gate Leases, and (ii) provided to the Lenders title reports
in form and substance satisfactory to all of the Lenders in
their sole and absolute discretion, and showing title vested
in the Borrower and the absence of Liens other than Liens
shown on the title reports delivered on the Effective Date.

(e) Mortgage Consents. The City of Phoenix, as
-----------------
landlord, and the Collateral Agent shall have duly autho-
rized, executed and delivered the Third Amendments to
Consent Agreement in substantially the forms of Exhibits
OO-1 and OO-2.

(f) Slots. The Borrower and the Collateral Agent
-----
shall have duly authorized, executed and delivered the
Second Amendment to Slot Lease Agreement in substantially
the form of Exhibit PP.

(g) Interim Extension Loan Order. The Lenders
----------------------------
shall have received a certified copy of the Interim
Extension Loan Order, and the Interim Extension Loan Order
shall have been entered by the Bankruptcy Court and shall be
in full force and effect and shall not have been stayed,
reversed, vacated, rescinded, modified or amended in any
respect (other than modifications acceptable to all of the
Lenders, in their sole and absolute discretion), and no
appeal shall been taken from the Interim Extension Loan
Order.

NY1-53665.4 -62-

(h) Operating Plan. The Operating Plan and the
--------------
recommendations contained in the report thereon of Simat,
Helliesen & Eichner, Inc., the Borrower's consultant, shall
have been adopted by the management and the Board of
Directors of the Borrower.

(i) Payment of Ansett Loans and Release and
---------------------------------------
Termination by Ansett. Prior to or simultaneously with the
---------------------
effectiveness of this Agreement and the extension of the
maturity of the Loans to the Maturity Date (as defined
herein), (i) all of the Ansett Loans shall be paid in full,
together with accrued and unpaid interest thereon, and
(ii) Ansett shall have duly authorized, executed and
delivered a Release and Termination in substantially the
form of Exhibit QQ releasing all of its right, title and
interest in and to the Collateral, the Loans and the Credit
Documents.

(j) Corporate Governance and Related Actions.
----------------------------------------
The Borrower shall have duly authorized, executed and
delivered the Amended and Restated Management Letter
Agreement substantially in the form of Exhibit RR and the
Lenders (other than Kawasaki) shall have received evidence,
satisfactory in form and substance to all of the Lenders
(other than Kawasaki) in their sole and absolute discretion,
that all actions described in the Amended and Restated
Management Letter Agreement to be taken on or prior to the
Third Amendment Effective Date shall have been taken to the
satisfaction of all of the Lenders (other than Kawasaki) in
their sole and absolute discretion.

(k) No Material Adverse Change. In the opinion
--------------------------
of the Lenders, no material adverse change shall have
occurred since September 15, 1993 in the financial
condition, business or prospects of the Borrower.

(l) Payment of Fees, etc. The Borrower shall
---------------------
have paid all costs, fees and expenses owing in connection
with this Agreement, the other Credit Documents and the
documents referred to herein and therein and due to the
Administrative Agent, the Collateral Agent and each Lender
on or before the Third Amendment Effective Date (including,
without limitation, legal fees and expenses).

(m) No Default; Representations and Warranties.
------------------------------------------
No Default or Event of Default shall have occurred and be
continuing on and as of the Third Amendment Effective Date
and all representations and warranties of or on behalf of
the Borrower in this Agreement and all the other Credit
Documents shall be true and correct in all material respects
on and as of the Third Amendment Effective Date with the

NY1-53665.4 -63-

same effect as though such representations and warranties
had been made on and as of the Third Amendment Effective
Date (it being understood and agreed that in the event of
any inconsistency between the representations and warranties
of or on behalf of the Borrower in this Agreement and the
representations and warranties of or on behalf of the
Borrower in the other Credit Documents, the representations
and warranties of or on behalf of the Borrower in this
Agreement shall control); and the Lenders shall have
received a certificate, dated the Third Amendment Effective
Date, and signed by the Vice President and Controller of the
Borrower, to such effect.

(n) Governmental Action. No Governmental Action
-------------------
shall purport to, and no Governmental Action or other action
or proceedings shall have been filed, instituted, threatened
or issued which seeks to, enjoin or restrain or otherwise
adversely affect the extension of the maturity of the Loans
to the Maturity Date (as defined herein) or the other
transactions provided for herein or contemplated hereby or
the Borrower's compliance with the terms hereof or of the
other Credit Documents.

(o) Other Action. There shall have been taken
------------
such other actions, and all of the Lenders shall have
received such other documents, instruments, opinions,
reliance letters, certifications and copies of governmental
consents, permits, licenses and approvals, as any Lender
shall have reasonably requested and which are acceptable to
all of the Lenders in their sole and absolute discretion.

On the Third Amendment Effective Date, the maturity of the
Loans of each Lender shall be extended to the Maturity Date
(as defined herein) and the Loans of each Lender shall
continue to be outstanding in an aggregate principal amount
equal to the amount set forth opposite its name on Annex I
attached hereto (and each Lender shall be deemed to have
waived any mandatory prepayments of the Loans of such Lender
otherwise required pursuant to Sections 4.02(i), 4.02(ii)
and 4.02(iv) of the Second Amended and Restated Credit
Agreement during the period July 1, 1993 through September
30, 1993). The Borrower and each of the Lenders (other than
Kawasaki) hereby acknowledge that, pursuant to this
Agreement and the Amended and Restated Management Letter
Agreement, the Borrower has granted to each Lender (other
than Kawasaki) certain rights of approval with respect to
members of the Board of Directors of the Borrower and the
Executive Committee of such Board of Directors. The
Borrower and each Lender (other than Kawasaki) further
acknowledge that Kawasaki is not a party to the Amended and
Restated Management Letter Agreement, and that the Borrower

NY1-53665.4 -64-

has not granted to Kawasaki any rights of approval with
respect to members of the Board of Directors of the Borrower
or the Executive Committee of such Board of Directors.
Neither Kawasaki nor any of its officers, directors or
advisors shall be liable or responsible to any Person for
any exercise of the rights of any other Lender under the
Amended and Restated Management Letter Agreement or for any
act or omission of any Director of the Borrower approved by
any such Lender. The Borrower and each Lender (including
Kawasaki) agree and acknowledge that no agency relationship
exists or is intended to be created hereby between Kawasaki
on the one hand and any other Lender or any Director
approved by such Lender on the other hand. On the Third
Amendment Effective Date, the Management Letter Agreement
shall be amended and restated in its entirety as provided in
the Amended and Restated Management Letter Agreement (and
the Management Letter Agreement shall be of no further force
or effect).

Notwithstanding the amendment and restatement of the Second
Amended and Restated Credit Agreement, all of the
Obligations shall continue to be secured by the Collateral
and the Borrower acknowledges and agrees that the Collateral
remains subject to a lien and security interest in favor of
the Collateral Agent for the benefit of the Secured Cred-
itors. Except as provided herein and in the Release and
Termination executed and delivered by Ansett pursuant
hereto, this Agreement is intended as a substitution of, and
not as payment of, the Obligations of the Borrower under the
Second Amended and Restated Credit Agreement and all amounts
outstanding and owing by the Borrower under the Second
Amended and Restated Credit Agreement shall be deemed to be
outstanding and owing by the Borrower hereunder.
Notwithstanding anything herein or in any of the other
Credit Documents which may be to the contrary, for all
purposes hereof and thereof, the Maturity Date shall be as
provided herein.

SECTION 6. REPRESENTATIONS, WARRANTIES AND
-------------------------------
AGREEMENTS.
----------

In order to induce the Lenders to enter into this
Agreement and to extend the maturity of the Loans to the
Maturity Date (as defined herein), the Borrower makes the
following representations, warranties and agreements as of
the Third Amendment Effective Date, which shall survive the
execution and delivery of this Agreement and the extension
of the maturity of the Loans to the Maturity Date (as
defined herein).

NY1-53665.4 -65-

6.01 Corporate Status. The Borrower (i) is a
----------------
duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority to own its
property and assets and to transact the business in which it
is engaged and (iii) is duly qualified as a foreign
corporation and in good standing in each jurisdiction where
the ownership, leasing or operation of its property or the
conduct of its business requires such qualification except
where the failure to be so qualified is not reasonably
likely to have a material adverse effect on the business,
operations, property or other assets or condition (financial
or otherwise) of the Borrower or on the Collateral or the
rights or remedies of the Collateral Agent in respect
thereof.

6.02 Corporate Power and Authority. Subject to
-----------------------------
the entry of the Interim Extension Loan Order by the
Bankruptcy Court, the Borrower has the corporate power to
execute, deliver and perform the terms and provisions of
each of the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such
Credit Documents. The Borrower has duly executed and
delivered each of the Credit Documents to which it is a
party, and each of such Credit Documents constitutes its
legal, valid and binding obligation enforceable against the
Borrower in accordance with its terms.

6.03 No Violation. Neither the execution,
------------
delivery or performance by the Borrower of the Credit
Documents to which it is a party, nor compliance by it with
the terms and provisions thereof, (i) will contravene any
provision of any law, statute, rule or regulation or any
order, writ, injunction or decree of any court or govern-
mental instrumentality, (ii) will conflict or be incon-
sistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except
pursuant to the Security Documents) upon any of the property
or assets of the Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other material agreement, contract or
instrument to which the Borrower is a party or by which its
property or assets are bound or to which it may be subject,
in each case to the extent entered into or assumed on or
after the Filing Date, or (iii) will violate any provision
of the Certificate of Incorporation or By-Laws of the
Borrower.

NY1-53665.4 -66-

6.04 Governmental Approvals. No order, consent,
----------------------
approval, license, authorization or validation of, or
filing, recording or registration with (except the entry of
the Orders and those which have been obtained or made or may
be required to be made in the future under any Credit
Document and cannot be obtained until such future time) or
exemption by, any governmental or public body or authority,
or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and
performance of any Credit Document or (ii) the legality,
validity, binding effect or enforceability of any Credit
Document.

6.05 Priority; Security Interests.
----------------------------

(a) The Obligations constitute allowed adminis-
trative expense claims in the Case having priority over all
administrative expenses of the kind specified in Section
503(b) or 507(b) of the Bankruptcy Code, except for the
Permitted Expenses and except as expressly permitted by
Section 8.05(vi).

(b) The Obligations shall be at all times secured
by a Lien on the Collateral in favor of the Collateral Agent
for the benefit of the Secured Creditors, which Lien shall
be a first priority Lien on all Collateral and perfected by
operation of the Orders, except that the Lien securing the
Obligations may be junior in priority to the Permitted First
Liens with respect to the property encumbered thereby. The
Borrower has good and marketable title to all Collateral
owned by it free and clear of all Liens, except (i) Liens
securing the Obligations, (ii) the Permitted First Liens and
(iii) other Liens permitted by Section 8.01, all of which
Liens referred to in this clause (iii) (other than the Liens
permitted by clause (vi) of Section 8.01) are and shall be
junior and subordinate to the Liens securing the
Obligations. All filings, notices, recordings and other
actions taken or made in the United States or any State
thereof or in any other jurisdiction necessary to perfect
the Liens on the Collateral created pursuant to the Security
Documents and the Orders have been made, given or
accomplished.

6.06 Financial Statements; Financial Condition;
------------------------------------------
Undisclosed Liabilities; etc.
-----------------------------

(a) The consolidated balance sheet of the
Borrower at December 31, 1992 and the related consolidated
statements of operations, shareholders' equity and cash
flows of the Borrower for the fiscal year ended on such date
and heretofore furnished to the Lenders present fairly in

NY1-53665.4 -67-

all material respects the financial position of the Borrower
at the date of such balance sheet and the results of
operations of the Borrower for such periods covered in the
statements of operations except as expressly disclosed
therein and in the notes thereto in conformity with
generally accepted accounting principles and practices
consistently applied.

(b) The consolidated balance sheet of the
Borrower at June 30, 1993 and the related consolidated
statements of operations and cash flows of the Borrower for
the six month period ended on such date and heretofore
furnished to the Lenders present fairly in all material
respects the financial position of the Borrower at the date
of such balance sheet and the results of the operations of
the Borrower for such periods covered in the statements of
operations thereby, except as otherwise disclosed therein
and in the notes thereto in conformity with generally
accepted accounting principles and practices consistently
applied, subject to appropriate year-end audit adjustments.

(c) Since September 15, 1993, there has been no
material adverse change in the business, operations,
property or other assets or condition (financial or
otherwise) of the Borrower, including, without limitation,
as a result of any casualty, strike, lockout or labor
dispute.

(d) Except as fully reflected in the financial
statements (including the footnotes thereto) referred to in
Section 6.06 (b) or in Schedule 9 hereto, there are no
liabilities or obligations (excluding current obligations
and liabilities incurred in the ordinary course of business)
with respect to the Borrower of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and
whether or not due), which either individually or in
aggregate are or would be reasonably likely to be materially
adverse to the ability of the Borrower to satisfy the
Obligations in accordance with their terms or the ability of
the Borrower to consummate the transactions contemplated by
the Credit Documents.

(e) The projections presented in the Operating
Plan (the "Projections") are based on good faith estimates
-----------
and assumptions made by the management of the Borrower on
and as of the date of the Operating Plan; and the management
of the Borrower believes that the Projections are reasonable
and attainable, it being recognized by the Lenders, however,
that projections as to future events are not to be viewed as
facts and that the actual results during the period or

NY1-53665.4 -68-

periods covered by the Projections may differ from the
projected results and that such differences may be material.

(f) The property register furnished by the
Borrower to the Lenders on and as of the Effective Date was
a true, complete and accurate description of all aircraft,
engines, rotables, Slots, Real Property and other material
property or other material assets of the Borrower.

6.07 Litigation. Except as set forth in Schedule
----------
10 hereto, there are no actions, suits or proceedings, other
than the Case, pending or, to the knowledge of the Borrower,
threatened that are reasonably likely to materially and
adversely affect the business, operations, property or other
assets or condition (financial or otherwise) of the Borrower
or the ability of the Borrower to perform its obligations
hereunder or under any of the other Credit Documents.

6.08 True and Complete Disclosure. All factual
----------------------------
information (taken as a whole) furnished on or prior to the
Third Amendment Effective Date by the Borrower in writing to
any Lender (including, without limitation, all information
contained in the Credit Documents but excluding (i) the
Projections and any other forecasts and projections of
financial information and results submitted to any Lender,
and (ii) factual information which was superseded or re-
placed on or prior to the date hereof) for purposes of or in
connection with this Agreement, or any transaction con-
templated herein, is true and accurate as of the date hereof
in all material respects and not incomplete by omitting to
state any fact necessary to make such information (taken as
a whole) not misleading in any material respect at such time
in light of the circumstances under which such information
was provided.

6.09 Use of Proceeds; Margin Regulations.
-----------------------------------

(a) All proceeds of the Loans were used for the
Borrower's working capital purposes in accordance with the
Operating Plan as defined in the Original Credit Agreement,
the First Amended and Restated Credit Agreement and/or the
Second Amended and Restated Credit Agreement, as applicable
(including, without limitation, to pay amounts due under the
A320 Leases, the Engine Leases and the Kawasaki Leases).

(b) No part of the proceeds of any Loan were used
by the Borrower to purchase or carry any Margin Stock or to
extend credit to others for the purposes of purchasing or
carrying any Margin Stock. Neither the making of any Loan
nor the use of the proceeds thereof violated or was

NY1-53665.4 -69-

inconsistent with the provisions of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System.

6.10 Tax Returns and Payments. The Borrower has
------------------------
filed all federal income tax returns and all other tax
returns required to be filed by it and has paid all income
and other taxes payable by it which have become due pursuant
to such tax returns and all other taxes and assessments
payable by it which have become due, other than those (x)
not yet delinquent, (y) contested in good faith and for
which adequate reserves have been established or (z) the
payment of which is excused or stayed as a result of the
Borrower's commencement of the Case. The Borrower has paid,
or has provided adequate reserves for the payment of, all
federal and state income taxes applicable for all prior
fiscal years and for the current fiscal year to the date
hereof.

6.11 Compliance with ERISA.
---------------------

(a) The Borrower and each member of the
Controlled Group is in compliance in all respects with any
applicable provisions of ERISA and the regulations and
published interpretations thereunder including all
procedural and fiduciary provisions.

(b) No Pension Plan has an accumulated or waived
funding deficiency within the meaning of Section 412 of the
Code and no Pension Plan is insolvent or in reorganization.

(c) No Termination Event has occurred or is
reasonably expected to occur with respect to any Pension
Plan administered by the Borrower or any member of the
Controlled Group or any administrator designated by the
Borrower or any member of the Controlled Group.

(d) There are no unfunded vested liabilities
under any Pension Plans administered by the Borrower or any
member of the Controlled Group or any administrators
designated by the Borrower or any member of the Controlled
Group.

(e) Neither the Borrower nor any member of the
Controlled Group has incurred or reasonably expects to incur
any withdrawal liability under ERISA to any Multiemployer
Plan or any similar liability or exposure.

(f) Neither the Borrower nor any member of the
Controlled Group has incurred, or expects to incur, any
material liability to or on account of any Pension Plan

NY1-53665.4 -70-

pursuant to Section 515, 4062, 4063, 4064, 4201, or 4204 of
ERISA.

(g) No Lien imposed under the Code or ERISA on
the assets of the Borrower nor any member of the Controlled
Group exists or is likely to arise on account of any Pension
Plan.

6.12 Subsidiaries. There are no Subsidiaries of
------------
the Borrower and the Borrower does not hold, directly or
indirectly, legally or beneficially, more than 5% of the
outstanding voting stock or similar interests of any other
Person.

6.13 Compliance with Statutes, etc.
------------------------------

(a) The Borrower is in compliance with all
applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental
Authorities, domestic or foreign, in respect of the conduct
of its businesses and the ownership of its property, except
(x) such noncompliances as are not likely to, in the
aggregate, have a material adverse effect on the business,
operations, property or other assets or condition (financial
or otherwise) of the Borrower or on its ability to perform
its obligations hereunder or under the other Credit
Documents or on the Collateral or any rights or remedies of
the Collateral Agent or the Lenders in respect thereof or
(y) any statute, regulation, order or restriction with which
the Borrower is not required to comply by virtue of the
Bankruptcy Code, the pendency of the Case or of any order
issued in the Case.

(b) Without limiting the foregoing, no Hazardous
Materials (i) exist on, under or about the Borrower's assets
or otherwise with respect to the Collateral, or (ii) have at
any time been transported to or from such property or used,
generated, manufactured, stored or disposed of on, under or
about such assets which, in the case of clauses (i) and (ii)
above, would violate any permits, regulations or other
Governmental Actions or would give rise to any Hazardous
Materials Claim materially and adversely affecting any
Collateral, including, without limitation, the economic
value, use, operation or transferability of any Collateral
or for which the Administrative Agent or any Lender could
have any liability or obligation with respect thereto or
would have a material adverse effect on the business,
property or other assets, condition, financial or otherwise,
or operations of the Borrower or could give rise to an
Environmental Lien. The Borrower has obtained all permits,
licenses and authorizations required under all Hazardous

NY1-53665.4 -71-

Materials Laws and is in compliance with the terms and
conditions of such permits, licenses and authorizations and
all applicable Hazardous Materials Laws except where the
failure to obtain such permit, license or authorization or
where such noncompliance would not affect any Collateral,
would not result in any liability of the Administrative
Agent or any Lender, and would not have a material adverse
effect on the business, property or other assets, condition,
financial or otherwise, or operations of the Borrower or on
its ability to perform its obligations hereunder or under
the other Credit Documents or on the Collateral or any
rights or remedies of the Collateral Agent or the Lenders in
respect thereof. The Borrower has not been notified that it
is liable for any penalties, fines or forfeitures for
failure to comply with any of the foregoing in the manner
set forth above. The Borrower is in compliance with, and
not in breach of or default under, any applicable writ,
order, judgment, injunction, decree, lease, first mortgage,
or other agreement or instrument to which the Borrower is a
party which would materially and adversely affect the
ability of the Borrower to operate any portion of the Real
Property or personal property owned or leased by it and no
event has occurred and is continuing which, with the passage
of time or the giving of notice or both, would constitute
noncompliance, breach of or default thereunder the breach of
which is likely to have a material adverse effect on the
property or other assets, business operation, condition
(financial or otherwise) of the Borrower. There are no
legal or governmental proceedings pending or, to the
knowledge of the Borrower, threatened, which (a) question
the validity, term or entitlement of the Borrower for any
permit, license, order or registration required for the
operation of any facility or personal property which the
Borrower currently operates and (b) wherein an unfavorable
decision, ruling or finding would have a material adverse
effect on the business, operation, property or other assets
or condition (financial or otherwise) of the Borrower or on
its ability to perform its obligations hereunder or under
the other Credit Documents or on the Collateral or any
rights or remedies of the Collateral Agent or the Lenders in
respect thereof.

6.14 Investment Company Act. The Borrower is not
----------------------
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

6.15 Public Utility Holding Company Act. The
----------------------------------
Borrower is not a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

NY1-53665.4 -72-

6.16 End of Fiscal Year; Fiscal Quarters. The
-----------------------------------
last day of the fiscal year of the Borrower shall be on
December 31 and the last day of each of the fiscal quarters
of the Borrower shall be on March 31, June 30, September 30
and December 31.

6.17 The Orders. The Final Order has been
----------
entered and has not been amended, stayed, vacated or
rescinded (except (i) to the extent superseded by the Final
Order and (ii) as amended in a manner satisfactory to all of
the Lenders in their sole and absolute discretion), and the
obligations of the parties to the Credit Documents have not
been stayed. Upon the maturity (whether by acceleration or
otherwise) of any of the Obligations, the Lenders shall be
entitled to immediate payment of such Obligations without
further application to or order by the Bankruptcy Court.
Upon any Event of Default the Collateral Agent shall be
entitled to take the actions or enforce the remedies set
forth in the Orders and the Security Documents without
further application to or order by the Bankruptcy Court or
any notice to (other than as expressly provided in the
provisos to the third to last sentence of Section 9) or
consent of any other Person. The GPA Order has been duly
entered, and the GPA Order has not been appealed, amended,
stayed, vacated or rescinded. The Additional Loan Order and
the Kawasaki Order have been entered and have not been
amended, stayed, vacated or rescinded (except as amended in
a manner satisfactory to all of the Lenders in their sole
and absolute discretion). The Second Additional Loan Order
has been entered and has not been amended, stayed, vacated
or rescinded (except as amended in a manner satisfactory to
all of the Lenders in their sole and absolute discretion).
The Interim Extension Loan Order has been entered and has
not been amended, stayed, vacated or rescinded (except as
amended in a manner satisfactory to all of the Lenders in
their sole and absolute discretion).

6.18 Operations.
----------

(a) Set forth on Schedule 11 is a true, correct
and complete list of (x) all Slots and Routes held or used
by the Borrower and (y) all Domestic Gates owned or leased
by the Borrower, in each case, as of the Third Amendment
Effective Date. The Borrower represents and warrants that
it holds the Slots held by it pursuant to Title 14, subject
only to the regulations of the FAA, and that it has, at all
times after obtaining such Slots, complied in all material
respects with all of the terms, conditions and regulations
set forth in Title 14, including, without limitation, the
usage requirements set forth in 93.227 thereof, and that
there exists no material violation of such terms, conditions

NY1-53665.4 -73-

and regulations that gives the FAA the right to terminate,
cancel, withdraw or modify any such Slots. Furthermore, the
Borrower shall not use any Slot which is to be used in
essential air service operations (as defined by the FAA) for
international or non-essential air service operations.

(b) The Borrower is a "citizen of the United
States" as defined in section 101(16) of the Aviation Act
and a duly certificated "air carrier" within the meaning of
the Aviation Act authorized to transport passengers and
cargo in domestic and international air transportation and
certificated under Sections 401 and 604(b) of the Aviation
Act. All such certificates are in full force and effect and
duly issued to the Borrower by the DOT (or the Civil
Aeronautics Board) and the FAA, and the Borrower has in full
force and effect and duly issued to it all licenses,
permits, authorizations, certificates of compliance,
certificates of public convenience and necessity and other
certificates (including, without limitation, air carrier
operating certificates and operations specifications issued
by the FAA pursuant to Part 121 of the Regulations of the
FAA and all applicable aircraft registration requirements of
the FAA, including those set forth in Part 47 of the
regulations of the FAA) which are required by the DOT or the
FAA for the conduct of the business of the Borrower as now
conducted. There are no license fees owed on the Borrower's
DOT or FAA licenses. The Borrower is in compliance with all
material requirements of the certificates and authorizations
issued to it by the DOT and the FAA.

6.19 GPA Agreements/Kawasaki Agreements. Each of
----------------------------------
the GPA Agreements and the Kawasaki Agreements is in full
force and effect, no "Default" or "Event of Default" under
and as defined in any such agreement (other than an event of
default which consists of the existence of the Case) has
occurred and is continuing and each of the representations
and warranties of the Borrower in the GPA Agreements and the
Kawasaki Agreements is true and correct as if made on the
Third Amendment Effective Date (except to the extent any
such representation or warranty expressly refers to a prior
date).

SECTION 7. AFFIRMATIVE COVENANTS.
---------------------

The Borrower covenants and agrees that, unless the
Required Lenders otherwise consent in their sole and absol-
ute discretion, on and after the Third Amendment Effective
Date and until the Loans and the Notes, together with all
interest, fees and other Obligations payable hereunder or
under the other Credit Documents, are paid in full:

NY1-53665.4 -74-

7.01 Information Covenants. The Borrower will
---------------------
furnish to each Lender:

(a) Weekly and Monthly Reports. By the Wednesday
--------------------------
after the end of each week, beginning with the first week or
part thereof in which the Third Amendment Effective Date
occurs, internal reports on the operations of the Borrower
in respect of such week and for the period from the
beginning of the current fiscal year to the end of such
week, in a format, and in a level of detail, reasonably
acceptable to and agreed upon by the Required Lenders; and
within 20 days after the end of each month, other than a
month which ends a fiscal quarter or a fiscal year of the
Borrower, the balance sheet of the Borrower as at the end of
such month and the related statements of operations and cash
flows for such month and for the elapsed portion of the
fiscal year ended with the last day of such month, in each
case setting forth comparative figures for the related
periods in the prior fiscal year, all of which shall be
certified on behalf of the Borrower by the Chief Financial
Officer, Treasurer or Vice President and Controller of the
Borrower (subject to year-end audit adjustments); and within
20 days after the end of each month, a report with respect
to sales of assets during such month, in a format, and in a
level of detail, reasonably acceptable to the Required
Lenders and demonstrating compliance with the provisions of
Sections 8.02(i), 8.02(iii) and 4.02(ii) of this Agreement;
and within 20 days after the end of each month, a report
with respect to leases entered into during such month, in a
format, and in a level of detail, reasonably acceptable to
the Required Lenders, and demonstrating compliance with the
provisions of Section 8.04 of this Agreement.

(b) Financial Statements. Within 50 days after
--------------------
the close of the first three fiscal quarters in each fiscal
year of the Borrower and within 105 days after the last
fiscal quarter in any fiscal year of the Borrower (or, if
earlier, at the time of filing with the SEC in the case of
any accounting period ending after the Effective Date), the
balance sheet of the Borrower as at the end of such
quarterly period and the related statements of operations,
cash flows and stockholders' equity for such quarterly
period and for the elapsed portion of the fiscal year ended
with the last day of such quarterly period, in each case
setting forth comparative figures for the related periods in
the prior fiscal year, all of which shall be certified on
behalf of the Borrower by the Chief Financial Officer,
Treasurer or Vice President and Controller of the Borrower
(subject to appropriate year-end audit adjustments in the
case of statements relating to the first three quarters of
any fiscal year) and, in the case of statements relating to

NY1-53665.4 -75-

the last quarter of the fiscal year and for such fiscal
year, certified by KPMG Peat Marwick or another independent
certified public accounting firm of recognized national
standing selected by the Borrower and reasonably acceptable
to the Required Lenders without qualification as to the
scope of the audit or as to generally accepted accounting
principles or practices.

(c) Officer's Certificates. At the time of the
----------------------
delivery of the financial statements provided for in
Section 7.01(b), a certificate of the Chief Financial
Officer, Treasurer or Vice President and Controller of the
Borrower, stating that he has reviewed the terms of this
Agreement and the Credit Documents and has made or caused to
be made under this provision a review in reasonable detail
of the transactions and condition of the Borrower during the
period covered thereby and is authorized to act on behalf of
the Borrower, to the effect that to the best of his
knowledge, no Default or Event of Default has occurred and
is continuing, or if such Chief Financial Officer, Treasurer
or Vice President and Controller is unable to make the
certifications required herein, he shall supply a statement
setting forth the reasons for such inability, specifying the
nature and extent of such reasons. Such certificate shall
also set forth the calculations required to establish
whether the Borrower was in compliance with each of the
provisions of Section 7.08 and Section 8, at the end of such
fiscal quarter or year, as the case may be.

(d) Notice of Default or Litigation. Promptly,
-------------------------------
and in any event within three Business Days after the
Borrower obtains knowledge thereof, notice of (i) the occur-
rence of any Default or Event of Default or (ii) any
litigation or governmental proceeding not filed in the Case
commenced (x) against the Borrower which could materially
and adversely affect the business, operations, property or
other assets or condition (financial or otherwise) of the
Borrower or its ability to perform its obligations hereunder
or under the other Credit Documents or the Collateral or the
rights or remedies of the Collateral Agent in respect
thereof or (y) with respect to any Credit Document.

(e) Other Reports and Filings. Promptly, copies
-------------------------
of (i) all financial information, proxy materials and other
information and reports concerning material developments in
the business, operations, property or other assets or
condition (financial or otherwise) of the Borrower, which
the Borrower (x) has filed with the Securities and Exchange
Commission or any governmental agencies substituted therefor
(the "SEC") or any comparable agency outside of the United
---
States, including periodic filings required as of the

NY1-53665.4 -76-

Effective Date by such agency, (y) has filed with the FAA or
the DOT, or, in each case, any comparable agency outside of
the United States or (z) has delivered to the Board of
Directors, any member of an Official Committee (exclusive of
materials delivered to members of an Official Committee in
their individual non-representative capacity) or holders of,
or to any agent or trustee with respect to, Indebtedness of
the Borrower in its capacity as such a holder, agent or
trustee (unless such information or materials have
theretofore been delivered to the Lenders pursuant to this
Section 7.01), and (ii) all financial and management reports
regarding the Borrower in connection with any audit by its
independent accountants, including, without limitation, any
report making accounting control recommendations or noting
deficiencies.

(f) Pleadings, etc. Promptly after the same is
---------------
available, (i) copies of all material pleadings, motions,
applications, judicial information, financial information
and other documents not generally noticed to all parties-
in-interest on the official service list in the Case (x)
filed by or on behalf of the Borrower with the Bankruptcy
Court in the Case or (y) distributed by or on behalf of the
Borrower to any Official Committee, except information which
is publicly available and information which the Borrower
reasonably believes is in the possession of, or generally
available to, the Lenders and (ii) copies of all pleadings,
motions and applications filed by third parties (it being
understood that any of the foregoing relating to ordinary
course of business matters and customary for bankruptcy
proceedings shall not be deemed material for this clause
(f)).

(g) Slot Use; Notice of Slot Use Prohibition.
----------------------------------------
(i) In the event that the Borrower shall have determined not
to use any Operating Route or Slot held by it in accordance
with Title 14 or any applicable law or regulation, the
Borrower shall give written notice to the Lenders no later
than three days following the date of such determination,
which notice shall identify such Slot or Operating Route,
and the extent of use of such Slot or Operating Route in the
twelve months preceding such notice, and (ii) in the event
of the proposal or imposition of any law, rule or regulation
with respect to Routes or Slots, which law, rule or regula-
tion could have the effect of (x) prohibiting or restricting
in any respect the ability of the Borrower to acquire, hold,
sell or otherwise transfer the right to hold or use the
Operating Routes or Slots, or (y) in any other respect,
adversely affecting the interests of the Lenders, the
Borrower will, in each case, within three days of such
event, give written notice of such proposal or imposition.

NY1-53665.4 -77-

(h) Collateral Schedules. On or before the 20th
--------------------
day of each month, a certificate executed by the Chief
Financial Officer, Treasurer or Vice President and Control-
ler of the Borrower of the existing Collateral, the value
thereof (showing, among other things, by type and category
of Collateral in detail reasonably acceptable to the
Required Lenders, compliance with Section 7.08 and Section
4.02(i)) and all locations thereof, plus any additional
filing, registration, or other action necessary or advisable
to fully perfect the Collateral Agent's security interest
therein under applicable law (other than under the
Bankruptcy Code by reason of the Orders) in substantially
the form of Exhibit M hereto.

(i) ERISA. Promptly (and in no event later than
-----
10 days) after becoming aware of the occurrence of any (i)
Termination Event, or (ii) "prohibited transaction," as such
term is defined in Section 4975 of the Code, in connection
with any Pension Plan of the Borrower or any trust created
thereunder, a written notice from an officer of the Borrower
specifying the nature thereof, what action the Borrower
proposes to take with respect thereto, and, when known, any
action taken or threatened by the Internal Revenue Service
or the PBGC with respect thereto; and with reasonable
promptness copies of (iii) all notices received by the
Borrower or any member of the Controlled Group of the PBGC's
intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (iv) each Form
5500 annual report, including Schedule B thereto (Actuarial
Information) filed by the Borrower or any member of the
Controlled Group with the Internal Revenue Service with
respect to each Pension Plan; and (v) all notices received
by the Borrower or any member of the Controlled Group from a
Multiemployer Plan sponsor concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of
ERISA.

(j) Compliance Reports. In March of 1994,
------------------
(x) reports of the type described in Section 5.01(e)(ii) in
each jurisdiction in which the UCC-1 financing statements
referred to in Section 5.01(e)(i) were filed and in which
any other UCC-1 financing statements were subsequently filed
(which shall show UCC-1 financing statements covering all
applicable Collateral duly filed and none of which shall
disclose evidence of any Liens other than Permitted First
Liens), and (y) an opinion of FAA counsel referred to in
Section 5.01(c)(i) (or other FAA counsel reasonably
acceptable to the Required Lenders) showing the filing,
perfection and priority of all Collateral covered by the
Aircraft/Engine Mortgage and the absence of any Liens other

NY1-53665.4 -78-

than Permitted First Liens, such opinion to be in form and
substance reasonably acceptable to the Required Lenders.

(k) Other Information. From time to time, such
-----------------
other information or documents (financial or otherwise),
including, without limitation, board papers and minutes, and
further including, without limitation, revised cash flow
statements and revised profit and loss statements, in each
case, supporting or relating to transactions with respect to
which the Borrower seeks or is required to obtain the
consent, concurrence, approval and/or waiver of the Required
Lenders, as the Administrative Agent or any Lender may
request in its sole and absolute discretion.

(l) Board and Committee Meetings. Upon the
----------------------------
request of any Lender (other than Kawasaki), such Lender may
(but shall be under no obligation to) attend (on a non-
participating basis) meetings of the Borrower's Executive
Committee (as such Executive Committee is constituted on the
Second Amendment Effective Date) or portions of meetings of
the Borrower's Board of Directors or committees thereof at
which matters relating to the Operating Plan and its
implementation, monitoring and oversight are discussed.

(m) Monthly Projections. Within ten days after
-------------------
the end of each month, internal projections for the three-
month period following the end of such month, which
projections shall (i) be based upon the Borrower's most
recent internal performance information, (ii) set forth
profit and loss projections on no less than a monthly basis
and cash flow projections on a daily basis, and (iii)
otherwise be in a form acceptable to the Required Lenders.

(n) Excess of "net available cash" Over
-----------------------------------
$125,000,000. If on any date the amount of "net available
------------
cash" (as such term is defined in Section 8.15(d)) exceeds
$125,000,000, then, within two Business Days of such date,
the Borrower shall give written notice of such excess to the
Lenders.

(o) Increase in Investment Account Minimum
--------------------------------------
pursuant to Section 4.02(i). On or before the 20th day of
---------------------------
each month, a certificate executed by the Chief Financial
Officer, Treasurer or Vice President and Controller of the
Borrower and furnished to the Lenders, the Collateral Agent
and the Administrative Agent, setting forth (i) the amount
by which the Investment Account Minimum is required to be
increased pursuant to Section 4.02(i) by reason of a
deficiency in the value of rotables as of the last day of
such month, and (ii) the amount to which the Investment
Account Minimum is increased by reason of such deficiency.

NY1-53665.4 -79-

7.02 Books, Records and Inspections. The
------------------------------
Borrower will keep proper books of record and account in
which full, true and correct entries in conformity with
generally accepted accounting principles and all require-
ments of applicable law shall be made of all dealings and
transactions in relation to its business and activities.
The Borrower will permit officers and designated repre-
sentatives of the Administrative Agent, the Collateral Agent
or any Lender to visit and inspect any of the properties of
the Borrower to the extent permitted by law, and to examine
the books of account of the Borrower and discuss the
affairs, finances and accounts of the Borrower with, and be
advised as to the same by, its and their officers, all at
such reasonable times and intervals and to such reasonable
extent as the Administrative Agent, the Collateral Agent or
any Lender may request.

7.03 Maintenance of Property; Insurance. The
----------------------------------
Borrower shall maintain or cause to be maintained in good
repair, working order and condition, excepting ordinary wear
and tear and damage due to casualty, all of its aircraft,
aircraft engines, ground equipment, simulators, terminals,
offices and all other properties material to its operations
and will make or cause to be made all appropriate repairs,
renewals and replacements thereof, consistent with past
practice as in effect prior to the Filing Date. The
Borrower shall maintain or cause to be maintained, with
financially sound and reputable insurers the liability and
property insurance policies and programs listed on Schedule
12 hereto or substantially similar programs or policies and
amounts or other programs, policies and amounts reasonably
acceptable to the Administrative Agent and the Required
Lenders. On or before the expiration or renewal date
thereof, the Borrower shall deliver or cause to be delivered
to the Lenders insurance certificates and opinions
evidencing compliance with the requirements hereof and of
each Credit Document for each such policy or program then in
effect: (i) the amount of such policy, (ii) the risks
insured against by such policy, (iii) the name of the
insurer, each insured party under such policy and the loss
payees under any property damage insurance and (iv) the
policy number of such policy. All such policies shall
contain an endorsement providing for naming of the
Administrative Agent, the Collateral Agent and the other
Secured Creditors as additional insureds, for payment to the
Collateral Agent on behalf of the Lenders in the case of
hull and other property damage insurance of all money due or
to become due thereunder except to the extent the holder of
a Permitted First Lien is the loss payee for such proceeds,
prior notice to the Administrative Agent of cancellation or
material changes in the terms of the insurance and such

NY1-53665.4 -80-

other terms as the Administrative Agent may reasonably
request. The provisions of this Section 7.03 shall be
deemed to be in addition to, but not in limitation of, the
provisions of any of the Security Documents that require the
maintenance of insurance.

7.04 Corporate Franchises. The Borrower will do
--------------------
or cause to be done all things necessary to preserve and
keep in full force and effect its existence and its rights
(including, franchises, licenses and patents), except in all
cases with respect to such rights, other than with respect
to Slots and Routes, where (x) the failure to do so is not
reasonably likely to have a material adverse effect on the
business, operations, property, assets or condition
(financial or otherwise) of the Borrower or (y) the failure
to do so is excused by virtue of the status of the Borrower
as a debtor-in-possession in the Case or any order issued in
the Case; provided, however, that in all cases the Borrower
-------- -------
shall preserve and keep in full force and effect all rights
which are applicable to the Collateral or the loss of which
could have a material adverse effect on the Collateral,
including, without limitation, on the value or transfer-
ability thereof.

7.05 Compliance with Statutes, etc. The Borrower
------------------------------
will comply with all applicable laws, statutes, regulations
and orders of, and all applicable restrictions imposed by,
all Governmental Authorities, domestic or foreign, in
respect of the conduct of its business and the ownership of
its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards
and controls), except such noncompliances as (x) are not
reasonably likely to (A) result in a forfeiture or
cancellation of the right of the Borrower to use the Slots
held or used by it or (B) in the aggregate, have a material
adverse effect on the business, operations, property or
other assets or condition (financial or otherwise) of the
Borrower or (y) are excused by virtue of the status of the
Borrower as the debtor-in-possession in the Case or any
order issued in the Case; provided, however, that in all
-------- -------
cases the Borrower shall comply with all laws, statutes,
regulations, orders and restrictions which are applicable to
the Collateral or if noncompliance therewith could have a
material adverse affect on the Collateral, including,
without limitation, on the value or transferability thereof.

7.06 End of Fiscal Years; Fiscal Quarters. After
------------------------------------
the Third Amendment Effective Date, the Borrower shall not
change the date on which any of its fiscal quarters or its
fiscal year shall end.

NY1-53665.4 -81-

7.07 Performance of Obligations. The Borrower
--------------------------
will perform all of its obligations arising after the Filing
Date, and not stayed as a result of the Case, under the
terms of each agreement by which it is bound, except such
non-performances as are not reasonably likely to, in the
aggregate, have a material adverse effect on the business,
operations, property, assets or condition (financial or
otherwise) of the Borrower or which are described in the
Operating Plan as agreements that will not be assumed or
otherwise performed.

7.08 Minimum Designated Collateral Balances.
--------------------------------------
Without limiting any other provision of this Agreement or
the other Credit Documents, the Borrower shall maintain at
all times Collateral of the following types and with the
following values as of the last day of each calendar month:

(a) Rotables Minimum Value
-------- -------------

B747-200 Rotables - $11 million
B757-200 Rotables - $23 million
B737-300 Rotables - $17 million
B737-200 Rotables - $21 million

Total Rotables - $72 million; less

for each category of rotables the amounts by
which the Investment Account Minimum is
increased as the result of a deficiency in
the required value of rotables in such
category; and provided, however, that the
-------- -------
amount (if any) by which the aggregate value
of B757-200 and B737-300 rotables exceeds the
aggregate minimum value specified above for
B757-200 and B737-300 rotables may be added,
without duplication, to (i) the value of
B737-200 rotables for the purpose of
determining compliance with the required
minimum value of B737-200 rotables and/or
(ii) the value of B747-200 rotables for the
purpose of determining compliance with the
required minimum value of B747-200 rotables;
and provided further, however, that if
-------- ------- -------
rotables of any category are the subject of
an Asset Sale (to which the Required Lenders
shall have consented in their sole and
absolute discretion), then the aggregate
minimum value specified above for the
rotables of such category and for total
rotables shall be reduced by the greater of
the net book value of the rotables that are

NY1-53665.4 -82-

the subject of such Asset Sale (calculated as
provided in the succeeding paragraph of this
Section 7.08(a)) and the gross proceeds of
such Asset Sale.

The value of rotables shall be deemed to be the
net book value of the rotables after giving effect to
depreciation thereof in accordance with the Borrower's
accounting principles and practices in effect as of the date
hereof (which principles and practices the Borrower repre-
sents and warrants were in effect for the Borrower's most
recent full fiscal year and agrees shall not be changed);
provided, however, that overhaul, refurbishment and other
-------- -------
such costs may be capitalized and included in the net book
value of the applicable rotables only to the extent such
costs would be included in accordance with such accounting
principles and practices and shall in any event be included
only with respect to rotables for auxiliary power units,
constant speed drives and landing gear and, provided
--------
further, however, that in all cases, as of the last day of
------- -------
each month, not less than 65% of the total value of all
rotables shall be in serviceable condition with FAA tags and
in the possession of the Borrower and no more than 35% of
the total value of all rotables shall be in the possession
of overhaul agencies, vendors or any Person other than the
Borrower.

(b) Certain
Equipment Minimum Value
--------- -------------

Ground support, $30 million, less
----
maintenance, depreciation charges
passenger service, properly taken with
food service, respect thereto on and
telecommunication, after August 1, 1991
surface transpor- and less the principal
----
tation, office, amount of any Loans
computer and repaid pursuant to
storage Section 4.02(i) as the
result of a deficiency in
the required value of
such equipment.

The value of such equipment shall be deemed to be
the net book value thereof after deducting depreciation
thereof in accordance with the Borrower's accounting
principles and practices in effect as of the date hereof
(which principles and practices the Borrower represents and
warrants were in effect for the Borrower's most recent
fiscal year and agrees shall not be changed).

NY1-53665.4 -83-

Non Offsettable $20 million
Eligible
Receivables

Total Eligible $65 million
Receivables less the principal
----
(Offsettable amount of any Loans
and Non- repaid pursuant to
Offsettable Section 4.02(i) as a
Receivables) result of a deficiency
in the required value of
total receivables;

provided, however, that the amount of cash or Cash Equiva-
-------- -------
lents on deposit in or to the credit of the Investment
Account which is in excess of the Investment Account Minimum
may be added to the value of Total Eligible Receivables (but
not Non-Offsettable Eligible Receivables) for the purpose of
determining compliance with the required minimum value of
total receivables (but not Non-Offsettable Receivables).

The value of Eligible Receivables shall be deemed
to be the net book value thereof after deducting an
allowance for bad debts in accordance with the Borrower's
accounting principles and practices in effect as of the date
hereof (which principles and practices the Borrower
represents and warrants were in effect for the Borrower's
most recent fiscal year and agrees shall not be changed).

The categorization of Non-Offsettable Receivables
and Offsettable Receivables shall be made based on the
Borrower's accounting principles and practices in effect as
of the date hereof (which principles and practices the
Borrower represents and warrants were in effect for the
Borrower's most recent fiscal year and agrees shall not be
changed), but in no event shall Non-Offsettable Receivables
include Receivables for goods which have not been shipped or
delivered or for services which have not been performed,
Airline Clearing House Universal Air Travel Card
Receivables, travel agency area settlement plan Receivables,
travel agency non area settlement plan Receivables, or
credit card Receivables; provided, however, that to the
-------- -------
extent the Borrower demonstrates the sufficiency thereof
through analyses and supportive documentation acceptable to
the Required Lenders, the Required Lenders may in their sole
and absolute discretion, agree to allow the Borrower to
characterize a portion of such Receivables as Non-
Offsettable Receivables.

NY1-53665.4 -84-

7.09 Hazardous Materials. The Borrower will
-------------------
handle, store, utilize, dispose of, transport, discharge or
emit any Hazardous Materials only in accordance with
applicable laws or other requirements of any Governmental
Authority. The Borrower will promptly take any and all
necessary remedial action required by any Governmental
Authority or by any Hazardous Material Law or prudent under
the circumstances in response to the presence, storage, use,
disposal, transportation or discharge of any Hazardous
Materials on, under or about any of its assets which would
affect the Collateral or could result in any liability or
obligation to the Administrative Agent or any Lender with
respect thereto or would have a material adverse effect upon
the business, operations, property or other assets or
condition (financial or otherwise) of the Borrower. In the
event the Borrower undertakes any remedial action with
respect to any Hazardous Material on, under or about any of
its assets, the Borrower shall conduct and complete such
remedial action in compliance with all applicable federal,
state and local laws, regulations, rules, ordinances and
policies, and in accordance with the orders and directives
of all Governmental Authorities except in each case where
such presence, storage, use, disposal, transportation or
discharge of any Hazardous Materials is being contested in
good faith. The Borrower shall promptly notify the
Administrative Agent of any such remedial action and provide
to the Administrative Agent such information or reports
relating thereto as it may request.

7.10 Cash Management.
---------------

(a) The Borrower shall comply with all terms and
conditions of the Initial Cash Management Agreement and any
other cash management arrangements entered into pursuant to
Section 5.01(p). In addition, the Borrower shall institute
and comply with such other account and cash management
arrangements as the Required Lenders may request in their
sole and absolute discretion, including, without limitation,
changes in the banks at which the accounts are held, the
existing lock box system, the collection of receivables and
the concentration of cash. In furtherance of the foregoing,
the Borrower shall execute and deliver such additional lock
box and concentration account cash management agreements as
are contemplated by the Initial Cash Management Agreement or
as the Required Lenders may request in their sole and
absolute discretion. The Borrower shall not enter into a
new or revised merchant bank arrangement with respect to the
VISA/Master Card credit card program (a "Successor Merchant
------------------
Bank Arrangement") unless (i) the Borrower shall have given
----------------
to all of the Lenders at least 20 days' prior written notice
of such Successor Merchant Bank Arrangement, (ii) all

NY1-53665.4 -85-

documents evidencing and/or relating to such Successor
Merchant Bank Arrangement shall be satisfactory in form and
substance to the Required Lenders in their sole and absolute
discretion, and (iii) prior to or simultaneously with the
entry by the Borrower into such Successor Merchant Bank
Arrangement, (a) the Borrower shall have delivered, and/or
caused to be delivered, all such amendments, supplements
and/or replacements of the Initial Cash Management Agreement
and all documents relating thereto as the Required Lenders
shall have requested, each in form and substance
satisfactory to the Required Lenders in their sole and
absolute discretion, and (b) to the extent deemed necessary
or appropriate by the Required Lenders in their sole and
absolute discretion, there shall have been entered an
amendment, in form and substance satisfactory to the
Required Lenders in their sole and absolute discretion, to
the Second Additional Loan Order and/or the Loan Extension
Order which reflects and accommodates, on a basis no less
favorable to the Lenders than that contained in the Second
Additional Loan Order and/or the Loan Extension Order in
respect of the predecessor merchant bank arrangement, any
Liens on cash collateral granted pursuant to the aforesaid
documents relating to such Successor Merchant Bank
Arrangement and the release of any Liens on cash collateral
that secure the predecessor merchant bank arrangement.

(b) The Borrower shall cause (i) to be deposited
in the Concentration Account all unrestricted cash funds of
the Borrower, (ii) to be transferred from the Concentration
Account and deposited in the Investment Account from time to
time any surplus of the moneys on deposit in the
Concentration Account over an amount equal to $5 million
(plus such other amounts as may be included in the
"Concentration Account Maximum" as such term is defined in
the Initial Cash Management Agreement), and (iii) to be
deposited in the Investment Account from time to time all
proceeds of the investment of moneys on deposit in the
Investment Account in Cash Equivalents; provided, however,
-------- -------
that the Borrower may cause to be withdrawn from the
Investment Account and deposited in the Concentration
Account from time to time amounts that are required to meet
the operating cash flow requirements of the Borrower after
application of amounts on deposit in the Concentration
Account and available for such purpose, so long as no
Default or Event of Default shall have occurred and be
continuing on the date of each such withdrawal and so long
as after giving effect to each such withdrawal the amount on
deposit in the Investment Account shall be at least equal to
the Investment Account Minimum for such day. Amounts
deposited in the Concentration Account pursuant to this

NY1-53665.4 -86-

Section 7.10(b) shall be used by the Borrower to meet the
cash flow requirements of the Borrower.

(c) Notwithstanding the provisions of Section
7.10(b), the "Section 7.10(c) Amount" (required as a
----------------------
condition to the use of amounts on deposit in the Investment
Account in accordance with the provisos to the remedies of
the Lenders contained in Section 9) shall, as of any day, be
an amount at least equal to the Investment Account Minimum
for such day.

(d) Notwithstanding the provisions of Section
7.10(b), if at any time following the occurrence and
continuance of an Event of Default, there shall be on
deposit in the Investment Account an amount (referred to as
the "Event of Default Collateralization Amount") equal to
-----------------------------------------
the sum of (i) the outstanding principal amount of the
Loans, (ii) interest accrued and to accrue on the Loans to
the next Interest Payment Date for the Loans, and (iii) all
other amounts due and to become due under this Agreement to
the next Interest Payment Date for the Loans (as the Event
of Default Collateralization Amount is confirmed by the
Required Lenders to the Borrower, the Collateral Agent and
the Local Bank), then the Borrower may, without the
necessity to obtain the consent of the Required Lenders,
(A) cause to be withdrawn from the Investment Account and
deposited in the Concentration Account from time to time
amounts that are in excess of the Event of Default
Collateralization Amount and are required to meet the
operating cash flow requirements of the Borrower after
application of amounts on deposit in the Concentration
Account and available for such purpose, and (B) cause to be
withdrawn from the Concentration Account and used for such
purpose amounts that are from time to time on deposit in the
Concentration Account; and provided further, however, that
-------- ------- -------
the Borrower shall cause amounts to be withdrawn from the
Concentration Account and used for such purpose prior to
causing amounts on deposit in the Investment Account to be
withdrawn and used for such purpose.

(e) At any time the amount on deposit in the
Investment Account shall be less than the Investment Account
Minimum, the Borrower shall (i) cause the Local Bank and/or
the Collateral Agent to notify the Lenders of the amount on
deposit in the Investment Account and the Concentration
Account as of the close of business on each day, and (ii)
furnish to the Lenders on each day a certificate of the
Chief Financial Officer, Treasurer or Vice President and
Controller of the Borrower, in the form of Exhibit O,
containing (x) a projection of the Borrower's cash inflow
and cash outflow for the next succeeding day, (y) the amount

NY1-53665.4 -87-

of moneys withdrawn from the Concentration Account and the
Investment Account on such day to meet the operating cash
flow requirements of the Borrower, and (z) such other
information as is set forth in and required by Exhibit O.

(f) The covenants of the Borrower contained in
Sections 7.10(b), (c), (d) and (e) shall not limit, alter or
modify in any respect any provision of any cash management
arrangement described or referred to in Section 7.10(a).

7.11 Further Assurances.
------------------

(a) Whenever and so often as reasonably requested
by the Administrative Agent, the Collateral Agent or the
Required Lenders, the Borrower will promptly execute and
deliver or cause to be executed and delivered, at its own
expense, all such other and further instruments, documents
or assurances, and promptly do or cause to be done all such
other and further things as may be necessary and reasonably
required, in order to further and more fully vest in the
Collateral Agent all rights, interests, powers, benefits,
privileges and advantages conferred or intended to be
conferred by this Agreement, the other Credit Documents and
the Orders.

(b) The Borrower agrees that any time and from
time to time, at the expense of the Borrower, it will
promptly execute and deliver all further instruments and
documents, including, without limitation, aircraft, aircraft
engines, aircraft parts mortgages and gates assignments and
take all further action that may be necessary or desirable,
or that the Administrative Agent, the Collateral Agent or
the Required Lenders may request, to perfect and protect any
Lien granted or purported to be granted hereby, by the other
Credit Documents or the Orders, and including in any event
the execution and delivery of an amendment or supplement
(including detailed property descriptions) to the Mortgage
in respect of Real Property acquired after the Effective
Date, or to enable the Collateral Agent to exercise and
enforce its rights and remedies with respect to any
Collateral. Without limiting the generality of the
foregoing, the Borrower will record the Mortgages if not
already recorded and provide promptly upon the request of
the Required Lenders A.L.T.A. title insurance in an amount
not less than the value of such Real Property as set forth
in Schedule 8 hereto with respect to the Lien of the
Collateral Agent on all or any Real Property, A.L.T.A.
surveys, and a "phase I" environmental report on Hazardous
Materials with respect to Real Property, in each case in
form and substance reasonably acceptable to the Required
Lenders. Also, without limiting the generality of the fore-

NY1-53665.4 -88-

going, the Borrower will execute and file such financing or
continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or
desirable, or that the Administrative Agent, the Collateral
Agent or the Required Lenders may request, to protect and
preserve the Liens granted or purported to be granted hereby
and by the other Credit Documents and the Orders.
Furthermore, without limiting the generality of the
foregoing, the Borrower will execute and record Amendment
No. 2 to Parts Mortgage in substantially the form of Exhibit
YY and cause to be furnished to the Lenders an opinion of
FAA Counsel, in reasonably acceptable form, with respect
thereto.

(c) The Borrower hereby authorizes the Collateral
Agent to file one or more financing or continuation state-
ments or other applicable documents, and amendments thereto,
relative to all or any part of the Collateral without the
signature of the Borrower, where permitted by law. A
carbon, photographic or other reproduction of the applicable
Security Document or any financing statement covering the
Collateral or any part thereof shall be sufficient as a
financing statement or other applicable document where
permitted by law. The Collateral Agent will promptly send
to the Borrower any such documents which it files without
the signature of the Borrower and the Collateral Agent will
promptly send the filing or recordation information with
respect thereto.

(d) In the event that the Collateral Agent shall
exercise any of its rights and remedies pursuant to the
Orders or any Security Document with respect to a sale of
any portion of the Collateral, the Borrower shall cooperate
in good faith with the Collateral Agent in effecting such
sale and execute such agreements, documents and instruments
as requested by the Collateral Agent in connection
therewith.

(e) Upon the request of the Collateral Agent, the
Borrower shall deliver certificates, chattel paper or
instruments representing any Collateral covered by any
Security Document and/or take such other action under any
Security Document as the Collateral Agent may request in
order to protect the security interests purported to be
granted thereby.

(f) Upon the request of the Required Lenders, the
Borrower shall cause to be prepared and delivered to the
Lenders an audit and valuation, prepared by a firm of
independent consultants acceptable to the Required Lenders,
with respect to the Borrower's rotables and/or receivables.

NY1-53665.4 -89-

SECTION 8. NEGATIVE COVENANTS.
------------------

The Borrower agrees that, unless the Required
Lenders otherwise consent in their sole and absolute
discretion, subject to the provisions of Section 10.21 of
this Agreement, on and after the Third Amendment Effective
Date and until the Loans, and the Notes, together with all
interest, fees and other Obligations payable hereunder or
under the other Credit Documents, are paid in full:

8.01 Liens. The Borrower will not create, incur,
-----
assume or suffer to exist any Lien upon or with respect to
any property or other assets (real or personal, tangible or
intangible) of the Borrower whether now owned or hereafter
acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of
accounts receivable with or without recourse to the Bor-
rower), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other
similar notice of Lien under any recording or notice statute
(except in connection with the Liens permitted below), or
apply to the Bankruptcy Court for the authority to do any of
the foregoing; provided that the creation, incurrence,
--------
assumption or existence of the following shall be permitted
(and the Borrower may apply to the Bankruptcy Court for
approval of):

(i) valid and enforceable Liens in existence
on the Filing Date to the extent described in Schedule
14 hereto and to the extent of the principal of the
Indebtedness secured thereby on the Filing Date, toget-
her with interest, fees, expenses and other charges
then and thereafter payable in respect of such
Indebtedness in accordance with the terms of such
Indebtedness as in effect on the Filing Date, and after
giving effect to any cross-collateralization of such
Indebtedness in accordance with the terms of such
Indebtedness as in effect on the Filing Date,
(including, without limitation, Liens securing
Indebtedness consisting of the payment deferrals
referred to in Section 5.02(f), but excluding in any
event a Lien on any Collateral or any other Lien in
favor of First Interstate Bank of Arizona, N.A., except
Liens on Collateral as set forth on Schedule 14
attached hereto and a Lien on cash constituting part of
the "Reserve" or the "Original Reserve" in accordance
with the Merchant Agreement Supplement), without giving
effect to any extensions or replacements of such Liens,
only to the extent encumbering the assets described in
such Schedule 14 on the Filing Date and proceeds and

NY1-53665.4 -90-

replacement assets of a similar type (A) if a Lien
thereon was expressly provided in the security
agreement providing for the Lien referred to in
Schedule 14 and only to the extent of the principal of
the Indebtedness secured thereby on the Filing Date,
together with interest, fees, expenses and other
charges then and thereafter payable in respect of such
Indebtedness in accordance with the terms of such
Indebtedness as in effect on the Filing Date, and after
giving effect to any cross-collateralization of such
Indebtedness in accordance with the terms of such
Indebtedness as in effect on the Filing Date, or (B) if
such Lien is approved after the Filing Date by an order
of the Bankruptcy Court as a first or prior Lien;

(ii) Liens securing the Obligations;

(iii) Liens arising under capitalized leases
to the extent permitted by Section 8.05(iii);

(iv) Customary Permitted Liens;

(v) Liens securing purchase money
Indebtedness permitted under Sections 8.05(vii) and
8.07 incurred after the Filing Date to acquire the
property subject to such Lien so long as such Lien
attaches only to the property so acquired and the
amount of the Indebtedness incurred in connection
therewith and secured by such Lien does not exceed 95%
of the acquisition price of the property subject to
such Lien;

(vi) Liens on the Collateral securing the
Indebtedness permitted by Section 8.05(vi), provided
--------
that such Liens are pari passu with, but not senior to,
---- -----
the Liens of the Security Documents, and provided
--------
further that all documentation relating to such Liens
-------
and Indebtedness is reasonably satisfactory to all of
the Lenders;

(vii) Liens securing the Indebtedness under
the Spares Credit Agreement, dated as of September 28,
1990, between the Borrower and IAE International Aero
Engines AG, as amended and supplemented, and the Credit
Agreement, dated as of September 28, 1990, between the
Borrower and IAE International Aero Engines AG, as
amended and supplemented, on assets of the Borrower not
subject to the Liens of such Spares Credit Agreement
and such Credit Agreement on the Filing Date but
thereafter subjected to such Liens pursuant to Section
4.03 of such Spares Credit Agreement and Section 3.03

NY1-53665.4 -91-

of such Credit Agreement, which Liens are subject and
subordinate to the Liens securing the Obligations and
all extensions, modifications, renewals and replace-
ments thereof, provided that, in each case, (i) the
--------
respective documentation with respect to such Liens
shall expressly provide that the holder or holders of
such Liens shall not, and shall have no right to,
exercise any right to foreclose or otherwise realize on
the assets subject thereto, or exercise any remedies
thereunder, prior to the occurrence of the Lien
Termination Date hereunder, and (ii) the respective
documentation with respect to such Liens shall express-
ly provide that such Liens shall terminate upon any
release or termination (including any such releases or
terminations pursuant to Section 8.02 hereof or as a
result of any sale or other disposition of the
Collateral as a result of the enforcement of the
remedies contained herein and in the Security
Documents) of the Liens created pursuant to the
Security Documents (other than such releases occurring
solely as a result of the occurrence of the Lien
Termination Date hereunder), with the rights of the
holders of such Liens in the event of any realization
or foreclosure of the respective Collateral being only
to receive any excess proceeds remaining from such
realization or disposition after the repayment in full
of all Obligations and the occurrence of the Lien
Termination Date hereunder;

(viii) Liens constituting security deposits,
maintenance reserves and similar arrangements (a) in
effect prior to the Filing Date, (b) approved by order
of the Bankruptcy Court prior to the Effective Date, or
(c) approved in writing by the Required Lenders; and
Liens on cash or investments constituting proceeds of
drawings under letters of credit issued for the account
of the Borrower prior to the Filing Date and held as,
or in lieu of, security deposits, maintenance reserves
or similar arrangements; and

(ix) Liens on cash collateral securing the
obligations of the Borrower in connection with any
Successor Merchant Bank Arrangement, provided that such
--------
Liens are in replacement or substitution or otherwise
in lieu of Liens on cash collateral securing the
obligations of the Borrower in connection with a
predecessor merchant bank arrangement, and provided
--------
further that all documents relating to such Liens are
-------
satisfactory to the Required Lenders, and provided
--------
further that all conditions precedent to such Successor
-------
Merchant Bank Arrangement set forth in Section 7.10(a)

NY1-53665.4 -92-

have been satisfied; and with respect to the Successor
Merchant Bank Arrangement to which Electronic Data
Systems Corporation is a party, the liens on Real
Property (securing the obligations of the Borrower in
connection therewith) to which the Required Lenders
consented pursuant to letter agreement, dated April 14,
1993, with the Borrower.

8.02 Consolidation, Merger, Sale of Assets, etc.
-------------------------------------------
The Borrower will not wind up, liquidate or dissolve its
affairs or enter into any transaction of merger or consoli-
dation, or convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time) all or
any part of its property or other assets, or enter into any
partnerships, joint ventures or sale-leaseback transactions,
or purchase or otherwise acquire (in one or a series of
related transactions) any part of the property or other
assets (other than purchases or other acquisitions of
inventory, materials, equipment and other property in the
ordinary course of business) of any Person, or apply to the
Bankruptcy Court to do any of the foregoing, except that the
foregoing shall not preclude (and the Borrower may apply to
the Bankruptcy Court for approval of):

(i) subject to maintaining the required
levels of certain types of Collateral described in
Section 7.08, sales and leases by the Borrower of
inventory, materials, equipment and other property
(exclusive in any case of aircraft, engines, Real
Property, Slots and receivables), in the ordinary
course of business not required to be approved by the
Bankruptcy Court under Section 363 of the Bankruptcy
Code;

(ii) Capital Expenditures to the extent not
in violation of Section 8.07;

(iii) Asset Sales (exclusive of Designated
Collateral except to the extent permitted by clause (i)
above) by the Borrower for cash at fair market value
(as approved by the Board of Directors of the Borrower)
pursuant to the Operating Plan, so long as (x) prior to
any such Asset Sale, the Borrower shall have received
written consent of the Required Lenders with respect
thereto, which consent may be withheld or granted in
their sole and absolute discretion, provided that the
--------
written consent of the Required Lenders shall not be
required with respect to any such Asset Sale or Asset
Sales if (I) the net book value of each item of the
property subject to such Asset Sale or Asset Sales is
less than $50,000, (II) the proceeds of the sale or

NY1-53665.4 -93-

other disposition of each such item is at least equal
to 40% of the net book value of such item, and (III)
the Net Proceeds of all such Asset Sales effected in
any one month without the prior written consent of the
Required Lenders do not exceed $100,000, (y) after
giving effect to any such Asset Sale (including any
such Asset Sale effected without the written consent of
the Required Lenders), the requirements of Sections
4.02 and 7.08 are satisfied and no Default or Event of
Default shall have occurred and be continuing or would
result therefrom after giving effect thereto, and (z)
the proceeds received from the consummation of such
Asset Sale are applied as provided in Section 4.02;

(iv) terminations of leases by way of
rejection under the Bankruptcy Code and in accordance
with the Operating Plan and terminations of leases of
aircraft by reason of the exercise of call rights under
such leases in accordance with the terms of such call
rights as set forth on Schedule 19; or

(v) to the extent expressly indicated on
Schedule 19 with respect to particular aircraft,
transfers of such aircraft to the holders of the
Permitted First Liens on such aircraft or to the
lessors of such aircraft.

To the extent the Required Lenders waive the provisions of
this Section 8.02 with respect to the sale of any
Collateral, or any Collateral is sold as permitted by this
Section 8.02 and/or the definition of the term "Asset Sale"
contained in Section 1.01, the Collateral Agent shall (if
applicable, following any required prepayment of the Loans
as provided in Section 4.02) take such action, at the
Borrower's expense, as the Borrower may reasonably request
to release the Collateral Agent's lien on the Collateral
subject to the Asset Sale, but not the proceeds thereof, so
that it may be free and clear of the Liens created by the
applicable Security Document and the Orders. Nothing
contained in this Section 8.02 shall preclude the Borrower
from entering into agreements or transactions which
contemplate or provide for the payment in full of all
Obligations and the occurrence of the Lien Termination Date
so long as such repayment and occurrence are conditions
precedent to the consummation of such agreements or
transactions and such conditions precedent are fulfilled
(and not waived).

8.03 Distributions. The Borrower shall not
-------------
authorize, declare or pay any Distributions or apply to the
Bankruptcy Court for the authority to do so.

NY1-53665.4 -94-

8.04 Leases. The Borrower will not permit the
------
aggregate annual minimum or base rent payments (excluding
(i) any property taxes, insurance costs, maintenance charges
or other amounts paid as additional rent or lease payments
and (ii) payments arising from capitalized lease obliga-
tions), and net of income arising from subleases to third
parties entered into or existing in the ordinary course of
business to the extent permitted by the Operating Plan, by
the Borrower under agreements to rent or lease any real or
personal property to exceed 105% of the applicable amount
set forth in the Operating Plan for the applicable period
set forth therein, provided that in any event the Borrower
--------
will not, on or after the Third Amendment Effective Date,
enter into any agreement (including, without limitation, any
agreement in the nature of an extension or renewal) to rent
or lease any aircraft or engines (but excluding any leases
entered into in accordance with or pursuant to the Put
Agreement or the Kawasaki Put Agreement or any amendment or
modification to either thereof which is referred to in
Section 5.04) or any real property unless, in each case, the
Required Lenders shall have consented thereto in writing;
and provided further that in any event the Borrower will
-------- -------
not, on or after the Third Amendment Effective Date, enter
into any agreement (including, without limitation, any
agreement in the nature of an extension or renewal) to rent
or lease any personal property (not described in the
preceding proviso), whether pursuant to an operating lease,
a capitalized lease or otherwise, unless (i) the aggregate
amount of all payments required or provided to be made by
the Borrower during the term of such agreement does not
exceed $500,000, or (ii) the Required Lenders have consented
thereto in writing.

8.05 Indebtedness. The Borrower will not
------------
contract, create, incur, assume or suffer to exist any
Indebtedness, or apply to the Bankruptcy Court for the
authority to do so, except (and the Borrower may apply to
the Bankruptcy Court for approval of):

(i) Indebtedness of the Borrower incurred
pursuant to this Agreement and the other Credit
Documents;

(ii) Indebtedness of the Borrower incurred
prior to, and outstanding on, the Filing Date
(including Indebtedness arising from reimbursement
obligations for letter of credit drawings occurring
after the Filing Date on letters of credit outstanding
on the Filing Date) and listed on Schedule 15 hereto
("Existing Debt"), without giving effect to any
-------------
extensions, renewals or refinancings thereof;

NY1-53665.4 -95-

(iii) Indebtedness secured by Liens consisting
of (a) capitalized lease obligations outstanding on the
Filing Date and (b) capitalized lease obligations
permitted under Section 8.07 up to an aggregate
principal amount at any one time outstanding of $5
million;

(iv) surety bonds and appeal bonds arising in
the ordinary course of business or in connection with
the enforcement of rights or claims of the Borrower or
arising out of any judgment not constituting an Event
of Default;

(v) Indebtedness consisting of the payment
deferrals referred to in Section 5.02(f) and Section
5.04(r);

(vi) Indebtedness in an amount of up to $25
million which is (i) incurred at any time prior to the
Maturity Date, (ii) secured by the Collateral on a
basis which is pari passu with, but not senior to, the
---- -----
Obligations, (iii) entitled to administrative priority
under Section 364(c)(1) of the Bankruptcy Code which is
pari passu with, but not senior to, the Obligations,
---- -----
(iv) on terms and conditions which are substantially
the same as the terms and conditions of this Agreement
and the other Credit Documents and (v) governed and
secured by the Credit Documents (which shall be
amended, supplemented or otherwise modified to provide
for such Indebtedness in a manner reasonably
satisfactory to all of the Lenders, including, without
limitation, an increase in the Investment Account
Minimum for each day subsequent to the date of issuance
of such Indebtedness to reflect the issuance of such
Indebtedness and ensure that the ratio of the
Investment Account Minimum to the aggregate principal
amount of all Indebtedness secured thereby remains
unchanged after the issuance of such Indebtedness);

(vii) Indebtedness of the Borrower incurred
pursuant to the Kawasaki Credit Agreement; and

(viii) Indebtedness consisting of purchase
money Indebtedness secured by a Lien permitted under
Sections 8.01(v) and otherwise permitted under Section
8.07 up to an aggregate principal amount of $5 million.

8.06 Advances, Investments and Loans. The
-------------------------------
Borrower will not lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital

NY1-53665.4 -96-

contribution to, any other Person, or apply to the
Bankruptcy Court for the authority to do any of the fore-
going, except that the following shall be permitted (and the
Borrower may apply to the Bankruptcy Court for approval
thereof):

(i) the Borrower may acquire receivables
owing to it, if created or acquired in the ordinary
course of business and payable or dischargeable in
accordance with customary trade terms;

(ii) cash and Cash Equivalents to or for the
credit of the Concentration Account and the Investment
Account;

(iii) the loans, advances and other invest-
ments made by the Borrower prior to, and outstanding
on, the Filing Date and listed on Schedule 16 hereto;

(iv) the Borrower may make advances to
employees for moving, relocation and travelling
expenses, drawing accounts and similar expenditures in
the ordinary course of business not to exceed
$1,000,000 at any time outstanding;

(v) cash and Cash Equivalents held as cash
collateral constituting Liens permitted under
Section 8.01(i) which are not greater than the amount
held on the Filing Date, except in the case of the Lien
on cash collateral in favor of First Interstate Bank of
Arizona, N.A. as and to the extent provided in Section
8.01(i); and

(vi) credit extended by the Borrower (other
than by means of cash payment) in the ordinary course
of business to employees in connection with share
purchases under employee benefit programs applicable to
all or substantially all employees.

8.07 Capital Expenditures. The Borrower will not
--------------------
make any expenditure for fixed or capital assets (excluding
expenditures for the maintenance and repair of aircraft,
engines and parts which should be capitalized in accordance
with generally accepted accounting principles, but including
capitalized lease obligations) (collectively, "Capital
-------
Expenditures"), in excess of 105% of the applicable amount
------------
(exclusive of such maintenance and repairs) set forth in the
Operating Plan for the applicable period set forth therein,
provided that in any event the Borrower will not, on or
--------
after the Third Amendment Effective Date, make any Capital
Expenditure, or enter into any agreement relating to or

NY1-53665.4 -97-

providing for the making of a Capital Expenditure, unless
(i) the amount of such Capital Expenditure does not exceed
$500,000, or (ii) the Required Lenders have consented
thereto in writing.

8.08 Limitation on Repayments, etc. Except for
------------------------------

(i) payments in respect of the A320 Leases,
the Engine Leases, the Put Agreement and any leases
entered into in connection with the Put Agreement or
any amendment or modification thereto which is referred
to in Section 5.04,

(ii) payments in respect of the Kawasaki
Leases, the Kawasaki Put Agreement and any leases
entered into in connection with the Kawasaki Put
Agreement or any amendment or modification thereto
which is referred to in Section 5.04,

(iii) payments of scheduled lease payments
under capitalized and operating leases of the Borrower
existing on the Filing Date to the extent such leases
are assumed by Borrower pursuant to the Case and in
accordance with the Operating Plan and only if the
lessors or lenders thereunder have (x) agreed to the
deferral described in Section 5.02(f) or such other
deferral arrangements as may have been disclosed to and
approved by the Required Lenders as provided in Section
5.02(f), and (y) agreed to the rental reductions and
deferrals described in Section 5.04(r) or such other
arrangements as may have been disclosed to and approved
by the Lenders as provided in Section 5.04(r) and, in
each case, the same is in full force and effect,
provided that, except as expressly set forth on
--------
Schedule 19 with respect to a particular lease of
particular aircraft, scheduled lease payments shall not
include, or be deemed to include, any amounts payable
as or constituting or representing termination or other
liquidated damage payments, but scheduled lease
payments shall include amounts necessary to meet return
condition requirements upon termination of leases upon
expiration of the stated terms thereof or upon exercise
of call rights thereunder in accordance with the terms
of such call rights as set forth on Schedule 19, and
provided further that scheduled lease payments shall
-------- -------
not include payments (or portions thereof) that are
deferred as provided in Sections 5.02(f) and 5.04(r)
(unless and until such payments (or portions thereof)
are payable in accordance with the terms of the
deferrals referred to in such Sections), and provided
--------

NY1-53665.4 -98-

further that scheduled payments with respect to a
-------
particular lease of a particular aircraft (determined
as aforesaid) may be reduced from those provided for in
Schedule 19 and the Operating Plan if (I) such
reduction (x) is agreed to in writing by the Borrower
and the applicable aircraft lessor, (y) does not
involve, require or result in the payment by the
Borrower, whether on a particular payment date or over
the term of the lease or otherwise, of any amount or
amounts in excess of those otherwise provided for in
Schedule 19 and the Operating Plan, and (z) does not,
cannot and will not result in a Default or an Event of
Default, and (II) the agreement relating to such
reduction, together with such other documents and
information reasonably requested by the Required
Lenders, has been reviewed by the Required Lenders and
approved by the Required Lenders for purposes of
ensuring compliance with the provisions of this Section
8.08(iii) (it being understood and agreed that the
approval rights of the Required Lenders shall be
limited to such purposes),

(iv) payments initially of defaulted amounts
owing, and thereafter of amounts when due, under 1110
Indebtedness outstanding on the Filing Date to the
extent such Indebtedness has been assumed by Borrower
and in accordance with the Operating Plan and then only
if lenders thereunder have (x) agreed to the deferral
described in Section 5.02(f) or such other deferral
arrangements as may have been disclosed to and approved
by the Required Lenders as provided in Section 5.02(f),
and (y) agreed to the rental reductions and deferrals
described in Section 5.04(r) or such other arrangements
as may have been disclosed to and approved by the
Lenders as provided in Section 5.04(r) and, in each
case, the same is in full force and effect, provided
--------
that, except as expressly set forth on Schedule 19 with
respect to particular 1110 Indebtedness secured by
particular aircraft, the foregoing amounts shall not
include any amounts payable or accruing after or by
reason of the return, redelivery or repossession of the
aircraft which secures any 1110 Indebtedness, and
provided further that the foregoing amounts shall not
-------- -------
include any amounts (or portions thereof) that are
deferred as provided in Sections 5.02(f) and 5.04(r)
(unless and until such payments (or portions thereof)
are payable in accordance with the terms of the
deferrals referred to in such Sections), and provided
--------
further that the foregoing amounts payable with respect
-------
to particular 1110 Indebtedness secured by particular
aircraft (determined as aforesaid) may be reduced from

NY1-53665.4 -99-

those provided for in Schedule 19 and the Operating
Plan if (I) such reduction (x) is agreed to in writing
by the Borrower and the applicable lender, (y) does not
involve, require or result in the payment by the
Borrower, whether on a particular payment date or over
the term of the 1110 Indebtedness or otherwise, of any
amount or amounts in excess of those otherwise provided
for in Schedule 19 and the Operating Plan, and (z) does
not, cannot and will not result in a Default or an
Event of Default, and (II) the agreement relating to
such reduction, together with such other documents and
information reasonably requested by the Required
Lenders, has been reviewed by the Required Lenders and
approved by the Required Lenders for purposes of
ensuring compliance with the provisions of this Section
8.08(iv) (it being understood and agreed that the
approval rights of the Required Lenders shall be
limited to such purposes),

(v) payments in respect of Existing Secured
Debt from the proceeds of Asset Sales to the extent
such Asset Sales are permitted in accordance with the
terms of this Agreement),

(vi) payments in respect of prepetition
obligations owing to Persons who because they are not
citizens of, or resident in, the United States are not
subject to the jurisdiction of the Bankruptcy Court not
to exceed $4,800,000 in aggregate amount at any time
after the Effective Date and to the extent provided for
in the Operating Plan (as defined in the Original
Credit Agreement at all times prior to the Amendment
Effective Date, the First Amended and Restated Credit
Agreement at all times prior to the Second Amendment
Effective Date, the Second Amended and Restated Credit
Agreement at all times prior to the Third Amendment
Effective Date and this Agreement at all times after
the Third Amendment Effective Date),

(vii) payments of interest and payments of
other amounts not exceeding $53,015 per month under
Existing Secured Debt with respect to property
necessary for the Borrower's operations in accordance
with the Operating Plan approved by the Bankruptcy
Court for adequate protection required under Sections
362 and 363 of the Bankruptcy Code,

(viii) payments not exceeding $2,000,000 in
aggregate amount at any time after the Effective Date
which are made in accordance with the Operating Plan
(as defined in the Original Credit Agreement at all

NY1-53665.4 -100-

times prior to the Amendment Effective Date, the First
Amended and Restated Credit Agreement at all times
prior to the Second Amendment Effective Date, the
Second Amended and Restated Credit Agreement at all
times prior to the Third Amendment Effective Date and
this Agreement at all times after the Third Amendment
Effective Date) in respect of prepetition obligations
(including any such payments required pursuant to order
of the Bankruptcy Court and any such payments in
respect of the Borrower's leasehold interest in Real
Property), and

(ix) scheduled payments of principal and
interest under Existing Secured Debt not otherwise
described in the preceding clauses (i) through (viii)
which (A) do not exceed $55,000,000 in principal, plus
interest thereon, during 1993, and $21,000,000 in
principal, plus interest thereon, during 1994, and (B)
are made in accordance with the Operating Plan on a
monthly basis without increase in any monthly payment
by more than 5% of the monthly payment provided for in
the Operating Plan,

and, in each case, only so long as no Default or Event of
Default has occurred and is continuing or would result
therefrom, the Borrower will not pay or apply to the
Bankruptcy Court for the authority to (w) assume or make any
payments (including, without limitation, for settlement
payments) in respect of any leases of real or personal
property and executory contracts except for leases and
executory contracts (1) entered into after the Filing Date
or (2) which do not relate to aircraft and have been or will
be assumed, and in each case in accordance with the
Operating Plan on a monthly basis without increase in any
monthly payment by more than 5% of the monthly payment
provided for in the Operating Plan, (x) make any payment or
prepayment on or redemption or acquisition for value
(including, without limitation, by way of depositing with
the trustee with respect thereto money or securities before
due for the purpose of paying when due) of any Indebtedness
of the Borrower incurred or created prior to the Filing
Date, (y) pay any interest on any Indebtedness or other
obligations of the Borrower incurred or created prior to the
Filing Date (whether in cash, in kind securities or
otherwise) or (z) pay any amounts with respect to trade or
ordinary course of business payables or other obligations
(other than payments contemplated under the Operating Plan
pursuant to and authorized by the Bankruptcy Court pursuant
to its orders styled (A) "Order Authorizing Payment or
Honoring of Prepetitions Obligations to America West
Ticketholders, Other Airlines With Whom America West Has

NY1-53665.4 -101-

Interline Arrangements, Travel Agents, Clearing Houses, Tour
Service Providers, Foreign Vendors, Fuel Suppliers, and
Other Essential Suppliers" dated June 27, 1991; (B) "Order
Authorizing Payment of Prepetition Wages, Salaries and
Commissions, Employee Business Expense Reimbursement
Contributions to Employee Benefit Plans, and other Employee
Benefits" dated June 27, 1991; (C) "Order Authorizing
Payment on Honoring of Certain Prepetition Claims of Outside
Mechanics and Repairmen" dated June 27, 1991; and (D) any
amended orders or further orders with respect to the matters
addressed in the orders listed above) of the Borrower
incurred or created prior to the Filing Date. Nothing in
this Section shall prevent the Borrower from paying post-
petition trade payables (including required utility deposits
and aircraft maintenance) or post-petition accrued expenses
arising in the ordinary course of business.

8.09 Transactions with Affiliates. The Borrower
----------------------------
will not, and will not apply to the Bankruptcy Court for the
authority to, enter into any transaction or series of
related transactions, whether or not in the ordinary course
of business, with any Affiliate of the Borrower, other than
on terms and conditions substantially as favorable to such
Person as would be obtainable by such Person at the time in
a comparable arm's-length transaction with a Person other an
Affiliate. Nothing in this Section 8.09 shall prohibit any
transactions permitted under Sections 8.05 and 8.06.

8.10 Subsidiaries. The Borrower will not
------------
establish, create, permit to exist or acquire any
Subsidiary.

8.11 Chapter 11 Claims. Except as expressly
-----------------
permitted by Section 8.05(vi), the Borrower will not apply
to the Bankruptcy Court for the authority to incur, create,
assume, suffer or permit any administrative expense claim
under Section 364, 503 or 507 of the Bankruptcy Code, Lien
against the Borrower or its property or other assets in the
Case to be pari passu with, or senior to, the Obligations
---- -----
and the Liens of the Collateral Agent and Secured Creditors
hereunder, except for the Permitted Expenses.

8.12 Final Extension Loan Order. The Borrower
--------------------------
shall cause, on or prior to October 8, 1993, the Final Order
to have been entered and to be in full force and effect.

8.13 Conversion to Chapter 7. The Borrower shall
-----------------------
not without giving the Lenders 10 Business Days prior
written notice, apply to the Bankruptcy Court to convert the
Case to a case under Chapter 7 of the Bankruptcy Code
pursuant to Section 1112(a) of the Bankruptcy Code. After

NY1-53665.4 -102-

giving the Lenders such notice, the Borrower shall take all
actions requested by the Lenders in connection with the
protection of the Collateral and the security interests
therein securing the Obligations.

8.14 Operation of Specified Aircraft/Engines.
---------------------------------------
The Borrower shall not (i) operate any Specified Aircraft
and Engines outside the United States, Canada, Mexico or
Japan, except for occasional other foreign use on charters
where the pilots used are the pilots of the Borrower and all
operational control and possession remains with the Borrower
and maintenance and insurance continue to be provided by the
Borrower, or lease the same to any other Person, or (ii)
(except as otherwise agreed in writing by the Required
Lenders) allow any Specified Aircraft and Engines to undergo
any major maintenance or structural work by any Person other
than employees of the Borrower or an FAA certified repair
station in the United States the location of which is set
forth in Annex B to the Security Agreement (so long as it
shall have no Lien rights against any Collateral except for
Liens subordinate to the Liens in favor of the Collateral
Agent contemplated hereunder to the extent (if any) provided
for in the Bankruptcy Code) or (iii) (except as otherwise
agreed in writing by the Required Lenders) allow any parts
covered by the Aircraft/Engine, Mortgage or other Collateral
covered by the Security Agreement to be located any where
other than the locations provided for in such Security
Document.

8.15 Operating Plan Covenants. The Borrower
------------------------
shall:

(a) Aircraft. Not have in its fleet on or after
--------
the Third Amendment Effective Date in excess of 86 aircraft
(exclusive of aircraft under leases entered into in
accordance with or pursuant to the Put Agreement or the
Kawasaki Put Agreement or any amendment or modification to
either thereof which is referred to in Section 5.04).

(b) Operating Profit/Loss. Cause its "operating
---------------------
loss" or "operating profit" to be not greater in the case of
an operating loss and not less in the case of an operating
profit than (i) $7.5 million more in the case of a loss or
$7.5 million less in the case of a profit than that
projected in the Operating Plan for any calendar month
including in any applicable month operating profit for the
cumulative number of prior months in such period in excess
of that projected for such period on a cumulative basis, and
(ii) $15 million more in the case of a loss or $15 million
less in the case of a profit than that projected in the
Operating Plan for any quarter ending March 31, June 30,

NY1-53665.4 -103-

September 30 or December 31. Operating profit and operating
loss have the same meanings set forth in the Operating Plan
and shall be calculated in the same manner as in the
Operating Plan.

(c) Net Income/Loss. Cause its "net income" or
---------------
"net loss" to be not less in the case of income or more in
the case of loss by the same applicable variance amount set
forth in clause (b) above than the amount projected in the
Operating Plan for such monthly or quarterly period
described in clause (b) above after, as the case may be,
adjusting the projected net losses during each such period
by excluding losses resulting from provisions for pre-
petition claims made in the Case and other losses and write-
offs which result from the Case which do not at any time
result in a cash expenditure by the Borrower. Net income
and net loss shall have the meanings set forth in the
Operating Plan and shall be calculated in the same manner as
in the Operating Plan.

(d) Cash Balance. Maintain "net available cash"
------------
(which term shall have the same meaning as set forth in the
Operating Plan and shall be calculated in the same manner as
in the Operating Plan, but shall in any event exclude all
deposits, advance payments not enumerated on Schedule 20,
holdbacks, reserves, cash collateral and other amounts held
by Persons other than the Borrower and all other cash to
which the Borrower's access is legally restricted in any way
except that cash and Cash Equivalents in or to the credit of
the Investment Account shall be included in "net available
cash") as of the end of each day occurring after the Third
Amendment Effective Date in an amount not less than the sum
of (i) $55,000,000, (ii) the aggregate amount of any Net
Proceeds of the Slot Collateral (or any part or portion
thereof) and/or the Engine Collateral (or any part or
portion thereof) theretofore required to be deposited in the
Investment Account pursuant to Section 4.02(ii), (iii) or
(v), and (iii) if such day is a day other than a day on
which the Loans are repaid to the full extent required
pursuant to Section 4.02(ii), the aggregate amount of the
Net Proceeds of Asset Sales that are required to be applied
to the repayment of the Loans pursuant to Section 4.02(ii)
but that have not been so applied; and in the event that as
of the end of any day occurring after the Third Amendment
Effective Date, the amount of "net available cash" exceeds
$125,000,000, notify the Lenders as provided in Section
7.01(n) and, if applicable, prepay the Loans as provided in
Section 4.02(iv). The amount of "net available cash"
required to be maintained pursuant to this Section 8.15(d)
on a given day is referred to herein as the "Cash Covenant
-------------
Amount" for such day. Notwithstanding anything herein which
------

NY1-53665.4 -104-

may be to the contrary and without creating any obligation
on the part of any Lender to extend, or to consent to the
extension of, the Maturity Date, the Cash Covenant Amount
for each day occurring after the Maturity Date shall be
determined simultaneously with, or prior to, any extension
of the Maturity Date.

(e) Investment Account Balance. Maintain cash
--------------------------
and Cash Equivalents on deposit in the Investment Account as
of the end of each day occurring after the Third Amendment
Effective Date in an amount not less than the sum of (i) (a)
$36,390,000 if such day is a day occurring on or prior to
December 30, 1993, or (b) $41,390,000 if such day is a day
occurring after December 30, 1993, (ii) the aggregate amount
of any Net Proceeds of the Slot Collateral (or any part or
portion thereof) and/or the Engine Collateral (or any part
or portion thereof) theretofore required to be deposited in
the Investment Account pursuant to Section 4.02(ii), (iii)
or (v), (iii) if such day is a day other than a day on which
Loans are repaid to the full extent required pursuant to
Section 4.02(ii), the aggregate amount of the Net Proceeds
of Asset Sales that are required to be applied to the
repayment of Loans pursuant to Section 4.02(ii) but that
have not been so applied, and (iv) the aggregate amount of
all increases in the Investment Account Minimum theretofore
required and effective pursuant to Section 4.02(i). The
amount of cash and Cash Equivalents required to be on
deposit in the Investment Account on a given day pursuant to
this Section 8.15(e) is referred to herein as the
"Investment Account Minimum" for such day. Notwithstanding
--------------------------
anything herein which may be to the contrary and without
creating any obligation on the part of any Lender to extend,
or to consent to the extension of, the Maturity Date, the
Investment Account Minimum for each day occurring after the
Maturity Date shall be determined simultaneously with, or
prior to, any extension of the Maturity Date.

8.16 Slots and Routes. Except in the case of
----------------
Slots and Routes subject to an Asset Sale permitted in
accordance with this Agreement, the Borrower shall not fail
to take all actions necessary or, in the reasonable judgment
of the Collateral Agent or Required Lenders, advisable in
order to maintain the value and utility of its respective
Slots and Routes. In addition to any other remedies for a
violation of this Section 8.16, if the Borrower does not
utilize any Slots in a manner, and with a degree of
frequency, needed to assure their continued status as assets
of the Borrower, then the Collateral Agent shall be entitled
(but shall not be required) to use or contract for the use
of such Slots so that same are not forfeited until such time
as the Borrower determines to fully utilize same or until

NY1-53665.4 -105-

same are sold by the Collateral Agent pursuant to the
exercise of its rights pursuant to the Security Documents.

8.17 Seizures. The Borrower shall not cause,
--------
permit or suffer to occur any seizure or similar restraint
of any aircraft or other assets owned or leased by the
Borrower intended to be used or operated under and in
accordance with the Operating Plan.

8.18 ERISA. The Borrower shall not, and shall
-----
not permit any member of the Controlled Group to:

(a) engage in any transaction in connection with
which the Borrower or any member of the Controlled Group
could be subject to either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975
of the Code;

(b) terminate any employee benefit plan within
the meaning of Section 3 of ERISA in a manner, or take any
other action, which could result in any liability of the
Borrower or any member of the Controlled Group to the PBGC.

(c) fail to make full payment when due of all
amounts which, under the provisions of any Pension Plan, the
Borrower or any member of the Controlled Group is required
to pay as contributions thereto, or permit to exist any
accumulated funding deficiency, whether or not waived, with
respect to any Pension Plan;

(d) permit the current value of all vested
accrued benefits under all Pension Plans which are subject
to Title IV of ERISA to exceed the current value of the
assets of such Pension Plans allocable to such vested
accrued benefits; or

(e) fail to make any payments to any
Multiemployer Plan that the Borrower or any member of the
Controlled Group may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining
thereto.

As used in this Section 8.18, the term
"accumulated funding deficiency" has the meaning specified
in Section 302 of ERISA and Section 412 of the Code, the
term "accrued benefit" has the meaning specified in Section
3 of ERISA and the term "current value" has the meaning
specified in Section 4062(b)(1)(A) of ERISA.

NY1-53665.4 -106-

SECTION 9. EVENTS OF DEFAULT.
-----------------

Upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------

9.01 Payments. The Borrower shall (i) default in
--------
the payment when due of any payment of principal of its
Loans or Notes or (ii) default, and such default shall
continue for at least two Business Days, in any payment of
interest on its Loans or any Fees or any other amounts owing
by it hereunder or the Credit Documents; or

9.02 Representations, etc. Any representation,
---------------------
warranty or statement made by the Borrower herein or in any
other Credit Document or in any certificate delivered
pursuant hereto or thereto shall prove to be untrue in any
material respect when made; or

9.03 Covenants. The Borrower shall (i) default
---------
in the due performance or observance by it of any term,
covenant or agreement contained in Section 7.01(d)(i), 7.08,
7.10, 7.11 or Section 8 or in any Security Document or
(ii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred
to in Sections 9.01 and 9.02 and clause (i) of this Section
9.03) contained in this Agreement or any other Credit
Document and such default shall continue unremedied for a
period of 15 days after written notice to the Borrower and
each Official Committee by the Administrative Agent or the
Required Lenders; or

9.04 The Case, etc.
--------------

(a) The Case shall be dismissed or converted to a
case under Chapter 7 of the Bankruptcy Code; a Chapter 11
trustee shall be appointed in the Case; or an application
shall be filed by the Borrower for the approval of, or there
shall arise, (i) any claims for recovery for amounts under
Section 506(c) of the Bankruptcy Code arising pursuant to a
final, nonappealable order of the Bankruptcy Court from the
preservation or disposal of Collateral or (ii) any other
administrative expense claim (except for the Permitted
Expenses and except as expressly permitted by Section
8.05(vi), having any priority over, or being pari passu
---- -----
with, the administrative expenses priority of the
Obligations in the Case; or

(b) The Bankruptcy Court shall enter an order
granting relief from the automatic stay applicable under
Section 362 of the Bankruptcy Code to the holder or holders

NY1-53665.4 -107-

of any security interest in any assets which constitute
Designated Collateral or are otherwise not expressly
contemplated to be disposed of or returned by the Borrower
under the Operating Plan of the Borrower and allowing such
holder or holders to foreclose or otherwise realize upon any
such security interests; or

(c) An order of the Bankruptcy Court shall be
entered in the Case appointing an examiner with powers
beyond investigatory powers under Section 1106(b) of the
Bankruptcy Code; or

(d) An order of the Bankruptcy Court or any other
court shall be entered amending, supplementing, staying,
vacating or otherwise modifying any of the Orders, provided,
--------
that no Event of Default shall occur under this clause (d)
to the extent that any such amendment, supplement or other
modification is made in compliance with this Agreement and
is not adverse, in the sole and absolute judgment of the
Required Lenders, to the rights and interests of the Lenders
under this Agreement and the other Credit Documents; or

9.05 Credit Documents and Kawasaki Credit
------------------------------------
Agreement. Any Credit Document shall, except in accordance
---------
with its terms, cease to be in full force and effect, any
Lien purported to be created by any Credit Document or any
of the Orders in any of the Collateral purported to be
covered thereby shall, for any reason, cease to be valid and
perfected with the priority contemplated hereby or the
Borrower or any Official Committee shall contest, deny or
seek to disaffirm any of the Borrower's obligations under
any Credit Document, or, on any date which is prior to the
Maturity Date, any principal of or interest on any loan
outstanding under the Kawasaki Credit Agreement shall be
paid or prepaid without the written consent of the Required
Lenders (not including Kawasaki) or any term or provision of
Section 7, 8 or 10 of the Kawasaki Credit Agreement (as in
effect on the Amendment Effective Date) or of the proviso at
the end of Section 9 of the Kawasaki Credit Agreement (as in
effect on the Amendment Effective Date) shall be amended
without the written consent of the Required Lenders (not
including Kawasaki), provided that a good faith dispute
--------
regarding the factual existence of an Event of Default shall
not be considered to be an Event of Default under this
Section 9.05; or

9.06 Judgments.
---------

(a) One or more judgments as to a post-petition
liability shall be entered against the Borrower in an amount
in the aggregate (to the extent not paid or fully covered

NY1-53665.4 -108-

(subject to a deductible not in excess of 10% of such
liability) by insurance) of (i) $2,500,000 or more
outstanding at any one time in regard to such liability
constituting or giving rise to an administrative expense
claim in the Case (not having priority over, or being pari
----
passu with, the administrative expenses priority of the
-----
Obligations in the Case), or (ii) $250,000 or more
outstanding at any one time in regard to any other such
liability, and either (x) enforcement by any creditor upon
such judgments occurs or is authorized pursuant to order of
the Bankruptcy Court or (y) there shall be any period of 10
consecutive days during which a stay of enforcement of such
judgments, by reason of a pending appeal or otherwise, shall
not be in effect; or

(b) Any non-monetary judgment or order with
respect to a post-petition event shall be rendered against
the Borrower which could reasonably be expected to (i) cause
a material adverse change in the condition (financial or
otherwise), business, operations or properties or other
assets of the Borrower, (ii) have a material adverse effect
on the ability of the Borrower to perform its obligations
under any Credit Document, or (iii) have a material adverse
effect on the Collateral (including, without limitation, the
value or transferability thereof) or the rights and remedies
of the Administrative Agent, the Collateral Agent or any
Lender under any Credit Document, and there shall be any
period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

9.07 GPA Agreements/Kawasaki Agreements. (i) Any
----------------------------------
of the GPA Agreements or the Kawasaki Agreements is
terminated, or purported in writing to be terminated, or
otherwise ceases to be in full force and effect other than
pursuant to an express termination thereof by the applicable
GPA Entity or by Kawasaki, as the case may be (except as a
result of the Borrower's breach thereunder or an "Event of
Default" thereunder), or an "Event of Default" (other than
an "Event of Default" which consists of the existence of the
Case) under and as defined in any of the GPA Agreements or
the Kawasaki Agreements (other than the Kawasaki Credit
Agreement) occurs and continues thereunder; or (ii) an order
of the Bankruptcy Court or any other court is entered
amending, supplementing, staying, vacating or otherwise
modifying the GPA Order or the Kawasaki Order to the extent
adverse, in the sole and absolute judgment of the GPA
Entities or Kawasaki, as the case may be; or (iii) the
Borrower or any Person (including, without limitation, an
Official Committee) acting by or on behalf of the Borrower
or such Person, shall contest, deny or seek to disaffirm the

NY1-53665.4 -109-

Borrower's or its obligations under any GPA Agreement or any
Kawasaki Agreement; or

9.08 Governance. The By-Laws or the Certificate
----------
of Incorporation of the Borrower shall be amended or
modified after the Third Amendment Effective Date without
the prior written consent of the Required Lenders (which
consent may be withheld in their sole and absolute
discretion); or the Borrower or the Board of Directors or
the stockholders of the Borrower shall take or authorize any
action in contravention of the By-Laws or the Certificate of
Incorporation of the Borrower or the Amended and Restated
Management Letter Agreement, in any case, without the prior
written consent of the Required Lenders (which consent may
be withheld in their sole and absolute discretion); or for
any reason, without the prior written consent of the
Required Lenders (which consent may be withheld in their
sole and absolute discretion), the membership of the Board
of Directors of the Borrower shall not be in compliance with
any term, condition or provision of the second paragraph of
the Amended and Restated Management Letter Agreement; or

9.09 Casualties. Any "Event of Loss" as defined
----------
in the Aircraft/Engine Mortgage shall occur with respect to
any aircraft or engine or parts covered thereby (without
giving effect to the grace periods contained in such
definitions) or any other casualty with respect to any other
Designated Collateral shall occur and the insurer of such
property shall not have paid the claim on such loss in full
within 90 days of such Event of Loss; or

9.10 ERISA. Any Pension Plan maintained by the
-----
Borrower or any member of the Controlled Group shall be
terminated within the meaning of Title IV of ERISA or a
trustee shall be appointed by an appropriate United States
district court to administer any Pension Plan, or the PBGC
shall institute proceedings to terminate any Pension Plan or
to appoint a trustee to administer any Pension Plan if as of
the date thereof the Borrower's liability or any member of
the Controlled Group's liability (after giving effect to the
tax consequences thereof) to the PBGC for unfunded
guaranteed vested benefits under the Pension Plans not
covered by insurance exceeds the then current value of
assets accumulated in such Pension Plan (or in the case of a
termination involving the Borrower or any member of the
Controlled Group as a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA)) the withdrawing employer's
proportionate share of such excess; or the Borrower or any
member of the Controlled Group as employer under a Multi-
employer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the Plan sponsor

NY1-53665.4 -110-

of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a
withdrawal liability; or

9.11 Other Indebtedness. Any "event of default"
------------------
under the terms of any Indebtedness permitted by
Section 8.05(vi) or Section 8.05(vii), or other similar
event or condition which under the terms thereof would
permit any holder of such Indebtedness or Trustee on behalf
of such holder, to accelerate or require mandatory
prepayment of such Indebtedness, occurs and is continuing;
or

9.12 Change of Control. The acquisition, whether
-----------------
directly or indirectly, by any Person or "group" (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) (other than an employee benefit or stock
ownership plan of the Borrower) of more than 30% of the
voting stock of the Borrower shall have occurred;

THEN, and in any such event, and at any time thereafter if
any Event of Default shall then be continuing and without
further order of or application to the Bankruptcy Court, the
Administrative Agent shall upon the written request of the
Required Lenders or, in the case of an Event of Default
described in Section 9.01, 9.04 (except clause (c) thereof),
9.05 or 9.07 any Lessor Lender (but in each case, only to
the extent the respective Event of Default is adverse with
respect to such Lessor Lender or its Obligations), without
notice to the Borrower, take any or all of the following
actions, without prejudice to any other rights of the
Administrative Agent, any Lender or the holder of any Note
to enforce its claims against the Borrower hereunder, under
the other Credit Documents or at law or in equity:
(i) declare the principal of and any accrued interest in
respect of any and all Loans and all other Obligations owing
hereunder or under any other Credit Document to be,
whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower; (ii)
instruct the Collateral Agent to exercise any rights or
remedies in its capacity as Collateral Agent under the
Credit Documents, including, without limitation, to sell
Collateral, and to set off and apply any amounts in or to
the credit of any account to the Obligations (except for
such cash as may be required to pay unpaid Permitted
Expenses then outstanding); and (iii) terminate the ability
of the Borrower to maintain Loans hereunder, whereupon such
ability shall forthwith terminate immediately and the
Borrower shall repay all Loans, unpaid accrued interest and
other Obligations owing hereunder or under any other Credit

NY1-53665.4 -111-

Document; provided, however, that prior to taking any action
-------- -------
described in the preceding clause (ii), other than any
action which precludes the withdrawal by or for the benefit
of the Borrower of any funds from the Investment Account,
the Concentration Account or any other account referred to
in the Initial Cash Management Agreement (but which does not
constitute set off against such funds), the Administrative
Agent, the Collateral Agent or such Lessor Lender, as the
case may be, shall have given to the Borrower and each
Official Committee not less than two Business Days' prior
written notice thereof; provided further, however, that
-------- ------- -------
promptly after taking any action which precludes the
withdrawal by or for the benefit of the Borrower of any
funds from the Investment Account, the Concentration Account
or any other account referred to in the Initial Cash
Management Agreement, the Administrative Agent, the
Collateral Agent or such Lessor Lender, as the case may be,
shall give to the Borrower and each Official Committee
written notice thereof; and provided further, however, that
-------- ------- -------
the failure to give any of the foregoing notices shall not
impair or otherwise affect any action taken pursuant to the
preceding clause (ii); and provided further, however, that
-------- ------- -------
notwithstanding any provision of this Agreement or the
Security Documents which may be to the contrary, the
Borrower may, without further order of the Bankruptcy Court
or further consent of the Required Lenders, use amounts on
deposit in the Concentration Account and/or amounts on
deposit in the Investment Account which are in excess of the
Section 7.10(c) Amount, during the period of two Business
Days after the taking by the Administrative Agent, the
Collateral Agent or any Required Lender of any action which
(but for this proviso) would preclude the withdrawal by or
for the benefit of the Borrower of such amounts, for the
purpose of making such payments as (i) are necessary (a) to
avoid immediate and irreparable harm to property of or in
the possession of the Borrower, and/or (b) to protect the
public health and safety, and (ii) do not exceed in the
aggregate $2,000,000; and provided further, however, that
-------- ------- -------
notwithstanding any provision of this Agreement or the
Security Documents which may be to the contrary, the
Borrower may, without further order of the Bankruptcy Court
or further consent of the Required Lenders, use amounts on
deposit in the Concentration Account and/or amounts on
deposit in the Investment Account which are in excess of the
Section 7.10(c) Amount for the purpose of making such
payments as (i) are claimed against the Borrower by (present
or former) directors of the Borrower for reimbursement of
the costs of defending claims against such directors which
are not covered by directors' and officers' liability
insurance, and (ii) do not exceed $100,000 in the aggregate;
and provided further, however, that the Borrower shall use
-------- ------- -------

NY1-53665.4 -112-

amounts on deposit in the Concentration Account for the
purpose described in the next preceding provisos prior to
using amounts on deposit in the Investment Account for such
purpose. Nothing contained herein or in any of the Security
Documents shall be deemed to impair or restrict the right of
the Borrower to apply to the Bankruptcy Court, upon motion,
notice and hearing, to use cash collateral, other than the
Section 7.10(c) Amount, subject to and in accordance with
the applicable provisions of the Bankruptcy Code (it being
acknowledged that, pursuant to the Orders, the Borrower is
expressly prohibited from seeking to use cash collateral on
deposit in the Investment Account which is not in excess of
the Section 7.10(c) Amount). If any Lessor Lender directs
the Administrative Agent to take the actions described in
clause (i) of the preceding sentence, then such Lessor
Lender may, except as provided in clause (iii) of the
proviso to Section 3.03(b) of the Agency Agreement, instruct
the Administrative Agent and the Collateral Agent as to the
disposition and other action to be taken in the exercise of
remedies pursuant to the Security Documents, provided that
--------
the Required Lenders may at any time furnish such instruc-
tions with respect thereto (although the Administrative
Agent shall follow all instructions received from the
respective Lessor Lender until it receives any additional or
contrary instructions from the Required Lenders with respect
thereto) so long as such instructions by the Required
Lenders will not have the effect of materially delaying such
disposition or other action, and the Administrative Agent
and the Collateral Agent shall not incur any liability from
relying on any such instructions of any Lessor Lender or the
Required Lenders, as the case may be.

SECTION 10. MISCELLANEOUS.
-------------

10.01 Payment of Expenses, etc. The Borrower
------------------------
agrees to: (i) whether or not the transactions herein
contemplated are consummated, pay all reasonable out-of-
pocket costs and expenses of the Lenders party hereto on the
Third Amendment Effective Date and the Administrative Agent
and the Collateral Agent and their designees, or reimburse
each of them therefor, in connection with the preparation,
execution and delivery of the Credit Documents and the
documents and instruments referred to therein, and the
ongoing administration thereof (including, without limita-
tion, the reasonable fees and disbursements of Paul,
Hastings, Janofsky & Walker; Milbank, Tweed, Hadley &
McCloy; Snell & Wilmer; and of any local counsel,
syndication expenses, the cost of inspections, field
examinations and collateral audits, the fees and expenses of
Simat, Helliesen & Eichner, Inc. (upon application to the

NY1-53665.4 -113-

Bankruptcy Court), the costs of the receivables management
arrangements described in Section 5.01(p)), the reasonable
expenses of Franke & Company, Inc. and the reasonable fees
and expenses of financial advisors to each of the Lessor
Lenders); (ii) pay all reasonable out-of-pocket costs and
expenses of the Lenders party hereto on the Third Amendment
Effective Date and the Administrative Agent and the
Collateral Agent and their designees in connection with any
amendment, waiver or consent relating to the Credit
Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees
and disbursements of Paul, Hastings, Janofsky & Walker;
Milbank Tweed, Hadley & McCloy; Snell & Wilmer; and of any
local counsel) and of the Administrative Agent and the
Collateral Agent and their designees and each of the Lenders
in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and
disbursements of counsel for the Administrative Agent and
the Collateral Agent and their designees and for each of the
Lenders); (iii) pay and hold each of the Lenders harmless
from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters
and save each of the Lenders harmless from and against any
and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to
such Lender) to pay such taxes; (iv) indemnify the
Administrative Agent and the Collateral Agent and their
designees and each Lender, and its Affiliates, and each of
their officers, directors, employees, representatives and
agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages, or expenses
incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, any investiga-
tion, litigation or other proceeding (whether or not any
such Person is a party thereto) related to the entering into
and/or performance of any Credit Document or the use or
proposed use of the proceeds of any Loans hereunder or the
transactions contemplated in any Credit Document, including,
without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified); and (v)
indemnify Kawasaki and its Affiliates, and each of their
officers, directors, employees, representatives and agents
from and hold each of them harmless against any and all
losses, liabilities, claims, damages, or expenses incurred
by any of them as a result of, or arising out of, or in any
way related to, or by reason of, the By-Law Letter

NY1-53665.4 -114-

Agreement, the Management Letter Agreement, the Amended and
Restated Management Letter Agreement or any rights of
approval with respect to members of the Board of Directors
of the Borrower and the Executive Committee of such Board of
Directors granted to, or exercised by, the Lenders at any
time party to the Original Credit Agreement, the Credit
Agreement, the Amended and Restated Credit Agreement and
this Agreement (other than Kawasaki) or any act or omission
of any Director of the Borrower approved by any such
Lenders.

10.02 Survival. All indemnities set forth herein
--------
including, without limitation, in Sections 2.09, 2.10, 2.11
and 10.01 shall survive the execution and delivery of this
Agreement and the Notes and the making and repayment of the
Loans and the termination of this Agreement.

10.03 Notices. Except as otherwise expressly
-------
provided herein, all notices and other communications
provided for hereunder shall be in writing (including
telegraphic, telex, telecopier) and mailed (by certified or
registered mail), telegraphed, telexed, telecopied, cabled
or delivered, if to the Borrower, at its address specified
opposite its signature below or in any Credit Document
executed by it; if to any Lender, at its address specified
on Annex I attached hereto; and if the Administrative Agent,
at its Notice Office; or, as to the Borrower or the
Administrative Agent, at such other address as shall be
designated by such party in a written notice to the other
parties hereto and, as to each other party, at such other
address as shall be designated by such party in a written
notice to the Borrower and the Administrative Agent. All
such notices and communications shall, when mailed (by
certified or registered mail), telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be
effective upon receipt.

10.04 Benefit of Agreement.
--------------------

(a) This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective
parties hereto and the successors and assigns of the parties
hereto, but no benefits hereunder shall inure to or be
enforceable by any other Person; provided however, that the
-------- -------
Borrower may not assign or transfer any of its rights and
obligations under any Credit Document without the prior
written consent of all of the Lenders; and provided further,
-------- -------
however, that, although any Lender may grant participations
in its rights and obligations hereunder and under the Notes,
such Lender shall remain a "Lender" for all purposes
hereunder (and may not transfer or assign its Loans

NY1-53665.4 -115-

hereunder) and the participant shall not constitute a
"Lender" hereunder; and provided further, however, that no
-------- ------- -------
Lender shall grant any participation under which the
participant shall have rights to approve any amendment to or
waiver of this Agreement except to the extent such amendment
or waiver would (i) extend the final maturity of the Loans
in which such participant is participating, or reduce the
rate of interest or Fees thereon, or reduce the principal
amount thereof, or change the date for payment of any such
amounts, or increase such participant's participating
interest in any Loan over the amount thereof then in effect,
or (ii) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this
Agreement, or (iii) consent to the release of all or
substantially all of the Collateral or to the release of any
cash Collateral if the effect of such release of such cash
Collateral is to cause or permit the amount of cash and Cash
Equivalents on deposit in or to the credit of the Investment
Account to be reduced below an amount equal to 33-1/3% of the
aggregate principal amount of the Loans then outstanding.
In the case of any such participation, the participant shall
not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such
Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of
the participant relating thereto and to be monitored solely
by the participant and such Lender) and all amounts payable
by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.

(b) Notwithstanding anything to the contrary in
Section 10.04(a), (x) any Lender may assign a portion of its
Loans and its rights and obligations to any of its
Affiliates or to one or more Lenders or any of their
Affiliates, and (y) any Lender may assign a portion, in an
amount of at least $1 million of its Loans and its rights
and obligations hereunder to another Person (including,
without limitation, a leasing company or credit corporation)
which is not an "air carrier" certificated under Section 401
of the Aviation Act or any Person of which such "air
carrier" is a Subsidiary, each of which assignees agrees to
become a party to this Agreement as a Lender prior to or
after the date thereof by executing an amendment to this
Agreement or by executing a supplemental agreement with the
assigning Lender, provided that, in the case of each such
assignment, (i) at the time it receives a copy of the
aforesaid amendment or agreement, together with the
processing fee referred to below, Annex I shall be modified
by the Administrative Agent to reflect the Loans of such
assignee Lender and of the existing Lenders, (ii) the
Administrative Agent shall have received from the parties to

NY1-53665.4 -116-

such assignment a processing fee of $2,500 and (iii) the
Borrower shall, if such assignee Lender so requests, issue
new Notes to such assignee Lender and to the assigning
Lender in conformity with the requirements of Section 2.05
to the extent needed to reflect the revised Loans of the
Lenders. To the extent of any assignment pursuant to this
Section 10.04(b), the assigning Lender shall be relieved of
its obligations hereunder with respect to its assigned
Loans.

10.05 No Waiver; Remedies Cumulative. No failure
------------------------------
or delay on the part of the Administrative Agent, the
Collateral Agent or any Lender or any holder of a Note in
exercising any right, power or privilege hereunder or under
any other Credit Document and no course of dealing between
the Borrower and the Administrative Agent or any Lender or
the holder of any Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exer-
cise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or
remedies which the Administrative Agent, or any Lender or
the holder of any Note would otherwise have. No notice to
or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights
of the Administrative Agent, the Lenders or the holder of
any Note to any other or further action in any circumstances
without notice or demand.

10.06 Payments Pro Rata.
-----------------

(a) Except as otherwise provided in Sections 2.12
and 4.02, the Administrative Agent agrees that promptly
after its receipt of each payment from or on behalf of the
Borrower in respect of any Obligations of the Borrower here-
under or under any Credit Document, it shall distribute such
payment to the Lenders pro rata based upon their respective
shares, if any, of the Obligations with respect to which
such payment was received.

(b) Except as otherwise provided in Sections 2.12
and 4.02, each of the Lenders agrees that, if it should
receive any amount hereunder (whether by voluntary payment,
by realization upon security, by the exercise of the right
of setoff or banker's lien, by counterclaim or cross action,
by the enforcement of any right under the Credit Documents,
or otherwise), which is applicable to the payment of the
principal of, or interest on, the Loans, or Facility Fee, of

NY1-53665.4 -117-

a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total
of such Obligation then owed and due to such Lender bears to
the total of such Obligation then owed and due to all of the
Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash with-
out recourse or warranty from the other Lenders an interest
in the Obligations of the Borrower to such Lenders in such
amount as shall result in a proportional participation by
all the Lenders in such amount; provided that if all or any
--------
portion of such excess amount is thereafter recovered from
such Lender, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but
without interest.

10.07 Calculations; Computations.
--------------------------

(a) The financial statements to be furnished to
the Lenders pursuant hereto shall be made and prepared in
accordance with generally accepted accounting policies and
principles consistently applied throughout the periods
involved (except as set forth in the notes thereto).

(b) All computations of interest and Fees
hereunder shall be made on the actual number of days elapsed
over a period of 360 days.

10.08 GOVERNING LAW. THIS AGREEMENT AND THE
-------------
OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE UNITED
STATES OF AMERICA, TO THE EXTENT APPLICABLE, AND THE STATE
OF NEW YORK.

10.09 Counterparts. This Agreement may be exe-
------------
cuted in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
A set of counterparts executed by all the parties hereto
shall be lodged with the Borrower, the Administrative Agent
and each Lender.

10.10 Headings Descriptive. The headings of the
--------------------
several sections and subsections of this Agreement are
inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this
Agreement.

10.11 Amendment or Waiver. Neither this Agree-
-------------------
ment nor any other Credit Document nor any terms hereof or

NY1-53665.4 -118-

thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in
writing signed by the Required Lenders; provided, however,
-------- -------
that no such change, waiver, discharge or termination shall,
without the written consent of each Lender affected thereby,
(i) extend the Maturity Date or alter the amortization
schedule of the Loans, or reduce the rate of interest or
Fees thereon, or reduce the principal amount thereof, or
change the date for payment of any such amounts, or increase
the Loans of any Lender over the amount thereof then in
effect, (ii) amend, modify or waive any provision of this
Section, or Sections 2, 3, 4 (except as permitted by the
following proviso to this sentence), 7.02, 7.06, 8.03,
8.05(vi), 8.11, 10.01, 10.04, 10.06, 10.07(b), 10.14 or
10.17 or any provision in the Credit Documents which
provides for a determination by all of the Lenders
(including the definitions of terms as used in the Sections
and provisions referred to in this clause (ii)),
(iii) change the definition of Required Lenders or (iv) con-
sent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement; and
provided further, however, that no such change, waiver,
-------- ------- -------
discharge or termination shall, without the written consent
of Lenders the principal amount of whose Loans outstanding
at the time exceed 85% of the total principal amount of
Loans outstanding at the time, permit or result in (a) the
amount of cash and Cash Equivalents on deposit in or to the
credit of the Investment Account to be reduced below such
amount as equals 33-1/3% of the aggregate principal amount
of the Loans then outstanding, or (b) the release to the
Borrower or other application for a purpose other than, or
in a manner inconsistent with, the repayment of Loans as
provided in Sections 4.02(ii) and (v), of any portion of the
Net Proceeds of an Asset Sale of Designated Collateral which
is in excess of 20% of the amount of such Net Proceeds, or
(c) the determination as to whether and to what extent Loans
should be prepaid pursuant to Sections 4.02(iv) and (v) by
reason of any excess of "net available cash" (as such term
is defined in Section 8.15(d)) over $125,000,000; and
provided further, however, that (i) each Lessor Lender shall
-------- ------- -------
have the exclusive right to waive for itself any Event of
Default under Section 9.01, 9.04, 9.05 or 9.07 or its right
to exercise remedies in respect of such Event of Default,
(ii) the rights of the Lessor Lenders under Section 9 may be
amended only with the written consent of each Lessor Lender,
and (iii) no provision of Section 9.01, 9.04, 9.05 or 9.07
(or the definitions of terms as used therein) may be amended
without the written consent of each Lender. The Borrower
shall give each Lender a copy of each report, notice or
other information furnished to any other Lender pursuant to
an express requirement of this Agreement; and the Borrower

NY1-53665.4 -119-

shall give each Lender written notice of any amendment or
waiver of any provision of this Agreement or the other
Credit Documents (which notice shall be accompanied by a
copy of such amendment or waiver). The Borrower shall give
each Official Committee written notice of any material
amendment or waiver of any provision of this Agreement. No
amendments of the Agency Agreement, or amendments of the
other Credit Documents which increase, change or modify the
rights or duties of the Administrative Agent, may be made
without the consent of the Administrative Agent. No amend-
ments of the Agency Agreement, or amendments of the other
Credit Documents which increase, change or modify the duties
of the Collateral Agent, may be made without the consent of
the Collateral Agent. Notwithstanding anything to the
contrary contained herein, the modifications contemplated by
Section 10.04, to the extent needed to make new Lenders
party to this Agreement, shall be permitted in accordance
with the terms thereof. Notwithstanding anything to the
contrary contained herein, no change, waiver, amendment or
modification of this sentence or of Section 2.12 or clauses
(ii), (iii), (iv), and (v) of Section 4.02 shall in any case
be effective without the prior written consent of GPA Sub.
Notwithstanding anything to the contrary contained herein or
in the Kawasaki Credit Agreement, if all Obligations shall
not have been paid in full on or prior to the Maturity Date,
the priority of the lien on and security interest in the
Collateral for the benefit of the lenders under the Kawasaki
Credit Agreement shall be subject to the prior written
consent of each of the Required Lenders (not including
Kawasaki). All amendments effected in compliance with this
Section 10.11 shall be effective and enforceable against all
parties hereto without further application to, or order of,
the Bankruptcy Court.

10.12 Domicile of Loans. Except as otherwise
-----------------
provided in Section 2.10(a) or 2.11(a), each Lender may
transfer and carry its Loans at, to or for the account of
any branch, office, or Affiliate of such Lender.

10.13 Confidentiality. Each Lender shall hold
---------------
all non-public information furnished by or on behalf of the
Borrower in connection with such Lender's evaluation of
whether to become a Lender hereunder or obtained pursuant to
the requirements of this Agreement, which has been expressly
identified as such by the Borrower by the conspicuous
designation thereof as "confidential" (collectively, the
"Confidential Material"), in accordance with its customary
---------------------
procedure for handling confidential information of this
nature and in any event may make disclosure reasonably
required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loans or

NY1-53665.4 -120-

participation therein or to its accountants, professional
advisors, lawyers, investment bankers and others as required
or requested by any Governmental Authority or representative
thereof or pursuant to legal process, provided that, unless
--------
specifically prohibited by applicable law or court order,
each Lender shall notify the Borrower of any request by any
Governmental Authority or representative thereof (other than
any such request in connection with an examination of the
financial condition of such Lender by such Governmental
Authority) for disclosure of any such non-public information
prior to disclosure of such information, and provided,
--------
further, that in no event shall any Lender be obligated or
-------
required to return any materials furnished by or on behalf
of the Borrower. Each Lender (including the Administrative
Agent) agrees that it will not provide to prospective
assignees, transferees or participants any of the
Confidential Material unless such Person has executed an
agreement to be bound by this Section 10.13.

10.14 Set-Off. The Borrower hereby acknowledges
-------
and agrees that any participation referred to in this
Agreement will give rise to a direct obligation of the
Borrower to the participant. The Borrower hereby authorizes
the Collateral Agent, the Administrative Agent, each Lender,
and each participant, in case of an Event of Default, at any
time and from time to time, without notice or demand, to set
off and apply all deposits (general, special, custodial or
for safekeeping, time or demand, provisional or final) and
other property (including, without limitation, money and
securities) at any time held by or in the possession of or
to the account of the Administrative Agent, the Collateral
Agent (including any lock box accounts, the Concentration
Account, the Investment Account and any other account or
cash Collateral), such Lender or participant, and other
obligations at any time owing by the Administrative Agent,
the Collateral Agent, such Lender or such participant to or
for the credit or account of the Borrower, in each of which
deposits, property and other obligations the Collateral
Agent, such Lender or such participant for the ratable
benefit of the Administrative Agent, and (except to the
extent prohibited by the Orders) each Lender is hereby
granted a security interest as security for any and all
obligations of the Borrower now or hereafter existing under
the Credit Documents (irrespective of whether or not the
Administrative Agent, the Collateral Agent, such Lender or
participant shall have made any demand for payment and
although the Borrower's obligations may be contingent and
unmatured). The rights of the Administrative Agent, the
Collateral Agent, the Lenders and their participants under
this Section are in addition to other rights and remedies
(including other rights of set-off) which the Collateral

NY1-53665.4 -121-

Agent, the Lenders or any such participants may have.
Promptly after effecting any such set-off, the Collateral
Agent shall give the Borrower notice thereof, but a failure
to give such notice shall not impair or otherwise affect the
effectiveness of the set-off. Notwithstanding any of the
foregoing, the Administrative Agent, the Collateral Agent,
the Lenders, or any participant shall not in any event set
off amounts such that the amounts remaining in all accounts
are not sufficient to cover all of the unpaid Permitted
Expenses then outstanding.

By acceptance of any interest in the Indebtedness
of the Borrower outstanding under this Agreement or any
rights under any other Credit Document, a participant agrees
to share proceeds obtained by it pursuant to the foregoing
sentence in accordance with the provisions of this
Agreement.

10.15 WAIVER OF JURY TRIAL. THE BORROWER, THE
--------------------
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE CREDIT
DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION AND THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The
Administrative Agent, each Lender and the Borrower warrant
and represent that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with
such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT
BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS. In the
event of litigation, this Agreement may be filed as a
written consent to a trial by the court.

10.16 Time of the Essence. Time is of the
-------------------
essence as to each provision herein or in the other Credit
Documents in which time is a factor.

10.17 Specified Lien Releases. Each of the
-----------------------
Administrative Agent and the Secured Creditors agrees that
(i) the Collateral Agent shall release its Lien on
Collateral consisting of cash to the extent necessary to pay
Permitted Expenses, (ii) to the extent expressly provided in
the penultimate sentence of Section 8.02, the Lien of the
Collateral Agent on the assets described therein shall be
released as provided therein and (iii) the Lien of the
Collateral Agent shall be released upon the first date (such

NY1-53665.4 -122-

date, the "Lien Termination Date") upon which all principal
---------------------
of, and interest accrued on, the Loans has been repaid in
full and all other Obligations have been repaid in full. In
determining whether the test set forth in clause (iii) of
the immediately preceding sentence has been met, the
Collateral Agent shall be entitled to rely upon the Required
Lenders in determining whether such test has been met and
shall be entitled to refrain from taking any action until it
has received a response to its request from the Required
Lenders, and upon receiving such response shall be entitled
to rely thereon with no liability hereunder. The occurrence
of the Lien Termination Date as provided above shall in no
event affect the Borrower's obligation to pay any
Obligations which thereafter become due and payable, and
shall in no event affect the administrative expense priority
granted to the Obligations by the Bankruptcy Court. Nothing
contained in this Agreement or in any Security Document
shall be construed to secure the obligations of the Borrower
under the GPA Agreements or the Kawasaki Agreements by the
Collateral.

10.18 Administrative Agent; Collateral Agent. In
--------------------------------------
acting pursuant to this Agreement and the other Credit
Documents, the Administrative Agent and Collateral Agent
shall act in the manner, and shall be subject to the rights
and duties, provided in the Agency Agreement, the provisions
of which are incorporated by reference herein as fully as if
the terms thereof were set forth herein in their entirety.
Each Person which becomes a Secured Creditor agrees to such
provisions, and to the rights and duties of the
Administrative Agent and Collateral Agent as set forth in
the Agency Agreement, and to the indemnities contained
therein, as fully as if said Secured Creditor were an
original party thereto.

10.19 Dating and Effectiveness. Although this
------------------------
Agreement is dated as of the date first written above for
convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under
the signatures hereto, and this Agreement shall be effective
on the Third Amendment Effective Date.

10.20 Participation by Commerce and Economic
--------------------------------------
Development Commission. Participation by Commerce and
----------------------
Economic Development Commission in the transactions
contemplated by this Agreement and the other Credit
Documents is subject to the provisions of Arizona Revised
Statutes Section 38-511; and by this reference, each of the other
Credit Documents to which Commerce and Economic Development
Commission is or becomes a party shall be deemed to include
a statement to such effect.

NY1-53665.4 -123-

10.21 Covenants Do Not Preclude Negotiation of a
------------------------------------------
Plan of Reorganization. Nothing contained in the covenants
----------------------
of the Borrower set forth in Section 8 of this Agreement
(including, without limitation, the covenants in Section
8.08 which restrict payments by the Borrower to aircraft
lessors and financiers) shall, or shall be construed to, (i)
preclude the Borrower from negotiating any plan of
reorganization or any financial or other accommodation in
anticipation of any plan or reorganization (including,
without limitation, any modification of payments by the
Borrower to its aircraft lessors or financiers) so long as,
without the prior written consent of the Required Lenders,
no breach of any of such covenants and no related Default or
Event of Default occurs prior to the occurrence of the
Maturity Date and the repayment in full of the Loans and the
payment in full of all of the other Obligations, or (ii)
preclude the Borrower from entering into agreements or other
contractual arrangements evidencing the results of such
negotiations so long as, pursuant to express terms, such
agreements or other contractual arrangements do not and
cannot become effective prior to the confirmation of such
plan of reorganization and the repayment in full of the
Loans and all other amounts payable under the Credit
Documents.

10.22 Certain Consents. The Lenders, in their
----------------
capacities as Lenders hereunder, and lenders under the
Second Amended and Restated Credit Agreement, hereby consent
to (i) the amendment of the By-Laws of the Borrower to
delete therefrom Section 4.16 thereof and replace the same
with the word "Reserved", and (ii) the actions taken and
resolutions adopted by the Board of Directors of the
Borrower to eliminate the Executive Committee of the Board
of Directors of the Borrower and, in consequence thereof, to
terminate all appointments to such Executive Committee.

10.23 Certain Waivers. The Lenders hereby waive
---------------
the condition precedent to the Third Amendment Effective
Date contained in clause (iii) of Section 5.05(c) that the
Lenders receive an opinion of Winthrop, Stimson, Putnam &
Roberts covering the United States citizenship of the
Borrower and other matters involving the DOT and the FAA;
provided, however, that the Borrower agrees that (i) the
-------- -------
Borrower shall cause such opinion (in substantially the same
form and with substantially the same content as the opinion
delivered by such firm on the Second Amendment Effective
Date) to be delivered to the Lenders on or before October 8,
1993, and (ii) breach by the Borrower of the covenant
contained in the preceding clause (i) shall constitute an
Event of Default (with the same effect as if such covenant
were referred to in clause (i) of Section 9.03).

NY1-53665.4 -124-

IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the respective dates set forth below.

"Borrower"

Notice Address: AMERICA WEST AIRLINES, INC.
--------------
4000 East Sky Harbor Blvd.
Phoenix, Arizona 85034
Attention: Senior Vice By: _________________________________
President-Finance
Title: ______________________________

Date: _______________________________

"Administrative Agent"

Notice Office: BT COMMERCIAL CORP.,
-------------
14 Wall Street as Administrative Agent
New York, New York 10005
Attention: Albert Fischetti

By: _________________________________

Title: ______________________________

Date: _______________________________

"Lenders"

GPA LEASING USA I, INC.

By: _________________________________

Title: ______________________________

Date: _______________________________

GPA LEASING USA SUB I, INC

By: _________________________________

Title: ______________________________

Date: _______________________________

NY1-53665.4 -125-

KAWASAKI LEASING
INTERNATIONAL INC.

By: _________________________________

Title: ______________________________

Date: _______________________________

B&B HOLDINGS, INC.
d/b/a PHOENIX CARDINALS

By: _________________________________

Title: ______________________________

Date: _______________________________

BANK OF AMERICA ARIZONA

By: _________________________________

Title: ______________________________

Date: _______________________________

BANK ONE, ARIZONA, N.A.

By: _________________________________

Title: ______________________________

Date: _______________________________

COMMERCE AND ECONOMIC
DEVELOPMENT COMMISSION

By: _________________________________

Title: ______________________________

Date: _______________________________

NY1-53665.4 -126-

THE DIAL CORP.

By: _________________________________

Title: ______________________________

Date: _______________________________

DMB HOLDING LIMITED
PARTNERSHIP

By: _________________________________

Title: ______________________________

Date: _______________________________

EL DORADO INVESTMENT COMPANY

By: _________________________________

Title: ______________________________

Date: _______________________________

FIRST INTERSTATE BANK OF
ARIZONA, N.A.

By: _________________________________

Title: ______________________________

Date: _______________________________

PHELPS DODGE CORPORATION

By: _________________________________

Title: ______________________________

Date: _______________________________

NY1-53665.4 -127-

PHOENIX NEWSPAPERS, INC.

By: _________________________________

Title: ______________________________

Date: _______________________________

PHOENIX SUNS LTD. PARTNERSHIP

By: _________________________________

Title: ______________________________

Date: _______________________________

NY1-53665.4 -128-

<PAGE>
ANNEX I
-------

List of Loan Amounts and Addresses
----------------------------------

Outstanding
Principal
Amount of Loans
as of the Third
Amendment
Effective Date
--------------

GPA Leasing USA I, Inc. $9,894,424.48
Address:
-------
c/o GPA Capital, Incorporated
9 West 57th Street
New York, New York 10019
Attention: General Counsel
Telephone: (212) 980-3313
Telecopy: (212) 980-6655

GPA Leasing USA Sub I, Inc $48,002,561.42
Address:
-------
c/o GPA Capital, Incorporated
9 West 57th Street
New York, New York 10019
Attention: General Counsel
Telephone: (212) 980-3313
Telecopy: (212) 980-6655

Kawasaki Leasing International Inc. $19,082,287.16
Address:
-------
65 East 55th Street
New York New York 10022
Attention: President
Telephone: (212) 223-1800
Telecopy: (212) 223-2199

B&B Holdings, Inc. $207,381.08
d/b/a Phoenix Cardinals
Address:
-------
8701 S. Hardy Drive
Tempe, Arizona 85284
Attention: Mr. William V. Bidwill
Telephone: (602) 379-1804
Telecopy: (602) 379-1819

NY1-53665.4

<PAGE>

Bank of America Arizona $829,685.74
Address:
-------
101 North First Avenue
31st Floor
Phoenix, Arizona 85003
Attention: Mr. David S. Hanna
Telephone: (602) 262-4136
Telecopy: (602) 262-4354

Bank One, Arizona, N.A. $1,078,585.97
Address:
-------
36th Floor
241 North Central Avenue
Phoenix, Arizona 85004
Attention: Mr. John T. Byrd
Telephone: (602) 221-2173
Telecopy: (602) 221-1535

Commerce and Economic $829,685.74
Development Commission
Address:
-------
3800 N. Central Avenue
Suite 1500
Phoenix, Arizona 85007
Attention: Mr. Jim Tuvell
Telephone: (602) 280-1369
Telecopy: (602) 280-1358

The Dial Corp. $1,078,585.97
Address:
-------
Dial Tower
Phoenix, Arizona 85077-2348
Attention: Mr. F. Edward Lake
Telephone: (602) 207-5657
Telecopy: (602) 207-5100

DMB Holding Limited Partnership $207,381.08
Address:
-------
4201 North 24th Street
Phoenix, Arizona 85018
Attention: Mr. Drew Brown
Telephone: (602) 956-7877
Telecopy: (602) 956-7961

NY1-53665.4 - 2 -

El Dorado Investment Company $207,381.08
Address:
-------
400 E. Van Buren, Suite 650
Phoenix, Arizona 85072-2132
Attention: Mr. Gregory S. Anderson
Telephone: (602) 252-1450
Telecopy: (602) 252-3444

First Interstate Bank of $1,078,585.87
Arizona, N.A.
Address:
-------
100 West Washington
Phoenix, Arizona 85003
Attention: Mr. William S. Randall
Telephone: (602) 229-4547
Telecopy: (602) 229-4525

Phelps Dodge Corporation $456,335.30
Address:
-------
2600 North Central Avenue
Phoenix, Arizona 85004-3014
Attention: Mr. Thomas M. St. Claire
Telephone: (602) 234-8131
Telecopy: (602) 234-8150

Phoenix Newspapers, Inc. $456,335.30
Address:
-------
120 East Van Buren
Phoenix, Arizona 85004
Attention: Mr. Louis A. (Chip) Weil, III
Telephone: (602) 271-8478
Telecopy: (602) 271-8340

Phoenix Suns Ltd. Partnership $207,381.08
Address:
-------
201 East Jefferson, 4th Floor
Phoenix, Arizona 85004
Attention: Mr. Jerry Colangelo
Telephone: (602) 379-7999
Telecopy: (602) 379-7990

NY1-53665.4 - 3 -

AMERICA WEST AIRLINES, INC.
4000 East Sky Harbor Blvd.
Phoenix, Arizona 85034

As of September 30, 1993

AMENDED AND RESTATED
MANAGEMENT LETTER AGREEMENT

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Ladies and Gentlemen:

Reference is made to the Third Amended and
Restated Credit Agreement, dated as of September 30, 1993
(the "Credit Agreement"), among America West Airlines, Inc.
(the "Borrower"), the lenders party thereto (collectively,
the "Lenders") and BT Commercial Corp., as agent for the
Lenders. Except as otherwise defined herein, capitalized
terms used herein shall have the meanings stated or ascribed
in the Credit Agreement.

The Borrower hereby agrees that, at all times
prior to the Lien Termination Date, and notwithstanding
anything to the contrary in the Restated Bylaws of the
Borrower (the "Bylaws"):

1. The Board of Directors of the Borrower (the
"Board") shall have no more than ten (10)
members. At all times, the composition of
the Board shall comply in all respects with
the U.S. citizenship requirements of the
Federal Aviation Act of 1958, as amended.

2. There shall be (a) five members of the Board
(the "Phoenix Directors") who have been
designated by the Second Amendment Lenders
other than Ansett Worldwide Aviation, U.S.A.
(such lenders being referred to herein as the
"Phoenix Lenders") for such membership (it
being understood that the Phoenix Directors
are neither agents nor employees of the
Phoenix Lenders), one of which Phoenix
Directors shall be the Chairman of the Board
as previously designated by the Phoenix
Lenders and who shall continue to serve as

NY-54719.2

<PAGE>

Chairman of the Board until his resignation
from the Board, in which event the Chairman
of the Board shall be a Phoenix Director who
shall be designated by the Phoenix Lenders to
serve as the Chairman of the Board or, in the
absence of such designation by the Phoenix
Lenders, shall be a member of the Board
elected by majority vote of the remaining
members of the Board, (b) two members of the
Board (the "GPA Directors") who have been
designated by GPA Leasing USA I, Inc. and GPA
Leasing USA Sub I, Inc (the "GPA Lenders")
for such membership, (c) one member of the
Board (the "Management Director") who shall
be the person serving in accordance with the
Bylaws as the President and Chief Executive
Officer of the Borrower, and (d) two members
of the Board (the "Independent Directors")
(A) both of whom (i) hold, and have in the
past held, no other position in the Borrower,
(ii) are not, and have in the past never
been, agents or employees of any Lender, and
(iii) have significant airline experience and
expertise, and (B) one of whom has not been,
at any time prior to the Third Amendment
Effective Date, a member of the Board;
provided in the event that on the Third
________
Amendment Effective Date a suitable person
having the qualifications required by the
preceding sub-clauses (A) and (B) of this
sub-paragraph 2 for one of the Independent
Directors has not been identified and
indicated a willingness to serve on the Board
in such capacity, the position of such
Independent Director may remain vacant until
the earlier of December 31, 1993 and the date
on which such Independent Director is duly
elected and appointed by the Board. In the
event of any vacancy on the Board, the
remaining directors then in office shall,
subject to and in accordance with the Bylaws
and this Amended and Restated Management
Letter Agreement, fill the resulting vacancy
on the Board. Attached hereto as Exhibit A
are the resolutions adopted by the Board and
in full force and effect electing and
appointing a director of the Borrower, which
resolutions, together with the written
resignations of certain directors of the
Borrower (copies of which have been provided
separately to the Lenders), cause the

NY-54719.2 -2-

Borrower to be in compliance with the terms
and provisions of this sub-paragraph 2 of
this Amended and Restated Management Letter
Agreement on and as of the Third Amendment
Effective Date.

4. The Borrower hereby agrees to advise each
member of the Board elected from time to time
that a breach or violation of any term of
this Amended and Restated Management Letter
Agreement by the Borrower (without the prior
written consent of the Required Lenders,
which consent may be withheld in the sole and
absolute discretion of the Required Lenders)
shall constitute an Event of Default under
the Credit Agreement.

[Signature page follows.]

NY-54719.2 -3-

Kindly indicate your acceptance of the foregoing
by executing this letter in the space provided below,
whereupon this letter shall become a binding agreement among
us as of the date first set forth above, to be governed and
construed in accordance with the laws of the State of New
York, and to be amended or waived only with the written
consent of the Borrower and each of the undersigned Lenders,
and to amend and restate (and thereby supercede in its
entirety) the Management Letter Agreement (as such term is
defined in the Credit Agreement).

AMERICA WEST AIRLINES, INC.

By: ______________________________

Title: _____________________

Accepted and approved as of
the date first set forth above.

GPA LEASING USA I, INC.

By: _______________________________

Title: ______________________

GPA LEASING USA SUB I, INC

By: _______________________________

Title: ______________________

NY-54719.2 -4-

B&B HOLDINGS, INC.
d/b/a PHOENIX CARDINALS

By: _______________________________

Title: _______________________

BANK OF AMERICA ARIZONA

By: ________________________________

Title: _______________________

BANK ONE, ARIZONA, N.A.

By: ________________________________

Title: _______________________

COMMERCE AND ECONOMIC
DEVELOPMENT COMMISSION

By: ________________________________

Title: _______________________

THE DIAL CORP.

By: ________________________________

Title: _______________________

DMB HOLDING LIMITED PARTNERSHIP

By: ________________________________

Title: _______________________

NY-54719.2 -5-

EL DORADO INVESTMENT COMPANY

By: ________________________________

Title: _______________________

FIRST INTERSTATE BANK OF
ARIZONA, N.A.

By: ________________________________

Title: _______________________

PHELPS DODGE CORPORATION

By: ________________________________

Title: _______________________

PHOENIX NEWSPAPERS, INC.

By: ________________________________

Title: _______________________

PHOENIX SUNS LTD. PARTNERSHIP

By: ________________________________

Title: _______________________

NY-54719.2 -6-

<PAGE>

SCHEDULE I

GPA Leasing USA I, Inc.
c/o GPA Capital, Incorporated
9 West 57th Street
New York, New York 10019

GPA Leasing USA Sub I, Inc
c/o GPA Capital, Incorporated
9 West 57th Street
New York, New York 10019

B&B Holdings, Inc.
d/b/a Phoenix Cardinals
8701 S. Hardy Drive
Tempe, Arizona 85284

Bank of America Arizona
101 North First Avenue
31st Floor
Phoenix, Arizona 85003

Bank One, Arizona, N.A.
36th Floor
241 North Central Avenue
Phoenix, Arizona 85004

Commerce and Economic
Development Commission
3800 N. Central Avenue
Suite 1500 Phoenix, Arizona 85007

The Dial Corp.
Dial Tower
Phoenix, Arizona 85077-2348

DMB Holding Limited Partnership
4201 North 24th Street
Phoenix, Arizona 85018

NY-54719.2

<PAGE>

El Dorado Investment Company
400 E. Van Buren, Suite 650
Phoenix, Arizona 85072-2132

First Interstate Bank of
Arizona, N.A.
100 West Washington
Phoenix, Arizona 85003

Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014

Phoenix Newspapers, Inc.
120 East Van Buren
Phoenix, Arizona 85004

Phoenix Suns Ltd. Partnership
201 East Jefferson, 4th Floor
Phoenix, Arizona 85004

NY-54719.2

<PAGE>

EXHIBIT A

AMERICA WEST AIRLINES, INC.
BOARD OF DIRECTORS RESOLUTIONS

ELECTION OF A DIRECTOR
(Adopted September 28, 1993)

WHEREAS, as a condition precedent to the extension
of the maturity of the Corporation's debtor-in-possession
financing pursuant to the Third Amended and Restated Credit
Agreement, dated as of September 30, 1993 (the "Extended
Credit Agreement"), among the Corporation, the lenders party
thereto (the "Lenders") and BT Commercial Corporation, as
Administrative Agent, the Corporation is entering into and
agreeing to the terms and provisions of an Amended and
Restated Management Letter Agreement, dated as of September
30, 1993 (the "Amended and Restated Management Letter
Agreement"), among the Corporation and certain of the
Lenders;

WHEREAS, in connection with the Extended Credit
Agreement and the Amended and Restated Management Letter
Agreement, there will arise two vacancies on the Board of
Directors of the Corporation; and

WHEREAS, the directors of the Corporation desire
to fill one of the vacancies on the Board of Directors of
the Corporation, effective upon the arising of such vacancy;

NOW, THEREFORE, BE IT RESOLVED, that, effective
upon the arising of a vacancy on the Board of Directors of
the Corporation (by reason of the effectiveness of the
resignation of Tibor Sallay), James C. Clarke be, and hereby
is, elected to the Board of Directors of the Corporation
(and shall serve until such time as his successor shall be
duly elected and qualified), with the result that the
membership of the Board of Directors of the Corporation and
the class and the status for purposes of the Amended and
Restated Management Letter Agreement of each member of the
Board of Directors of the Corporation shall be as follows:

NY-54719.2

<PAGE>
<TABLE>
<CAPTION>
Management
Name Class Letter Status
---- ----- -------------

<S> <C> <S>
John R. Norton 1992 Phoenix Director
Samuel L. Eichenfield 1992 Phoenix Director
Fred Bradley 1992 Independent Director
James M. King 1993 GPA Director
O. Mark De Michelle 1993 Phoenix Director
Richard C. Kraemer 1993 Phoenix Director
William A. Franke 1994 Phoenix Director
Michael J. Conway 1994 Management Director
James C. Clarke 1994 GPA Director
</TABLE>

NY-54719.2 -2-

AMERICA WEST AIRLINES, INC.
4000 East Sky Harbor Blvd.
Phoenix, Arizona 85034

February 8, 1994

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Re: Amendment to Amended and Restated Management
Letter Agreement; Consent to Amendment of
Bylaws

Ladies and Gentlemen:

Reference is made to the Amended and Restated
Management Letter Agreement, dated as of September 30, 1993
(the "Management Letter Agreement"), among America West
Airlines, Inc. ("America West") and the parties listed on
Schedule I hereto (collectively, the "Management Letter
Agreement Lenders"). Except as otherwise defined herein,
all capitalized terms used herein shall have the respective
meanings stated or ascribed in the Management Letter
Agreement.

America West desires that clause (a) of the first
sentence of paragraph 2 of the Management Letter Agreement
be amended, effective as of December 31, 1993, by causing
the final sub-clause thereof which begins with the words "in
which event" to read as follows:

in which event the Chairman of the Board shall be
a member of the Board elected by the vote of at
least two-thirds (2/3) of the remaining members of
the Board

America West further desires that clause (c) of
the first sentence of paragraph 2 of the Management Letter
Agreement be amended, effective as of December 31, 1993, to
read in its entirety as follows:

NY-66576.3
<PAGE>

(c) one member of the Board (the "Management
Director") who (i) at all times prior to February
1, 1994 shall be the person then serving in
accordance with the Bylaws as the President and
Chief Executive Officer of the Borrower or, if no
person shall then be serving as the President and
Chief Executive Officer of the Borrower, the
person most recently having served as the
President and Chief Executive Officer of the
Borrower, and (ii) at all times on and after
February 1, 1994 shall be the person then serving
in accordance with the Bylaws as the Chief

Operating Officer of the Borrower; provided,
--------
however, that there may be a vacancy in the
-------
position of the Management Director during the
period between February 1, 1994 and February 8,
1994.

The amendments to the Management Letter Agreement set forth
in the preceding paragraphs of this letter are referred to
herein, collectively, as the "Management Letter Agreement
Amendments".

In addition, America West requests the consent of
the Management Letter Agreement Lenders, acting as Required
Lenders under the Credit Agreement, to the amendment of the
Bylaws, effective as of December 31, 1993, to read in their
entirety as set forth in Exhibit A attached hereto (such
amendment of the Bylaws being referred to herein as the
"Bylaw Amendment").

Each Management Letter Agreement Lender is
requested to indicate its agreement with the Management
Letter Agreement Amendments and its consent to the Bylaw
Amendment by signing this letter in the space provided below
(which signature may be in any number of counterparts and by
different Management Letter Agreement Lenders on separate
counterparts, each of which counterparts, when signed and
delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one
and the same instrument). Upon signature by all of the
Management Letter Agreement Lenders, (i) the Management
Letter Agreement Amendments shall be deemed effective as of
December 31, 1993, (ii) except as specifically amended by
the Management Letter Agreement Amendments, the Management
Letter Agreement shall remain in full force and effect as in
existence on December 31, 1993 and shall be deemed to be
ratified and confirmed in all respects by America West and
the Management Letter Agreement Lenders, and (iii) the

NY-66576.3 -2-

Management Letter Agreement Lenders, acting as Required
Lenders under the Credit Agreement, shall be deemed to have
consented to the Bylaw Amendment effective as of December
31, 1993.

Very truly yours,

AMERICA WEST AIRLINES, INC.

By: ___________________________

Title: ____________________

Agreed and consented as of
the dates set forth above.

GPA LEASING USA I, INC.

By: ________________________

Title: _________________

GPA LEASING USA SUB I, INC

By: ________________________

Title: _________________

B&B HOLDINGS, INC.
d/b/a PHOENIX CARDINALS

By: ________________________

Title: _________________

BANK OF AMERICA ARIZONA

By: ________________________

Title: _________________

NY-66576.3 -3-

BANK ONE, ARIZONA, N.A.

By: ________________________

Title: _________________

COMMERCE AND ECONOMIC
DEVELOPMENT COMMISSION

By: ________________________

Title: _________________

THE DIAL CORP.

By: ________________________

Title: _________________

DMB HOLDING LIMITED PARTNERSHIP

By: ________________________

Title: _________________

EL DORADO INVESTMENT COMPANY

By: ________________________

Title: _________________

FIRST INTERSTATE BANK OF
ARIZONA, N.A.

By: ________________________

Title: _________________

NY-66576.3 -4-

PHELPS DODGE CORPORATION

By: ________________________

Title: _________________

PHOENIX NEWSPAPERS, INC.

By: ________________________

Title: _________________

PHOENIX SUNS LTD. PARTNERSHIP

By: ________________________

Title: _________________

NY-66576.3 -5-

<PAGE>

SCHEDULE I

GPA Leasing USA I, Inc.
c/o GPA Corporation
Lee Farm Corporate Park
83 Wooster Heights Road
Danbury, Connecticut 06810

GPA Leasing USA Sub I, Inc
c/o GPA Corporation
Lee Farm Corporate Park
83 Wooster Heights Road
Danbury, Connecticut 06810

B&B Holdings, Inc.
d/b/a Phoenix Cardinals
8701 S. Hardy Drive
Tempe, Arizona 85284

Bank of America Arizona
101 North First Avenue
31st Floor
Phoenix, Arizona 85003

Bank One, Arizona, N.A.
36th Floor
241 North Central Avenue
Phoenix, Arizona 85004

Commerce and Economic
Development Commission
3800 N. Central Avenue
Suite 1500
Phoenix, Arizona 85007

The Dial Corp.
Dial Tower
Phoenix, Arizona 85077-2348

NY-66576.3

<PAGE>

DMB Holding Limited Partnership
4201 North 24th Street
Phoenix, Arizona 85018

El Dorado Investment Company
400 E. Van Buren, Suite 650
Phoenix, Arizona 85072-2132

First Interstate Bank of
Arizona, N.A.
100 West Washington
Phoenix, Arizona 85003

Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014

Phoenix Newspapers, Inc.
120 East Van Buren
Phoenix, Arizona 85004

Phoenix Suns Ltd. Partnership
201 East Jefferson, 4th Floor
Phoenix, Arizona 85004

NY-66576.3

REVISED INTERIM PROCEDURES AGREEMENT

THIS REVISED INTERIM PROCEDURES AGREEMENT, entered into
and dated as of March 11, 1994 (this "Agreement"), between
---------
America West Airlines, Inc., a Delaware corporation (including,
on or after the effective date of the Plan, as hereinafter
defined, its successors, as reorganized pursuant to Chapter 11 of
the Bankruptcy Code, as hereinafter defined) (hereinafter, the
"Company"), operating as debtor-in-possession under Chapter 11 of
-------
the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330
(the "Bankruptcy Code") and AmWest Partners, L.P., a Texas
----------------
limited partnership (hereinafter the "Investor"). All capitalized
--------
terms used in this Agreement without definition shall have the
meanings assigned to them in the Investment Agreement between the
Company and Investor dated as of the date hereof (the "Investment
----------
Agreement").
---------

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

WHEREAS, the Company has filed a case seeking relief
under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Arizona (the "Bankruptcy
----------
Court"), and is operating its business as debtor-in-possession;
-----

WHEREAS, on December 8, 1993, the Bankruptcy Court
entered an Order on Motion to Establish Procedures for Submission
of Investment Proposals (the "Procedures Order");
----------------

WHEREAS, in accordance with the Procedures Order,
Investor submitted on February 22, 1994 a proposal for making an
investment in the Company (the "Investment") which, subject to
----------
certain changes requested by the Company and the Equity
Committee, is set forth in the Investment Agreement;

WHEREAS, pursuant to the Procedures Order, the Company
has selected the Investment Agreement as the Lead Plan Proposal
(as defined in the Procedures Order) and has provided appropriate
notification of such selection to all persons entitled to receive
such notification; and

WHEREAS, the Investment Agreement contemplates, among
other things, the consummation of a plan of reorganization (the
"Plan") that would, subject to the terms and conditions set forth
----
in the Investment Agreement, provide for (i) a recapitalization
of the Company, (ii) the execution and delivery of the Alliance
Agreements, the intended effect of which would be to improve the
financial performance of the Company and (iii) the execution and
delivery of the Governance Agreements;

NOW, THEREFORE, in consideration of the premises, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby
agrees with Investor as follows:

SECTION 1. No Solicitation, etc. (a) Prior to the
---------------------
termination of this Agreement, the Company shall not directly, or
indirectly through any of its officers, directors, employees,
agents or otherwise, initiate or solicit any offer or proposal

providing for or in furtherance of any Prohibited Transaction.
The term "Prohibited Transaction" shall mean (i) any transaction
----------------------
or transactions (A) similar to or in substitution for the
Investment contemplated by the Investment Agreement or (B)
similar to or in substitution for the issuance and sale by the
Company of any of the Contemplated Securities (as defined below);
(ii) the designation as a Lead Plan Proposal of any other
proposal made by a party other than Investor; or (iii) the
execution of a contract with another airline or affiliate thereof
which would interfere with full implementation of the Alliance
Agreements, it being understood that normal course of business
arrangements between and among carriers that are either
terminable on not more than 60 days' notice or entered into or
continued with the consent of Investor (which consent shall not
be unreasonably withheld) shall not constitute Prohibited
Transactions. The "Prohibited Transactions," as defined above,
shall also include, without limitation, (1) any merger or
consolidation of the Company, (2) any issuance or sale of equity
or debt securities of the Company, and (3) any sale, encumbrance,
lease or other disposition of material assets of the Company or
interest therein outside the ordinary and normal course of the
Company's business. Notwithstanding the foregoing, Prohibited
Transactions shall not include any Permitted Transaction (as
hereinafter defined).

(b) Nothing in this Agreement shall be construed to
prohibit the Company from soliciting proposals or entering
negotiations for a Prohibited Transaction if, at any time after
the date hereof and prior to the Effective Date, Investor or any
of its partners shall (1) initiate proceedings in bankruptcy or
receivership or, voluntarily or involuntarily, be or become
subject to proceedings for protection from its creditors or (2)
shall suffer an adverse change in its condition (financial or
otherwise), business assets, properties or prospects that, in the
reasonable judgment of the Company's board of directors,
materially impairs (A) the ability of Investor or such partner,
as the case may be, to perform its obligations under this
Agreement, the Investment Agreement or the Related Agreements or
(B) the Company's ability to realize (1) the intended benefits
and value of this Agreement, the Investment Agreement or, the
Related Agreements (other than the Alliance Agreements) and (2)
an increase in the Company's pretax income of not less than $40
million per year from the Alliance Agreements as contemplated by
Section 9(g) of the Investment Agreement; provided, however, that
in no event shall the Company be entitled under this paragraph
(b) to solicit proposals for a Prohibited Transaction until after
the Company shall have given Investor not less than one business
day's advance written notice of the Company's intention to do so.

(i) the Company receives a proposal for a Prohibited
Transaction (the "Alternate Proposal"); and
------------------

(ii) the Company's board of directors (A)
determines in good faith, based on advice from the
Company's independent financial advisor, that the
Alternate Proposal satisfies the criteria for
qualification as an Overbid (as set forth below) and (B)
desires to accept the Alternate Proposal as being in the
best interests of the Company and its constituents,

then the Company shall promptly disclose the Alternate
Proposal to Investor and within two business days submit to
Investor copies of all documents or written information
received by the Company from or on behalf of the party
making such proposal setting forth the terms of such
Alternate Proposal (the "Related Documentation"). In making
---------------------
the determination required in clause (ii)(B) above, the
Company's board of directors shall consider all relevant
considerations and factors, including, without limitation,
the form and value of consideration, the extent to which the
economic benefits of the Alternate Proposal, taken as a
whole, differ from the economic benefits to the Company
contemplated to be provided by the Investment Agreement,
taken as a whole, the likelihood that the party making the
Alternate Proposal is able to obtain financing to consummate
the Alternate Proposal, the proposed closing date, the
certainty of consummation, competitive issues and closing
conditions. If within seven business days of receipt by
Investor of all Related Documentation and notice that the
Company deems such seven-day period to have started,
Investor offers amendments to the Investment Agreement
and/or the Alliance Agreements that, taken as a whole,
satisfy the criteria for qualification as an Overbid in
respect of the Alternate Proposal, then Investor's offer
will continue as the Lead Plan Proposal and all the terms of
this Agreement and the Investment Agreement, as so amended,
will continue in full force and effect. If (A) Investor
offers no such amendments within such seven business days or
(B) in the event the Company disagrees with Investor's
characterization of its offer as an Overbid and the
Bankruptcy Court determines, upon petition by the Company,
that Investor's amended offer does not qualify as an Overbid
or (C) in the event Investor disagrees with the Company's
determination referred to in clause (ii) above and the
Bankruptcy Court determines, upon petition by Investor, that
the Alternate Proposal does qualify as an Overbid, then the
Company may terminate this Agreement in accordance with
Section 20(a)(v), provided that the Fee and Expenses have
been paid to Investor as provided in Section 3.

(d) For purposes of paragraph (c) above, the term
"Overbid" shall mean a proposal or offer that is presented to the
-------
Company entirely in writing from one or more parties reasonably
believed by the Company to be financially capable of performing
in full the provisions of its proposal, which proposal:

(A) must provide overall economic benefits to the
Company and its constituents which (i) in the case of a
proposal or offer made by a third party, are materially
greater, in the Company's reasonable judgment, than the
overall economic benefits to be provided under this
Agreement, the Investment Agreement and the Related
Agreements, taken as a whole, and (ii) in the case of a
proposal or offer made by Investor, are not less, in the
Company's reasonable judgment, than the overall economic
benefits to be provided under the Alternate Proposal;

(B) is otherwise on terms and conditions that, taken as
a whole, are (i) in the case of a proposal or offer made by
a third party, more favorable to the Company than those
contained in this Agreement, the Investment Agreement and
the Related Agreements, taken as a whole, and (ii) in the
case of a proposal or offer made by Investor, are at least
as favorable to the Company as those contained in the
Alternate Proposal; and

(C) is not subject to any due diligence, litigation,
environmental or regulatory approval condition that (i) in
the case of a proposal or offer made by a third party, is
more favorable to the proponent than those contained in this
Agreement, the Investment Agreement and the Related
Agreements, taken as a whole, and (ii) in the case of a
proposal or offer made by Investor, is no more favorable to
Investor than those contained in the Alternate Proposal.

(e) Nothing in this Agreement shall prohibit the Company
from consummating any Permitted Transaction (as defined in
Section 4.2).

SECTION 2. Expenses. Following the entry of the order
--------
referred to in Section 16, the Company shall, immediately upon
request and upon receipt of an accounting reasonably acceptable
to the Company, reimburse Investor for all reasonable
out-of-pocket or third-party expenses actually paid by Investor
or its partners in connection with efforts to consummate the
Investment, including the negotiation and preparation of
documents necessary or appropriate to consummate the Investment,
and including, without limitation, legal, investment banking,
appraisal, accounting and other similar professional fees
(collectively, the "Expenses"). Notwithstanding the preceding
--------
sentence, the aggregate of the Expenses reimbursable in full to
Investor and its partners pursuant to this Agreement shall not
exceed (i) $550,000 for the period prior to March 1, 1994, (ii)
$250,000 for any calendar month commencing on or after March 1,
1994; provided, that any unused portion of such $250,000 amount
for any month shall accumulate and be carried forward and be
available in any subsequent month to reimburse any Expenses, and
(iii) $3 million for all periods commencing on or after March 1,
1994.

SECTION 3. Effect of Termination and Consummation.
--------------------------------------

(a) Fee and Expenses. (i) In the event this Agreement
-----------------
is terminated by the Company pursuant to Section 20(a)(v), the
Company shall pay to Investor, within 15 days of such
termination, a single cash fee (the "Fee") in the amount of (i)
---
$4 million if the date on which this Agreement is so terminated
occurs prior to the entry by the Bankruptcy Court of an order
approving a disclosure statement with respect to the Plan (the
"Disclosure Statement Order") or (ii) $8 million if the date on
--------------------------
which this Agreement is so terminated occurs after the entry of
the Disclosure Statement Order by the Bankruptcy Court.

(ii) In the event this Agreement is terminated by
Investor pursuant to Section 20(a)(iii) on account of the
Company's willful breach, deliberate misconduct or bad faith, the
Company shall, if requested by Investor, pay Investor the Fee
and, upon payment of the Fee and Expenses to Investor, the
Company shall have no further liability to Investor or any other
Person on account of such willful breach, deliberate misconduct
or bad faith. If Investor does not demand payment of the Fee
pursuant to this clause (ii) within seven days after the
termination date, Investor shall retain the right, as Investor's
sole remedy for any such breach, to seek to obtain specific
performance by the Company of its obligations under this
Agreement and the Investment Agreement. If Investor elects to
pursue such a specific performance remedy and it is denied by
unstayed or final order of the Bankruptcy Court, the Company
shall, within 15 days of such denial, pay the Fee to Investor.

(iii) In the event this Agreement terminates pursuant
to Section 20(c), the Company shall pay the Fee to Investor
within 15 days of such termination; provided, however, that, for
purposes of this clause (iii), the Fee shall be $4,000,000 and,
provided further, that in no event shall Investor be entitled to
payment of the Fee under this clause (iii) if, at the time of
confirmation of the plan of reorganization giving rise to such
termination, either (1) Investor (or any of its Affiliates) was
in material breach of any of its representations, warranties,
covenants or obligations under this Agreement, the Investment
Agreement or any Related Agreement, which breach was not earlier
waived in writing by the Company or (2) Investor shall have
previously exercised any termination right granted to it under
Section 20.

(iv) In the event this Agreement is terminated pursuant
to Section 20(a) or (c) for any reason, the Company shall pay to
Investor, within 15 days of such termination, all Expenses not
previously reimbursed under Section 2 subject only to the
limitations set forth in the second sentence of Section 2.

(b) Expenses Paid Upon Consummation. Upon the Effective
--------------------------------
Date, the Company shall pay to Investor all Expenses not
previously reimbursed under Section 2 subject only to the
limitations set forth in clauses (i) and (iii) of the second
sentence of Section 2.

(c) Expenses and Fee Not Subject to Offset. Except to
----------------------------------------
the extent otherwise provided herein, the Fee and Expenses
payable under this Agreement by the Company shall not be subject
to any offset, return, recoupment or counterclaim and shall be an
allowed administrative expense under Section 507(a)(1) of the
Bankruptcy Code.

(d) Appropriateness of Payment of Fee and Reimbursement
-----------------------------------------------------
of Expenses. The Company and Investor agree that the Fee and
------------
Expenses payable hereunder are commercially reasonable and
necessary to induce Investor to continue pursuing and to attempt
to consummate the transactions contemplated by the Investment
Agreement.

(e) Rights. The payment of the Fee to Investor as
------
required hereunder and the payment to Investor of any Expenses
payable hereunder shall be in full satisfaction of any and all
claims (other than for indemnification under Section 9) that
Investor shall have against the Company. The termination of the
Investment Agreement and this Agreement by the Company pursuant
to Section 20 shall not constitute a breach of such Agreements by
the Company.

SECTION 4. Interim Period. The Company covenants as
---------------
follows with respect to the period prior to the earlier of (a)
the Effective Date and (b) the termination of this Agreement:

4.1. The Company shall use all commercially
reasonable efforts and shall take all actions reasonably
necessary or appropriate to preserve the value of the business,
assets and goodwill of the Company and to operate the business of
the Company in the ordinary and normal course consistent in all
material respects with prior practices.

4.2. Except as expressly permitted hereunder or with
the written consent of Investor (which consent shall not be
unreasonably withheld or delayed), the Company (a) shall not
implement any material changes to the operation of its business
(such as material route deletions, transfers of international
route authorities, material changes in marketing or advertising,
or abandoning material franchises); (b) shall not enter into any
new material contracts (such as labor union contracts and
employment contracts) or amend, modify or terminate any such
contracts, or waive any of its material rights thereunder; and
(c) shall not modify its business plans or budgets in any
material respect; provided, however, that nothing in this
Agreement shall be construed to prohibit the Company from taking
any of the following actions (collectively, the "Permitted
---------
Transactions"), none of which will be deemed to be a Prohibited
------------
Transaction:

(i) entering into any material modification of any
existing leases, loan agreements and/or security agreements
provided that the Company will obtain the approval of
Investor (which approval shall not be unreasonably withheld
or delayed) before entering into any such modification;

(ii) renewing or extending existing contracts for
products and services, or entering into replacement
contracts for such products and services, in the ordinary
course of business and upon terms and conditions available
in the market place in arms'-length transactions with
non-affiliates;

(iii) entering into agreements with respect to 11
leased aircraft which provide in August 1994 for reset of
lease rentals (as heretofore stipulated in the Bankruptcy
Court and as described in Plan R-2) to the higher of the
current rate and fair market rental value;

(iv) entering into a 3-year lease agreement, on terms
currently available, for a Boeing 757-200 aircraft in
replacement of an A-320 aircraft to be returned in April
1994;

(v) selling to AVSA, S.A.R.L. or its affiliates surplus
A-320 parts for approximately $1.3 million, with the
proceeds thereof to be applied against amounts due to AVSA,
S.A.R.L. or its affiliates under existing spare parts
agreements with the Company;

(vi) entering into a $12.8 million settlement with
the Internal Revenue Service relating to certain priority
tax claims for pre-petition transportation taxes, with
approximately $1 million of the settlement amount payable
prior to the Effective Date and the balance payable after
the Effective Date in accordance with the provisions of the
Bankruptcy Code;

(vii) entering into one or more settlement agreements
with taxing authorities relating to certain priority tax
claims for prepetition ad valorem taxes as contemplated by
Plan R-2, provided that the Company will not be permitted to
enter into settlement agreements pursuant to this clause
(vii) for more than $11.5 million without the prior consent
of Investor;

(viii) extending the Company's existing approximately
83.6 debtor-in-possession loan ("Present DIP Financing")
----------------------
through December 31, 1994, provided that at no time will the
principal amount of the Present DIP Financing, together with
any other loan for similar purposes, including any renewal,
extension, modification or replacement thereof, exceed $83.6
million;

(ix) extending the terms of the existing leases
between the Company and Canadian Airlines covering three
Boeing 737-200 aircraft as contemplated by Plan R-2 but in
no event at rentals greater than as currently provided for
in such leases;

(x) entering into an employment contract with the
individual to be hired by the Company to fill the vacancy
created by the resignation of the Company's Senior Vice
President - Operations;

(xi) entering into a settlement agreement or
stipulation with International Aero Engines relating to the
terms under which the Company will exercise its existing
purchase option for one aircraft engine currently held by
the Company under lease, provided that the Company will
consult with Investor before entering into any such
settlement agreement or stipulation;

(xii) consummating the "Real Property Consolidation
Project" initiated in 1993 with the approval of the
Bankruptcy Court;

(xiii) making the capital expenditures contemplated by
Plan R-2, provided that the Company shall consult with
Investor before making any such capital expenditure in
excess of $250,000;

(xiv) selling or otherwise disposing of surplus assets
within the limits specified in the Present DIP Financing;

(xv) implementing increases in employee compensation
through 1995 as contemplated by Plan R-2, provided that the
Company will consult with Investor before implementing any
such increases;

(xvi) issuing common stock of the Company upon the
exercise of options or conversion rights under securities of
the Company currently outstanding;

(xvii) paying and/or compromising administrative claims
as contemplated by Plan R-2; or

(xviii) negotiating a collective bargaining agreement
with the International Air Line Pilots Association on behalf
of the Company's flight deck crew members prusuant to the
Railway Labor Act, as amended, provided that the terms,
conditions and provisions of such collective bargaining
agreement shall be subject to the approval of Investor
(which approval shall not be unreasonably withheld or
delayed).

4.3. The Company shall provide Investor and its
Representatives (as hereinafter defined) with full access to all
the Company data reasonably requested by them, with reasonable
access to the Company officers and with full opportunity to
complete an investigation of the Company's business and assets
and shall keep Investor fully informed in reasonable detail and
with all reasonable promptness regarding (i) negotiations with
its creditors, employees, labor unions and other interested
parties in the Company's bankruptcy case; (ii) the nature of, and
any material changes to, its condition (financial or other),
business, assets, liabilities (including contingencies),
properties, prospects (including forecasts and projections), net
worth, working capital, results of operations and cash flows; and
(iii) the nature of any material actions to be taken or omitted
by the Company with respect to any environmental claim or
threatened claim, proceedings or notifications and all known
material instances of noncompliance with environmental laws.

4.4. The Company shall provide Investor with reports
that include a comparison of actual operating performance with
the Projections and Monthly Targets, in form and substance
reasonably satisfactory to Investor, on a monthly basis no later
than 30 days after the end of each month or daily basis not less
than the end of the business day following each day, as
appropriate.

4.5. The Company will promptly advise Investor, and
(other than with respect to actions respecting environmental
concerns and actions which are disclosed in Plan R-2) will afford
Investor with reasonable and timely opportunities to consult (as
deemed appropriate by Investor), regarding any material actions
to be taken or omitted by the Company with respect to the
proceedings in the Bankruptcy Court or with respect to any
material changes in its charter or bylaws, material capital
commitments, material capital expenditures, material financing
transactions (including renegotiations or other modifications to
existing material debt, credit or lease liabilities or
arrangements, material purchases or sales of assets, material
contracts or material litigation); provided, however, that,
notwithstanding anything else in this Agreement, ultimate control
of the business of the Company shall remain exclusively with the
Company until the Effective Date.

4.6. As soon as practicable, the Company and Investor
will make, and cooperate in making, all filings, applications,
requests for consents or similar authorizations for Regulatory
Approvals; provided that the Company and Investor each agrees to
make such filings and request any such Regulatory Approvals
required on its part by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or from the United States
Department of Transportation no later than April 15, 1994.

SECTION 5. Cooperation. The Company shall use all
-----------
commercially reasonable efforts and endeavor in good faith and
without unreasonable delay (a) to develop with Investor and
jointly file a Plan consistent with the provisions of the
Investment Agreement, (b) to obtain the order described in
Section 16, (c) to obtain the Disclosure Statement Order, (d) to
obtain the Confirmation Order and (e) subject to the entry of the
Confirmation Order, to consummate the transactions contemplated
by the Investment Agreement and the Related Agreements, all
within the respective time periods set forth in the Investment
Agreement. Investor agrees to cooperate in good faith as
reasonably requested by the Company in performing the obligations
in the preceding sentence. The Company shall consult and
coordinate with Investor with respect to all material filings,
hearings and other proceedings in the Bankruptcy Court,
including, without limitation, those that are pertinent (x) to
the Company's performance of its obligations under the Investment
Agreement, this Agreement and the Related Agreements, or to the
satisfaction of the conditions to the consummation of the
transactions contemplated hereby or thereby or (y) to the entry
of the orders described above. Such consultation and
coordination shall include providing Investor with reasonable
opportunity to review and comment on all significant drafts of
the Plan and the disclosure statement accompanying the Plan (the
"Disclosure Statement").
--------------------

SECTION 6. Public Announcements. Unless otherwise
---------------------
mutually agreed, neither party hereto shall make or authorize any
public release of information regarding the matters contemplated
by this Agreement, the Investment Agreement and any Related
Agreement except (i) that a press release or press releases in
mutually agreed-upon form shall be issued by the parties as
promptly as is practicable following the execution of this
Agreement, (ii) that the parties may communicate with employees,
creditors and other parties in interest in the Company's
bankruptcy case, customers, suppliers, stockholders, bondholders,
lenders, lessors, regulatory authorities, analysts, stock
exchanges and other particular groups including prospective
lenders and investor groups, as may be necessary or appropriate
and not inconsistent with the provisions of Section 1 and the
prompt consummation of the transactions contemplated by this
Agreement, the Investment Agreement and any Related Agreement, it
being understood that each party hereto will keep the other
reasonably informed with respect to such communications which are
material and not confidential and (iii) as either party on advice
of legal counsel shall reasonably deem necessary in complying
with applicable law.

SECTION 7. Confidentiality. (a) Neither party (the
---------------
"Recipient") will in any manner, directly or indirectly, disclose
---------
in whole or in part, any confidential or proprietary information
(including, without limitation, information concerning the
Alliance Agreements) of the other party (the "Protected Party")
---------------
that comes, or has come, into the possession of the Recipient in
connection with the transactions contemplated hereby (the
"Confidential Information") to any Person or use such
--------------------------
Confidential Information for commercial gain or competitive
advantages or in any way detrimental to the Protected Party;
provided, however, that Confidential Information may be disclosed
to Representatives (as defined below) of the Recipient, to any
prospective investor in the Contemplated Securities or to any
prospective lender to Investor or the Company who needs to know
the Confidential Information for purposes of participating in or
financing the transactions contemplated hereby, it being
understood that all such Representatives will be advised by the
Recipient of the confidential nature of such Confidential
Information and that, by receiving such Confidential Information,
they are agreeing to be bound by this Section. The Company and
Investor shall use their commercially reasonable efforts to
assure that their respective Representatives adhere to the terms
of this Section.

(b) As used herein with respect to any Person, the term
"Representative" shall include (i) any and all officers,
--------------
directors, employees, affiliates, agents, partners and
representatives of such Person, (ii) all lawyers, financial
advisers, appraisers, accountants, other professionals or
consultants (and their respective officers, directors, employees,
affiliates, agents, partners and representatives) engaged by such
Person and (iii) any prospective purchaser of any Contemplated
Securities and any prospective lender that is considering making
a loan to the Company or Investor to assist in the consummation
of the transactions contemplated hereby, by the Investment
Agreement or by the Related Agreements and their respective
lawyers, financial advisers, appraisers, accountants, other
professionals or consultants (and their respective officers,
directors, employees, affiliates, agents, partners and
representatives) engaged by such prospective purchaser or lender.

(c) The Recipient shall not be obligated to maintain any
Confidential Information in confidence to the extent that (i) the
Confidential Information is or becomes public knowledge other
than through the breach by the Recipient of this Section or any
other similar agreement binding on the Recipient, (ii) the
Confidential Information is or becomes available on an
unrestricted basis to the Recipient from a source other than the
Protected Party (or its Representatives), or (iii) the
Confidential Information is required to be disclosed pursuant to
court order or government action.

(d) Upon termination of this Agreement (i) if requested
by the Company, and if no dispute between Investor and the
Company or any other Person is pending or in the reasonable
judgment of Investor foreseeable, Investor will destroy all
Confidential Information (including any analyses or reports that
incorporate any Confidential Information) in its possession
relating to the Company and shall certify such destruction and
(ii) if requested by Investor, and if no dispute between Investor
or any other Person and the Company is pending or in the
reasonable judgment of the Company foreseeable, the Company will
destroy all Confidential Information (including any analyses or
reports that incorporate any Confidential Information) in its
possession relating to Investor and shall certify such
destruction.

(e) The foregoing provisions of this Section shall not
apply to any partner of Investor if and to the extent such
provisions are inconsistent with any written agreement relating
to the subject matter of this Section between the Company and
such partner.

(f) The Company shall, upon the request of the
Creditors' Committee or Equity Committee, provide such Committee
with copies of the Confidential Information which is provided to
and/or by Investor pursuant to the provisions of this Agreement,
the Investment Agreement and the Related Agreements following
receipt from such Committee and each of its Representatives who
will have access to such Confidential Information of a written
confidentiality agreement which contains provisions which provide
the Company and Investor protection for such Confidential
Information at least equivalent, in all material respects, to
that provided pursuant to this Section 7 and which contains other
terms and conditions which are reasonably required by the Company
and Investor.

(g) This Section shall survive termination of this
Agreement.

SECTION 8. Liability. Notwithstanding any provision
---------
hereof or in the Investment Agreement (or any implication of such
provision) to the contrary, it is expressly agreed that:

8.1. Investor (including any affiliate, partner,
agent, advisor or Representative thereof) shall not have nor
be under any liability of any nature whatsoever to the
Company, the estate of the Company, any trustee, any
committee of creditors or of equity security holders or any
party in interest in the bankruptcy case concerning the
Company, nor to any other Person whatsoever, arising out of
or in any manner connected with this Agreement, the
Investment Agreement or any Related Agreement, or any
actions, inactions or omissions in any manner relating
hereto or thereto or to any actions or transactions
contemplated hereby or thereby, whether occurring prior to
or after the date hereof, except to the extent that Investor
is liable to the Company for damages which are found in a
final judgment by a court of competent jurisdiction to have
resulted from (i) any material breach by Investor of an
express obligation or undertaking contained in this
Agreement, the Investment Agreement or any Related Agreement
or any material breach (as of the date made) by Investor of
an express representation or warranty contained in this
Agreement, the Investment Agreement or any Related Agreement
or for any act of bad faith or willful or deliberate
wrongdoing by Investor, which bad faith, breach or
wrongdoing is not discontinued or remedied promptly (and in
any event within seven days) after written notice thereof
specifying the same in reasonable detail from the Company or
(ii) any untrue statement or alleged untrue statement of a
material fact contained in the Disclosure Statement or in
any offering document pursuant to which any or all of the
securities of the Company in connection with and as part of
the transactions contemplated by the Agreements (the
"Contemplated Securities") may be placed or offered or the
------------------------
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission
was made in such offering document in reliance upon and in
conformity with written information furnished by Investor
specifically for inclusion therein or (iii) any action or
inaction in respect of which the Company is entitled to
indemnification under Section 9.

8.2. The Company (including any affiliate,
stockholder, director, officer, agent, advisor or
Representative thereof) shall not have nor be under any
liability of any nature whatsoever to Investor or any of its
partners or affiliates, nor to any other Person whatsoever,
arising out of or in any manner connected with this
Agreement, the Investment Agreement or any Related
Agreement, or any actions, inactions or omissions in any
manner relating hereto or thereto or to any actions or
transactions contemplated hereby or thereby, whether
occurring prior to or after the date hereof, except to the
extent that the Company is liable to Investor for damages
which are found in a final judgment by a court of competent
jurisdiction to have resulted from (i) any material breach
by the Company of an express obligation or undertaking
contained in this Agreement, the Investment Agreement or any
Related Agreement or any material breach (as of the date
made) by the Company of an express representation or
warranty contained in this Agreement, the Investment
Agreement or any Related Agreement or for any act of bad
faith or willful or deliberate wrongdoing by the Company,
which bad faith, breach or wrongdoing is not discontinued or
remedied promptly (and in any event within seven days) after
written notice thereof specifying the same in reasonable
detail from Investor or (ii) any untrue statement or alleged
untrue statement of a material fact contained in the
Disclosure Statement or in any offering document pursuant to
which any or all of the Contemplated Securities may be
placed or offered or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in such offering document in
reliance upon and in conformity with written information
furnished by Investor or any of its partners specifically
for inclusion therein or (iii) any action or inaction in
respect of which Investor is entitled to indemnification
under Section 9.

8.3. No partner of the Investor shall have or be
under any liability by reason of any negligence or asserted
negligence or any material breach or willful or deliberate
wrongdoing of any other partner of Investor.

8.4. No consequential, exemplary or punitive damages
shall under any circumstances be recoverable against
Investor, the Company or any other Indemnified Party (as
defined in Section 9) in respect of any claim relating to
this Agreement or the Investment Agreement or in connection
with the consummation of or any failure to consummate the
transactions contemplated hereby or thereby.

SECTION 9. Indemnity.
---------

9.1. As used herein:

(a) "Losses" means (i) in the case of any Investor
------
Indemnified Party, any and all losses, claims, damages,
liabilities, fines, fees, penalties, deficiencies and
expenses (including, but not limited to, interest,
court costs, fees and expenses of attorneys,
accountants, and other experts or other expenses of
litigation or other proceedings or of any claim, default
or assessment) incurred by such Investor Indemnified
Party as a result of any third party claim asserted
against such Investor Indemnified Party on account of
any breach of any representation or warranty of the
Company contained in this Agreement, the Investment
Agreement or any Related Agreement, or any breach or
alleged breach of any of the Company's covenants or
obligations contained herein or therein and (ii) in the
case of any Company Indemnified Party, any and all
losses, claims, damages, liabilities, fines, fees,
penalties, deficiencies and expenses (including, but
not limited to, interest, court costs, fees and expenses
of attorneys, accountants, and other experts or other
expenses of litigation or other proceedings or of any
claim, default or assessment) incurred by such Company
Indemnified Party as a result of any third party claim
asserted against such Company Indemnified Party on
account of any any breach or alleged breach of any
representation or warranty of Investor contained in this
Agreement, the Investment Agreement or any Related
Agreement, or any breach or alleged breach of any of
Investor s covenants or obligations contained herein or
therein.

(b) "Investor Indemnified Party" means Investor or
---------------------------
any of its partners, affiliates, controlling persons or
employees.

(c) "Company Indemnified Party" means the Company
--------------------------
or any of its partners, affiliates, controlling persons,
directors or employees.

(d) "Indemnified Party" means a Company Indemnified
-----------------
Party or an Investor Indemnified Party, as the case may
be.

(e) "Indemnifying Party" means the Company or
-------------------
Investor, as the case may be.

9.2. Subject to Section 9.4 and to Section 3(e), the
Company agrees to indemnify each Investor Indemnified Party
from and against any and all Losses incurred by such
Investor Indemnified Party, whether prior to or after the
date hereof.

9.3.Subject to Section 9.5, Investor agrees to indemnify
each Company Indemnified Party from and against any and all
Losses incurred by such Company Indemnified Party, whether
prior to or after the date hereof.
.
9.4. The Company will not be liable under this
Section 9 for Losses which consist of Expenses covered by
Section 2 (which Expenses shall only be payable in the
manner and subject to the limitations set forth in Sections
2 and 3), nor shall the Company be liable to any Investor
Indemnified Party to the extent that any Loss is found in a
final judgment by a court of competent jurisdiction to have
resulted from (i) any breach by such Investor Indemnified
Party of an express obligation or undertaking pursuant to
this Agreement, the Investment Agreement or any of the
Related Agreements or any act of bad faith or willful or
deliberate wrongdoing by such Investor Indemnified Party,
which bad faith, breach or wrongdoing is not discontinued or
remedied promptly (and in any event within seven days) after
written notice thereof specifying the same in reasonable
detail from the Company or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any
offering document pursuant to which any or all of the
Contemplated Securities may be placed or offered or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if, and to the extent
that, such untrue statement or alleged untrue statement or
omission or alleged omission was made in such offering
document in reliance upon and in strict conformity with
written information furnished by such Investor Indemnified
Party specifically for inclusion therein, or
(iii) investment losses in respect of the Contemplated
Securities incurred by such Investor Indemnified Party.

9.5. Investor will not be liable under this Section 9
to any Company Indemnified Party to the extent that any Loss
is found in a final judgment by a court of competent
jurisdiction to have resulted from (i) any breach by such
Company Indemnified Party of an express obligation or
undertaking pursuant to this Agreement, the Investment
Agreement or any of the Related Agreements or any act of bad
faith or willful or deliberate wrongdoing by such Company
Indemnified Party, which bad faith, breach or wrongdoing is
not discontinued or remedied promptly (and in any event
within seven days) after written notice thereof specifying
the same in reasonable detail from Investor or (ii) any
untrue statement or alleged untrue statement of a material
fact contained in any offering document pursuant to which
any or all of the Contemplated Securities may be placed or
offered or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading, except to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission
was made in such offering document in reliance upon and in
strict conformity with written information furnished by such
Investor Indemnified Party specifically for inclusion
therein or (iii) investment losses in respect of the
Contemplated Securities incurred by such Company Indemnified
Party.

9.6. If the indemnification of an Indemnified Party
provided for in this Section 9 is for any reason held
unenforceable, the Indemnifying Party agrees to contribute
to the Losses for which such indemnification is held
unenforceable (x) in such proportion as is appropriate to
reflect the relative benefits or proposed benefits to the
Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, of the Agreements (whether or not
the Agreements are entered into and whether or not any
transaction or action pursuant thereto is consummated) or
(y) if (but only if) the allocation provided for in clause
(x) is for any reason held unenforceable, in such proportion
as is appropriate to reflect not only the relative benefits
referred to in clause (x) but also the relative fault of the
Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, as well as any other relevant
equitable considerations. The Indemnifying Party agrees
that for the purposes of this paragraph, the relative
benefits or proposed benefits to the Indemnifying Party and
such Indemnified Party of the Agreements shall be deemed to
be in the same proportion that the total value paid or
issued to, or to be paid or issued to, the Indemnifying
Party, its creditors or its security holders, as the case
may be, as a result of or in connection with the Agreements
bears to the amount received by such Indemnified Party
pursuant to the Agreements (whether in the form of fees paid
to such Indemnified Party or the reimbursement of expenses
provided by the Indemnified Party to such Party).

9.7. Without the Indemnified Party's prior written
consent (which consent shall not be unreasonably withheld),
no Indemnifying Party will settle, compromise or consent to
the entry of any judgment in any pending or threatened
claim, action or proceeding in respect of which
indemnification could reasonably be expected to be sought
against such Indemnifying Party by such Indemnified Party
under this Section 9 (whether or not such Indemnified Party
is an actual party to such claims, action or proceeding),
unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Party from all
liability arising out of such claim, action or proceeding.

9.8. The provisions herein in respect of any
Indemnified Party shall not be affected, or the obligations
of the Indemnifying Party hereunder as to any Indemnified
Party in any manner reduced or limited, by any action,
inaction, omission, breach or default of any Person (other
than of such Indemnified Party and its officers, directors,
employees, agents, advisors, Representatives and controlling
Persons), but then only to the extent provided hereby.

9.9. Without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably
withheld), no Indemnified Party shall settle, compromise or
consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which
indemnification from the Indemnifying Party could reasonably
be expected to be sought by such Indemnified Party under
this Section 9 unless such Indemnified Party unconditionally
releases the Indemnifying Party from any and all
indemnification obligations to it arising out of such claim,
action or proceeding.

9.10. Promptly after any Indemnified Party becomes
aware of the existence of facts or other information which
could reasonably be expected to give rise to a claim by such
Indemnified Party for indemnification under this Section 9,
such Indemnified Party will provide written notice thereof
to the Indemnifying Party describing such facts and other
information in reasonable detail. The failure of an
Indemnified Party to give notice in the manner and at the
time provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 9, except to the
extent that the Indemnifying Party actually is prejudiced in
any material respect by such failure to give notice. Any
notice given the Indemnifying Party pursuant to this Section
9.10 shall contain a statement to the effect that the
Indemnified Party giving such notice is making or may in the
future make a claim pursuant to and a formal demand for
indemnification under this Section 9.

9.11. Upon the commencement of any claim, action or
proceeding in respect of which indemnification could be
sought by an Indemnified Party under this Section 9, the
Indemnifying Party shall have the right, with counsel
selected by it (which counsel shall be reasonably
satisfactory to the Indemnified Party), to assume the
defense of such claim, action or proceeding and the
Indemnified Party shall cooperate with the Indemnifying
Party, at the sole cost and expense of the Indemnifying
Party, in connection with such defense. In the event that
the Indemnifying Party selects counsel to defend any claim,
action or proceeding in respect of which indemnification
could be sought by any Indemnified Party under this Section
9 and such counsel determines (or such Indemnified Party
reasonably determines) that issues exist with respect to
such claim, action or proceeding which give rise to a
conflict between the interests of the Indemnifying Party and
such Indemnified Party, then such Indemnified Party shall be
entitled, at the Company's expense, to retain separate
counsel regarding such issues.

SECTION 10. Assignment of this Agreement. This
------------------------------
Agreement shall be binding upon and shall inure to the benefit of
the parties to this Agreement and their successors and permitted
assigns without limitation. Neither this Agreement nor any of
the rights and obligations of any party to this Agreement may be
assigned without the consent of the other party hereto; provided,
however, that Investor may assign any or all of its rights under
this Agreement to any partner, affiliate, related party, or
representative of Investor or to any fund or account managed or
advised by Fidelity Management Trust Company. No such assignment
shall relieve either party hereto of any obligations hereunder,
under the Investment Agreement or under any Related Agreement.

SECTION 11. Notices. All notices required to be given
-------
under this Agreement shall be in writing (including
telecommunication transmission), shall be effective when received
and shall be addressed as follows:

If to the Company:

America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: W. A. Franke and Martin J. Whalen
Fax Number: (602) 693-5904

with a copy to:

LeBoeuf, Lamb, Greene & MacRae
633 17th Street, Suite 2800
Denver, Colorado 80202
Attention: Carl A. Eklund
Fax Number: (303) 297-0422

and a copy to:

Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins
Fax Number: (713) 220-4285

and a copy to:

Lord, Bissell and Brook
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336

and a copy to:

Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879

If to Investor:

AmWest Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James G. Coulter
Fax Number: (817) 338-2064

with a copy to:

Arnold & Porter
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
Attention: Richard P. Schifter
Fax Number: (202) 872-6720

and a copy to:

Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske
Fax Number: (216) 586-7864

and a copy to:

Lord Bissell and Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336

and a copy to:

Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879

or to such other address as either party hereto may designate to
the other party to this Agreement in accordance with this
Section.

SECTION 12. Counterparts. This Agreement may be
------------
executed in one or more counterparts and by telecopy, each of
which shall be deemed to constitute an original and all of which
shall be considered one and the same instrument. With respect to
signatures transmitted by telecopy, upon request by either party
to the other party, an original signature of such other party
shall promptly be substituted for its facsimile.

SECTION 13. Entire Agreement. This Agreement sets
-----------------
forth the entire agreement and understanding of the parties with
respect to the subject matter of this Agreement and, except as
otherwise set forth herein, supersedes all prior agreements and
understandings with respect to the subject matter thereof
(including, without limitation, the Expense Reimbursement
Agreement previously entered into by the Company and Investor but
excluding any existing confidentiality agreement between the
Company and any Affiliate of Investor). This Agreement may only
be amended, supplemented or modified by a written instrument
signed by authorized representatives of each of the parties
hereto.

SECTION 14. Governing Law, etc. Except to the extent
------------------
inconsistent with the Bankruptcy Code, this Agreement shall be
governed by and construed in accordance with the laws of the
State of Arizona, without reference to principles of choice or
conflicts of laws under which the law of any other jurisdiction
would apply.

SECTION 15. Invalid Provisions. If any provision of
-------------------
this Agreement is held to be illegal, invalid or unenforceable
under any present or future laws, rules or regulations, and if
the rights or obligations of Investor and the Company under this
Agreement will not be materially and adversely affected thereby,
(a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom
and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in
terms of such illegal, invalid or unenforceable provision as may
be possible. If the rights and obligations of Investor or the
Company will be materially and adversely affected by any such
provision held to be illegal, invalid or unenforceable, then
unless such provision is waived in writing by the affected party
in its sole discretion, this Agreement shall be null and void.

SECTION 16. Bankruptcy Court Approval. This Agreement
-------------------------
shall not become effective for any purpose unless and until the
Bankruptcy Court shall have entered an order approving this
Agreement.

SECTION 17. Jurisdiction of Bankruptcy Court. The
-----------------------------------
parties agree that the Bankruptcy Court shall have and retain
jurisdiction to enforce and construe the provisions of this
Agreement.

SECTION 18. No Third Party Beneficiary. This
--------------------------------
Agreement and the Investment Agreement are made solely for the
benefit of the Company and Investor, and no other Person
(including, without limitation, employees, shareholders and
creditors of the Company) shall have any right, claim or cause of
action under or by virtue of this Agreement or the Investment
Agreement, except to the extent such Person is entitled to
expense reimbursement pursuant to this Agreement or may assert a
claim for indemnity pursuant to this Agreement.

SECTION 19. Interpretation. In this Agreement, unless
--------------
a contrary intention appears, (i) the words "herein", "hereof"
and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section or other
subdivision and (ii) reference to any Section means such Section
hereof. The Section headings herein are for convenience only and
shall not affect the construction hereof. No provision of this
Agreement shall be interpreted or construed against either party
solely because such party or its legal representative drafted
such provision.

SECTION 20. Termination. (a) Anything herein or
-----------
elsewhere to the contrary notwithstanding, this Agreement and the
Investment Agreement may be terminated at any time prior to the
Effective Date:

(i) by mutual consent of Investor and the Company;

(ii) by either Investor or the Company if a domestic
court of competent jurisdiction or a domestic Regulatory
Authority of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action, in each
case permanently restraining, enjoining or otherwise
prohibiting the Investment, and such order, decree or ruling

or other action shall have become final and non-appealable;
provided, however, that in no event shall Investor be
entitled to terminate this Agreement or the Investment
Agreement pursuant to this clause (ii) on account of the
issuance of any order, decree or ruling or the taking of any
other action relating to antitrust laws or regulations;

(iii) by Investor if:

(A) any of the conditions specified in Section 8(a),
8(g), 8(n), 8(p), 8(r) or 8(s) of the Investment
Agreement has not been satisfied by the respective
deadlines (as extended from time to time) set forth with
respect thereto in such clauses for any reason other
than (1) a material breach by Investor of any of its
representations, warranties, covenants or obligations
under this Agreement, the Investment Agreement or any
Related Agreement or (2) the issuance of any order,
decree or ruling or the taking of any other action
relating to antitrust laws or regulations;

(B) any of the other conditions precedent set forth
in Section 8 of the Investment Agreement has not been
or, in the reasonable good faith determination of
Investor, will not be able to be satisfied by the
Outside Date for any reason other than (1) a material
breach by Investor of any of its representations,
warranties, covenants or obligations under this
Agreement, the Investment Agreement or any Related
Agreement or (2) the issuance of any order, decree or
ruling or the taking of any other action relating to
antitrust laws or regulations; or

(C) any of the Company's representations or
warranties made herein, in the Investment Agreement or
in any Related Agreement prove to have been inaccurate
in any material respect when made;

provided, however, that Investor shall not be entitled to
terminate this Agreement pursuant to this clause (iii) at a
time when Investor (or its Affiliates) shall be in material
breach of any of its representations, warranties, covenants
or obligations under this Agreement, the Investment
Agreement or any Related Agreement; and, provided further,
however, that upon Investor becoming aware of any breach by
the Company of any of its representations, warranties,
covenants or obligations hereunder or under the Investment
Agreement or any of the Related Agreements, or the
occurrence or nonoccurrence of any other event, in any such
case which would give Investor the ability to terminate this
Agreement pursuant to the provisions of this clause (iii),
Investor promptly shall notify the Company, the Equity
Committee and the Creditors' Committee of the existence of
such breach and provide the Company seven business days to
cure such breach or remedy such occurrence or nonoccurrence
before exercising the termination right granted hereunder;

(iv) by the Company if:

(A) any of the conditions specified in Section 9 of
the Investment Agreement has not been or, in the
reasonable good faith determination of the Company, will
not be able to be satisfied by the Outside Date for any
reason other than a material breach by the Company of
any of its representations, warranties, covenants or
obligations under this Agreement, the Investment
Agreement or any Related Agreement; or

(B) any of the Investor's representations or
warranties made herein, in the Investment Agreement or
in any Related Agreement prove to have been inaccurate
in any material respect when made;

provided, however, that the Company shall not be entitled to
terminate this Agreement pursuant to this clause (iv) at a
time when the Company shall be in material breach of any of
its representations, warranties, covenants or obligations
under this Agreement, the Investment Agreement or any
Related Agreement; and, provided further, however, that upon
the Company becoming aware of any breach by Investor of any
of its representations, warranties, covenants or obligations
hereunder or under the Investment Agreement or any of the
Related Agreements, or the occurrence or nonoccurrence of
any other event, in any such case which would give the
Company the ability to terminate this Agreement pursuant to
the provisions of this clause (iv), the Company promptly
shall notify Investor, the Equity Committee and the
Creditors' Committee of the existence of such breach and
provide Investor seven business days to cure such breach or
remedy such occurrence or nonoccurrence before exercising
the termination right granted hereunder;

(v) by the Company as contemplated by Section 1(c); or

(vi) by either the Company or the Investor if the
Effective Date has not occurred by December 31, 1994.

(b) In the event of the termination of this Agreement by
either party pursuant to paragraph (a) above, written notice
thereof shall be promptly given to the other party and, subject
to paragraph (d) below, this Agreement and the Investment
Agreement shall terminate and the transactions contemplated
hereby and thereby shall be abandoned without further action by
Investor or the Company.

(c) This Agreement shall automatically terminate upon
confirmation of a plan of reorganization (other than the Plan)
prior to the Outside Date (as defined in the Investment
Agreement).

(d) In the event of the termination of this Agreement as
provided in paragraph (a) or (c) above, (i) this Agreement, the
Investment Agreement and the Related Agreements shall forthwith
become null and void, and there shall be no liability on the part
of any Investor or the Company or any of their respective
partners, officers, directors, employees, agents or stockholders,
except for fraud or for willful breach of this Agreement, the
Investment Agreement (but only if the Confirmation Order is
entered) or the Related Agreements and except that the parties
shall continue to be obligated as set forth in Sections 2, 3, 7,
8, 9, 17 and 18 of this Agreement and in Sections 28(b) and 30 of
the Investment Agreement, all of which Sections shall survive the
termination of this Agreement. The termination of this Agreement
and the Investment Agreement pursuant to paragraph (a) above
shall become effective when (y) in the case of a termination
pursuant to clause (i) of paragraph (a) above, the required
consent is executed and (z) in the case of a termination pursuant
to any other clause of paragraph (a) above, the required notice
is given by the terminating party. No termination of this
Agreement pursuant to this Section 20 shall constitute a breach
of this Agreement. The termination of this Agreement and the
Investment Agreement shall not cause or constitute a termination
of any existing confidentiality agreement between the Company and
one or more Affiliates of Investor.

SECTION 21. Privileged Communication. The parties
-------------------------
hereto anticipate that, being similarly situated and having a
common interest in the Company's bankruptcy case with respect to
the Plan, and in anticipation of potential litigation with other
constituents of the Company, they may share certain documents,
information, factual materials, mental impressions, memoranda,
reports, and attorney-client communications that may be
privileged from disclosure to adverse or other parties as a
result of the attorney-client privilege, the attorney work
product privilege, or other applicable privileges. The parties
hereto agree that the sharing of such information or materials
shall not diminish in any way the confidentiality of such
information or materials and shall not constitute a waiver of any
applicable privilege.

IN WITNESS WHEREOF, the Company and Investor, by their
respective officers thereunto duly authorized, have executed this
Agreement as of the date first above written.

AMERICA WEST AIRLINES, INC.
as Debtor and Debtor-in-Possession

By: _______________________________
Title: ____________________________

AMWEST PARTNERS, L.P.

By: AmWest Genpar, Inc.,
its General Partner

By: _______________________________
Title: ____________________________

REVISED INVESTMENT AGREEMENT
----------------------------

March 11, 1994

America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, AZ 85034

Attention: William A. Franke
Chairman of the Board

Gentlemen:

This letter agreement (this "Agreement") sets forth the
---------
agreement between America West Airlines, Inc., a Delaware
corporation (including, on or after the effective date of the
Plan, as defined herein, its successors, as reorganized pursuant
to the Bankruptcy Code, as defined herein) (the "Company"), and
-------
AmWest Partners, L.P., a Texas limited partnership ("Investor").
--------

The Company will issue and sell to Investor, and
Investor hereby agrees and commits to purchase from the Company,
a package of securities of the Company for $220 million in cash
(subject to adjustment as herein provided), consisting of (i)
shares of Class A Common Stock of the Company ("Class A Common"),
--------------
(ii) shares of Class B Common Stock of the Company ("Class B
-------
Common" and, together with the Class A Common, "Common Stock"),
------ -------------
(iii) senior unsecured notes of the Company ("Notes") and (iv)
-----
warrants to purchase shares of Class B Common ("Warrants") , all
--------
on the terms and subject to the terms and conditions hereinafter
set forth.

Investor s purchase of the securities referred to above
(the "Investment") will be made in connection with and as part of
----------
the transactions to be consummated pursuant to a joint Plan of
Reorganization of the Company (the "Plan") and an order (the
----
"Confirmation Order") confirming the Plan issued by the
-------------------
Bankruptcy Court, as defined herein. The Plan will contain
provisions called for by, or otherwise consistent with, this
Agreement.

In consideration of the agreements of Investor
hereunder, and as a precondition and inducement to the execution
of this Agreement by Investor, the Company has entered into the
Interim Procedures Agreement with Investor, dated the date hereof
(the "Procedures Agreement").
--------------------

SECTION 1. Definitions. For purposes of this
-----------
Agreement, except as expressly provided herein or unless the
context otherwise requires, the following terms shall have the
following respective meanings:

"Affiliate" shall mean (i) when used with reference to
---------
any partnership, any Person that, directly or indirectly,
owns or controls 10% or more of either the capital or profit
interests of such partnership or is a partner of such
partnership or is a Person in which such partnership has a
10% or greater direct or indirect equity interest and (ii)
when used with reference to any corporation, any Person
that, directly or indirectly, owns or controls 10% or more
of the outstanding voting securities of such corporation or
is a Person in which such corporation has a 10% or greater
direct or indirect equity interest. In addition, the term
"Affiliate," when used with reference to any Person, shall
also mean any other Person that, directly or indirectly,
controls or is controlled by or is under common control with
such Person. As used in the preceding sentence, (A) the
term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the
management and policies of the entity referred to, whether
through ownership of voting securities, by contract or
otherwise and (B) the terms "controlling" and "controls"
shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, the Company will be deemed
not to be an Affiliate of Investor or any of its partners.

"Alliance Agreements" shall have the meaning specified
--------------------
in Section 5.

"Approvals" shall have the meaning specified in Section
---------
8(b).

"Average Closing Price" shall have the meaning specified
---------------------
in Section 4(a)(2)(v)(B).

"Bankruptcy Code" shall mean Chapter 11 of the United
----------------
States Bankruptcy Code.

"Bankruptcy Court" shall mean the United States
------------------
Bankruptcy Court for the District of Arizona.

"Business Combination" means:
--------------------

(i) any merger or consolidation of the Company with
or into Investor or any Affiliate of Investor;

(ii) any sale, lease, exchange, transfer or
other disposition of all or any substantial part
of the assets of the Company to Investor or any
Affiliate of Investor;

(iii) any transaction with or involving
the Company as a result of which Investor or
any of Investor s Affiliates will, as a result of
issuances of voting securities by the Company (or any
other securities convertible into or exchangeable for
such voting securities) acquire an increased percentage
ownership of such voting securities, except pursuant to
a transaction open on a pro rata basis to all holders of
Class B Common; or

(iv) any related series or combination of
transactions having or which will have, directly
or indirectly, the same effect as any of the foregoing.

"Class A Common" shall have the meaning specified in the
--------------
second paragraph of this Agreement.

"Class B Common" shall have the meaning specified in the
---------------
second paragraph of this Agreement.

"Common Stock" shall have the meaning specified in the
------------
second paragraph of this Agreement.

"Company" shall have the meaning specified in the first
-------
paragraph of this Agreement.

"Confirmation Date" shall mean the date on which the
-----------------
Confirmation Order is entered by the Bankruptcy Court.

"Confirmation Order" shall have the meaning specified in
------------------
the third paragraph of this Agreement.

"Continental" shall mean Continental Airlines, Inc.
-----------

"Creditors Committee" shall mean the Official Committee
--------------------
of the Unsecured Creditors of America West Airlines, Inc.
appointed in the Company's Chapter 11 case pending in the
Bankruptcy Court.

"Disclosure Statement" shall mean a disclosure statement
--------------------
with respect to the Plan.

"Effective Date" shall mean the effective date of the
---------------
Plan; provided, that in no event shall the Effective Date be
(a) earlier than 11 days after the Bankruptcy Court approves
and enters the Confirmation Order providing for the
confirmation of the Plan or (b) before all material
Approvals are obtained.

"Electing Party" shall have the meaning specified in
---------------
Section 4(a)(2)(ii).

"Equity Committee" shall mean the Official Committee of
----------------
Equity Holders of America West Airlines, Inc. appointed in
the Company's Chapter 11 case pending in the Bankruptcy
Court.

"Equity Holders" shall mean the Company's equity
----------------
security holders (including holders of common stock and
preferred stock) of record as of the applicable record date
fixed by the Bankruptcy Court.

"Escrow Shares" shall have the meaning specified in
--------------
Section 4(a)(2)(v).

"Governance Agreements" shall have the meaning specified
---------------------
in Section 6.

"GPA" shall mean GPA Group plc or, if applicable, any
---
direct or indirect subsidiary thereof.

"GPA Put Agreement" shall have the meaning specified in
-----------------
Section 7(j).

"Independent Directors" shall have the meaning specified
---------------------
in Section 6(a)(ii).

"Initial Order" shall have the meaning specified in
-------------
Section 8(a).

"Investment" shall have the meaning specified in the
----------
third paragraph of this Agreement.

"Investor" shall have the meaning specified in the first
--------
paragraph of this Agreement.

"Mesa" shall mean Mesa Airlines, Inc.
----

"Monthly Targets" shall mean the amounts specified in
----------------
the Monthly Targets Schedule.

"Monthly Targets Schedule" shall mean the letter
---------------------------
agreement between the Company and Investor dated the date
hereof.

"Non-Contingent Shares" shall have the meaning specified
---------------------
in Section 4(a)(2)(v)(A).

"Notes" shall have the meaning specified in the second
-----
paragraph of this Agreement.

"Outside Date" shall mean August 15, 1994; provided that
------------
Investor shall have the right from time to time to
irrevocably extend the Outside Date to a date not later than
November 30, 1994, but only if Investor gives the Company
prior written notice of its election to extend the then
current Outside Date (which notice shall specify the new
Outside Date) and then only if, at the time of the giving of
such notice, Investor is not in breach of any of its
representations, warranties, covenants or obligations under
this Agreement, the Procedures Agreement or any Related
Agreement (excluding any breach by Investor which is not
willful or intentional and which is capable of being cured
on or before the new Outside Date). Unless waived by the
Company, any notice given pursuant to this definition shall
be delivered to the Company not less than 15 days prior to
the then current Outside Date except that, in the event the
Effective Date has not occurred for any reason arising
within such 15-day period not due to a breach by Investor of
any of its representations, warranties, covenants or
agreements hereunder, such notice shall be given as soon as
practicable but in no event later than the then current
Outside Date.

"Person" means a natural person, a corporation, a
------
partnership, a trust, a joint venture, any Regulatory
Authority or any other entity or organization.

"Plan" shall have the meaning specified in the third
----
paragraph of this Agreement.

"Plan 9" means the Company's Plan Revision No. 9 which
------
consists of the Summary Pro Forma Financial Statements: June
1993 Through December 1994, dated July 15, 1993.

"Plan R-2" shall mean the Company's Summary Pro Forma
---------
Financial Statements, 5 Year Plan: 1994 Through 1998, Plan
No. R-2, dated January 13, 1994.

"Prepetition Claims" shall mean, as of any date, the
------------------
aggregate amount of the allowed or allowable prepetition
unsecured claims without priority of the Unsecured Creditors
(other than the Electing Parties) under Section 502 of the
Bankruptcy Code as of such date as determined by a final
order of the Bankruptcy Court, provided that the first such
determination shall be made at an estimation hearing to be
held on or before the date of the hearing on the
Confirmation Order.

"Procedures Agreement" shall have the meaning specified
--------------------
in the fourth paragraph of this Agreement.

"Projections" shall mean the projections set forth in
-----------
Plan 9 on pages 15 and 18 of Tab E and pages 7 and 8 of Tab
F.

"Purchase Price" shall have the meaning specified in
--------------
Section 2.

"Regulatory Approvals" shall mean all approvals,
----------------------
permits, authorizations, consents, licenses, rulings,
exemptions and agreements required to be obtained from, or
notices to or registrations or filings with, any Regulatory
Authority (including the expiration of all applicable
waiting periods, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) that are
necessary or reasonably appropriate to permit the Investment
and the other transactions contemplated hereby and by the
Related Agreements and to permit the Company to carry on its
business after the Investment in a manner consistent in all
material respects with the manner in which it was carried on
prior to the Effective Date or proposed to be carried on by
the reorganized Company.

"Regulatory Authority" shall mean any authority, agency,
--------------------
commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign
state, county, city or other political subdivision.

"Related Agreements" shall have the meaning specified in
------------------
Section 3.

"Securities" shall mean the securities of the Company
----------
issued to the Unsecured Parties, Investor and GPA under this
Agreement. The Securities are described in Section 4.

"Shortfall" shall mean, as of any date, the amount by
---------
which (i) the aggregate amount determined by the Bankruptcy
Court as required for full recovery as of the Effective Date
for the holders of the Prepetition Claims exceeds (ii) the
value of the Non-Contingent Shares as of the date of such
determination.

"Unsecured Creditors" shall mean, as of any date, the
--------------------
Persons holding of record as of such date the allowed or
allowable prepetition unsecured claims without priority of
the Company.

"Unsecured Parties" shall mean the Equity Holders and
------------------
the Unsecured Creditors.

"Warrants" shall have the meaning specified in the
--------
second paragraph of this Agreement.

SECTION 2. Commitment to Make Investment. Subject to
------------------------------
the terms and conditions of this Agreement and the Procedures
Agreement, on the Effective Date, the Company shall issue and
sell and Investor shall purchase Securities in accordance with
this Agreement and the Plan. Such Securities shall be issued,
sold and delivered to Investor, its designees and/or one or more
third party investors, and the $220 million purchase price
therefor, as such purchase price may be adjusted pursuant hereto
(the "Purchase Price"), shall be paid by wire transfer of
---------------
immediately available funds on the Effective Date.

SECTION 3. Related Agreements. The agreements necessary
------------------
to effect the Investment (the "Related Agreements", such term
------------------
to include the Alliance Agreements and the Governance Agreements)
shall be in form and substance reasonably satisfactory to
Investor and the Company, and shall contain terms and provisions,
including representations, warranties, covenants, warranty
termination periods, materiality exceptions, cure opportunities,
conditions precedent, anti-dilution provisions (as appropriate),
and indemnities, as are in form and substance reasonably
satisfactory to such parties; provided, however, that the Related
Agreements shall contain provisions called for by, or otherwise
consistent with, this Agreement.

SECTION 4. Capitalization. (a) Upon consummation of
--------------
the Plan, the capitalization of the Company shall be as follows:

(1) Class A Common. There shall be 1,200,000 shares of
---------------
Class A Common, all of which shares shall, in accordance
with the Plan, be issued to Investor. Investor shall pay
$7,964,444 for the Class A Common. At the option of the
holders thereof, shares of Class A Common shall be
convertible into shares of Class B Common on a share for
share basis.

(2) Class B Common. There shall be 43,800,000 shares of
---------------
Class B Common, all of which shares shall, in accordance
with the Plan, be issued as follows:

(i) Investor. Investor shall be issued 15,675,000
--------
shares plus the number of shares (if any) to be acquired
by Investor pursuant to clause (ii) below minus the
number of shares, if any, issued to the Equity Holders
pursuant to clause (iii) below. For each share of Class
B Common issued to it, Investor shall pay $7.147;
provided that (A) for each share acquired by Investor
pursuant to clause (ii) below, Investor shall pay $8.889
and (B) for each share not purchased by the Equity
Holders pursuant to clause (iii) below, Investor shall
pay $8.296.

(ii) Unsecured Creditors. The Unsecured
---------------------
Creditors (or a trust created for their benefit) shall
be issued 20,250,000 shares. Notwithstanding the
foregoing, each Unsecured Creditor shall have the right
to elect to receive cash equal to 8.889 for each share
of Class B Common otherwise allocable to it under this
clause (ii). The election of each such Person (the
"Electing Party") must be made on or before the date
--------------
fixed by the Bankruptcy Court for voting with respect to
the Plan; provided, however, that in the event that such
elections of all Electing Parties aggregate to more than
$100 million, then (A) the amount of cash so paid shall
be limited to $100 million and (B) the Electing Parties
shall each receive proportionate amounts of cash and
Class B Common in accordance with the Plan. Subject to
the foregoing proviso, Investor shall increase the
Investment by the amount necessary to pay all Electing
Parties the cash amounts payable to them under this
clause (ii) in respect of the shares of Class B Common
specified in their elections and, upon payment of such
amounts, such shares shall be issued to Investor without
further consideration. Notwithstanding the foregoing,
Investor s acquisition of shares of Class B Common
pursuant to this clause (ii) shall, if permitted by
applicable securities and other laws, be consummated
immediately after the issuance of such shares to the
Electing Parties on the Effective Date. If such shares
are not so acquired post-consummation of the Plan, all
shares of Class B Common acquired by Investor pursuant
to this clause (ii) shall, for all purposes hereof, be
deemed to be part of the Securities acquired by Investor
hereunder.

(iii) Equity Holders. The Equity Holders shall
---------------
have the right to purchase up to 1,808,036 shares
allocable to Investor pursuant to clause (i) above at
$8.296 per share. Such election must be made by each
Equity Holder on or before the date fixed by the
Bankruptcy Court for voting with respect to the Plan.
The Plan shall set forth the terms and conditions on
which the foregoing rights may be exercised.

(iv) GPA. 3,375,000 shares shall be issued to
---
GPA.

(v) Escrow Shares. 4,500,000 shares (the "Escrow
-------------- ------
Shares") shall be issued to the Unsecured Parties as
------
follows:

(A) All of the Escrow Shares shall be issued to
the Equity Holders if the Bankruptcy Court
determines on the Confirmation Date that the
Non Contingent Shares will provide a full recovery,
as of the Effective Date, for the holders of
Prepetition Claims. As used herein, "Non-Contingent
--------------
Shares" means the 20,250,000 shares of Class B
------
Common issuable to the Unsecured Creditors pursuant
to clause (ii) above less the number of such shares
to be acquired by Investor pursuant to the
provisions of such clause.

(B) If, however, the Bankruptcy Court determines
on the Confirmation Date that the value of the
Non-Contingent Shares does not, as of the Effective
Date, provide a full recovery for the holders of the
Prepetition Claims, then the Escrow Shares will be
placed in escrow with a bank or trust company
reasonably acceptable to the Creditors' Committee
and the Equity Committee (the "Escrow Agent") for a
------------
period of one year ending on the first anniversary
of the Effective Date ("First Anniversary"). If, on
------------------
any date prior to the First Anniversary, the Closing
Price of the Non-Contingent Shares for any ten out
of 15 consecutive trading days ending on or before
such date is equal to or exceeds the Closing Price
at which the Bankruptcy Court determines the holders
of the Prepetition Claims shall have received a full
recovery as of the Effective Date, the Escrow Agent
shall terminate the escrow and release the Escrow
Shares therefrom for distribution to the Equity
Holders. As used herein, "Closing Price" for any
-------------
trading day means (i) if shares of Class B Common
are traded on the New York Stock Exchange or the
American Stock Exchange, the closing price of Class
B Common for such trading day or (ii) if shares of
Class B Common are traded on NASDAQ or otherwise in
the over the counter markets, the final bid price of
the Class B Common for such trading day. If the
escrow is not terminated early as aforesaid, then
(x) the value of the Non-Contingent Shares shall be
determined on the First Anniversary based on the
average of the Closing Prices for the 20 consecutive
trading days prior to the First Anniversary (the
"Average Closing Price"), (y) the Unsecured
-------------------------
Creditors shall be distributed such number of the
Escrow Shares as shall equal the quotient determined
by dividing (aa) the amount of the Shortfall as of
the First Anniversary (if any) by (bb) the Average
Closing Price and (z) the remaining Escrow Shares,
if any, shall be distributed to the Equity Holders.

(3) Warrants. There shall be Warrants to purchase
--------
6,428,572 shares of Class B Common at the exercise price as
specified in and subject to the terms of Exhibit A hereto,
----------
and such Warrants shall, in accordance with the Plan, be
issued as follows:

(i) Warrants to purchase up to 2,571,429 shares of
Class B Common shall be issued to Investor; and

(ii) Warrants to purchase up to 2,571,429 shares
of Class B Common shall be issued to the Equity Holders
or a trust or trusts created for their benefit; and

(iii) Warrants to purchase up to 1,285,714 shares
of Class B Common shall be issued to GPA.

(4) Senior Unsecured Notes. There shall be issued $103
-----------------------
million principal amount of Notes on the terms set forth in
and subject to the terms of Exhibit B hereto, and such Notes
---------
shall, in accordance with the Plan, be issued (i) 100
million principal amount to Investor against payment in cash
of not less than 99% of the principal amount thereof and
(ii) $3 million principal amount to GPA.

(b) Holders of the Class A Common shall have fifty votes
per share. Holders of Class B Common shall have one vote per
share. Holders of Class A Common and holders of Class B Common
shall vote together as a single class except as otherwise
required by law or the provisions of this Agreement. Investor
may elect, with respect to any shares of Class B Common held by
it, to suspend the voting rights relating to such shares by
giving prior written notice to the Company, which notice shall
describe such shares in reasonable detail and state whether or
not the voting suspension is permanent or temporary and, if
temporary, specify the period thereof. All Escrow Shares shall
be counted for purposes of determining a quorum at any meeting of
the Company's stockholders. In the case of each matter submitted
for a vote by the holders of Class B Common, the Escrow Agent
shall vote all of the Escrow Shares in the same proportion as all
other shares of Class B Common are voted with respect to such
matter.

SECTION 5. Business Alliance Agreements. Continental
-----------------------------
and the Company shall enter into mutually acceptable business
alliance agreements on the Effective Date, which agreements may
include, but shall not be limited to, agreements to share ticket
counter space, ground handling agreements, agreements to link
frequent flier programs, and combined purchasing agreements, and
schedule coordination and code sharing agreements. On the
Effective Date, Mesa shall enter into agreements with the Company
extending the existing contractual arrangements between the
Company and Mesa for five years from the Effective Date and
modifying the termination provisions thereof consistent with such
extension. Such agreements with Continental and Mesa are herein
collectively referred to as the "Alliance Agreements".
-------------------

SECTION 6. Governance Agreements. On the Effective
----------------------
Date, the Company, Investor and Investor s partners (other than
any such partner holding shares of Class B Common the voting
rights with respect to which have been suspended as contemplated
by Section 4(b)) shall enter into one or more written agreements
(the "Governance Agreements") effectively providing as follows:
---------------------

(a) At all times during the three-year period commencing
on the Effective Date, the Company's board of directors
shall consist of 15 members designated as follows:

(i) nine members (at least 8 of whom are U.S.
citizens) shall be designated by Investor, with certain
of the partners of Investor having the right to
designate certain of Investor s designated directors;

(ii) four members (the "Independent Directors")
----------------------
(at least two of whom are U.S. citizens) shall be
designated by a majority of the Stockholder
Representatives; provided that each such member shall be
reasonably acceptable to Investor at the time of his or
her initial designation; and

(iii) two members shall be designated by GPA for
so long as GPA shall own at least 4% of the voting
equity securities of the Company; provided that each
such member shall be reasonably acceptable to Investor
at the time of his or her initial designation.

As used herein, "Stockholder Representatives" shall mean,
----------------------------
collectively, (A) three individuals who, on the date hereof,
are serving as directors of the Company, (B) one individual
who, on the date hereof, is serving as a member of the
Creditors' Committee and (C) one individual who, on the date
hereof, is serving as a member of the Equity Committee. The
initial Stockholder Representatives shall be selected on or
before the Effective Date (x) by the Company's board of
directors in the case of the three individuals referred to
in clause (A) above, (y) by the Creditors' Committee in the
case of the individual referred to in clause (B) above and
(z) by the Equity Committee in the case of the individual
referred to in clause (C) above. In the case of the death,
resignation, removal or disability of a Stockholder
Representative after the Effective Date, his or her
successor shall be designated by a majority of the remaining
Stockholder Representatives.

(b) Until the third anniversary of the Effective Date,
Investor will vote and cause to be voted all shares of
Common Stock (other than those the voting rights of which
have been suspended) owned by Investor or any of its
partners or by the assignees or transferees of all or
substantially all of the Common Stock owned by Investor or
any of its partners (other than a Person who acquires such
stock pursuant to a tender or exchange offer open to all
stockholders of the Company) in favor of the election as
directors of any and all individuals designated for such
election as contemplated by clauses (ii) and (iii) of
paragraph (a) above.

(c) No director nominated by Investor shall be an
officer or employee of Continental. All Company directors,
if any, who are selected by, or who are directors of,
Continental shall recuse themselves from voting on, or
otherwise receiving any confidential Company information
regarding, matters in connection with negotiations between
Continental and the Company (including, without limitation,
those relating to the Alliance Agreements) and matters in
connection with any action involving direct competition
between Continental and the Company. All Company directors,
if any, who are selected by, or who are directors, officers
or employees of, Mesa shall recuse themselves from voting
on, or otherwise receiving any confidential Company
information regarding, matters in connection with
negotiations between Mesa and the Company (including,
without limitation, those relating to the Alliance
Agreements) and matters in connection with any action
involving direct competition between Mesa and the Company.

(d) During the three-year period commencing on the
Effective Date, the Company will not consummate any Business
Combination unless such transaction shall be approved in
advance by at least three Independent Directors or by a
majority of the stock voted at the meeting held to consider
such transaction which is owned by stockholders of the
Company other than Investor or any of its Affiliates;
provided, however, that neither Mesa nor any Fidelity Fund
(or any of their non-Affiliated transferees) will be deemed
an Affiliate of Investor for purposes of voting on any
Business Combination involving Continental.

SECTION 7. Plan of Reorganization. The Plan shall (i)
----------------------
be proposed jointly by the Company and Investor, (ii) contain
terms and conditions reasonably satisfactory to Investor and the
Company, and (iii) include the following provisions; provided
that Investor and the Company may, by mutual agreement, modify
the Plan or otherwise restructure the Investment in a manner
consistent with the contemplated economic consequences to the
Company, Investor, the Unsecured Parties and GPA in order to
enable the Company, as reorganized, to more fully utilize its
existing tax attributes:

(a) Debtor-in-Possession Financing. The Company's
---------------------------------
debtor-in-possession financing shall be repaid in full in
cash on the Effective Date.

(b) Administrative Claims. All allowed administrative
----------------------
claims shall be paid as required pursuant to Section 1129(a)
of the Bankruptcy Code, provided that such claims do not
exceed the amount set forth in Plan R-2 plus $15 million,
and provided further that payment of such claims in excess
of those set forth in Plan R-2 would not, if payment was to
be made in the month immediately preceding the Effective
Date, cause the Company to fail to meet any of the Monthly
Targets for such month.

(c) Tax Claims. All priority tax claims shall be paid
----------
over the maximum term permitted by the Bankruptcy Code, as
determined by the Bankruptcy Court, with interest accruing
at a rate determined by the Bankruptcy Court, provided that
such claims do not exceed the amounts set forth in Plan R-2
plus $8.5 million, and provided further that payment of such
claims in excess of those set forth in Plan R-2 would not,
if payment was to be made in the month immediately preceding
the Effective Date, cause the Company to fail to meet any of
the Monthly Targets for such month .

(d) Nontax Priority Claims. All nontax priority claims
-----------------------
shall be paid as required pursuant to Section 507 of the
Bankruptcy Code, provided that such claims do not exceed the
amounts set forth in Plan R-2.

(e) Secured Claims. Secured debt claims shall be
---------------
treated as provided in Plan R-2 subject to (i) modification
based on updated appraisals of collateral values to be
conducted by the Company and consistent with the applicable
provisions of the Bankruptcy Code, or (ii) such other terms
as shall be reasonably satisfactory to the Company and
Investor.

(f) Unsecured Creditors. In consideration for (A) the
-------------------
shares and cash issued or paid, as the case may be, to the
Unsecured Creditors pursuant to Section 4(a)(2)(ii), and (B)
the shares, if any, issued to the Unsecured Creditors
pursuant to Section 4(a)(2)(v)(B), the unsecured claims of
the Unsecured Creditors shall be cancelled as specified in
the Plan.

(g) Equity Holders. In consideration for (A) the right
---------------
to purchase shares pursuant to Section 4(a)(2)(iii), (B) the
shares, if any, issued to the Equity Holders pursuant to
Section 4(a)(2)(v), and (C) the Warrants issued to the
Equity Holders pursuant to Section 4(a)(3)(ii), the equity
interests of the Equity Holders shall be cancelled as
specified in the Plan.

(h) Leases. All aircraft leases which have been assumed
------
prior to the date hereof will be honored by the Company in
accordance with their terms and without reduction of rentals
thereunder, provided that with the consent of the Company,
Investor and any applicable lessor, any such lease may be
amended to reduce the rentals payable thereunder, it being
understood that, in consideration of any such amendment and
with the consent of the Creditors' Committee, securities of
the Company may be issued to such lessors from securities
otherwise allocable to the Unsecured Parties to the extent
consistent with any agreement in writing entered into by
Investor and the Equity Committee on or before the date
hereof.

(i) Kawasaki. The contractual right of Kawasaki Leasing
--------
International Inc. ("Kawasaki") to require the Company to
--------
lease certain aircraft and aircraft engines shall be
modified on terms satisfactory to the Company, Investor and
Kawasaki or, in the absence of such modification, honored.

(j) GPA. In consideration for (A) the shares to be
---
issued to GPA pursuant to Section 4(a)(2)(iv), (B) the
Warrants to be issued to GPA pursuant to Section
4(a)(3)(iii), (C) the Notes to be issued to GPA pursuant to
Section 4(a)(4) and (D) the granting to GPA on the Effective
Date of the right (the "New GPA Put") to require the Company
-----------
to lease from GPA on or prior to June 30, 1999, up to eight
aircraft of types consistent with the fleet currently
operated by the Company, GPA shall, as specified in the
Plan, cancel and waive all rights to put any aircraft to the
Company which it may have pursuant to the Put Agreement
between GPA and the Company, dated as of June 25, 1991 (the
"GPA Put Agreement") and/or the related Agreement Regarding
------------------
Rights of First Refusal for A320 Aircraft, dated as of
September 1, 1992 (the "First Refusal Agreement") and all
------------------------
other claims of any kind or nature arising out of or in
connection with the GPA Put Agreement and/or the First
Refusal Agreement (other than claims for reimbursement of
expenses incurred by GPA in connection therewith). Each
such lease shall provide for the payment by the Company of a
fair market rental (determined at or about the time of
delivery of the related aircraft to the Company on the basis
of rentals then prevailing in the marketplace for comparable
leases of comparable aircraft to lessees of comparable
creditworthiness); and each such lease shall have such other
terms and provisions and be in such form as is agreed upon
by the Company and GPA with the approval of Investor (which
approval shall not be unreasonably withheld or delayed) and
attached to the agreement pursuant to which GPA is granted
the New GPA Put.

(k) Prepetition Aircraft Purchase Contracts. The
--------------------------------------------
prepetition contract for the purchase of aircraft between
the Company and The Boeing Company shall either be modified
on terms satisfactory to Investor, the Company and The
Boeing Company or, in the absence of such agreement,
rejected. The Company's aircraft purchase contract with
AVSA, S.A.R.L. ("Airbus") shall be amended on terms
------
consistent with the provisions of the AmWest - A320 Term
Sheet, dated as of February 23, 1994 by and between Investor
and Airbus.

(l) Employees. The Company shall have the right to
---------
release employees from all currently existing obligations to
the Company in respect of shares of Company stock purchased
by such employees pursuant to the Company's stock purchase
plan, such release to be in consideration for the
cancellation of such shares.

(m) Exculpation. The Plan will contain customary
------------
exculpation provisions for the benefit of the Creditors'
Committee and the Equity Committee and their respective
professionals.

SECTION 8. Conditions to Investor's Obligations
--------------------------------------------
Relating to the Investment. The obligations of Investor to
----------------------------
consummate the Investment and the other transactions contemplated
herein shall be subject to the satisfaction, or the written
waiver by Investor, of the following conditions:

(a) an initial order approving the Procedures Agreement,
which order shall be in form and substance reasonably
satisfactory to Investor (the "Initial Order"), shall have
-------------
been entered by the Bankruptcy Court on or prior to
March 31, 1994 and, once entered, shall be in effect and
shall not be modified in any material respect or stayed;

(b) subject to Section 10(b), the Company and Investor,
as applicable, shall have received all Regulatory Approvals,
which shall have become final and nonappealable or any
period of objection by Regulatory Authorities shall have
expired, as applicable, and all other material approvals,
permits, authorizations, consents, licenses and agreements
from other third parties that are necessary or appropriate
to permit the Investment and the other transactions
contemplated hereby and by the Related Agreements and to
permit the Company to carry on its business after the
Effective Date in a manner consistent in all material
respects with the manner in which it was carried on prior to
the Effective Date (collectively with Regulatory Approvals,
the "Approvals"), which Approvals shall not contain any
---------
condition or restriction that, in Investor's reasonable
judgment, materially impairs the Company's ability to carry
on its business in a manner consistent in all material
respects with prior practice or as proposed to be carried on
by the reorganized Company;

(c) the certificate of incorporation and bylaws of the
Company shall contain the terms contemplated by this
Agreement and shall otherwise be reasonably satisfactory to
Investor;

(d) there shall be in effect no injunction, stay,
restraining order or decree issued by any court of competent
jurisdiction, whether foreign or domestic, staying the
effectiveness of any of the Approvals, the Initial Order or
the Confirmation Order, and there shall not be pending any
request or motion for any such injunction, stay, restraining
order or decree; provided, however, that the foregoing
condition shall not apply to any such injunction, stay,
order or decree requested, initiated or supported by
Investor or any of its partners or other Affiliates or to
any such request or motion made, initiated or supported by
Investor or any its partners or other Affiliates;

(e) there shall not be threatened or pending any suit,
action, investigation, inquiry or other proceeding
(collectively, "Proceedings") by or before any court of
-----------
competent jurisdiction or Regulatory Authority (excluding
the Company's bankruptcy case, but including adversary
proceedings and contested matters in such bankruptcy case,
and excluding any such Proceedings fully and accurately
disclosed by the Company in Schedule I hereto), or any
-----------
adverse development occurring since December 31, 1993 in any
such Proceedings, which Proceedings or development, singly
or in the aggregate, in the good faith judgment of Investor,
are reasonably likely to have a material adverse effect on
the Company's ability to carry on its business in a manner
consistent in all material respects with prior practices or
are reasonably likely to impair in any material respect
Investor's ability to realize the intended benefits and
value of this Agreement, the Procedures Agreement or any
Related Agreement; provided, however, that the foregoing
condition shall not apply to any such Proceeding or
development requested, initiated or supported by Investor or
any of its partners or other Affiliates;

(f) the Company shall have delivered to Investor
appropriate closing documents, including the instruments
evidencing the Securities being issued to Investor,
certifications of the Company officers (including, but not
limited to, incumbency certificates, and certificates as to
the truth and correctness of statements made in the
Disclosure Statement or any other offering document
distributed in connection with any securities issued in
respect of this Agreement or the Related Agreements) and
opinions of legal counsel, all of which shall be reasonably
satisfactory to Investor;

(g) by no later than March 31, 1994, the Company shall
have delivered to Investor audited financial statements as
of December 31, 1993, and for the year then ended, which
statements shall reflect a financial performance and a
financial position of the Company consistent in all material
respects with the unaudited results previously announced by
the Company for such year, and, if requested by Investor,
the Company shall have discussed such financial statements
with Investor and provided an opportunity for Investor to
discuss such financial statements with the Company's
auditors;

(h) since December 31, 1993, except for the matters
disclosed in Schedule I hereto, no material adverse change
-----------
in the Company's condition (financial or otherwise),
business, assets, properties, operations or relations with
employees or labor unions shall have occurred and no matter
(except for the matters disclosed in Schedule I hereto)
----------
shall have occurred or come to the attention of Investor
that, in the reasonable judgment of Investor, is likely to
have any such material adverse effect;

(i) the following shall be true in all material respects
(in each case based on the Company's actual monthly or daily
financial statements, which shall be prepared by the Company
in a manner consistent in all material respects with its
historical monthly and daily financial statements previously
furnished to Investor): (A) the Company's actual monthly
Operating Cash Flow (as defined on the Monthly Targets
Schedule) shall not, in any month, be less than the minimum
amount therefor established as part of the Monthly Targets,
(B) the Company's actual 4 month Rolling Cash Flow (as
defined on the Monthly Targets Schedule) shall not be less,
as of the end of any four calendar month period, than the
minimum amount therefor established as part of the Monthly
Targets, (C) the Company's actual end of month Reported Cash
Balance (as defined in the Monthly Targets Schedule) shall
not, as of the end of any calendar month, be less than the
minimum amount therefor established as part of the Monthly
Targets, (D) the Company's actual five-day average Minimum
Cash Balance (as defined in the Monthly Targets Schedule)
shall not be, as of the end of any five day period, less
than the minimum amount therefor established as part of the
Monthly Targets; (E) the Company shall not have taken any
actions which the Company knew or reasonably should have
known would likely impair or hinder in any material respect
the Company's ability to achieve the Projections; (F) the
amount and nature of the obligations and liabilities
(including, without limitation, tax liabilities and
administrative expense claims) required to be paid by the
Company on the Effective Date or to be paid by the Company
following the Effective Date pursuant to obligations assumed
by the Company during the course of its bankruptcy
proceedings shall not be in excess of the amounts reflected
in Plan R-2 plus any additional allowances provided in
Section 7 (as reduced by any repayments of the existing
debtor-in-possession loan made on or prior to the Effective
Date) and shall not be materially different in nature than
those specified in Plan R-2 (except with respect to
administrative claims not known to the Company when Plan R-2
was developed); and (G) the Company shall have paid all fees
and expenses due Investor under the Procedures Agreement;

(j) since the date hereof, there shall have occurred no
outbreak or escalation of hostilities or other international
or domestic calamity, crisis or change in political,
financial or economic conditions or other adverse change in
the financial markets that impairs (or could reasonably be
expected to impair) in any material respect the Company's
ability to carry on its business in a manner consistent in
all material respects with prior practice or impairs (or
could reasonably be expected to impair) in any material
respect Investor s ability to realize the intended benefits
and value of this Agreement or any Related Agreement;

(k) the Related Agreements, including all Alliance
Agreements, to be executed by the Company shall have been
executed by the Company on or before the Effective Date and,
once executed, shall not have been modified without the
consent of Investor, shall be in effect and shall not have
been stayed;

(l) the Company shall have performed in all material
respects all obligations on its part required to be
performed on or before the Effective Date under this
Agreement, the Procedures Agreement and the Related
Agreements and all orders of the Bankruptcy Court in respect
thereof that are consistent with the provisions of such
intruments;

(m) all representations and warranties of the Company
under this Agreement, the Procedures Agreement and the
Related Agreements shall be true in all material respects as
of the Effective Date;

(n) the Plan and Disclosure Statement each shall have
been filed by the Company on or prior to May 1, 1994, and,
once filed, shall have been served by the Company on all
appropriate parties and, once served, shall not have been
modified in any material respect without the prior consent
of Investor (which consent shall not be unreasonably
withheld), withdrawn by the Company or dismissed;

(o) the Disclosure Statement (in the form approved by
the Bankruptcy Court and as amended or supplemented, if
applicable) shall have been true and correct in all material
respects as of the date first mailed to Unsecured Parties
and as of the date fixed by the Bankruptcy Court for voting
on the Plan and such Disclosure Statement shall not contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein (taken as a whole), in light of the circumstances
under which they were made, not misleading; provided,
however, that the foregoing condition shall not apply to
statements or other information furnished or provided by
Investor or any of its Affiliates for use in the Disclosure
Statement;

(p) the order approving the Disclosure Statement shall
have been entered by the Bankruptcy Court on or prior to
June 15, 1994, and, once entered, shall not have been
modified in any material respect, shall be in effect and
shall not have been stayed;

(q) the Plan (including all securities of the Company to
be issued pursuant thereto and all contracts, instruments,
agreements and other documents to be entered into in
connection therewith), the Disclosure Statement and the
Confirmation Order shall be consistent with the terms of
this Agreement and otherwise reasonably satisfactory in form
and substance to Investor;

(r) the Confirmation Order shall have been entered by
the Bankruptcy Court in form reasonably satisfactory to
Investor on or before August 1, 1994, and, once entered,
shall not have been modified in any material respect, shall
be in effect and shall not have been stayed and shall not be
subject to any appeal;

(s) the Effective Date shall have occurred on or prior
to the Outside Date unless the reason therefor shall be
attributable to the breach by Investor or its Affiliates of
any of their respective representations, warranties,
covenants or obligations contained herein or in the
Procedures Agreement or any Related Agreement;.

(t) either pursuant to the Confirmation Order or
otherwise, the Bankruptcy Court shall have established one
or more bar dates for administrative expense claims pursuant
to an order reasonably acceptable to Investor, which bar
date or dates shall occur on or before dates reasonably
acceptable to Investor; and

(u) the Securities and Exchange Commission shall have
declared effective a shelf registration statement with
respect to the Securities issuable to Investor.

In the event any of the conditions set forth in clause (a) (n),
(p) or (r) is not satisfied by the date specified in such clause
(the "Deadline"), then, on the 15th day following the then
current Deadline, the Deadline shall be automatically extended on
a day-to-day basis unless the Company and Investor otherwise
agree in writing or unless Investor gives a notice of termination
to the Company pursuant to Section 20(b) of the Procedures
Agreement within such 15-day period. If any Deadline is
automatically extended as aforesaid, Investor may thereafter
establish a new Deadline by giving notice to the Company
specifying the new Deadline, provided that the new Deadline may
not be sooner than 30 days after the date of such notice.

SECTION 9. Conditions to Company's Obligations Relating
---------------------------------------------
to Investment. The Company's obligations to consummate or to
--------------
cause the consummation of the issuance and sale of the Securities
and the other transactions contemplated by this Agreement shall
be subject to the satisfaction, or to the effective written
waiver by the Company, of the condition described in Section 8(b)
and the following additional conditions:

(a) payment of the Purchase Price;

(b) Investor shall have delivered to the Company
appropriate closing documents, including, but not limited
to, executed counterparts of the Related Agreements and
certifications of officers, and opinions of legal counsel,
all of which shall be reasonably satisfactory to the
Company;

(c) there shall be in effect no injunction, stay,
restraining order or decree issued by any court of competent
jurisdiction, whether foreign or domestic, staying the
effectiveness of any of the Approvals, the Initial Order or
the Confirmation Order, and there shall not be pending any
request or motion for any such injunction, stay, restraining
order or decree; provided, however, that the foregoing
condition shall not apply to any such injunction, stay,
order or decree requested, initiated or supported by the
Company or to any such request or motion made, initiated or
supported by the Company;

(d) the Related Agreements to be executed by Investor
or any of its partners shall have been executed by such
parties on or before the Effective Date and, once executed,
shall not have been modified without the consent of the
Company, shall be in effect and shall not have been stayed;

(e) Investor, Continental and Mesa shall have performed
in all material respects all obligations on their part
required to be performed on or before the Effective Date
under this Agreement, the Procedures Agreement and the
Related Agreements and all orders of the Bankruptcy Court in
respect thereof that are consistent with the provisions of
such instruments;

(f) all representations and warranties of Investor,
Continental and Mesa under this Agreement, the Procedures
Agreement and the Related Agreements shall be true and
correct in all material respects as of the Effective Date;

(g) the Company shall be reasonably satisfied that the
Alliance Agreements, when fully implemented, shall result in
an increase to the Company's pretax income of not less than
$40 million per year;

(h) since the date hereof, there shall have occurred (A)
no outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in
political, financial or economic conditions or other adverse
change in the financial markets or (B) any adverse change in
the condition (financial or otherwise), business, assets,
properties or prospects of Continental or Mesa, in each case
that materially impairs the ability of either Continental or
Mesa to perform its obligations under the Alliance
Agreements or the Company's ability to realize the intended
benefits and value of this Agreement, the Alliance
Agreements (as contemplated by clause (g) above) or the
other Related Agreements;

(i) since the time of their initial filing by the
Company, neither the Plan nor the Disclosure Statement shall
have been modified in any material respect without the prior
consent of the Company (which consent shall not be
unreasonably withheld or delayed), withdrawn by Investor or
dismissed;

(j) the certificate of incorporation and bylaws of the
Company shall contain the terms contemplated by this
Agreement and shall otherwise be reasonably satisfactory to
the Company;

(k) the Plan (including all Securities to be issued
pursuant thereto and all contracts, instruments, agreements
and other documents to be entered into in connection
therewith), the Disclosure Statement and the Confirmation
Order shall be consistent with the terms of this Agreement
and otherwise reasonably satisfactory in form and substance
to the Company;

(l) the Confirmation Order shall have been entered by
the Bankruptcy Court in form reasonably acceptable to the
Company and, once entered, shall not have been modified in
any material respect, shall be in effect and shall not have
been stayed and shall not be subject to any appeal; and

(m) the Effective Date shall have occurred on or prior
to the Outside Date unless the reason therefor shall be
attributable to the breach by the Company of any of its
representations, warranties, covenants or obligations
contained herein or in the Procedures Agreement or any
Related Agreement.

SECTION 10. Cooperation.
-----------

(a) The Company and Investor will cooperate in a
commercially reasonable manner, and will use their respective
commercially reasonable efforts, to consummate the transactions
contemplated hereby, including all commercially reasonable
efforts to satisfy the conditions specified in this
Agreement. The Company will use commercially reasonable efforts,
and Investor will cooperate in a commercially reasonable manner
in seeking, to obtain all Approvals.

(b) Notwithstanding anything in Section 8 or 9 to the
contrary, if prior to the Outside Date, the Department of Justice
or any other Regulatory Authority raises any antitrust objection
to the consummation of the Investment or the implementation of
any Alliance Agreement, which objection has not been resolved on
or before the Outside Date, Investor nevertheless shall be
required to consummate the Investment and, to that end, agrees
to timely make such adjustment to the composition of its
partnership and to the Alliance Agreements as required to resolve
such antitrust objection; provided, however, that nothing in this
paragraph (b) shall affect the rights of the Company under
Section 9(g) or obligate the Company to enter into or approve any
adjustment or modification of the Alliance Agreements which, in
the Company's reasonable judgment, is prejudicial to the Company
or the Unsecured Parties in any material respect and which, if
entered into or approved, would materially impair the Company's
ability to realize the reasonably anticipated benefits of such
Alliance Agreements.

SECTION 11. Registration Rights Agreement. Investor
------------------------------
and the Company will enter into a registration rights agreement
on terms acceptable to Investor and the Company. The
registration rights agreement will reflect the understanding of
the parties with respect to their registration rights and
obligations and will provide that Investor, its partners and any
assignees and transferees, shall have the right to cause the
Company to (i) include the Securities issuable to Investor
pursuant to the Plan (including any such Securities issued or
issuable in respect of the Warrants or by way of any stock
dividend or stock split or in connection with any combination of
shares, merger, consolidation or similar transaction), on
customary terms, in "piggyback" underwritings and registrations
and (ii) to effect, on customary terms, one demand registration
under the Securities Act for the public offering and sale of the
Securities issued to Investor under the Plan at any time after
the third anniversary of the Effective Date.

SECTION 12. Applicable Provisions of Law and
-----------------------------------------
Regulations. It is understood and agreed that this Agreement
-----------
shall not create any obligation of, or restriction upon, the
Company or Investor or the partners of Investor that would
violate applicable provisions of law or regulation relating to
ownership or control of a U.S. air carrier. At all times after
the Effective Date, the certificate of incorporation of the
Company shall provide that, in the event persons who are not U.S.
citizens shall own (beneficially or of record) or have voting
control over shares of Common Stock, the voting rights of such
persons shall be subject to automatic suspension as required to
ensure that the Company is in compliance with applicable
provisions of law or regulation relating to ownership or control
of a U.S. air carrier.

SECTION 13. Representations and Warranties of the
------------------------------------------
Company. The Company represents and warrants to Investor as
-------
follows:

(a) The Company has complied in all material respects
with the terms of all orders of the Bankruptcy Court in
respect of the Investment, this Agreement and the Procedures
Agreement.

(b) The Company has delivered to Investor copies of the
audited balance sheets of the Company as of December 31,
1992 and the statements of income, stockholders' equity and
cash flows for the years then ended, together with the notes
thereto. Such financial statements, and when delivered to
Investor the financial statements of the Company referred to
in Section 8(g) will, present fairly, in accordance with
generally accepted accounting principles (applied on a
consistent basis except as disclosed in the footnotes
thereto), the financial position and results of operations
of the Company as of the dates and for the periods therein
set forth.

(c) When delivered to Investor, the unaudited financial
statements of the Company referred to in Section 15(b)(ii)
will (i) present fairly, in accordance with generally
accepted accounting principles (applied on a consistent
basis except as disclosed therein and subject to normal
year-end audit adjustments), the financial position and
results of operations of the Company as of the date and for
the period therein set forth, it being understood and
agreed, however, that the foregoing representation relating
to conformity with generally accepted accounting principles
is being made only to the extent such principles are
applicable to interim unaudited reports and (ii) reflect a
financial position and results of operations not materially
worse than those set forth in the pro forma financial
statements contained in Plan 9.

(d) The Projections and the Monthly Targets were
prepared in good faith on a reasonable basis, and when
prepared represented the Company's best judgment as to the
matters set forth therein, taking into account all relevant
facts and circumstances known to the Company. Nothing has
come to the Company's attention since the dates on which the
Projections and the Monthly Targets, respectively, were
prepared which causes the Company to believe that any of the
projections and other information contained therein were
misleading or inaccurate in any material respect as of such
dates. It is specifically understood and agreed that the
delivery of the Projections and the Monthly Targets shall
not be regarded as a representation, warranty or guarantee
that the particular results reflected therein will in fact
be achieved or are likely to be achieved.

(e) No written statement, memorandum, certificate,
schedule or other written information provided (or to be
provided) to Investor or any of its representatives by or on
behalf of the Company in connection with the transactions
contemplated hereby, when viewed together with all other
written statements and information provided to Investor and
its representatives by or on behalf of the Company, in light
of the circumstances under which they were made, (i)
contains or will contain any materially misleading statement
or (ii) omits or will omit to state any material fact
necessary to make the statements therein not misleading.

(f) The board of directors of the Company has approved
the Investment and Investor's acquisition of Securities
hereunder for purposes of, and in accordance with the
provisions and requirements of, Section 203(a)(1) of the
General Corporation Law of the State of Delaware and, as a
consequence, Investor will not be subject to the provisions
of such Section with respect to any business combination
between Investor and the Company (as such term is defined in
said Section 203).

SECTION 14. Representations and Warranties of
----------------------------------------
Investor. Investor represents and warrants to the Company as
--------
follows:

(a) The general and limited partners of Investor (other
than one such partner which will elect to suspend the voting
rights of its Securities as contemplated by Section 4(b))
are U.S. citizens within the meaning of Section 101(16) of
the Federal Aviation Act of 1958, as amended.

(b) Investor has, or has commitments for, sufficient
funds to pay the Purchase Price and otherwise perform its
obligations under this Agreement.

(c) No written statement, memorandum, certificate,
schedule or other written information provided (or to be
provided) to the Company or any of its representatives by or
on behalf of Investor in connection with the transactions
contemplated by the Alliance Agreements, when viewed
together with all other written statements and information
provided to the Company and its representatives by or on
behalf of Investor, in light of the circumstances under
which they were made, (i) contains or will contain any
materially misleading statement or (ii) omits or will omit
to state any material fact necessary to make the statements
therein not misleading.

SECTION 15. Covenants.
---------

(a) Investor covenants (i) to support, subject to
management's recommendation, increases in employee compensation
through 1995 at least equal to those set forth in Plan R-2 and
(ii) after the Effective Date, to cause the board of directors of
the Company to consider implementation of a broad based employee
incentive compensation plan and a management stock incentive plan.

(b) The Company covenants (i) to use commercially
reasonable efforts to cause the shelf registration statement
referred to in Section 8(u) to remain effective for three years
following its effective date and (ii) as soon as available, to
deliver to Investor a copy of the unaudited balance sheet of the
Company as of the end of each fiscal quarter of the Company prior
to the Effective Date and the unaudited statements of income and
cash flows for the periods then ended.

SECTION 16. Certain Taxes. The Company shall bear and
-------------
pay all transfer, stamp or other similar taxes (if any are not
exempted under Section 1146 of the Bankruptcy Code) imposed in
connection with the issuance and sale of the Securities.

SECTION 17. Administrative Expense. All amounts owed
-----------------------
to Investor by the Company under this Agreement, the Related
Agreements, the Procedures Agreement and all orders of the
Bankruptcy Court in respect thereof shall be treated as an
allowed administrative expense priority claim under Section
507(a)(1) of the Bankruptcy Code.

SECTION 18. Incorporation by Reference. The
------------------------------
provisions set forth in the Procedures Agreement, including, but
not limited to, the provisions regarding confidentiality,
liability indemnity and termination, are hereby incorporated by
reference and such provisions shall have the same force and
effect herein as if they were expressly set forth herein in full.

SECTION 19. Notices. All notices, requests and other
-------
communications hereunder must be in writing and will be deemed to
have been duly given only if delivered personally or by facsimile
transmission or mailed (first class postage prepaid) or by
prepaid express courier to the parties at the following addresses
or facsimile numbers:

If to the Company: America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: William A. Franke and
Martin J. Whalen
Fax Number: (602) 693-5904

with a copy to: LeBoeuf, Lamb, Greene & MacRae
633 17th Street, Suite 2800
Denver, Colorado 80202
Attention: Carl A. Eklund
Fax Number: (303) 297-0422

and a copy to: Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins
Fax Number: (713) 220-4285

and a copy to: Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879

and a copy to: Lord, Bissell and Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336

If to Investor: AmWest Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James G. Coulter
Fax Number: (817) 871-4010

with a copy to: Arnold & Porter
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
Attention: Richard P. Schifter
Fax Number: (202) 872-6720

and a copy to: Jones, Day, Reavis & Pogue
North Point 901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske
Fax Number: (216) 586-7864

and a copy to: Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879

and a copy to: Lord, Bissell and Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336

All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section,
be deemed given upon receipt, and (iii) if delivered by mail or
by express courier in the manner described above to the address
as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice is received by any
other person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section).
Either party from time to time may change its address, facsimile
number or other information for the purpose of notices to that
party by giving notice specifying such change to the other party
hereto.

SECTION 20. Governing Law. Except to the extent
--------------
inconsistent with the Bankruptcy Code, this Agreement shall in
all respects be governed by and construed in accordance with the
laws of the State of Arizona, without reference to principles of
conflicts or choice of law under which the law of any other
jurisdiction would apply.

SECTION 21. Amendment. This Agreement may only be
---------
amended, waived, supplemented or modified by a written instrument
signed by authorized representatives of Investor and the Company.
Investor may extend the time for satisfaction of the conditions
set forth in Section 8 (prior to or after the relevant date) by
notifying the Company in writing. The Company may extend the
time for satisfaction of the conditions set forth in Section 9
(prior to or after the relevant date) by notifying Investor in
writing.

SECTION 22. No Third Party Beneficiary. This
--------------------------------
Agreement and the Procedures Agreement are made solely for the
benefit of the Company and Investor, and no other Person
(including, without limitation, employees, stockholders and
creditors of the Company) shall have any right, claim or cause of
action under or by virtue of this Agreement or the Procedures
Agreement, except to the extent such Person is entitled to
protection as contemplated by Section 28(b) or to expense
reimbursement pursuant to the Procedures Agreement or may assert
a claim for indemnity pursuant to the Procedures Agreement.

SECTION 23. Assignment. Except as otherwise provided
----------
herein, Investor may assign all or part of its rights under this
Agreement to any of its partners (each of whom may assign all or
part to its Affiliates) or to any fund or account managed or
advised by Fidelity Management Trust Company and may assign any
Securities (or the right to purchase any Securities) to any
lawfully qualified Person or Persons, and the Company may assign
this Agreement to any Person with which it may be merged or
consolidated or to whom substantially all of its assets may be
transferred in facilitation of the consummation of the Plan and
the effectuation of the issuance and sale of the Securities as
contemplated hereby or by the Related Agreements. None of such
assignments shall relieve the Company or Investor of any
obligations hereunder, under the Procedures Agreement or under
the Related Agreements.

SECTION 24. Counterparts. This Agreement may be
------------
executed by the parties hereto in counterparts and by telecopy,
each of which shall be deemed to constitute an original and all
of which together shall constitute one and the same instrument.
With respect to signatures transmitted by telecopy, upon request
by either party to the other party, an original signature of such
other party shall promptly be substituted for its facsimile.

SECTION 25. Invalid Provisions. If any provision of
------------------
this Agreement is held to be illegal, invalid or unenforceable
under any present or future laws, rules or regulations, and if
the rights or obligations of Investor and the Company under this
Agreement will not be materially and adversely affected thereby,
(a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c)
the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom, and (d)
in lieu of such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be
possible. If the rights and obligations of Investor or the
Company will be materially and adversely affected by any such
provision held to be illegal, invalid or unenforceable, then
unless such provision is waived in writing by the affected party
in its sole discretion, this Agreement shall be null and void.

SECTION 26. Tagalong Rights. On the Effective Date,
----------------
Investor shall enter into a written agreement for the benefit of
all holders of Class B Common (other than Investor and its
Affiliates) whereby Investor shall agree, for a period of three
years after the Effective Date, not to sell, in a single
transaction or related series of transactions, shares of Common
Stock representing 51% or more of the combined voting power of
all shares of Common Stock then outstanding unless such holders
shall have been given a reasonable opportunity to participate
therein on a pro rata basis and at the same price per share and
on the same economic terms and conditions applicable to Investor;
provided, however, that such obligation of Investor shall not
apply to any sale of shares of Common Stock made by Investor (i)
to any Affiliate of Investor, (ii) to any Affiliate of Investor s
partners, (iii) pursuant to a bankruptcy or insolvency
proceeding, (iv) pursuant to judicial order, legal process,
execution or attachment, (v) in a widespread distribution
registered under the Securities Act of 1933, as amended
("Securities Act") or (vi) in compliance with the volume
---------------
limitations of Rule 144 (or any successor to such Rule) under the
Securities Act.

SECTION 27. Stock Legend. All Notes issued to Investor
------------
pursuant to the Plan and all certificates representing shares of
Common Stock issued to Investor pursuant to the Plan shall be
conspicuously endorsed with an appropriate legend to the effect
that such Notes or shares may not be sold, transferred or
otherwise disposed of except in compliance with (i) Section 26
and (ii) applicable securities laws.

SECTION 28. Directors' Liability and Indemnification.
------------------------------------------

(a) Upon, and at all times after, consummation of the
Plan, the certificate of incorporation of the Company shall
contain provisions which (i) eliminate the personal liability
of the Company's former, present and future directors for monetary
damages resulting from breaches of their fiduciary duties to the
fullest extent permitted by applicable law and (ii) require the
Company, subject to appropriate procedures, to indemnify the
Company's former, present and future directors and executive
officers to the fullest extent permitted by applicable law. In
addition, upon consummation of the Plan, the Company shall enter
into written agreements with each person who is a director or
executive officer of the Company on the date hereof providing for
similar indemnification of such person and providing that no
recourse or liability whatsoever with respect to this Agreement,
the Procedures Agreement, the Related Agreements, the Plan or the
consummation of the transactions contemplated hereby or thereby
shall be had, directly or indirectly, by or in the right of the
Company against such person. Notwithstanding anything contained
herein to the contrary, the provisions of this Section 28(a)
shall not be applicable to any person who ceased being a director
of the Company at any time prior to March 1, 1994.

(b) Investor agrees, on behalf of itself and its
partners, that no recourse or liability whatsoever (except as
provided by applicable law for intentional fraud, bad faith or
willful misconduct) shall be had, directly or indirectly, against
any person who is a director or executive officer of the Company
on the date hereof with respect to this Agreement, the Procedures
Agreement, the Related Agreements, the Plan or the consummation
of the transactions contemplated hereby or thereby, such recourse
and liability, if any, being expressly waived and released by
Investor and its partners as a condition of, and in consideration
for, the execution and delivery of this Agreement.

SECTION 29. Bankruptcy Court Approval. This Agreement
--------------------------
shall not become effective for any purpose unless and until the
Bankruptcy Court shall have entered the Confirmation Order.

SECTION 30. Jurisdiction of Bankruptcy Court. The
-----------------------------------
parties agree that the Bankruptcy Court shall have and retain
exclusive jurisdiction to enforce and construe the provisions of
this Agreement.

SECTION 31. Interpretation. In this Agreement, unless
--------------
a contrary intention appears, (i) the words "herein", "hereof"
and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section or other
subdivision and (ii) reference to any Section means such Section
hereof. The Section headings herein are for convenience only and
shall not affect the construction hereof. No provision of this
Agreement shall be interpreted or construed against either party
solely because such party or its legal representative drafted
such provision.

SECTION 32. Termination. This Agreement shall
-----------
terminate concurrently with the termination of the Procedures
Agreement.

AMWEST PARTNERS, L.P.

By: AmWest Genpar, Inc.,
its General Partner

By: _______________________________
Title: ____________________________

Accepted and Agreed to
this 11th day of March, 1994.

AMERICA WEST AIRLINES, INC.
as Debtor and Debtor-in-Possession

By: _______________________________
Title: ____________________________
<PAGE>
SCHEDULE I
TO
INVESTMENT AGREEMENT

1. On October 26, 1993, the National Mediation board
certified the Airline Pilots Association as
collective bargaining agent for the Company's
flight deck crew members in NMB Case No. R-6213.
As of March 3, 1994, the union remained in a
process of internal organization consisting of a
membership drive and election of local union
officers. No proposals for a collective bargaining
agreement have yet been tendered. The Company
anticipates a formal exchange of opening proposals
as contemplated by the Railway Labor Act to occur
in mid-April.

2. On February 15, 1989 in NMB Case No. R-5817, the
Association of Flight Attendants lost an election
to determine whether the Association would be the
bargaining agent for certain of the Company's
Customer Service Representatives. The NMB has
ordered a rerun election and a determination of
eligibility to vote in such a rerun election is
on-going. No date for a rerun election has yet
been set by the NMB.

3. The Company is subject to an informal inquiry by a
governmental agency as described in the letter,
dated February 22, 1994, from Martin J. Whalen, Sr.
Vice President and General Counsel of the Company,
to Richard P. Schifter, counsel for Investor.

<PAGE>

Exhibit A
---------

Stock Purchase Warrants

Indicative Summary of Key Terms and Conditions

Issuer America West (the "Company").
-------

Issue Stock Purchase Warrants (the
"Warrants").
--------

Number Warrants to purchase 6,428,572
shares of the Company's Class B
Common Stock ("Common Stock").
------------

Exercise Price The Exercise Price for the Warrants
will be determined by the
Bankruptcy Court based on a per
share price for the Common Stock
which assumes that all holders of

Prepetition Claims have received
full recovery in respect thereof as
of the Effective Date.

Expiration The Warrants will be exercisable by
the holders thereof at any time on
or prior to the fifth anniversary
of the Effective Date.

Redemption The Warrants will not be
redeemable.

Anti-Dillution Adjustments The number of shares of Common
Stock purchasable upon exercise of
each Warrant will be adjusted upon
(i) payment of a dividend payable
in, or other distribution of,
Common Stock to all of the then
current holders of Common Stock,
(ii) a combination, subdivision or
reclassification of Common Stock,
and (iii) rights issuances.

Common Stock When delivered, the Common Stock
purchased upon exercise of the

Warrants will be fully paid and
nonassessable.

Voting Rights The holders of the Warrants will
not have any voting rights in
respect thereof.

Merger The holders of the Warrants will be
protected in the case of a merger
or other similar transaction
involving the Company.
<PAGE>

Exhibit B
---------

Senior Unsecured Notes

Indicative Summary of Key Terms and Conditions

Issuer (Reorganized) America West
Airlines, Inc. (the "Company").
-------

Issue Senior Unsecured Notes (the
"Notes").
-----

Principal Amount $103,000,000.

Maturity Seven years from issuance.

Interest Rate The Notes will bear interest,
payable semiannually, in arrears at
a fixed rate equal to 10% per
annum.

Ranking The Notes will rank pari passu with
all existing and future senior
unsecured indebtedness of the
Company.

Operational Redemption The Notes will not be redeemable
during the first three years except
that the Company may redeem up to
$30 million in principal amount of
the Notes issued to Investor and up
to 1 million in principal amount
of the Notes issued to GPA, in each
case from the Net Proceeds of any
underwritten offering of primary
shares of the Company's Class B
Common Stock at a purchase price
equal to 108% of principal plus
accrued interest as of the date of
redemption. Thereafter, the Notes
are redeemable at the Company's
option, in whole or in part, after
30 days notice. The redemption
price will be equal to the
following percentage of the
principal amount redeemed in each
of the following years plus accrued
interest:

Year 4: 108%
Year 5: 105.3%
Year 6: 102.7%
Year 7: 100.1%

Mandatory Redemption None.

Covenants and Other Provisions Purchasers will negotiate
in good faith standard
covenants and provisions,
including, but not limited
to, limitations on
additional indebtedness,
liens, restricted payments,
investments, mergers,
asset sales, transactions
with affiliates, and the
like.

<TABLE>
<CAPTION>
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(in thousands of dollars except per share amount)

Years ended December 31,
------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Computation for Statements
of Operation:
Income (loss) before
extraordinary item. . . . . . . . $ 37,165 $ (131,761) $ (222,016) $ (76,695) $ 12,803
Adjustment for interest
on debt reduction . . . . . . . . 4,210 - - - 1,414
Preferred stock dividend
requirement . . . . . . . . . . . - (1,672) (1,673) (1,673) (1,673)
----------- ----------- ----------- ----------- -----------

Income (loss) applicable
to common stock before
extraordinary item. . . . . . . . 41,375 (133,433) (223,689) (78,368) 12,544
Extraordinary item, tax
benefit . . . . . . . . . . . . . - - - - 795
Extraordinary item, net . . . . . . - - - 2,024 7,215
----------- ----------- ----------- ----------- -----------
Income (loss) applicable
to common stock . . . . . . . . . $ 41,375 $ (133,433) $ (223,689) $ (76,344) $ 20,554
=========== =========== =========== =========== ===========

Weighted average number
of common shares
outstanding . . . . . . . . . . . 24,480,487 23,914,298 21,533,992 18,395,970 16,761,622
Assumed exercise of
stock options and
warrants (a). . . . . . . . . . . 3,044,504 - - - 3,864,273
----------- ----------- ----------- ----------- -----------

Weighted average number
of common shares
outstanding as adjusted . . . . . 27,524,991 23,914,298 21,533,992 18,395,970 20,625,895
=========== =========== =========== =========== ===========

Primary earnings per common share:
Income (loss) before
extraordinary item. . . . . . . . $ 1.50 $ (5.58) $ (10.39) $ (4.26) $ 0.61
Extraordinary item. . . . . . . . . - - - 0.11 0.39
----------- ----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . $ 1.50 $ (5.58) $ (10.39) $ (4.15) $ 1.00
=========== =========== =========== =========== ===========

Loss before extraordinary item. . . $ (131,761) $ (222,016) $ (76,695)
Preferred stock dividend
requirement . . . . . . . . . . . (1,672) (1,673) (1,673)
Interest adj net of taxes . . . . . 4,964 4,408 2,818
----------- ----------- -----------

Loss applicable to common stock
before extraordinary item . . . . (128,469) (219,281) (75,550)

Extraordinary item, tax benefit . . 2,756 2,448 1,490
Extraordinary item, net . . . . . . - - 2,024
----------- ----------- -----------
Loss applicable to common stock . . $ (125,713) $ (216,833) $ (72,036)
=========== =========== ===========

Weighted average number
of common shares outstanding. . . . 23,914,298 21,533,992 18,395,970
Assumes exercise of stock options
and warrants. . . . . . . . . . . . 7,383,922 6,704,746 4,922,120
----------- ----------- -----------

Weighted average number of common
shares as adjusted. . . . . . . . . 31,298,220 28,238,738 23,318,090
=========== =========== ===========

Primary earnings per common share:
Loss before extraordinary item. . . $ (4.10) $ (7.77) $ (3.24)
Extraordinary item. . . . . . . . . 0.09 0.09 0.15
----------- ----------- -----------
Net loss (c). . . . . . . . . . . . $ (4.01) $ (7.68) $ (3.09)
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands of dollars except per share amount)

<CAPTION>
Years ended December 31,
-------------------------------------------------------------------
FULLY DILUTED EARNINGS PER SHARE 1993 1992 1991 1990 1989
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>

Computation for Statements of Operations:
Income (loss) before
extraordinary items. . . . . . . . . $ 37,165 $ (131,761) $ (222,016) $ (76,695) $ 12,803
Adjustment for interest
on debt reduction. . . . . . . . . . 5,812 - - - 1,219
Preferred stock dividend
requirement. . . . . . . . . . . . . - (1,672) (1,673) (1,673) (1,673)

----------- ----------- ----------- ----------- -----------
Income (loss) applicable
to common stock before
extraordinary items. . . . . . . . . 42,977 (133,433) (223,689) (78,368) 12,349
Extraordinary items,
tax benefit. . . . . . . . . . . . . - - - 2,024 7,902
----------- ----------- ----------- ----------- -----------

Net income (loss). . . . . . . . . . . $ 42,977 $ (133,433) $ (223,689) $ (76,344) $ 20,251
=========== =========== =========== =========== ===========

Weighted average number of
common shares outstanding. . . . . . 24,480,487 23,914,298 21,533,992 18,395,970 16,761,622
Assumed exercise of stock
options and warrants (a) . . . . . . 4,240,761 - - - 3,864,273
----------- ----------- ----------- ----------- -----------

Weighted average number of common
shares outstanding as adjusted . . . 28,721,248 23,914,298 21,533,992 18,395,970 20,625,895
=========== =========== =========== =========== ===========

Fully diluted income (loss)
per common share:
Income (loss) before
extraordinary items. . . . . . . . . $ 1.50 $ (5.58) $ (10.39) $ (4.26) $ 0.60
Extraordinary items. . . . . . . . . . - - - 0.11 0.38
----------- ----------- ----------- ----------- -----------
Net income (loss) (b). . . . . . . . . $ 1.50 $ (5.58) $ (10.39) $ (4.15) $ 0.98
=========== =========== =========== =========== ===========

Additional Fully Diluted Computation:

Additional adjustment to net
income (loss) as adjusted per
fully diluted computation above
Income (loss) before
extraordinary items as
adjusted per fully diluted
computation above. . . . . . . . . $ 37,165 $ (131,761) $ (222,016) $ (76,695) $ 12,803
Add - Interest on 7.75%
subordinated debenture,
net of taxes . . . . . . . . . . . - - 869 1,829 1,853

Add - Interest on 7.5%
subordinated debenture,
net of taxes . . . . . . . . . . . - - 806 1,712 1,735
Add - Interest on 11.5%
subordinated debenture,
net of taxes . . . . . . . . . . . - - 3,506 7,629 6,948
Add interest on debt
reduction, net of taxes. . . . . . 5,812 4,964 4,352 2,777 1,219
----------- ----------- ----------- --------- -----------
Income (loss) before
extraordinary items
as adjusted. . . . . . . . . . . . 42,977 (126,797) (212,483) (62,748) 24,558
Extraordinary items. . . . . . . . . - 2,756 5,293 9,399 13,828
----------- ----------- ----------- --------- -----------
Net income (loss). . . . . . . . . . $ 42,977 $ (124,041) $ (207,190) $ (53,349) $ 38,386
=========== =========== =========== ========= ===========

Additional adjustment to
weighted average number of
shares outstanding
Weighted average number of
shares outstanding as
adjusted per fully diluted
computation above . . . . . . . . . 28,721,248 23,914,298 21,533,992 18,395,970 20,625,895
Additional dilutive effect of
outstanding options and warrants. . - 7,383,922 6,704,746 5,266,266 -
Additional dilutive effect
of assumed conversion
of preferred stock:
Series B 10.5%. . . . . . . . . . 851,294 1,164,596 1,164,596 1,164,596 1,164,596
Series C 9.75%. . . . . . . . . . 73,099 73,099 73,099 73,099 73,099
Additional dilutive effect of
assumed conversion of 7.75%
subordinated debenture. . . . . . 2,263,007 2,278,151 2,483,528 2,735,200 2,767,111
Additional dilutive effect
of assumed conversion of 7.5%
subordinated debenture. . . . . . 2,272,548 2,291,607 2,347,604 2,551,060 2,582,357
Additional dilutive effect of
assumed conversion of 11.5%
subordinated debenture. . . . . . 7,328,201 7,486,391 9,081,162 9,866,509 8,995,021
----------- ----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding
as adjusted . . . . . . . . . . . 41,509,397 44,592,064 43,388,727 40,052,700 36,208,079
=========== =========== =========== =========== ===========

Fully diluted income (loss)
per common share:
Income (loss) before
extraordinary items . . . . . . . . $ 1.04 $ (2.84) $ (4.90) $ (1.57) $ 0.68
Extraordinary items . . . . . . . . . - 0.06 0.12 0.23 0.39
----------- ----------- ----------- ----------- -----------
Net income (loss) (c) . . . . . . . . $ 1.04 $ (2.78) $ (4.78) $ (1.34) $ 1.07
=========== =========== =========== =========== ===========
- ----------------------

(a) The stock options and warrants are included only in the periods
in which they are dilutive.

(b) The calculation is submitted in accordance with Regulation S-K
Item 601 (b)(11) although not required by footnote 2 to
paragraph 14 of APB Opinion No. 15 because it results in
dilution of less than 3%.

(c) The calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although it is contrary to paragraph 40 of
APB Opinion No. 15 because it produces an antidilutive result.
</TABLE>

<TABLE>
AMERICA WEST AIRLINES, INC.

Computation of Ratio of Earnings to Fixed Charges

<CAPTION>
Years ended December 31,

- --------------------------------------------------------
1993 1992 1991 1990
1989
-------- -------- -------- --------
- --------
<S> <C> <C> <C> <C>
<C>
(in thousands except ratio of earnings
to fixed charges)

Computation of Earnings:

Income (loss) before income taxes and extraordinary item $ 37,924 $(131,761) $(222,016) $(76,695) $
20,040

Add:
Interest expense including amortization of debt expense 54,252 55,886 63,991 61,239
43,934
Interest portion of rent expense 81,795 102,314 106,414 77,537
58,759
--------- --------- --------- --------
- --------
Income (loss), as adjusted $ 173,971 $ 26,439 $ (51,611) $ 62,081
$122,733
========= ========= ========= ========
========

Computation of Fixed Charges:

Interest expense including amortization of debt expense $ 54,252 $ 55,886 $ 63,991 $ 61,239 $
43,934
Interest portion of rent expense 81,795 102,314 106,414 77,537
58,759
Capitalized interest - - 6,664 6,375

7,250
--------- --------- --------- --------
- --------
Fixed charges $ 136,047 $ 158,200 $ 177,069 $145,151
$109,943
========= ========= ========= ========
========

Ratio of earnings to fixed charges 1.28 (*) (*) (*)

1.12

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

(*) For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of income (loss)
before income taxes and extraordinary item plus fixed charges less capitalized interest. "Fixed charges"
consist of interest expense including amortization of debt expense, one-third of rent expense, which is
deemed to be representative of an interest factor, and capitalized interest. For the years ended
December 31,
1992, 1991, and 1990 earnings were insufficient to cover fixed charges by $131,761,000, $228,680,000,
and $83,070,000 respectively.

</TABLE>

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
America West Airlines, Inc., D.I.P.:

We consent to incorporation by reference in the registration statement nos.
2-84022, 2-84023, 2-89485, 2-92118, 2-95934, 33-1755, 33-1756, 33-5461,
33-5462, 33-5463, 33-14325, 33-14326, 33-14327, 33- 19888, 33-21763,
33-21764, 33-24600, 33-28481, 33-28478, 33-28480, 33- 35221, 33-35155,
33-35150, 33-35164, 33-40938 and 33-40939 on Forms S-8 of America West
Airlines, Inc., D.I.P. of our report dated March 18, 1994, relating to the
balance sheets of America West Airlines, Inc., D.I.P. as of December 31,
1993 and 1992, and the related statements of operations, cash flows and
stockholders' equity (deficiency) and related financial statement schedules
for each of the years in the three-year period ended December 31, 1993,
which report appears in the December 31, 1993 annual report on Form 10-K of
America West Airlines, Inc., D.I.P.

Our report dated March 18, 1994, contains an explanatory paragraph that
describes events and circumstances that raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements
and financial statement schedules do not include any adjustments that might
result from the outcome of that uncertainty. In addition, our report
refers to the adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, January 1, 1993.

KPMG PEAT MARWICK

Phoenix, Arizona
March 25, 1994