Contract

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*****]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Exhibit 10.05

IAE PROPRIETARY INFORMATION

FLEET HOUR AGREEMENT

between

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN, S.A. DE C.V.

and

IAE INTERNATIONAL AERO ENGINES AG

Page 1 of 37

IAE PROPRIETARY INFORMATION

Table of Contents

1.		Definitions			3
2.		FHA Services			7
3.		Period of Cover			7
4.		Shop Visit Coverage			8
5.		Lease Engine Support			9
6.		Transportation			10
7.		General Fleet Hour Agreement Services			10
8.		Excess Work			10
9.		Obligations of Vuela			12
10.		FHA Rates and Payment			14
11.		Escalation Protection			18
12.		Warranties			18
13.		Delays			19
14.		Duplicate Benefits			19
15.		Intellectual Property			20
16.		Amendment			21
17.		Assignment			21
18.		Exhibits			21
19.		Headings			21
20.		Notices			21
21.		Exclusion of Other Provisions and Previous Understandings			21
22.		Termination, Expiration and Events of Xxxxxxx			00
00.		Negation of Waiver			23
24.		Severability And Partial Invalidity			23
25.		Governing Law			23
26.		Limitation of Liability			24
27.		Publicity			24
28.		Confidentiality			24
29.		Records and Audit			24
Exhibit A Eligible Engine List					26
Exhibit B IAE FHA Escalation Formula					27
Exhibit C Accessories					28
Exhibit D Powerplant – Description					30
Exhibit E Addresses					33
Exhibit F IAE Engine Monitoring Services					36
Exhibit G Excess Work Labor and Fee Rates					37
Exhibit H FHA Rate Adjustment					38

Page 2 of 37

IAE PROPRIETARY INFORMATION

Fleet Hour Agreement

THIS FLEET HOUR AGREEMENT (the “Agreement”) is made this          day of          June 2007, between

IAE INTERNATIONAL AERO ENGINES AG		A joint stock company organized and existing under the laws of Switzerland, with a place of business at 000 Xxxx Xxxxxx, M/S 000-00, Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000, XXX, (hereinafter called “IAE”).
AND
CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN, S.A. DE C.V.		A corporation organized and existing under the laws of Mexico with a place of business at Xx. Xxxxxxxxxxxx Xxxxxxx # 000 Xxxxxx Xxxx, Xxxxxxx Lomas Santa Fe, Delegación Xxxxxx Xxxxxxx, Xxxxxx, Xxxxxxxx Xxxxxxx, X.X. 00000 Xxxxxx (hereinafter called “Vuela”).

(IAE and VUELA may be referred to herein collectively as the “Parties”, or individually as a “Party”.)

WHEREAS:

A. Vuela is acquiring from Airbus ***** new firm A319 aircraft powered by new V2527M-A5 engines and up to *****new option V2500 powered A320 family aircraft, and is purchasing from IAE ***** new V2527M-A5 firm spare engines as well as any additional option V2500-A5 spare engines necessary to support option aircraft acquired by Vuela;

B. Vuela and IAE have entered a General Terms Agreement, of even date herewith, for the sale of the spare V2527M-A5 engines and the supply of certain support services and parts for V2527M-A5 engines; and

C. IAE and Vuela now wish to agree upon terms whereby IAE shall arrange for, manage and subcontract certain maintenance of Vuela’s Eligible Engines (as hereinafter defined).

NOW THEREFORE IT IS AGREED AS FOLLOWS:

1. Definitions

1.1 “Accessory” or “Accessories” includes those items listed in Exhibit C to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible engines.

1.2 “Airbus” shall mean Airbus Industrie SAS.

1.3 “Aircraft” shall mean all or each of

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

1.3.1 The ***** Airbus A319 Firm Aircraft to be delivered in accordance with the schedule set forth in Exhibit B of the Support Contract, as such delivery schedule may be amended from time to time;

1.3.2 Up to ***** new V2500-A5 powered Airbus A320 family aircraft which Vuela may acquire in addition to the Aircraft identified in Clauses 1.3.1 above.

1.4 “Aircraft Maintenance Manual” or “AMM” means the aircraft maintenance manual published by Airbus for the Aircraft.

1.5 “Airworthiness Directive” shall mean any applicable airworthiness directive issued by the Aviation Authority based on certification rules current as of the date of this Agreement.

1.6 “Aviation Authority” shall mean the United States Federal Aviation Administration.

1.7 “Beyond Economic Repair” shall mean wear, tear or damage to an item of Eligible Engine that is beyond economic repair.

1.8 “BFE Item” shall mean those buyer furnished equipment items listed as such in Exhibit D of this Agreement.

1.9 “Business Day(s)” shall mean a Day other than a Saturday, Sunday or holiday scheduled by law for commercial banking institutions in the City of New York, New York, United States.

1.10 “Day” means a calendar day.

1.11 “DGAC” shall mean the Dirección General de Aeronáutica Civil of Mexico.

1.12 “EBU Item” shall mean those engine build up items listed as such in Exhibit D to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.

1.13 “Eligible Engine(s)” shall mean (a) the new Engines operated by Vuela originally installed on the Aircraft, (b) the Spare Engines, and (c) any other Engines mutually agreed by the parties and listed in Exhibit A, in each case so long as such Engine is operated by Vuela. Exhibit A to this Agreement identifies the Eligible Engines as of the date hereof by serial number, and will be updated by the Parties from time to time to identify Eligible Engines by serial number as Vuela takes delivery of the Aircraft and the Spare Engines (or as the parties agree to cover other Engines under this Agreement).

1.14 “Eligible Engine Flight Cycles” shall mean, for each Eligible Engine, the number of times the wheels of an Aircraft on which the Eligible Engine is installed leaves the ground on take-off during regularly scheduled revenue service.

1.15 “Eligible Engine Flight Hours” shall mean, for each Eligible Engine, the sum total of each hour or part thereof (fractions thereof measured to two decimal places) elapsing from the moment the wheels of an Aircraft on which the Eligible Engine is installed leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

1.16 “Eligible Removal” shall mean the necessary removal of an Eligible Engine from an Aircraft during the Period of Cover following all reasonable and appropriate line maintenance actions and troubleshooting in accordance with the AMM and the FHA Manager’s recommendations, where such removal is due to (i) exceedance of AMM limits for continued operation as mutually agreed by Vuela and the FHA Manager to be necessary (such agreement not to be unreasonably withheld); (ii) Life Limited Parts time expiry, provided the last Shop Visit for the Eligible Engine was performed by IAE during the Period of Cover; or (iii) the written recommendation of the FHA Manager.

1.17 “Engine(s)” shall mean the basic IAE V2500-A5 turbofan engine, described in the V2500 Turbofan Engine Model Specifications set forth in Exhibit A of the Support Contract, and which excludes Accessories, EBU Items and QEC Items.

1.18 “Engine Manual” shall mean the IAE document which sets forth the requirements for Engine off-wing repair.

1.19 “Excess Work” shall mean work undertaken by the Maintenance Center during a Shop Visit pursuant to this Agreement that is not covered by the FHA Rates, as further described in Clause 0 of this Agreement.

1.20 “Failure” shall mean the breakage or malfunction of a Part (or Parts) rendering the Engine unserviceable and incapable of continued operation without corrective action which is not as a result of misuse, neglect, accident, maintenance error, or improper maintenance activities by any party other than IAE or the Maintenance Center.

1.21 “FHA” shall mean this Fleet Hour Agreement.

1.22 “FHA Manager” shall mean the manager provided by IAE for the support of the operation of this Agreement in accordance with the provisions of Clause 7 of this Agreement.

1.23 “FHA Rate(s)” shall mean the rate(s) collectively as set forth in Clause 10.1 below.

1.24 “Foreign Object Damage” shall mean damage to an Eligible Engine caused by the non-negligent ingestion of birds, hailstones or Runway Debris only.

1.25 “Life Limited Parts” or “LLPs” shall mean the Parts identified in Chapter 5 of the V2500-A5 Engine Manual as having specific life limits.

1.26 “Maintenance Center” shall mean the IAE shareholder maintenance center(s) designated by IAE and agreed by Vuela (such agreement not to be unreasonably withheld, conditioned, or delayed) from time to time to perform services under this Agreement and which is approved by the Aviation Authority as a certified repair station.

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IAE PROPRIETARY INFORMATION

1.27 “Maintenance Management Plan” or “MMP” shall mean the then-current V2500 engine maintenance planning documents described in Clause 7 of this Agreement, as customized for Vuela.

1.28 “Miscellaneous Shop Visit” shall mean any visit of an Eligible Engine to the Maintenance Center(s) following an Eligible Removal resulting from Failure of a Part in an Eligible Engine or any other unplanned cause and which does not result in a Restoration Shop Visit being undertaken.

1.29 “Part(s)” shall mean Engine part(s) provided under this Agreement and delivered by IAE to Vuela as original equipment in an Eligible Engine, or Engine spare parts sold to Vuela by IAE or Engine spare parts delivered to the designated Maintenance Center in support of Eligible Engines, excluding Accessories, EBU Items and QEC Items.

1.30 “Period of Cover” shall mean the applicable period for which IAE agrees to provide the services for each Eligible Engine pursuant to this Agreement, as set forth in Clause 3 of this Agreement.

1.31 “QEC Item” shall mean those items listed as such in Exhibit D to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.

1.32 “Restoration Shop Visit” shall mean any visit of an Eligible Engine to the Maintenance Center(s) following an Eligible Removal to accomplish Engine performance restoration sufficient to make the Eligible Engine serviceable in accordance with the then current revision of the MMP for the relevant Engine (or any successor to such MMP), IAE technical publications, Airworthiness Directives, and other IAE and Airworthiness Authority approved maintenance procedures, and which, as a minimum, includes a Level 3 refurbishment of the combustor and high pressure turbine.

1.33 “Runway Debris” shall mean any stones, gravel, or other small organic objects commonly found on properly maintained commercial airport runways.

1.34 “Service Bulletin(s)” shall mean those IAE target V2500-A5 service bulletins (excluding service bulletins for Accessories) as indicated in the MMP for Vuela, including service bulletins with a compliance code ***** which provide reliability and maintenance cost improvements;

1.35 “Shop Visit” shall mean either a Restoration Shop Visit or a Miscellaneous Shop Visit, as applicable.

1.36 “Spare Engine(s)” shall mean all or each of the new V2500-A5 Engines currently identified as Spare Engines in the Support Contract and either purchased or to be purchased by Vuela from IAE and to be delivered in accordance with the schedule set forth in Exhibit B of the Support Contract, as such delivery schedule may be amended from time to time in accordance with the Support Contract.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

1.37 “Support Contract” shall mean the V2500 General Terms Agreement, between IAE and Vuela dated of even date herewith, including all side letters and amendments thereto.

1.38 “Taxes” shall mean imposts, taxes, duties, levies, fees, assessments or other like charges imposed by any government entity or taxing authority.

1.39 “Testable Engine” shall mean an Eligible Engine with Accessories (including without limitation the Pneumatic Starter, ATA Code 80-13-41, and the Pneumatic Starter Valve, ATA Code 80-13-51) installed so as to enable the Engine to be tested either prior to or following its repair without the need for making use of units provided by the Maintenance Center, as further described in the applicable Engine Manual.

1.40 “Vuela Affiliates” shall mean any subsidiaries or other affiliates of Vuela that are either wholly-owned or otherwise controlled by Vuela or its shareholders.

1.41 “Workscope” shall mean an IAE written repair request to the Maintenance Center(s) compliant with the MMP that authorizes the Maintenance Center(s) to undertake work on Eligible Engines.

2. FHA Services

IAE shall provide to Vuela the following FHA service coverage for the Period of Cover for each Eligible Engine:

2.1 Engine Shop Visit Coverage in accordance with the terms of Clause 4;

2.2 Lease Engine Coverage in accordance with the terms of Clause 5;

2.3 General FHA Services in accordance with the terms of Clause 7; and

2.4 Excess Work as required in accordance with the terms of Clause 0.

The provision of such coverage by IAE is subject to Vuela not being in material breach (beyond any applicable grace period) of its obligations under Clause 9.

3. Period of Cover

3.1 FHA coverage and payment as set forth in this FHA will begin for each Eligible Engine as of the date of each Engine’s initial entry into service and will remain in force and effect for each Eligible Engine as follows:

3.1.1 For fifty percent (50%) of the Eligible Engines, until the expiration of ten (10) years after delivery of each such Eligible Engine (“Period of Cover A”); and

3.1.2 For each of the remaining fifty percent (50%) of the Eligible Engines, until the later of (a) the expiration of ten (10) years after delivery of each such Eligible Engine; and (b) completion of two (2) Restoration Shop Visits for each such Eligible Engine (“Period of Cover B”).

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IAE PROPRIETARY INFORMATION

3.2 Vuela shall have the option to elect which Period of Cover is applicable for each Eligible Engine within the constraints listed above by providing written notice to the IAE FHA Manager of its election for each Eligible Engine by no later than the date of induction for the first Restoration Shop Visit of each such Engine. For each Eligible Engine for which Vuela has not provided notice of its election prior to such Engine’s first Restoration Shop Visit, the applicable Period of Cover shall be Period of Cover A.

3.3 In the event that after the Period of Cover for an Eligible Engine has been determined in accordance with 3.2 above, Vuela sells or otherwise transfers such Engine to a lessor or financier as part of a sale and leaseback or similar financing arrangement, then Vuela at its election may request in writing that such Eligible Engine be reallocated from Period of Cover A to Period of Cover B (or vice versa). Following IAE’s receipt of Vuela’s request, the Parties will mutually evaluate whether some or all of the Eligible Engines can be reallocated between the two Period of Cover options to accommodate Vuela’s change in financing while at the same time maintaining (a) the Period of Cover balance set forth in Clause 3.1 and (b) the economic effects of the previous allocation. If the Parties determine that such reallocation can be accomplished within the criteria set forth in the preceding sentence, the Parties will amend Exhibit A to this Agreement to reflect the agreed-upon reallocation.

3.4 The Parties agree to amend Exhibit A to this Agreement from time to time to accurately reflect the Period of Cover applicable for each Eligible Engine, as determined in accordance with this Clause 3.

4. Shop Visit Coverage

Following an Eligible Removal, the affected Eligible Engine shall be forwarded to the Maintenance Center. IAE shall provide Vuela with the proposed Workscope as early as possible (but in no event less than 3 days) prior to induction for a Shop Visit. IAE shall reasonably consider any modifications or additions to the Workscope proposed by Vuela and shall incorporate into such Workscope all such modifications or additions which are required to be made in accordance with the MMP and this Agreement. Notwithstanding the foregoing, the parties acknowledge that IAE shall have the ultimate control of the Workscope. IAE shall communicate the Workscope to the Maintenance Center and cause the Maintenance Center to complete the Shop Visit and provide Shop Visit reports with respect thereto in a timely manner. IAE shall pay to the Maintenance Center all charges directly incurred in respect of goods, work and services carried out during the Shop Visit, excluding charges for Excess Work (if such charges have been invoiced directly to Vuela), including for the following items:

4.1 Labor, new and used material, handling fees and charges, vendor fees, and test cell fees (including fuel and oil consumed at test) required to:

4.1.1 perform Engine reconditioning and repair in accordance with the Workscope to make the Eligible Engine serviceable to the specifications established in accordance with the then current customized MMP for Vuela, IAE technical publications, Airworthiness Directives and other IAE or FAA approved maintenance procedures.

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IAE PROPRIETARY INFORMATION

4.1.2 perform required Eligible Engine testing and retesting required by the Maintenance Center;

4.1.3 inspect, repair or replace Parts as required by Airworthiness Directives;

4.1.4 incorporate Service Bulletins ***** in accordance with the customized MMP;

4.1.5 Remove, repair or replace LLPs, except as provided in Clause 8.1.16 below;

4.1.6 provide Shop Visit documentation as follows:

(a) serviceability tag FAA Form 8130-3 or -4, as applicable, and FAA Form 337;

(b) a shop findings report on the services accomplished, including a report stating any damage detected and repairs accomplished;

(c) a list of all Service Bulletins and Airworthiness Directives incorporated;

(d) a list of all LLPs with associated times and cycles since new;

(e) test cell performance data;

(f) a list of Accessories by serial number.

4.2 IAE’s obligations for an Eligible Engine Shop Visit caused by Foreign Object Damage shall be limited to the provision of repair work and Parts provided through the Maintenance Center to a maximum of ***** per event and such liability shall only be incurred to the extent that the damage is uninsured or not covered by insurance for failure to have met any deductible.

5. Lease Engine Support

*****

5.2 IAE’s obligation to provide such V2500-A5 lease Engine to Vuela is contingent on Vuela being in compliance with its obligations under Clause 9 and Vuela demonstrating the availability of reasonably sufficient Spare Engines, Accessories, components and Parts to maintain proper support of the Eligible Engines.

5.3 Unless otherwise agreed in writing by the FHA Manager, Vuela shall ship to IAE any lease Engines furnished pursuant to 5.1 above within the earlier of the thirty (30) days (as extended if applicable) as described above, or five (5) days after a Vuela Engine becomes available for installation at Vuela’s facilities.

5.4 Should Vuela require a spare Engine to support a shop visit not covered by this Agreement or that does not otherwise meet the above conditions, all terms of the STOBL then in effect between IAE and Vuela, including all applicable rates, charges and fees, shall apply.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

6. Transportation

6.1 Following an Eligible Removal, Vuela shall deliver the affected Eligible Engines to the Maintenance Center in a Testable Engine configuration, with all Accessories attached and in a serviceable condition.

6.2 Vuela shall be responsible for transportation of Eligible Engines to the applicable Maintenance Center, and the return of such Engines from the Maintenance Center, including risk of loss or damage during such transportation.

7. General Fleet Hour Agreement Services

IAE shall provide the following additional services:

7.1 A customized MMP for the Eligible Engines will be produced for Vuela by IAE in consultation with Vuela, taking into account the specifics of the operation of the Aircraft and Eligible Engines. The MMP shall be determined in good faith and on a nondiscriminatory basis by IAE, and approved by Vuela (such approval not to be unreasonably withheld or delayed). The MMP shall establish maintenance requirements including LLP management, incorporation of applicable Service Bulletins and Aviation Authority Airworthiness Directive requirements and Eligible Engine removal planning.

7.2 Engine monitoring data program services set forth in Exhibit E;

7.3 The following FHA Engine management and maintenance planning services (which shall normally be undertaken by the FHA Manager):

7.3.1 overall FHA program coordination;

*****

8. Excess Work

8.1 If a Maintenance Center charges Vuela or IAE for Excess Work, such charges shall be paid for by Vuela directly to the Maintenance Center or, if the Maintenance Center has invoiced IAE for such charges, to IAE in accordance with Clause 10.3 of this Agreement. “Excess Work” shall mean any labor, material and other charges for Eligible Engines that arise from the following:

8.1.1 repairs for inflight and/or ground accident damage, except Foreign Object Damage to the extent of IAE’s responsibility under Clause 4.2;

8.1.2 Service Bulletins requested by Vuela which are not required in accordance with the MMP;

8.1.3 Maintenance of any items other than Eligible Engines;

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

8.1.4 Line Maintenance requirements, except if performed at a Shop Visit in accordance with the requirements of the MMP;

8.1.5 Incremental shop visits or additional work that was not required to be performed in accordance with the requirements of the MMP and was requested and authorized by Vuela in order to enable it to meet any lease return conditions;

8.1.6 Misuse, neglect, accident or maintenance error or improper maintenance activity by any party other than IAE or the Maintenance Center;

8.1.7 The removal and replacement of non-IAE approved part(s) or repaired part(s) and damage caused by such part(s);

8.1.8 Occurrences outside the course of Vuela’s normal business activities as a civil commercial airline, such occurrences including, but not limited to, acts of God, use by government agencies and services, acts of war, rebellion, seizure, terrorism, riots or other belligerent acts;

8.1.9 Exceedance of Engine operating limits published by IAE;

8.1.10 Work required to repair damage resulting from Engine operation in an abrasive or corrosive environment, excluding normal operations (for example ingestion of volcanic ash, fire extinguishing chemicals, or desiccants, etc.). *****

8.1.11 Delivery to the Maintenance Center with missing or non-serviceable Parts or Accessories, requiring the use of units provided by the Maintenance Center to permit the testing of the Eligible Engine following its refurbishment;

8.1.12 Delivery to the Maintenance Center with Parts or Accessories which require re-certification;

8.1.13 The exchanging of QEC Items or EBU Items between installed Engines and Spare Engines or the provisioning of such QEC Items or EBU Items;

8.1.14 Work requested by Vuela which is not covered by the terms of this Agreement;

8.1.15 Charges associated with placing an Eligible Engine into a Testable Engine configuration, unless the Eligible Engine was delivered by Vuela to the Maintenance Center in a Testable Engine configuration;

8.1.16 Charges for material and handling associated with replacing Life Limited Parts due to time expiry or MMP build requirements;

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

8.1.17 Inspection, repair, or replacement of Accessories, QEC Items, EBU Items, or BFE Items, and provisioning, restocking, and availability of such items; or

8.1.18 Charges associated with IAE’s provision to Vuela of any accident and disassembly reports and pictures or “dirty fingerprint” records that may be reasonably requested by Vuela from time to time.

8.2 In addition to the above, at the discretion of IAE, “Excess Work” may mean any labor, material and other charges for Eligible Engines that arise from the failure of Vuela to undertake any of its obligations as set out in Clause 9 below. IAE shall provide ***** days’ notice that such failure shall result in Excess Work, during which time, Vuela may rectify such failure.

8.3 In the event IAE determines that the Workscope for a Shop Visit of an Eligible Engine will consist entirely of Excess Work, then the FHA Manager shall so notify Vuela and obtain Vuela’s written authorization to proceed prior to the commencement of such work.

9. Obligations of Vuela

Vuela agrees to fulfill, or to cause the Vuela Affiliates that operate or maintain the Aircraft and Engines to fulfill, the following responsibilities and perform the following tasks and to reasonably cooperate with IAE in the performance of IAE’s responsibilities hereunder.

9.1 Data and Procedures

Vuela shall at its own expense maintain Eligible Engine electronic condition monitoring capabilities for each Eligible Engine, and with respect to information and data required for the performance of this Agreement, Vuela shall:

9.1.1 maintain, collect and provide to IAE performance trend monitoring data on each Eligible Engine in accordance with Exhibit E, maintain timely records in form and detail sufficient for the accurate and expeditious administration of the terms of this Agreement including the assessment of operating conditions relative to those set out in Clause 10.5 of this Agreement;

9.1.2 make available, and provide access to IAE’s provider of electronic condition monitoring data analysis, all data collected in accordance with 9.1.1 above in an electronic format agreed to by IAE, as required for the operation and administration of this Agreement;

9.1.3 implement and follow the IAE recommendations resulting from analysis of the performance trend monitoring data;

9.1.4 within ***** Days after the end of each month during the Period of Cover, report to IAE, in an electronic format agreed to by IAE, the hours and cycles flown, take off derate, and temperature (ISA+X° C) for each flight by each Eligible Engine during the preceding month;

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

9.1.5 ensure that all data that is available to Vuela and requested by IAE to facilitate the correction and/or diagnosis of any problem causing an Eligible Engine Removal is promptly made available to IAE;

9.1.6 ensure that each Eligible Engine delivered to the Maintenance Center is accompanied by a record of Eligible Engine total time and cycles, date of Eligible Engine removal, and reason for removal;

9.1.7 upon written request from IAE, confirm the serial numbers of Eligible Engines installed on the Aircraft; and

9.1.8 after Eligible Removals, ship Eligible Engines to the applicable Maintenance Center in a Testable Engine configuration.

9.2 Engine Preparation for Transportation

For the purposes of the transportation of Eligible Engines as required under this Agreement, Vuela shall:

9.2.1 unless otherwise mutually agreed in writing, make Eligible Engines available for shipment as soon as practicable following Eligible Removal, but in any event Vuela shall deliver Eligible Engines to the Maintenance Center prior to the scheduled induction date for each Eligible Engine Shop Visit;

9.2.2 maintain in a serviceable condition one (1) IAE approved transportation stand per spare Engine plus one (1) additional serviceable IAE approved transportation stand; and

9.2.3 at the time of an Eligible Removal, remove the Eligible Engine from the Aircraft, mount it on an IAE approved transportation stand and prepare such Eligible Engine for shipment, all in accordance with the procedures specified in the applicable IAE manuals.

9.3 Operation, Maintenance and Troubleshooting of Eligible Engines

Vuela shall operate, maintain and troubleshoot the Eligible Engines consistent with standard industry practice in accordance with the applicable Airbus operating, maintenance and troubleshooting manuals, the then current MMP for Vuela, and IAE’s written recommendations and instructions (including, but not limited to, service information letters, all operator wires and non-modification service bulletins, component maintenance manuals and Airworthiness Directives), provided that such recommendations and instructions are (i) reasonable with reference to industry standards, and (ii) apply generally to and are applied generally (on a non-discriminatory basis) to V2500-A5 engines and operators operating under similar conditions. Vuela shall incorporate the relevant provisions of the MMP into its then current airworthiness maintenance program.

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IAE PROPRIETARY INFORMATION

9.4 Administration

Vuela shall cooperate with IAE to fulfill any reasonable administrative or other requirements of the Maintenance Center, including endorsement of Workscopes for Aviation Authority and DGAC requirements. Vuela shall accomplish quality audits and obtain certifications required by the Aviation Authority, the DGAC, and the Maintenance Center for accomplishment of work on the Eligible Engines at the Maintenance Center(s).

9.5 One Time Concessions

Vuela shall not unreasonably withhold its approval of any IAE proposed utilization of on-wing or off-wing “One Time Concessions” on Eligible Engines.

9.6 Payment

Vuela shall make payments as required in accordance with Clause 10 of this Agreement.

9.7 Records and Audit

Vuela shall comply with the provisions of Clause 29 of this Agreement.

10. FHA Rates and Payment

10.1 FHA Rates

10.1.1 The FHA Rate per Eligible Engine Flight Hour for Restoration Shop Visit Coverage during the Period of Cover for Eligible Engines on A319 and A320 Aircraft shall be as follows:

Xxxxxx/Xxxxxx		Xx XXX 0		Xx XXX 0		Xx XXX 0
*****		*****		*****		*****
*****		*****		*****		*****
*****		*****		*****		*****
*****		*****		*****		*****

The FHA Rate per Eligible Engine Flight Hour for Restoration Shop Visit Coverage during the Period of Cover for Eligible Engines on A321 Aircraft shall be as follows:

Xxxxxx/Xxxxxx		Xx XXX 0		Xx XXX 0		Xx XXX 0
*****		*****		*****		*****
*****		*****		*****		*****

IAE shall invoice Vuela at induction of the Eligible Engine into the Maintenance Center for a Restoration Shop Visit, an amount equal to the above applicable FHA Rate (escalated in accordance with Clause 10.2) multiplied by the Eligible Engine Flight Hours flown by such

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

Eligible Engine since new or if the Eligible Engine has had a prior Restoration Shop Visit, since its last Restoration Shop Visit. The above FHA Rates are subject to adjustment in accordance with the provisions of Exhibit G to the extent applicable.

10.1.2 The FHA Rate for Miscellaneous Shop Visit Coverage shall be ***** per Eligible Engine Flight Hour during the Period of Cover. IAE shall invoice Vuela on a monthly basis in an amount equal to the FHA Rate for Miscellaneous Shop Visit Coverage (escalated in accordance with Clause 10.2) multiplied by the Eligible Engine Flight Hours flown in the previous month by Eligible Engines within their respective Periods of Cover; *****

10.2 All FHA Rates in Clause 10.1 shall be paid in accordance with Clause 10.6.1 below, and are subject to escalation from the base month of January 2004 to the date of calculation of the applicable FHA Rate invoice in accordance with the formula set forth in Exhibit B.

10.3 Excess Work Rates

10.3.1 Charges for Excess Work shall be invoiced to Vuela by IAE in accordance with the rates identified in Exhibit F. However, where prior to the applicable Shop Visit Vuela notifies IAE that it has contracted Excess Work rates directly with the applicable Maintenance Center, IAE will consent to the Maintenance Center’s directly invoicing Vuela for such Excess Work charges, provided that such Maintenance Center agrees not to charge IAE for such Excess Work.

10.3.2 IAE may invoice Vuela its reasonable estimate of the cost of any Excess Work prior to commencement, or during the execution, of such Excess Work. IAE shall invoice Vuela for the balance of the cost of any Excess Work upon receipt of the corresponding invoice from the Maintenance Center (or either promptly credit Vuela’s account with IAE or, upon the parties’ mutual agreement, refund by electronic transfer to Vuela, the amount of any excess payment received from Vuela).

10.4 Payment for Additional or Loss of LLP Life

Where IAE provides a replacement LLP (the “Replacement LLP”) as a result of damage to an LLP (the “Damaged LLP”) and the Replacement LLP is provided pursuant to the coverage provided for under the terms of this Agreement, then either (a) Vuela shall pay to IAE the amount by which the value of the Replacement LLP exceeds the value of the Damaged LLP; or (b) IAE shall pay to Vuela the amount by which the value of the Damaged LLP exceeds the value of the Replacement LLP, in each case as determined in accordance with the following formula:

*****

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

Page 15 of 37

IAE PROPRIETARY INFORMATION

Where:

*****		=		*****
*****		=		*****
*****		=		*****
*****		=		*****
*****		=		*****

Upon completion of any Shop Visit at which IAE has provided a Replacement LLP, payment of the amount determined in accordance with the above formula shall be due (i) to IAE from Vuela in the event the calculation above results in a positive amount or (ii) to Vuela from IAE in the event the calculation above results in a negative amount. Vuela shall pay all invoices submitted by IAE pursuant to this Clause 10.4 in accordance with Clause 10.6.1. IAE will credit Vuela’ account with IAE with any amount due to Vuela from IAE under this Clause 10.4. Such credits may be used by Vuela toward the payment of FHA invoices from IAE, or for other goods and services provided by IAE.

10.5 General Conditions

The FHA Rates are predicated upon Vuela:

10.5.1 maintaining within its fleet of Aircraft an annual average flight cycle length of ***** hours per cycle (calculated from the moment the wheels of an Aircraft, on which any Eligible Engine is installed, leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing);

10.5.2 maintaining an average engine thrust derate of ***** relative to the V2527M-A5 thrust rating, ***** relative to the V2524-A5 thrust rating, or ***** relative to the V2522-A5 thrust rating, as applicable;

10.5.3 maintaining an average ambient temperature for take-off no greater than ISA + *****

10.5.4 taking delivery of all of the Aircraft and Spare Engines in accordance with the schedule set forth in Exhibit B of the Support Contract, as such delivery schedule may be amended from time to time in accordance with the Support Contract.

IAE may make adjustments to the FHA Rates in accordance with Exhibit G if there is a change in any of the operational parameters set forth in Clauses 10.5.1 through 10.5.3.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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10.6 Payment

10.6.1 Except as otherwise provided for herein, Vuela shall pay invoices submitted by IAE within ***** Days after submission.

10.6.2 Vuela undertakes that IAE shall receive the full amount of payments falling due under this Clause 10, without any withholding or deduction whatsoever.

10.6.3 All payments under this Clause 10 shall be made by electronic transfer and shall be deposited not later than the due date of payment with:

Bank of America

0000 Xxxxxx xx Xxxxxxxx

Xxx Xxxx, XX 00000-0000

*****

or to such other account as IAE may from time to time designate in writing, which designation shall be effective upon receipt by Vuela of such notice.

10.6.4 Should Vuela fail to make any payment to IAE required as set forth in this Clause 10, then, notwithstanding any rights which IAE may have in contract or in law, IAE reserves the right to assess interest on such late payment at the rate of ***** of the outstanding amount per month from the date the payment was due to be made until the date such payment is received by IAE.

10.7 Taxes and Other Like Charges

In addition to amounts stated to be payable by Vuela pursuant to this Agreement, Vuela shall pay:

10.7.1 any and all Taxes (excluding (i) any income, gains, or excess profit, franchise and similar Taxes imposed, levied, or assessed on, or otherwise payable by, IAE or the Maintenance Center; and (ii) any Taxes which would not have been imposed but for IAE’s failure to comply with applicable regulations or filing requirements (collectively, the “Excluded Taxes”) arising from IAE’s and the Maintenance Center’s performance under this Agreement; and

10.7.2 Taxes other than Excluded Taxes payable by IAE in connection with or pursuant to contracts for goods, work and/or services with Maintenance Center for or in connection with Eligible Engines.

If either IAE or Vuela becomes aware of any Taxes for which the other Party is responsible, the relevant party will promptly notify the other party, and both parties agree to consult in good faith and take such other reasonable steps in order to mitigate payment and/or the amount of such Taxes.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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All amounts stated to be payable by Vuela pursuant to this Agreement exclude any value added tax, sales tax or taxes on turnover. In the event that the supply of goods or services under this Agreement is chargeable to any value added tax, sales tax or taxes on turnover such tax will be borne by Vuela, subject to the receipt of any appropriate documentation that may be required to enable or assist Vuela to claim or verify any tax credit, exemption, set off, rebate or refund in respect of such Taxes paid or payable in connection with this Agreement. IAE shall give due consideration to whether any Parts provided by IAE to Vuela are exempt from Taxes under any applicable law.

11. Escalation Protection

Except as otherwise noted to the contrary, for the period beginning January 1, 2006 and ending January 1, 2012 (the “Cap Period”), IAE agrees to cap escalation of all credits, FHA Rates, and other items escalated in accordance with the formula in Exhibit B (“Base Amounts”) at a cumulative rate of *****, compounding annually, provided that for any year in which escalation exceeds ***** over the previous year, such escalation exceedance above 6.5% shall be shared ***** by IAE and ***** by Vuela, as follows:

*****

12. Warranties

12.1 If IAE fails to comply with its obligations set out in this Agreement, IAE shall, as its sole responsibility for such failure, undertake, at its sole cost and expense, all work necessary to achieve such obligations.

12.2 IAE shall warrant Excess Work to Vuela as follows: IAE will repair any Eligible Engines in which any defect in the Excess Work performed by the Maintenance Center or in any Parts incorporated by the Maintenance Center becomes evident, in each case within three thousand (3,000) flight hours or within eighteen (18) months after installation on an Aircraft or, if not installed on an Aircraft, within twenty-four (24) months after delivery of the Eligible Engine from the applicable Shop Visit, whichever occurs first. Transportation charges for the return of defectively serviced goods to IAE or the Maintenance Center, and their reshipment to Vuela and risk of loss thereof shall be borne by IAE only if such goods are returned in accordance with reasonable written shipping instructions from IAE.

12.3 IAE warrants to Vuela that that title to Parts or components thereof installed on an Eligible Engine by a Maintenance Center shall pass to the owner of such Eligible Engine free and clear of all security interests and rights of IAE, the Maintenance Center, or others upon installation. IAE’s liability and Vuela’s remedy under this warranty are limited to the removal of any title defect or, at the election of IAE, to the replacement of the new Parts or components thereof which are defective in title; provided, however, that the rights and remedies of the Parties with respect to patent infringement shall be limited to the provisions of Clause 15 of this Agreement.

12.4 Vuela warrants that title to Parts or components thereof removed from an Eligible Engine by a Maintenance Center shall pass to IAE free and clear of all security

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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interests and rights of Vuela or others at the time that title to the replacement Part passes to Vuela. Vuela’s liability and IAE’s remedy under this warranty are limited to the removal of any title defect or, at the election of Vuela, to the replacement of the Parts or components thereof which are defective in title.

12.5 THE FOREGOING WARRANTIES TOGETHER WITH THE EXPRESS REMEDIES PROVIDED TO VUELA IN ACCORDANCE WITH THIS AGREEMENT ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (I) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (II) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR STRICT LIABILITY AGAINST IAE OR ITS SHAREHOLDERS, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED, OF IAE OR ITS SHAREHOLDERS. THE REMEDIES OF VUELA SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION SHALL BE BINDING UPON IAE UNLESS IN WRITING, SIGNED BY A DULY AUTHORIZED OFFICER OF IAE.

13. Delays

13.1 Excusable Delays

IAE shall not be charged with any liability for delay in the performance of any of its obligations when such delay is caused by acts of God or the public enemy, compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it proves to be invalid, fires, riots, labor disputes, unusually severe weather, delays of suppliers as a result of any of the aforementioned reasons, or any cause beyond the reasonable control of IAE. To the extent that such causes actually delay performance on the part of IAE, the time for the performance shall be extended for as many days as are required to obtain removal of such causes. This provision shall not, however, relieve IAE from using commercially reasonable efforts to avoid or remove such causes, perform obligations not prevented by such causes, or continue performance with reasonable dispatch whenever such causes are removed.

13.2 Non-Excusable Delay

If IAE delays the delivery of an Eligible Engine from a Shop Visit beyond the time for delivery specified in the Workscope (as such time may be extended pursuant to the provisions of this Agreement) for any reason other than those specified in Clause 13.1 above, IAE’s obligations shall be as set forth in Clause 5.

14. Duplicate Benefits

Vuela and IAE agree that it is not the intention to provide duplicate benefits under the terms of this Agreement and the Support Contract or under any other arrangement between IAE or IAE’s suppliers or Airbus and Vuela. In the event of any such

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IAE PROPRIETARY INFORMATION

duplication of benefits, Vuela may, at the relevant time in respect of the relevant circumstances, opt to receive any one such benefit to the exclusion of all other duplicate benefits.

15. Intellectual Property

15.1 IAE shall conduct, at its own expense, the entire defense of any claim, suit or action brought against Vuela alleging that the use or resale by Vuela or any subsequent purchaser or user of the Parts furnished by IAE or a Maintenance Center hereunder infringes any United States patent or any patent of any other country that is a signatory to Article 27 of the Convention of International Aviation signed by the United States at Chicago on December 7, 1944, in which Vuela is authorized to operate.

15.2 Vuela shall provide prompt written notice to IAE of such claim, suit or action and shall provide IAE with full opportunity and authority to assume the sole defense thereof, including settlement and appeals, and all information available to Vuela or subsequent purchaser or user for such defense.

15.3 Provided that such Parts have been made according to a specification or design furnished by IAE or, if a process patent is involved, the process performed with such Parts if recommended in writing by IAE, IAE shall, at its own expense, either settle said claim, suit or action or shall pay all damages awarded by the court thereon, and, if the use or resale of such Parts is finally enjoined, IAE shall, at IAE’s option:

15.3.1 procure for Vuela the right to use or resell the Parts,

15.3.2 replace them with equivalent non-infringing Parts,

15.3.3 modify them so they become non-infringing but equivalent, or

15.3.4 remove them and refund the purchase price (less a reasonable allowance for use, damage and obsolescence).

15.3.5 IAE shall not be liable to Vuela for any consequential damage or any loss of use of any Parts or of the Aircraft in which the Parts may be incorporated arising as a result directly or indirectly of any claim subject to this Clause 15.3.

15.4 The indemnity contained in Clause 15.3 shall not apply to any claim, suit or action based on infringement in respect of:

i) Parts manufactured to a design or specification furnished by Vuela; or

ii) Parts not of IAE design (but IAE shall in the event of any claim for infringement pass on to Vuela, so far as it has the right to do so, the benefits of any indemnity given to IAE by the designer, manufacturer or supplier of such Parts); or

Page 20 of 37

IAE PROPRIETARY INFORMATION

iii) the manner of method in which any of the Parts have been installed in the Aircraft; or

iv) the performance of a process not recommended in writing by IAE, or

v) the use or sale of the Parts delivered hereunder in combination with other new parts not delivered to Vuela by IAE.

16. Amendment

This Agreement shall not be amended, changed, or modified in any way other than by agreement in writing, signed by the Parties hereto after the date of this Agreement, which is expressly stated to amend this Agreement.

17. Assignment

Neither Party may assign any of its rights or obligations hereunder without the written consent of the other Party, except that IAE may assign its rights to receive money hereunder, and may assign any or all of its rights and/or obligations hereunder to any of IAE’s shareholders. Any assignment made in violation of this Clause 17 shall be null and void. IAE shall support Vuela in its pursuit to secure a workmanship warranty from the Maintenance Center for the Eligible Engines at the end of the Period of Cover.

18. Exhibits

In the event of any conflict or discrepancy between the Exhibits (which are hereby incorporated by reference as part of this Agreement) and the Clauses of this Agreement, the Clauses of this Agreement shall prevail.

19. Headings

Captions, clause headings, and the Table of Contents are for convenience of reference only and shall not be deemed or construed in any way as forming a part of this Agreement, nor shall they govern or affect the interpretation of the language or provisions of this Agreement.

20. Notices

Any notice to be served pursuant to this Agreement shall be sent by registered mail, by internationally recognized overnight courier, or by facsimile (with the original notice sent by registered mail or internationally recognized overnight courier) to the applicable addresses indicated in 0.

21. Exclusion of Other Provisions and Previous Understandings

21.1 This Agreement is the sole and entire agreement of the Parties with respect to the subject matter hereof and shall apply to the exclusion of any other provisions on or attached to or otherwise forming part of any order form of Vuela, or any acknowledgment or acceptance by IAE, or of any other document which may be issued by either Party relating to such services.

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IAE PROPRIETARY INFORMATION

21.2 The Parties agree that neither of them have placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this Agreement, whether orally or in writing, relating to such services, other than those expressly incorporated in this Agreement, which has been negotiated on the basis that its provisions represent their entire agreement relating to such services and shall supersede all such representations, agreements, statements and understandings.

22. Termination, Expiration and Events of Default

22.1 Bankruptcy/Insolvency

Either Party shall have the option, at its sole discretion, to terminate this Agreement upon the occurrence of any of the following events: (a) a receiver or trustee is appointed for any of the other Party’s property, or (b) the other Party is adjudicated or voluntarily becomes bankrupt under any bankruptcy or winding up laws or other similar legislation, or (c) the other Party becomes insolvent or makes an assignment for the benefit of creditors.

22.2 Failure to Make Payments or to Meet Obligations

A non-defaulting Party shall have the right to declare an event of default and terminate this Agreement (i) if the other Party fails to pay any amount hereunder not reasonably subject to dispute when and as the same becomes due and payable and such default continues for a period of ***** or more; or (ii) if the other Party fails to perform any other material obligation under this Agreement and such default or failure shall not have been fully corrected within thirty (30) days after the non-defaulting Party gives notice thereof to the defaulting Party.

If Vuela fails to make any payment to IAE as set forth in Clause 10 of this Agreement (including any late interest due thereon) not reasonably subject to dispute and such default continues for a period of *****, then, without prejudice to IAE’s other rights which IAE may have in contract or in law, IAE reserves the right not to induct, to suspend all work on, or not to release from the Maintenance Center(s) any Eligible Engine, Accessory, EBU Item or QEC Item until full payment is made by Vuela to IAE.

The obligation of IAE to provide, or cause to be provided, the services set out in this Agreement shall be subject to the non-existence of a continuing event of default by Vuela, after the expiration of any applicable grace or cure period, in any payment or other obligation of Vuela under any other agreement in effect between the Parties (an “Event of Default”). Should any such Event of Default exist, IAE reserves the right not to induct, to stop all work on, or not to release from the Maintenance Center any Eligible Engine until such Event of Default is rectified by Vuela to IAE’s satisfaction.

*****

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

22.4 Expiration

This Agreement shall be effective from the day and year first above written until the end of the Period of Cover for each Eligible Engine.

22.5 Effect of Termination or Expiration

Except as otherwise set out in this Clause 22.5 and any rights or obligations arising under applicable law, the rights and obligations of the Parties under this Agreement shall terminate upon the termination or expiration of this Agreement, and Vuela shall no longer be provided with FHA coverage under the terms of this Agreement.

Upon any termination or expiration of this Agreement, all liabilities and obligations (including payment obligations) that have accrued prior to such termination or expiration (including payment for Excess Work) shall survive.

This Clause 22.5 and Clauses 25 and 26 of this Agreement shall survive any expiration or termination of this Agreement.

23. Negation of Waiver

Failure by either Party to enforce any term of this Agreement shall not constitute a waiver of such term.

24. Severability And Partial Invalidity

If any provision of this Agreement or the application thereof to either Party shall be invalid, illegal or unenforceable to any extent, the remainder of the Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.

25. Governing Law

This Agreement shall be construed and the performance thereof determined in accordance with the laws of the State of New York, United States of America2, without regard to its conflict of laws provisions. The Parties agree to exclude the application of the United Nations Convention on Contracts for the International Sale of Goods.

The Parties irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in Xxx Xxxx Xxxxxx, Xxx Xxxx, Xxxxxx Xxxxxx of America, in connection with any suit, action or proceeding arising out of or relating to this Agreement and irrevocably waive to the fullest extent permitted by law, any objection to the laying of venue of any such suit, action or proceeding in any such court or any claim that any suit, action or proceeding has been brought in an inconvenient forum. Further, the Parties hereto agree to waive any rights either of them may have to a jury trial in connection with any such suit, action or proceeding.

Page 23 of 37

IAE PROPRIETARY INFORMATION

26. Limitation of Liability

26.1 The liability of IAE to Vuela arising out of, connected with, or resulting from the furnishing of Parts and services under this Agreement, whether in contract, tort (including, negligence, but excluding gross negligence, reckless misconduct, and intentionally wrongful conduct) or otherwise, shall be as expressly set forth in this Agreement, and shall not in any event exceed per claim the fair market value of the Engine giving rise to Vuela’s claim. The foregoing shall constitute the sole remedy of Vuela and the sole liability of IAE. In no event shall IAE be liable for special, incidental or consequential damages, including, damage to, or loss of use, revenue or profit with respect to any aircraft, engine, or part thereof.

26.2 For the purpose of this Clause 26, “IAE” shall be deemed to include IAE; Xxxxx and Xxxxxxx of East Hartford, Connecticut, USA; Rolls-Royce plc of London, United Kingdom; JAEC, Japanese Aero Engine Corporation, of Tokyo, Japan; and MTU Aero Engines, Motoren und Turbinen Union Munchen, of Munich, Germany and the respective directors, officers, employees and agents of each.

27. Publicity

Vuela shall not use the name of IAE or the V2500 engine in any publicity material without the prior written consent of IAE.

28. Confidentiality

Each of IAE and Vuela acknowledge and understand that certain commercial and financial information contained in or provided in connection with this Agreement is considered by the other to be confidential. IAE and Vuela each hereby agree, for the benefit of the other, that it shall treat the contents of this Agreement as confidential and shall not, without the prior written consent of the other, disclose or cause to be disclosed the terms hereof to any person except to its legal and financial advisors and auditors, or expect as may be required by applicable law or governmental regulation, including federal and state securities laws, or pursuant to an order issued by any court or governmental authority having jurisdiction over Vuela or IAE as the case may be.

29. Records and Audit

The Parties shall maintain adequate records as required to meet their obligations and compliance with the applicable provisions of this FHA.

A Party shall not unreasonably condition or deny the other Party access to such adequate and applicable records for the administration of this Agreement. Vuela or its nominee may visit the premises of IAE or the Maintenance Center at a time mutually agreeable to the Parties and upon reasonable notice to IAE, for the purpose of quality assurance and to inspect the materials, parts, equipment and tools being used, the work being performed, and to review the quality assurance system in use by IAE and the Maintenance Center.

If IAE or its nominee requires access to the premises of Vuela under this FHA it shall provide reasonable written notice to Vuela and such visit or inspection will be at a time mutually agreeable to the Parties.

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IAE PROPRIETARY INFORMATION

Each Party will comply and ensure that its personnel comply with the other Party’s conduct policies, rules, regulations and directions governing the conduct of visitors upon their premises.

IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be signed on their behalf by the hands of their authorized officers as of the day and year first above written:

IAE International Aero Engines AG				Controladora Vuela Compañía de Aviación, S.A. de C.V.
/s/ Xxxxxx X. X. Xxxxx Name				/s/ Xxxxxx Xxxxx Name
Xxxxxx X. X. Xxxxx Printed Name				Xxxxxx Xxxxx Printed Name
Commercial Director Title				Technology Director Title

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IAE PROPRIETARY INFORMATION

Exhibit A

Eligible Engine List

No.		Thrust Rating		Serial Number		Delivery Date		Period of Cover
1		V2527-A5		V12285		Mar-06		TBD
2		V2524-A5		V12274		May-06		TBD
3		V2524-A5		V12278		May-06		TBD
4		V2524-A5		V12286		May-06		TBD
5		V2524-A5		V12288		May-06		TBD
6		V2527M-A5		V12487		Jan-07		TBD
7		V2527M-A5		V12472		Jan-07		TBD
8		V2527M-A5		V12545		Mar-07		TBD
9		V2527M-A5		V12532		Mar-07		TBD
10		V2527M-A5		V12559		Mar-07		TBD
11		V2527M-A5		V12557		Mar-07		TBD
12		V2527M-A5		V12561		Mar-07		TBD
13		V2527M-A5		V12563		Mar-07		TBD
14		V2527-A5		TBD		Nov-07		TBD
15		V2527-A5		TBD		Nov-07		TBD
16		V2527-A5		TBD		Jan-08		TBD
17		V2527-A5		TBD		Jun-08		TBD
18		V2527-A5		TBD		Jun-08		TBD
19		V2527-A5		TBD		Jul-08		TBD
20		V2527-A5		TBD		Jul-08		TBD
21		V2527-A5		TBD		Oct-08		TBD
22		V2527-A5		TBD		Oct-08		TBD
23		V2527-A5		TBD		Jan-09		TBD
24		V2527-A5		TBD		Jan-09		TBD
25		V2527-A5		TBD		Mar-09		TBD
26		V2527-A5		TBD		Mar-09		TBD
27		V2527-A5		TBD		Jun-09		TBD
28		V2527-A5		TBD		Jun-09		TBD
29		V2527-A5		TBD		Jun-09		TBD
30		V2527-A5		TBD		Sep-09		TBD
31		V2527-A5		TBD		Sep-09		TBD
32		V2527-A5		TBD		Nov-09		TBD
33		V2527-A5		TBD		Nov-09		TBD
34		V2527-A5		TBD		Mar-10		TBD
35		V2527-A5		TBD		Mar-10		TBD

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IAE PROPRIETARY INFORMATION

Exhibit B

IAE FHA Escalation Formula

1. FHA Rates will be subject to escalation in accordance with the formula set forth below:

*****

Where:

*****

Base Month shall mean the base month specified for the FHA Rates in the Proposal.

*****

For avoidance of doubt, the quarterly values of CIU2023211000000I will apply to each month of a given quarter.

2. The values of the factors *****, and ***** respectively, shall be determined to the nearest fourth decimal place. If the fifth decimal is five or more, the fourth decimal place shall be raised to the next higher number.

3. If the U.S. Department of Labor ceases to publish the above statistics or modifies the basis of their calculation, then IAE, in its sole discretion, shall select a substitute for such values from data published by the Bureau of Labor Statistics or otherwise make revisions to the escalation formula such that the escalation will as closely as possible approximate the result that would have been attained by continuing the use of the original escalation formula and values as they may have fluctuated during the applicable time period.

4. If the application of the formula contained in this Exhibit results in an FHAR for the month which is lower than FHARb, FHAR for the month will be set equal to FHARb.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

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IAE PROPRIETARY INFORMATION

Exhibit C

Accessories

TYP PART NUMBER		PART NAME		ATA CHAPTER				FIG				ITEM
16844-000		COOLER, IDG OIL			242142				1				100
7702-03		DETECTOR, ASSY FIRE ACCESSORY			261215				1				100
7827-02		DETECTOR, ASSY FIRE			261217				1				100
AC69576		VALVE, SOLENOID STAGE 10 BLE			361157				1				100
005RL05		BOX, RELAY			715149				1				100
5009913G		PUMP, FUEL LP/HP			731241				1				100
17300G09		VALVE, FUEL DIVERTER & RETUR			731342				1				100
2A0526		VALVE, FUEL FLOW DIVIDER			731343				1				20
2A3343		PROBE, TOTAL PRESS&TEMP			732211				1				10
2A1126		PROBE, TEMP&PRESS DIFSR CASE			732215				1				30
2A3504		CONTROL, ELECTRONIC ENGINE			732234				1				280
430153		GENERATOR, STATOR ALTERNATOR			732238				1				100
FMU550MK1		METER, FUEL			732252				1				100
9-217-59		TRANSMITTER, FUEL FLOW			733117				1				100
21SN04-300B		SWITCH, FUEL FILT DIFF PRESS			733415				1				10
22912-000		THERMOCOUPLE, FUEL TEMP			733515				1				100
5U0012		EXCITER, IGNITION			741138				1				120
5U0012		EXCITER, IGNITION			741138				1				520
5U0072		LEAD, IGNITION			742143				1				100
D1876-1000A		COOLER, AIR XX.0 XXX XXXX			000000				1				100
5860010-108		VALVE, AIR STG 10 TO HPT			752351				1				100
5860016-131		VALVE, AIR HPT/LPT XXX			000000				1				100
5860017-139		ACTUATOR,VALVE HPT/LPT ACC			752452				1				100
1777MK2		ACTUATOR, MASTER LPC BLEED			753142				1				100
1778MK1		ACTUATOR, SLAVE-LPC BLEED			753143				1				100
2607MK2		ACTUATOR VARIABLE STATOR			753241				1				100
AC69572		VALVE, SOLENOID STG 7 HPC			753251				1				100
AC69572		VALVE, SOLENOID STG 7 HPC			753251				1				100
AC69572		VALVE, SOLENOID STG 7 HPC			753251				1				100
AC69924		VALVE, BLEED ST7 HP COMPRESS			753252				1				100
AC69924		VALVE, BLEED ST7 HP COMPRESS			753252				1				100
AC69924		VALVE, BLEED ST7 HP COMPRESS			753252				1				100
AC69574		VALVE, SOLENOID STG 10 HPC			753253				1				400
5950041-108		VALVE, XXXXX XX 00 HP COMP			753254				1				400
RP 162-02		SENSOR, NACELLE TEMPERATURE			754115				1				100
2A2159		THERMOCOUPLE OPTION			772115				20				100
144-171-000-031		*TRANSDUCER, VIBRATION			773215				1				100
4A7110		PUMP & FILTER A/O PRESS.			792141				1				1
4A7111		PUMP & FILTER A/O PRESS.			792142				2				2
4A7112		PUMP & FILTER A/O PRESS.			792143				3				3
4A7113		PUMP & FILTER A/O PRESS.			792144				4				4
4A7114		PUMP & FILTER A/O PRESS.			792145				5				5
4A7115		PUMP & FILTER A/O PRESS.			792146				6				6
4A7116		PUMP & FILTER A/O PRESS.			792147				7				7
4A7117		PUMP & FILTER A/O PRESS.			792148				8				8

Page 28 of 37

IAE PROPRIETARY INFORMATION

TYP PART NUMBER		PART NAME		ATA CHAPTER				FIG				ITEM
4A7118		PUMP & FILTER A/O PRESS.			792149				9				9
4A7119		PUMP & FILTER A/O PRESS.			792150				10				10
4A7120		PUMP & FILTER A/O PRESS.			792151				11				11
4A7121		PUMP & FILTER A/O PRESS.			792152				12				12
4A7122		PUMP & FILTER A/O PRESS.			792153				13				13
4A7123		PUMP & FILTER A/O PRESS.			792154				14				14
4A7124		PUMP & FILTER A/O PRESS.			792155				15				15
4A7125		PUMP & FILTER A/O PRESS.			792156				16				16

Page 29 of 37

IAE PROPRIETARY INFORMATION

Exhibit D

Powerplant – Description

*****

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

Page 30 of 37

IAE PROPRIETARY INFORMATION

Exhibit E

Addresses

1. Vuela ADDRESSES

(a) Address for Notices:

Xx. Xxxxxxxxxxxx Xxxxxxx # 000,

Xxxxxx Xxxx,

Xxxxxxx Lomas Santa Fe,

Delegacion Xxxxxx Xxxxxxx

Mexico,

Distrito Federal

C.P 01210

Facsimile No. 52 55 5261 6460

Attention: Chief Financial Officer

(b) Address for Invoices:

Xx. Xxxxxxxxxxxx Xxxxxxx # 000,

Xxxxxx Xxxx,

Xxxxxxx Lomas Santa Fe,

Delegacion Xxxxxx Xxxxxxx

Mexico,

Distrito Federal

C.P 01210

Facsimile No. 52 55 5261 6460

Attention: Financial Controller

2. IAE ADDRESSES

(a) Address for Notices:

Attention: Chief Legal Officer & Company Secretary

IAE International Aero Engines AG

000 Xxxx Xxxxxx

Mail Stop 000-00

Xxxx Xxxxxxxx, XX 00000

Fax: (000) 000-0000

(b) Address for Invoices:

Attention: Accounts Receivable Manager

IAE International Aero Engines AG

000 Xxxx Xxxxxx

Mail Stop 000-00

Xxxx Xxxxxxxx, XX 00000

Fax: (000) 000-0000

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IAE PROPRIETARY INFORMATION

(c) Address for all Other FHA Matters:

Attention: Customer Fleet Director

IAE International Aero Engines AG

000 Xxxx Xxxxxx

Mail Stop 000-00

Xxxx Xxxxxxxx, XX 00000

Fax: (860) 565-xxxx

Page 32 of 37

IAE PROPRIETARY INFORMATION

Exhibit F

IAE Engine Monitoring Services

1. IAE will provide the following Engine monitoring services (“Services”) through the ***** system:

(a) Engine Trend Monitoring

(i) Provide processing of in-flight Engine data received from Vuela into IAE’s EHM database as provided per the data input and transmission requirements set forth in Section 3 herein. All processed data will be provided to Vuela via IAE’s web portal. Daily updates require web portal access described in Section 1(b) herein.

(ii) Provide automated mechanical exceedance reporting for those Aircraft that are equipped with required on-board hardware and software.

(iii) Provide technical analysis of Eligible Engines’ performance data and report anomalies indicated by such data to designated Vuela personnel as required.

(iv) Provide access to monthly Eligible Engine operating trend analysis report covering post Period of Cover operations to assist Vuela in the planning and scheduling of Eligible Engines for shop visits.

(v) Provide automated alert notification of parameters that have exceeded level and rate change limits.

(vi) Provide access to alert details reports that identify Aircraft and Eligible Engines by serial number and provide the date, time, magnitude and details of occurrences when such Eligible Engine exceeds specific performance parameters and provide the ability to store comments associated with a given alert.

(vii) Provide exhaust gas temperature (subject to data availability) Watch-Lists, updated monthly utilizing data received from Vuela to assist Vuela in scheduling Eligible Engine removals for maintenance purposes. The Watch-Lists provide an engine ranking and predicted removal date for a given Eligible Engine based on the measured parameter and deterioration rate to assist with proactive on-wing management and maintenance planning.

(viii) Provide access to the following engine performance parameter trend plots that are updated real-time as new in-flight Engine data is received from Vuela:

• EGT Margin

• Sea Level Outside Air Temperature Limits

• N1 and N2 Shaft Speeds

• Fuel Flow

• Vibration

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

Page 33 of 37

IAE PROPRIETARY INFORMATION

• Oil Temperature

• Oil Pressure

• P2.5, T2.5, P3.0, T3.0, P12.5

(ix) Upon special request, raw in-flight Engine data can be supplied to Vuela.

(x) Input data files and individually processed records will be stored for a minimum period of five (5) years.

(b) WEB PORTAL ACCESS

(i) Provide twenty-four (24) hour per day access to reports and processed information, provided to under Section 1(a) herein, through a secure web portal created and maintained by IAE. Such web portal access shall be created and provided to Vuela approximately thirty (30) days from the execution of this Agreement. Vuela must meet IAE defined requirements for access as detailed in Section 2 herein. IAE will use all reasonable efforts to ensure a service availability target of 96% when measured on an annual basis and that down time of the system is no longer than one (1) Business Day for any one incident.

(ii) IAE shall provide Services under the terms of this Agreement contingent upon the timely receipt of data required by IAE from Vuela. It is understood between the parties that the ability of IAE to provide timely and accurate reports and processed information through these web-based services is dependent upon the quality and timeliness of the data received from Vuela.

(iii) If email, or pager or cell phone alert notifications are required by Vuela, Vuela shall be responsible for acquiring and maintaining the required pager and cell phone hardware and software and pay any associated communications fees. It is Vuela’s responsibility to establish an alert notification contact list and advise IAE of any changes.

2. ACCESSIBILITY

(a) To facilitate internet portal access, Vuela is required to maintain the following: (i) internet access; (ii) Internet Explorer version 5.5 or higher; (iii) 128 bit Secure Socket Layer (“SSL”) encryption capability; and (iv) a minimum internet speed of 56K bits per second to access the internet portal.

(b) All information being transmitted through the internet portal will be protected using SSL encryption. In addition, each user of the internet portal will be authenticated at logon with a unique user identification and password. Once authenticated to the internet portal, Vuela will only be allowed to access the information that Vuela and IAE mutually agree a specific user may review. IAE shall review security requirements for web portal access from time to time to ensure an appropriate level of data protection. Updated security requirements shall be communicated to Vuela on a timely basis.

Page 34 of 37

IAE PROPRIETARY INFORMATION

3. TRANSMISSION OF DATA BY VUELA

(a) Vuela shall provide all data requested by IAE in order to perform the Services, including but not limited to the date and time the data was recorded, aircraft and engine number, engine position, altitude and mach (or air speed), total air temperature, engine pressure ratio, rotor speeds, fuel flow, oil temperature, oil pressure, mechanical exceedances and pertinent maintenance actions (EHM Eligible Engine changes, sensor changes, other items that may impact engine performance). Vuela shall electronically transmit engine condition monitoring data to IAE’s designated ground station via air-to-ground service providers (e.g., ARINC and SITA) or via such other routing as the parties mutually agree.

(b) Using the facilities available within IAE’s V2500 engine monitoring program services, Vuela shall provide feedback of on-wing maintenance actions taken as a result of an alert notification as provided in accordance with Section 1(a)(v) herein.

Page 35 of 37

IAE PROPRIETARY INFORMATION

Exhibit G

Excess Work Labor and Fee Rates

Item		Basis		Rates/Fees4
Hourly labor rate		Labor hours		*****
Handling fee, new parts		Current catalog part price		*****
Handling fee, LLP’s		Current catalog part price1		*****
Handling fee, used parts		***** of current catalog part price		*****
Handling fee, customer supplied material		Current catalog part price		*****
Handling fee, vendor repair		Vendor invoice amount		*****
Rotable fee3		Vendor invoice amount		*****

Notes:

1. The price of used LLPs will be adjusted pro-rata on the basis LLP cycle life remaining.

2. A line item cap of *****applies.

3. Rotable transactions are subject to both the rotable material fee and the vendor repair handling fee.

4. The above labor rates are expressed in United States Dollars and are subject to escalation from the base month of January 2004 in accordance with the formula set forth in Exhibit B (as may be modified in accordance with the provisions of Clause 11 to this Agreement.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

Page 36 of 37

IAE PROPRIETARY INFORMATION

Exhibit H

FHA Rate Adjustment

For each Eligible Engine whose individual operational parameters differ from those set forth in Clause 10.5 of the Agreement, the Restoration Shop Visit FHA Rates shall be adjusted for the different parameters in accordance with the following formula:

*****

Where:

*****		=		*****
*****		=		*****
*****		=		*****
*****		=		*****

The MTBR model will be Model V1.2.TB, as provided by IAE to Vuela.

***** Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

Page 37 of 37