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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                             | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|For the Quarterly Period Ended June 30, 2006.
|OR                                           
|o                                             | 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 1-12175.              

LOGO

SABRE HOLDINGS CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

75-2662240(I.R.S. Employer
Identification No.)3150 Sabre Drive, Southlake, Texas(Address of principal executive offices)

76092(Zip Code)


Registrant's telephone number, including area code(682) 605-1000

Not Applicable(Former name, former address and former fiscal year, if changed since last report)

---

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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check One):

Large
Accelerated Filer ý                Accelerated
Filer o                Non-accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý

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

|Class                                |  | Outstanding at July 28, 2006
|------------------------------------ |  | ----------------------------
|Class A Common Stock, $.01 par value |  | 131,799,501 Shares          



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INDEX

SABRE HOLDINGS CORPORATION



|PART I:   |  | FINANCIAL INFORMATION                                                                   |  | 3 
|--------- |  | --------------------------------------------------------------------------------------- |  | --
|Item 1.   |  | Financial Statements (Unaudited)                                                        |  | 3 
|          |  | Consolidated Statements of IncomeThree and six months ended June 30, 2005 and 2006     |  | 3 
|          |  | Consolidated Balance SheetsDecember 31, 2005 and June 30, 2006                         |  | 4 
|          |  | Consolidated Condensed Statement of Stockholders' EquitySix months ended June 30, 2006 |  | 5 
|          |  | Consolidated Statements of Cash FlowsSix months ended June 30, 2005 and 2006           |  | 6 
|          |  | Notes to Consolidated Financial Statements                                              |  | 7 
|Item 2.   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations   |  | 33
|Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                              |  | 59
|Item 4.   |  | Controls and Procedures                                                                 |  | 60
|PART II:  |  | OTHER INFORMATION                                                                       |  | 63
|Item 1.   |  | Legal Proceedings                                                                       |  | 63
|Item 1A   |  | Risk Factors                                                                            |  | 63
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                             |  | 63
|Item 3.   |  | Defaults Upon Senior Securities                                                         |  | 64
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                     |  | 64
|Item 5.   |  | Other Information                                                                       |  | 64
|Item 6.   |  | Exhibits                                                                                |  | 65
|SIGNATURE |  | 66                                                                                     

2

---





PART I. FINANCIAL INFORMATION



SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In thousands, except per share amounts)

|                                           |                                         | Three Months Ended
June 30, |         | Six Months Ended
June 30, |  
|------------------------------------------ | --------------------------------------- | --------------------------- | ------- | ------------------------- | -
|
|Revenues                                   |                                         | $                           | 722,612 |                           | $
|                                           | Cost of revenues                        |                             |         | 418,389                   |  
|                                           | Amortization of purchased technology    |                             |         | 8,502                     |  
|                                           |                                         |                             |         |                           |  
|Total cost of revenues                     |                                         |                             | 426,891 |                           |  
|Gross profit                               |                                         |                             | 295,721 |                           |  
|Other operating expenses                   |                                         |                             |         |                           |  
|                                           | Selling, general and administrative     |                             |         | 207,604                   |  
|                                           | Amortization of other intangible assets |                             |         | 9,728                     |  
|                                           |                                         |                             |         |                           |  
|Total other operating expenses             |                                         |                             | 217,332 |                           |  
|Operating income                           |                                         |                             | 78,389  |                           |  
|Other income (expense)                     |                                         |                             |         |                           |  
|                                           | Interest income                         |                             |         | 2,544                     |  
|                                           | Interest expense                        |                             |         | (19,297                   | )
|                                           | Gain on sale of investment              |                             |         |                          |  
|                                           | Loss on derivative instrument           |                             |         |                          |  
|                                           | Other, net                              |                             |         | (11,084                   | )
|                                           |                                         |                             |         |                           |  
|Total other income (expense)               |                                         |                             | (27,837 | )                         |  
|Income before provision for income taxes   |                                         |                             | 50,552  |                           |  
|Provision for income taxes                 |                                         |                             | 16,796  |                           |  
|                                           |                                         |                             |         |                           |  
|Net earnings                               |                                         | $                           | 33,756  |                           | $
|                                           |                                         |                             |         |                           |  
|Earnings per common share                  |                                         |                             |         |                           |  
|                                           | Basic                                   |                             | $       | 0.26                      |  
|                                           | Diluted                                 |                             | $       | 0.26                      |  
|Weighted average common shares outstanding |                                         |                             |         |                           |  
|                                           | Basic                                   |                             |         | 130,372                   |  
|                                           | Diluted                                 |                             |         | 130,691                   |  

See Notes to Consolidated Financial Statements.

3

---



SABRE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                                                                                                               |  | June 30,
2006 |           | December 31,
2005 |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --------- | ----------------- | -
|
|Assets                                                                                                                         |  |               |           |                   |  
|Current assets                                                                                                                 |  |               |           |                   |  
|Cash                                                                                                                           |  | $             | 226,666   |                   | $
|Restricted cash                                                                                                                |  |               | 9,744     |                   |  
|Marketable securities                                                                                                          |  |               | 229,566   |                   |  
|Accounts receivable, net                                                                                                       |  |               | 538,243   |                   |  
|Prepaid expenses                                                                                                               |  |               | 36,135    |                   |  
|Deferred income taxes                                                                                                          |  |               | 20,202    |                   |  
|Other receivables                                                                                                              |  |               | 147,905   |                   |  
|                                                                                                                               |  |               |           |                   |  
|Total current assets                                                                                                           |  |               | 1,208,461 |                   |  
|Property and equipment                                                                                                         |  |               |           |                   |  
|Buildings and leasehold improvements                                                                                           |  |               | 319,282   |                   |  
|Furniture, fixtures and equipment                                                                                              |  |               | 35,965    |                   |  
|Computer equipment                                                                                                             |  |               | 177,486   |                   |  
|Internally developed software                                                                                                  |  |               | 279,837   |                   |  
|                                                                                                                               |  |               |           |                   |  
|                                                                                                                               |  |               | 812,570   |                   |  
|Less accumulated depreciation and amortization                                                                                 |  |               | (380,551  | )                 |  
|                                                                                                                               |  |               |           |                   |  
|Total property and equipment                                                                                                   |  |               | 432,019   |                   |  
|Deferred income taxes                                                                                                          |  |               | 3,668     |                   |  
|Investments in joint ventures                                                                                                  |  |               | 145,230   |                   |  
|Goodwill and intangible assets, net                                                                                            |  |               | 2,407,906 |                   |  
|Other assets, net                                                                                                              |  |               | 174,556   |                   |  
|                                                                                                                               |  |               |           |                   |  
|Total assets                                                                                                                   |  | $             | 4,371,840 |                   | $
|                                                                                                                               |  |               |           |                   |  
|Liabilities and stockholders' equity                                                                                           |  |               |           |                   |  
|Current liabilities                                                                                                            |  |               |           |                   |  
|Accounts payable                                                                                                               |  | $             | 161,394   |                   | $
|Travel supplier liabilities and deferred revenue                                                                               |  |               | 483,038   |                   |  
|Accrued compensation and related benefits                                                                                      |  |               | 51,546    |                   |  
|Accrued subscriber incentives                                                                                                  |  |               | 118,029   |                   |  
|Deferred revenues                                                                                                              |  |               | 63,930    |                   |  
|Other accrued liabilities                                                                                                      |  |               | 414,645   |                   |  
|Bridge Facility                                                                                                                |  |               |          |                   |  
|                                                                                                                               |  |               |           |                   |  
|Total current liabilities                                                                                                      |  |               | 1,292,582 |                   |  
|Pensions and other postretirement benefits                                                                                     |  |               | 186,349   |                   |  
|Other liabilities                                                                                                              |  |               | 36,141    |                   |  
|Minority interests                                                                                                             |  |               | 6,921     |                   |  
|Long-term capital lease obligation                                                                                             |  |               | 153,799   |                   |  
|Public and other notes payable                                                                                                 |  |               | 968,845   |                   |  
|Commitments and contingencies                                                                                                  |  |               |           |                   |  
|Stockholders' equity                                                                                                           |  |               |           |                   |  
|Preferred stock: $0.01 par value; 20,000 shares authorized; no shares issued                                                   |  |               |          |                   |  
|Class A Common Stock: $0.01 par value; 250,000 shares authorized; 145,856 shares issued at June 30, 2006 and December 31, 2005 |  |               | 1,459     |                   |  
|Additional paid-in capital                                                                                                     |  |               | 1,274,201 |                   |  
|Retained earnings                                                                                                              |  |               | 793,404   |                   |  
|Accumulated other comprehensive loss                                                                                           |  |               | (19,956   | )                 |  
|Less treasury stock at cost: 14,206 and 14,281 shares, respectively                                                            |  |               | (321,905  | )                 |  
|                                                                                                                               |  |               |           |                   |  
|Total stockholders' equity                                                                                                     |  |               | 1,727,203 |                   |  
|                                                                                                                               |  |               |           |                   |  
|Total liabilities and stockholders' equity                                                                                     |  | $             | 4,371,840 |                   | $
|                                                                                                                               |  |               |           |                   |  

See Notes to Consolidated Financial Statements.

4

---



SABRE HOLDINGS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2006
(Unaudited) (In thousands)

|                                         |                                       | Class A
Common
Stock                                                                           |       | Additional Paid
in Capital |   | Retained
Earnings |         | Accumulated
Other
Comprehensive
Loss |         | Treasury
Stock |        | Total   |  
|---------------------------------------- | ------------------------------------- | ---------------------------------------------------------------------------------------------- | ----- | -------------------------- | - | ----------------- | ------- | ------------------------------------ | ------- | -------------- | ------ | ------- | -
|Balance at December 31, 2005             |                                       | $                                                                                              | 1,459 |                            | $ | 1,275,836         |         | $                                    | 769,231 |                | $      | (77,872 | )
|Issuances pursuant to:                   |                                       |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|                                         | Stock option plans                    |                                                                                                |       |                           |   |                   | 236     |                                      |         |               |        |         | 
|                                         | Restricted stock (net of forfeitures) |                                                                                                |       |                           |   |                   | (19,160 | )                                    |         |               |        |         | 
|Dividends, $0.20 per common share        |                                       |                                                                                                |      |                            |   |                  |         |                                      | (26,390 | )              |        |        |  
|Purchases of Treasury Stock              |                                       |                                                                                                |      |                            |   |                  |         |                                      |        |                |        |        |  
|Amortization of stock-based compensation |                                       |                                                                                                |      |                            |   | 15,844            |         |                                      |        |                |        |        |  
|                                         | Comprehensive income:                 |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|                                         |                                       | Net earnings                                                                                   |       |                            |  |                   |         |                                     |         |                | 50,563 |         |  
|                                         |                                       | Unrealized gain on foreign currency forward and option contracts, net of deferred income taxes |       |                            |  |                   |         |                                     |         |                |       |         |  
|                                         |                                       | Unrecognized gain on hedge settlement                                                          |       |                            |  |                   |         |                                     |         |                |       |         |  
|                                         |                                       | Unrealized gain on investments, net of deferred income taxes                                   |       |                            |  |                   |         |                                     |         |                |       |         |  
|                                         |                                       | Unrealized foreign currency translation gain, net of deferred income taxes                     |       |                            |  |                   |         |                                     |         |                |       |         |  
|                                         |                                       |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|                                         | Total comprehensive income            |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|                                         |                                       |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|                                         | Other                                 |                                                                                                |       |                           |   |                   | 1,445   |                                      |         |               |        |         | 
|                                         |                                       |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  
|Balance at June 30, 2006                 |                                       | $                                                                                              | 1,459 |                            | $ | 1,274,201         |         | $                                    | 793,404 |                | $      | (19,956 | )
|                                         |                                       |                                                                                                |       |                            |   |                   |         |                                      |         |                |        |         |  

See Notes to Consolidated Financial Statements.

5

---



SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)

|                                                                                |                                                                | Six Months Ended June 30,                      |           
|------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------- | ----------
|
|Operating Activities                                                            |                                                                |                                                |           
|Net earnings                                                                    |                                                                | $                                              | 50,563    
|Adjustments to reconcile net earnings to cash provided by operating activities: |                                                                |                                                |           
|                                                                                | Depreciation and amortization                                  |                                                |           
|                                                                                | Stock-based compensation for employees                         |                                                |           
|                                                                                | Allowance for doubtful accounts                                |                                                |           
|                                                                                | Deferred income taxes                                          |                                                |           
|                                                                                | Loss on derivative instrument                                  |                                                |           
|                                                                                | Joint venture equity loss (income)                             |                                                |           
|                                                                                | Gain on sale of investment                                     |                                                |           
|                                                                                | Loss on sale of subsidiaries                                   |                                                |           
|                                                                                | Other                                                          |                                                |           
|                                                                                | Changes in operating assets and liabilities:                   |                                                |           
|                                                                                |                                                                | Accounts and other receivables                 |           
|                                                                                |                                                                | Prepaid expenses                               |           
|                                                                                |                                                                | Other assets                                   |           
|                                                                                |                                                                | Accrued compensation and related benefits      |           
|                                                                                |                                                                | Accounts payable and other accrued liabilities |           
|                                                                                |                                                                | Pensions and other postretirement benefits     |           
|                                                                                | Excess tax benefits from stock-based compensation arrangements |                                                |           
|                                                                                |                                                                |                                                |           
|                                                                                | Cash provided by operating activities                          |                                                |           
|Investing Activities                                                            |                                                                |                                                |           
|Additions to property and equipment                                             |                                                                |                                                | (51,977   
|Purchases of marketable securities                                              |                                                                |                                                | (6,447,541
|Sales of marketable securities                                                  |                                                                |                                                | 6,594,488 
|Proceeds from sale of investment                                                |                                                                |                                                |          
|Loans to and investments in joint venture partners                              |                                                                |                                                |          
|Acquisitions (net of cash acquired)                                             |                                                                |                                                | (53,887   
|Proceeds from release of restricted cash                                        |                                                                |                                                | 37,211    
|Purchase of foreign currency options                                            |                                                                |                                                |          
|Other investing activities                                                      |                                                                |                                                | 6,250     
|                                                                                |                                                                |                                                |           
|                                                                                | Cash provided by (used for) investing activities               |                                                |           
|Financing Activities                                                            |                                                                |                                                |           
|Proceeds from issuance of Common Stock                                          |                                                                |                                                | 7,750     
|Dividends paid                                                                  |                                                                |                                                | (26,390   
|Prepayment of Bridge Facility                                                   |                                                                |                                                | (800,000  
|Proceeds from borrowings on revolving credit agreement                          |                                                                |                                                | 180,000   
|Payments of borrowings on revolving credit agreement                            |                                                                |                                                | (25,000   
|Proceeds from issuance of Notes                                                 |                                                                |                                                | 397,136   
|Excess tax benefits from stock-based compensation arrangements                  |                                                                |                                                | 686       
|Purchases of treasury stock                                                     |                                                                |                                                | (23,387   
|Other financing activities                                                      |                                                                |                                                | (3,973    
|                                                                                |                                                                |                                                |           
|                                                                                | Cash used for financing activities                             |                                                |           
|                                                                                | Effect of exchange rate changes on cash and cash equivalents   |                                                |           
|Increase (decrease) in cash                                                     |                                                                |                                                | 91,433    
|Cash at beginning of period                                                     |                                                                |                                                | 135,233   
|                                                                                |                                                                |                                                |           
|Cash at end of period                                                           |                                                                | $                                              | 226,666   
|                                                                                |                                                                |                                                |           

See Notes to Consolidated Financial Statements.

6

---



SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.     General Information



2.     Summary of Significant Accounting Policies



---



7

---







8

---





Three Months Ended
June 30,

Six Months Ended
June 30,2006

2005

2006

2005Denominator for basic earnings per common shareweighted-average shares

130,372

129,286

130,384

129,767Dilutive effect of stock awards and options

319

756

1,310

628Denominator for diluted earnings per common shareadjusted weighted-average shares

130,691

130,042

131,694

130,395




3.     Significant Events



9

---





10

---







11

---





Working capital

$
(25,275
)Tradenames (indefinite life)


5,400Tradenames (5 year useful life)


800Technology (5 year useful life)


3,130Goodwill


51,004Total purchase price

$
35,059




12

---





Working capital

$
(200,382
)Property and equipment


21,185Investments in joint ventures and other assets, net


524Tradenames (indefinite life)


281,789Tradenames (14.2 year average useful life)


45,005Technology (3.5 year useful life)


95,411Customer and contractual relationships (7 year useful life)


108,012Non-compete agreements (1 year useful life)


1,800Goodwill


823,028Non-current liabilities


(1,483
)Total purchase price

$
1,174,889




13

---





Three Months
Ended
June 30, 2005

Six Months
Ended
June 30, 2005Pro forma revenues

$
711,949

$
1,354,773Pro forma net earnings


27,965


38,151Pro forma net earnings per common share:Basic

$
0.22

$
0.29Diluted

$
0.22

$
0.29




Assets acquired net of liabilities assumed

$
5,503Purchased technology (5 year useful life)


3,900Customer relationships (8 year useful life)


10,700Tradenames


1,800Goodwill


19,196Total purchase price

$
41,099




14

---







4.     Pension and Other Postretirement Benefit Plans



Three Months Ended June 30,

Six Months Ended June 30,Pension Benefits
Components of net periodic benefit cost:2006

2005

2006

2005Service cost

$
29

$
1,465

$
57

$
3,019Interest cost


6,022


5,356


10,695


10,807Expected return on plan assets


(7,339
)

(6,033
)

(12,993
)

(12,009
)Amortization of transition asset


(3
)

(3
)

(6
)

(6
)Amortization of prior service cost





54





69Amortization of actuarial loss


754


1,065


1,338


2,378Net periodic benefit cost


(537
)

1,904


(909
)

4,258Settlement loss








307


Total net periodic benefit cost

$
(537
)
$
1,904

$
(602
)
$
4,258


Three Months Ended June 30,

Six Months Ended June 30,Other Benefits
Components of net periodic benefit cost:2006

2005

2006

2005Service cost

$
293

$
54

$
586

$
623Interest cost


1,163


180


2,326


2,162Amortization of transition asset


4


4


8


8Amortization of prior service cost


(1,622
)

56


(3,244
)

(3,077
)Amortization of actuarial loss


963


218


1,926


1,591Total net periodic benefit cost

$
801

$
512

$
1,602

$
1,307




15

---





5.     Options and Other Stock-Based Awards



Three Months Ended June 30,

Six Months Ended June 30,2006

2005

2006

2005Stock options

$
4,450

$
375

$
8,981

$
830Restricted stock


3,795


2,613


6,737


4,833Performance shares


1,182





1,957


SFAS 123R adjustment








(1,831
)

Total

$
9,427

$
2,988

$
15,844

$
5,663




16

---





Three Months Ended
June 30, 2005

Six Months Ended
June 30, 2005Net earnings, as reported

$
43,887

$
101,568Add stock compensation expense determined under intrinsic value method, net of income taxes


1,874


3,552Less total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes


(8,022
)

(16,291
)Pro forma net earnings

$
37,739

$
88,829Net earnings per common share, as reported:Basic

$
0.34

$
0.78Diluted

$
0.34

$
0.78Net earnings per common share, pro forma:Basic

$
0.29

$
0.68Diluted

$
0.29

$
0.68




Three Months Ended
June 30, 2005

Six Months Ended
June 30, 2005Average risk-free interest rate


3.79
%

3.64
%Expected life (in years)


4.5


4.5Sabre Holdings dividend yield


1.8
%

1.7
%Sabre Holdings implied volatility


49.4
%

49.8
%Fair value

$
7.89

$
8.27




17

---





Restricted Stock

Shares

Weighted-
Average Grant
Date Fair ValueNonvested at December 31, 2005

1,757,084

$
20.81Granted

1,034,200


23.59Vested

(539,350
)

20.62Forfeited

(91,296
)

20.82Nonvested at June 30, 2006

2,160,638

$
22.11




Sabre Holdings initial stock price

$23.62Sabre Holdings implied volatility

27.41
%Sabre Holdings dividend yield

1.67
%Risk free rate

4.63%-4.65
%




18

---







19

---





Stock Options

Shares

Weighted-
Average
Exercise Price
per Share

Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic ValueOutstanding at December 31, 2005

16,990,060

$
30.10

6.32

$
511,400,806Granted

15,561


21.37Exercised

(551,882
)

19.73Cancelled

(839,162
)

31.24Outstanding at June 30, 2006

15,614,577

$
30.34

5.81

$
473,789,024


Options Outstanding

Options ExercisableRange of Exercise Prices

Shares

Weighted-
Average
Remaining
Life
(Years)

Weighted-
Average
Exercise
Price

Shares

Weighted-
Average
Exercise
Price$0.16-$15.99

21,229

3.65

$
7.60

20,929

$
7.48$16.00-$25.99

7,504,769

7.25


20.65

4,115,519


20.64$26.00-$35.99

1,313,666

3.35


31.70

1,303,581


31.73$36.00-$48.99

5,642,427

4.88


38.42

5,642,427


38.42$49.00-$60.99

1,009,902

3.73


50.01

1,009,902


50.01$61.00-$105.06

122,584

3.72


79.58

122,584


79.58Total

15,614,577

5.81

$
30.34

12,214,942

$
33.03




20

---





6.     Income Taxes



Three Months Ended
June 30,

Six Months Ended
June 30,2006

2005

2006

2005Income tax provision at statutory federal income tax rate

$
17,694

$
25,134

$
27,047

$
56,337State income taxes, net of federal benefit


1,174


1,435


1,789


3,186Reversal of previously accrued taxes


(4,773
)




(4,773
)

Other, net


2,701


1,356


2,650


(127
)Total provision for income taxes

$
16,796

$
27,925

$
26,713

$
59,396


7.     Derivatives



21

---





8.     Debt



Covenant

Requirement

Level at
June 30,
2006Consolidated Leverage Ratio (Debt to EBITDA)

3.75 to 1 maximum

2.82Consolidated Net Worth

$1.2 billion

$1.7 billion


22

---





As amended on July 22, 2005

RequirementConsolidated Leverage Ratio (Debt to EBITDA) for the quarters ended:June 30, 2006 through September 30, 2006

3.50 to 1 maximumDecember 31, 2006 through March 31, 2007

3.25 to 1 maximumJune 30, 2007 and thereafter

3.00 to 1 maximum




9.     Business Segments



23

---





Three Months Ended June 30,

Six Months Ended June 30,2006

2005

2006

2005Revenues from external customers, excluding adjusting items:Sabre Travel Network

$
405,311

$
416,619

$
842,610

$
830,321Travelocity


245,058


134,485


441,332


243,866Sabre Airline Solutions


67,706


66,844


132,531


129,617Total

$
718,075

$
617,948

$
1,416,473

$
1,203,804Intersegment revenues:Sabre Travel Network

$
10,423

$
8,939

$
20,188

$
14,895Travelocity


35,874


39,655


73,692


81,468Total

$
46,297

$
48,594

$
93,880

$
96,363Equity in net income (loss) of equity method investees:Sabre Travel Network

$
4,484

$
3,383

$
5,936

$
3,532Travelocity


53


(2,076
)

391


(6,193
)Total

$
4,537

$
1,307

$
6,327

$
(2,661
)Consolidated revenues:Sabre Travel Network

$
420,218

$
428,941

$
868,734

$
848,748Travelocity


280,985


172,064


515,415


319,141Sabre Airline Solutions


67,706


66,844


132,531


129,617Elimination of intersegment revenues


(46,297
)

(48,594
)

(93,880
)

(96,363
)Total

$
722,612

$
619,255

$
1,422,800

$
1,201,143




24

---





Three Months Ended June 30,

Six Months Ended June 30,2006

2005

2006

2005Segment operating income (loss) excluding adjusting items:Sabre Travel Network

$
73,125

$
71,614

$
148,630

$
152,902Travelocity


22,713


6,544


5,406


(5,236
)Sabre Airline Solutions


9,969


11,660


16,579


21,570Net corporate allocations


(324
)

243


(697
)

256Total

$
105,483

$
90,061

$
169,918

$
169,492Impact of adjusting items on operating income(increase)/decrease:Sabre Travel Network:Other intangibles amortization

$
3,856

$
4,402

$
7,563

$
9,611Stock-based compensation


4,571





8,636


Total Sabre Travel Network

$
8,427

$
4,402

$
16,199

$
9,611Travelocity:Other intangibles amortization

$
13,814

$
1,614

$
27,979

$
3,617Stock-based compensation


2,994


376


5,658


831Total Travelocity

$
16,808

$
1,990

$
33,637

$
4,448Sabre Airline Solutions:Other intangibles amortization

$
562

$
563

$
1,120

$
1,133Stock-based compensation


1,297





2,647


Total Sabre Airline Solutions

$
1,859

$
563

$
3,767

$
1,133Total operating income adjusting items

$
27,094

$
6,955

$
53,603

$
15,192Consolidated operating income (loss):Sabre Travel Network

$
64,698

$
67,212

$
132,431

$
143,291Travelocity


5,905


4,554


(28,231
)

(9,684
)Sabre Airline Solutions


8,110


11,097


12,812


20,437Net corporate allocations


(324
)

243


(697
)

256Total

$
78,389

$
83,106

$
116,315

$
154,300


10.   Supplemental Guarantor/Non-Guarantor Financial Information



25

---





26

---





UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME  FOR THE THREE MONTHS ENDED JUNE 30, 2006  (In thousands)

|                                         |                          | Sabre
Holdings               |        | Sabre
Inc. |        | Non-Guarantor
Subsidiaries |         | Eliminations |         | Sabre
Consolidated |       
|---------------------------------------- | ------------------------ | ---------------------------- | ------ | ---------- | ------ | -------------------------- | ------- | ------------ | ------- | ------------------ | ------
|Revenues                                 |                          | $                            |       |            | $      | 390,193                    |         | $            | 460,066 |                    | $     
|Operating expenses                       |                          |                              | 1,247  |            |        | 342,483                    |         |              | 428,140 |                    |       
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |       
|Operating income (loss)                  |                          |                              | (1,247 | )          |        | 47,710                     |         |              | 31,926  |                    |       
|Other income (expense)                   |                          |                              |        |            |        |                            |         |              |         |                    |       
|                                         | Interest income          |                              |        | 36,565     |        |                            | 1,315   |              |         | 6,093              |       
|                                         | Interest expense         |                              |        | (15,827    | )      |                            | (44,000 | )            |         | (899               | )     
|                                         | Income from subsidiaries |                              |        | 20,984     |        |                            | 14,426  |              |         |                   |       
|                                         | Other, net               |                              |        |           |        |                            | 23      |              |         | (11,107            | )     
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |       
|                                         |                          | Total other income (expense) |        |            | 41,722 |                            |         | (28,236      | )       |                    | (5,913
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |       
|Income before provision for income taxes |                          |                              | 40,475 |            |        | 19,474                     |         |              | 26,013  |                    |       
|Provision (credit) for income taxes      |                          |                              | 6,719  |            |        | (1,510                     | )       |              | 11,587  |                    |       
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |       
|Net earnings                             |                          | $                            | 33,756 |            | $      | 20,984                     |         | $            | 14,426  |                    | $     
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |       

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME  FOR THE THREE MONTHS ENDED JUNE 30, 2005  (In thousands)

|                                         |                          | Sabre
Holdings               |        | Sabre
Inc. |        | Non-Guarantor
Subsidiaries |         | Eliminations |         | Sabre
Consolidated |      
|---------------------------------------- | ------------------------ | ---------------------------- | ------ | ---------- | ------ | -------------------------- | ------- | ------------ | ------- | ------------------ | -----
|Revenues                                 |                          | $                            |       |            | $      | 397,375                    |         | $            | 352,767 |                    | $    
|Operating expenses                       |                          |                              | 880    |            |        | 346,064                    |         |              | 320,092 |                    |      
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Operating income (loss)                  |                          |                              | (880   | )          |        | 51,311                     |         |              | 32,675  |                    |      
|Other income (expense)                   |                          |                              |        |            |        |                            |         |              |         |                    |      
|                                         | Interest income          |                              |        | 24,116     |        |                            | 4,633   |              |         | 6,351              |      
|                                         | Interest expense         |                              |        | (5,499     | )      |                            | (31,403 | )            |         | (486               | )    
|                                         | Income from subsidiaries |                              |        | 32,266     |        |                            | 24,409  |              |         |                   |      
|                                         | Other, net               |                              |        |           |        |                            | (9,611  | )            |         | 605                |      
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|                                         |                          | Total other income (expense) |        |            | 50,883 |                            |         | (11,972      | )       |                    | 6,470
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Income before provision for income taxes |                          |                              | 50,003 |            |        | 39,339                     |         |              | 39,145  |                    |      
|Provision for income taxes               |                          |                              | 6,116  |            |        | 7,073                      |         |              | 14,736  |                    |      
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Net earnings                             |                          | $                            | 43,887 |            | $      | 32,266                     |         | $            | 24,409  |                    | $    
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      

27

---



UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME  FOR THE SIX MONTHS ENDED JUNE 30, 2006  (In thousands)

|                                         |                          | Sabre
Holdings               |        | Sabre
Inc. |        | Non-Guarantor
Subsidiaries |         | Eliminations |         | Sabre
Consolidated |      
|---------------------------------------- | ------------------------ | ---------------------------- | ------ | ---------- | ------ | -------------------------- | ------- | ------------ | ------- | ------------------ | -----
|Revenues                                 |                          | $                            |       |            | $      | 793,391                    |         | $            | 879,027 |                    | $    
|Operating expenses                       |                          |                              | 2,292  |            |        | 715,255                    |         |              | 838,556 |                    |      
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Operating income (loss)                  |                          |                              | (2,292 | )          |        | 78,136                     |         |              | 40,471  |                    |      
|Other income (expense)                   |                          |                              |        |            |        |                            |         |              |         |                    |      
|                                         | Interest income          |                              |        | 73,429     |        |                            | 4,205   |              |         | 11,510             |      
|                                         | Interest expense         |                              |        | (32,095    | )      |                            | (88,007 | )            |         | (1,582             | )    
|                                         | Income from subsidiaries |                              |        | 27,443     |        |                            | 25,187  |              |         |                   |      
|                                         | Other, net               |                              |        | (1,831     | )      |                            | 286     |              |         | (4,954             | )    
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|                                         |                          | Total other income (expense) |        |            | 66,946 |                            |         | (58,329      | )       |                    | 4,974
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Income before provision for income taxes |                          |                              | 64,654 |            |        | 19,807                     |         |              | 45,445  |                    |      
|Provision (credit) for income taxes      |                          |                              | 14,091 |            |        | (7,636                     | )       |              | 20,258  |                    |      
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      
|Net earnings                             |                          | $                            | 50,563 |            | $      | 27,443                     |         | $            | 25,187  |                    | $    
|                                         |                          |                              |        |            |        |                            |         |              |         |                    |      

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME  FOR THE SIX MONTHS ENDED JUNE 30, 2005  (In thousands)

|                                         |                          | Sabre
Holdings               |         | Sabre
Inc. |         | Non-Guarantor
Subsidiaries |         | Eliminations |         | Sabre
Consolidated |       
|---------------------------------------- | ------------------------ | ---------------------------- | ------- | ---------- | ------- | -------------------------- | ------- | ------------ | ------- | ------------------ | ------
|Revenues                                 |                          | $                            |        |            | $       | 798,648                    |         | $            | 639,561 |                    | $     
|Operating expenses                       |                          |                              | 1,826   |            |         | 670,533                    |         |              | 611,550 |                    |       
|                                         |                          |                              |         |            |         |                            |         |              |         |                    |       
|Operating income (loss)                  |                          |                              | (1,826  | )          |         | 128,115                    |         |              | 28,011  |                    |       
|Other income (expense)                   |                          |                              |         |            |         |                            |         |              |         |                    |       
|                                         | Interest income          |                              |         | 50,238     |         |                            | 7,854   |              |         | 8,195              |       
|                                         | Interest expense         |                              |         | (10,657    | )       |                            | (60,387 | )            |         | (776               | )     
|                                         | Income from subsidiaries |                              |         | 76,831     |         |                            | 35,439  |              |         |                   |       
|                                         | Other, net               |                              |         |           |         |                            | (9,757  | )            |         | 21,954             |       
|                                         |                          |                              |         |            |         |                            |         |              |         |                    |       
|                                         |                          | Total other income (expense) |         |            | 116,412 |                            |         | (26,851      | )       |                    | 29,373
|                                         |                          |                              |         |            |         |                            |         |              |         |                    |       
|Income before provision for income taxes |                          |                              | 114,586 |            |         | 101,264                    |         |              | 57,384  |                    |       
|Provision for income taxes               |                          |                              | 13,018  |            |         | 24,433                     |         |              | 21,945  |                    |       
|                                         |                          |                              |         |            |         |                            |         |              |         |                    |       
|Net earnings                             |                          | $                            | 101,568 |            | $       | 76,831                     |         | $            | 35,439  |                    | $     
|                                         |                          |                              |         |            |         |                            |         |              |         |                    |       

28

---





UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS  JUNE 30, 2006  (In thousands)

|                                           |                                                  | Sabre
Holdings             |           | Sabre
Inc. |           | Non-Guarantor
Subsidiaries |          | Eliminations |           | Sabre
Consolidated
|------------------------------------------ | ------------------------------------------------ | -------------------------- | --------- | ---------- | --------- | -------------------------- | -------- | ------------ | --------- | ------------------
|Assets                                     |                                                  |                            |           |            |           |                            |          |              |           |                   
|Current Assets                             |                                                  |                            |           |            |           |                            |          |              |           |                   
|                                           | Cash and marketable securities                   |                            | $         |           |           | $                          | 229,616  |              | $         | 226,616           
|                                           | Restricted cash                                  |                            |           |           |           |                            |         |              |           | 9,744             
|                                           | Accounts receivable, net                         |                            |           |           |           |                            | 225,731  |              |           | 312,512           
|                                           | Intercompany accounts receivable (payable)       |                            |           |           |           |                            | (267,643 | )            |           | 267,643           
|                                           | Other current assets                             |                            |           |           |           |                            | 103,159  |              |           | 101,083           
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total current assets       |           |            |          |                            |          | 290,863      |           |                   
|Property and equipment                     |                                                  |                            |           |            |           |                            |          |              |           |                   
|Property and equipment, net                |                                                  |                            |          |            |           | 338,446                    |          |              | 93,573    |                   
|Investments in subsidiaries                |                                                  |                            | 823,083   |            |           | 2,655,749                  |          |              |          |                   
|Intercompany notes                         |                                                  |                            | 1,882,583 |            |           | (1,882,583                 | )        |              |          |                   
|Investments in joint ventures              |                                                  |                            |          |            |           | 4,883                      |          |              | 140,347   |                   
|Goodwill and intangible assets, net        |                                                  |                            |          |            |           | 11,072                     |          |              | 2,396,834 |                   
|Other assets, net                          |                                                  |                            | 6,977     |            |           | 177,654                    |          |              | (6,407    | )                 
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total assets               |           | $          | 2,712,643 |                            | $        | 1,596,084    |           | $                 
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   
|Liabilities and stockholders' equity       |                                                  |                            |           |            |           |                            |          |              |           |                   
|Current liabilities                        |                                                  |                            |           |            |           |                            |          |              |           |                   
|                                           | Accounts payable                                 |                            | $         | 1          |           | $                          | 57,735   |              | $         | 103,658           
|                                           | Travel supplier liabilities and deferred revenue |                            |           |           |           |                            |         |              |           | 483,038           
|                                           | Accrued compensation and related benefits        |                            |           |           |           |                            | 37,640   |              |           | 13,906            
|                                           | Other current accrued liabilities                |                            |           | 21,585     |           |                            | 313,581  |              |           | 261,438           
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total current liabilities  |           |            | 21,586    |                            |          | 408,956      |           |                   
|Pensions and other postretirement benefits |                                                  |                            |          |            |           | 186,192                    |          |              | 157       |                   
|Other liabilities                          |                                                  |                            | 10,085    |            |           | 24,054                     |          |              | 2,002     |                   
|Minority interests                         |                                                  |                            |          |            |           |                           |          |              | 6,921     |                   
|Long-term capital lease obligation         |                                                  |                            |          |            |           | 153,799                    |          |              |          |                   
|Public and other notes payable             |                                                  |                            | 953,769   |            |           |                           |          |              | 15,076    |                   
|                                           |                                                  | Total stockholders' equity |           |            | 1,727,203 |                            |          | 823,083      |           |                   
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   
|Total liabilities and stockholders' equity |                                                  | $                          | 2,712,643 |            | $         | 1,596,084                  |          | $            | 3,541,945 |                   
|                                           |                                                  |                            |           |            |           |                            |          |              |           |                   

29

---



UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS  DECEMBER 31, 2005  (In thousands)

|                                           |                                                  | Sabre
Holdings            |           | Sabre
Inc. |           | Non-Guarantor
Subsidiaries |          | Eliminations |           | Sabre
Consolidated
|------------------------------------------ | ------------------------------------------------ | ------------------------- | --------- | ---------- | --------- | -------------------------- | -------- | ------------ | --------- | ------------------
|Assets                                     |                                                  |                           |           |            |           |                            |          |              |           |                   
|Current Assets                             |                                                  |                           |           |            |           |                            |          |              |           |                   
|                                           | Cash and marketable securities                   |                           | $         |           |           | $                          | 380,898  |              | $         | 130,920           
|                                           | Restricted cash                                  |                           |           |           |           |                            | 11,237   |              |           | 45,782            
|                                           | Accounts receivable, net                         |                           |           |           |           |                            | 251,408  |              |           | 235,626           
|                                           | Intercompany accounts receivable (payable)       |                           |           |           |           |                            | (158,906 | )            |           | 158,906           
|                                           | Other current assets                             |                           |           |           |           |                            | 81,192   |              |           | 111,225           
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total current assets      |           |            |          |                            |          | 565,829      |           |                   
|Property and equipment, net                |                                                  |                           |          |            |           | 344,179                    |          |              | 85,389    |                   
|Investments in subsidiaries                |                                                  |                           | 744,562   |            |           | 2,583,474                  |          |              |          |                   
|Intercompany notes                         |                                                  |                           | 2,122,011 |            |           | (2,122,011                 | )        |              |          |                   
|Investments in joint ventures              |                                                  |                           |          |            |           | 4,189                      |          |              | 152,088   |                   
|Goodwill and intangible assets, net        |                                                  |                           |          |            |           | 11,361                     |          |              | 2,321,779 |                   
|Other assets, net                          |                                                  |                           | 4,106     |            |           | 169,509                    |          |              | 33,223    |                   
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total assets              |           | $          | 2,870,679 |                            | $        | 1,556,530    |           | $                 
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   
|Liabilities and stockholders' equity       |                                                  |                           |           |            |           |                            |          |              |           |                   
|Current liabilities                        |                                                  |                           |           |            |           |                            |          |              |           |                   
|                                           | Accounts payable                                 |                           | $         | 3,559      |           | $                          | 77,478   |              | $         | 86,848            
|                                           | Travel supplier liabilities and deferred revenue |                           |           |           |           |                            |         |              |           | 301,377           
|                                           | Accrued compensation and related benefits        |                           |           |           |           |                            | 56,710   |              |           | 17,918            
|                                           | Other accrued liabilities                        |                           |           | 11,013     |           |                            | 309,983  |              |           | 227,577           
|                                           | Bridge Facility                                  |                           |           | 800,000    |           |                            |         |              |           |                  
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   
|                                           |                                                  | Total current liabilities |           |            | 814,572   |                            |          | 444,171      |           |                   
|Pensions and other postretirement benefits |                                                  |                           |          |            |           | 190,486                    |          |              | 967       |                   
|Other liabilities                          |                                                  |                           | 1,692     |            |           | 19,123                     |          |              | 2,753     |                   
|Minority interests                         |                                                  |                           |          |            |           |                           |          |              | 38,948    |                   
|Long-term capital lease obligation         |                                                  |                           |          |            |           | 158,188                    |          |              |          |                   
|Public and other notes payable             |                                                  |                           | 411,303   |            |           |                           |          |              | 15,076    |                   
|Total stockholders' equity                 |                                                  |                           | 1,643,112 |            |           | 744,562                    |          |              | 2,583,474 |                   
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   
|Total liabilities and stockholders' equity |                                                  | $                         | 2,870,679 |            | $         | 1,556,530                  |          | $            | 3,274,938 |                   
|                                           |                                                  |                           |           |            |           |                            |          |              |           |                   

30

---





UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS  FOR THE SIX MONTHS ENDED JUNE 30, 2006  (In thousands)

|                     |                                                                | Sabre
Holdings |   | Sabre
Inc. |   | Non-Guarantor
Subsidiaries |          | Eliminations |   | Sabre
Consolidated |  
|-------------------- | -------------------------------------------------------------- | -------------- | - | ---------- | - | -------------------------- | -------- | ------------ | - | ------------------ | -
|Operating Activities |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Cash provided by operating activities                          |                | $ |           |   | $                          | 225,666  |              | $ | 65,902             |  
|Investing Activities |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Additions to property and equipment                            |                |   |           |   |                            | (26,873  | )            |   | (25,104            | )
|                     | Net sales of marketable securities                             |                |   |           |   |                            | 146,857  |              |   | 90                 |  
|                     | Acquisitions (net of cash acquired)                            |                |   |           |   |                            | (19,727  | )            |   | (34,160            | )
|                     | Proceeds from release of restricted cash                       |                |   |           |   |                            |         |              |   | 37,211             |  
|                     | Other investing activities                                     |                |   |           |   |                            | (956     | )            |   | 7,206              |  
|                     |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Cash provided by (used for) investing activities               |                |   |           |   |                            | 99,301   |              |   | (14,757            | )
|Financing Activities |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Proceeds from issuance of Common Stock                         |                |   | 7,750      |   |                            |         |              |   |                   |  
|                     | Dividends paid                                                 |                |   | (26,390    | ) |                            |         |              |   |                   |  
|                     | Contributions (distributions) from affiliates, net             |                |   | 290,405    |   |                            | (323,974 | )            |   | 33,569             |  
|                     | Prepayment of Bridge Facility                                  |                |   | (800,000   | ) |                            |         |              |   |                   |  
|                     | Proceeds from borrowings on revolving credit agreement         |                |   | 180,000    |   |                            |         |              |   |                   |  
|                     | Payment of borrowings on revolving credit agreement            |                |   | (25,000    | ) |                            |         |              |   |                   |  
|                     | Proceeds from issuance of Notes                                |                |   | 395,936    |   |                            | 1,200    |              |   |                   |  
|                     | Excess tax benefits from stock-based compensation arrangements |                |   | 686        |   |                            |         |              |   |                   |  
|                     | Purchases of treasury stock                                    |                |   | (23,387    | ) |                            |         |              |   |                   |  
|                     | Other financing activities                                     |                |   |           |   |                            | (6,546   | )            |   | 2,573              |  
|                     |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Cash provided by (used for) financing activities               |                |   |           |   |                            | (329,320 | )            |   | 36,142             |  
|                     | Effect of exchange rate changes on cash and cash equivalents   |                |   |           |   |                            |         |              |   | 8,499              |  
|                     | Increase (decrease) in cash                                    |                |   |           |   |                            | (4,353   | )            |   | 95,786             |  
|                     | Cash at beginning of period                                    |                |   |           |   |                            | 4,418    |              |   | 130,815            |  
|                     |                                                                |                |   |            |   |                            |          |              |   |                    |  
|                     | Cash at end of period                                          |                | $ |           |   | $                          | 65       |              | $ | 226,601            |  
|                     |                                                                |                |   |            |   |                            |          |              |   |                    |  

31

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UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS  FOR THE SIX MONTHS ENDED JUNE 30, 2005  (In thousands)

|                     |                                                              | Sabre
Holdings |   | Sabre
Inc. |   | Non-Guarantor
Subsidiaries |         | Eliminations |   | Sabre
Consolidated |  
|-------------------- | ------------------------------------------------------------ | -------------- | - | ---------- | - | -------------------------- | ------- | ------------ | - | ------------------ | -
|Operating Activities |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Cash provided by operating activities                        |                | $ |           |   | $                          | 141,084 |              | $ | 15,588             |  
|Investing Activities |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Additions to property and equipment                          |                |   |           |   |                            | (25,411 | )            |   | (15,198            | )
|                     | Net sales of marketable securities                           |                |   |           |   |                            | 13,088  |              |   | 18,309             |  
|                     | Proceeds from sale of investment                             |                |   |           |   |                            |        |              |   | 26,013             |  
|                     | Loans to and investments in joint venture partners           |                |   |           |   |                            |        |              |   | (12,538            | )
|                     | Acquisitions (net of cash acquired)                          |                |   |           |   |                            | (41,708 | )            |   | (25,065            | )
|                     | Purchase of foreign currency options                         |                |   |           |   |                            | (10,000 | )            |   |                   |  
|                     |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Cash used for investing activities                           |                |   |           |   |                            | (64,031 | )            |   | (8,479             | )
|Financing Activities |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Proceeds from issuance of Common Stock                       |                |   | 3,834      |   |                            |        |              |   |                   |  
|                     | Dividends paid                                               |                |   | (23,530    | ) |                            |        |              |   |                   |  
|                     | Contributions (distributions) from affiliates, net           |                |   | 82,909     |   |                            | (82,909 | )            |   |                   |  
|                     | Purchases of treasury stock                                  |                |   | (63,213    | ) |                            |        |              |   |                   |  
|                     | Other financing activities                                   |                |   |           |   |                            | (1,200  | )            |   |                   |  
|                     |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Cash provided by (used for) financing activities             |                |   |           |   |                            | (84,109 | )            |   |                   |  
|                     | Effect of exchange rate changes on cash and cash equivalents |                |   |           |   |                            |        |              |   | (2,297             | )
|                     | Increase (decrease) in cash                                  |                |   |           |   |                            | (7,056  | )            |   | 4,812              |  
|                     | Cash at beginning of period                                  |                |   |           |   |                            | 7,467   |              |   | 42,204             |  
|                     |                                                              |                |   |            |   |                            |         |              |   |                    |  
|                     | Cash at end of period                                        |                | $ |           |   | $                          | 411     |              | $ | 47,016             |  
|                     |                                                              |                |   |            |   |                            |         |              |   |                    |  

32

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



Overview of Business



33

---





Business Trends



34

---





35

---





36

---





Components of Revenues and Expenses



37

---





Matters affecting comparability:



Year
acquired

Entity

Segment

Purchase price
(in millions)2006

Zuji Holdings Limited(1)
TRAMS, Inc.

Travelocity
Sabre Travel Network

$$
35
222005

SynXis Corporation
lastminute.com plc

Sabre Travel Network
Travelocity

$$
41
1,175


---





38

---





|                                     |  | Three Months Ended June 30,
|------------------------------------ |  | ---------------------------
|
|
|Segment revenues                     |  | $                          
|Cost of revenues                     |  |                            
|Amortization of purchased technology |  |                            
|                                     |  |                            
|Gross profit                         |  |                            
|                                     |  |                            
|Selling, general & administrative    |  |                            
|Amortization of intangible assets    |  |                            
|                                     |  |                            
|Operating income (loss)              |  | $                          
|                                     |  |                            

39

---



|                                     |  | Six Months Ended June 30,
|------------------------------------ |  | -------------------------
|
|
|Segment revenues                     |  | $                        
|Cost of revenues                     |  |                          
|Amortization of purchased technology |  |                          
|                                     |  |                          
|Gross profit                         |  |                          
|                                     |  |                          
|Selling, general & administrative    |  |                          
|Amortization of intangible assets    |  |                          
|                                     |  |                          
|Operating income (loss)              |  | $                        
|                                     |  |                          

Three Months Ended June 30, 2006 and 2005

|                       |  | Three Months Ended June 30, |        
|---------------------- |  | --------------------------- | -------
|
|
|
|Revenues               |  | $                           | 768,909
|Total cost of revenues |  |                             | 473,188



40

---





Sabre Travel Network

Three Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
420,218

$
428,941

$
(8,723
)
(2.0
)%Cost of revenues


286,120


294,364


(8,244
)
(2.8
)%Amortization of purchased technology


1,009


1,415


(406
)
(28.7
)%Gross profit


133,089


133,162


(73
)
(0.1
)%Selling, general & administrative


65,628


62,910


2,718

4.3
%Amortization of intangible assets


2,763


3,040


(277
)
(9.1
)%Operating income

$
64,698

$
67,212

$
(2,514
)
(3.7
)%




41

---





Travelocity

Three Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
280,985

$
172,064

$
108,921

63.3
%Cost of revenues


129,214


74,490


54,724

73.5
%Amortization of purchased technology


7,330


356


6,974

1959.0
%Gross profit


144,441


97,218


47,223

48.6
%Selling, general & administrative


132,053


91,406


40,647

44.5
%Amortization of intangible assets


6,483


1,258


5,225

415.3
%Operating income

$
5,905

$
4,554

$
1,351

29.7
%






42

---







43

---



Sabre Airline Solutions

Three Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
67,706

$
66,844

$
862

1.3
%Cost of revenues


49,015


45,476


3,539

7.8
%Amortization of purchased technology


163


147


16

10.9
%Gross profit


18,528


21,221


(2,693
)
(12.7
)%Selling, general & administrative


9,936


9,547


389

4.1
%Amortization of intangible assets


482


577


(95
)
(16.5
)%Operating income

$
8,110

$
11,097

$
(2,987
)
(26.9
)%




44

---



Non-operating Items



Three Months Ended June 30,2006

2005

change

% change(thousands)Operating income

$
78,389

$
83,106

$
(4,717
)
(5.7
)%Interest income


2,544


6,100


(3,556
)
(58.3
)%Interest expense


(19,297
)

(8,388
)

(10,909
)
(130.1
)%Loss on derivative instrument





(9,994
)

9,994

100.0
%Other, net


(11,084
)

988


(12,072
)
(1221.9
)%Less: Provision for income taxes


16,796


27,925


(11,129
)
(39.9
)%Net earnings

$
33,756

$
43,887

$
(10,131
)
(23.1
)%


Interest Income



Interest Expense



Loss on Derivative Instrument



Other, net



Income Taxes



45

---



Net Earnings



Six Months Ended June 30, 2006 and 2005

|                       |  | Six Months Ended June 30, |          
|---------------------- |  | ------------------------- | ---------
|
|
|
|Revenues               |  | $                         | 1,516,680
|Total cost of revenues |  |                           | 963,227  



46

---





Sabre Travel Network

Six Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
868,734

$
848,748

$
19,986

2.4
%Cost of revenues


599,111


568,334


30,777

5.4
%Amortization of purchased technology


1,992


2,820


(828
)
(29.4
)%Gross profit


267,631


277,594


(9,963
)
(3.6
)%Selling, general & administrative


129,622


127,373


2,249

1.8
%Amortization of intangible assets


5,578


6,930


(1,352
)
(19.5
)%Operating income

$
132,431

$
143,291

$
(10,860
)
(7.6
)%


Revenues



47

---





Travelocity

Six Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
515,415

$
319,141

$
196,274

61.5
%Cost of revenues


248,343


144,137


104,206

72.3
%Amortization of purchased technology


14,867


899


13,968

1553.7
%Gross profit


252,205


174,105


78,100

44.9
%Selling, general & administrative


267,325


181,071


86,254

47.6
%Amortization of intangible assets


13,111


2,718


10,393

382.4
%Operating loss

$
(28,231
)
$
(9,684
)
$
(18,547
)
(191.5
)%




48

---





49

---



Sabre Airline Solutions

Six Months Ended June 30,2006

2005

change

% change(thousands)Segment revenues

$
132,531

$
129,617

$
2,914

2.2
%Cost of revenues


97,868


88,011


9,857

11.2
%Amortization of purchased technology


323


294


29

9.9
%Gross profit


34,340


41,312


(6,972
)
(16.9
)%Selling, general & administrative


20,566


19,715


851

4.3
%Amortization of intangible assets


962


1,160


(198
)
(17.1
)%Operating income

$
12,812

$
20,437

$
(7,625
)
(37.3
)%




50

---



Non-operating Items



Six Months Ended June 30,2006

2005

change

% change(thousands)Operating income

$
116,315

$
154,300

$
(37,985
)
(24.6
)%Interest income


6,523


10,469


(3,946
)
(37.7
)%Interest expense


(39,063
)

(16,002
)

(23,061
)
(144.1
)%Gain on sale of investment





20,594


(20,594
)
(100.0
)%Loss on derivative instrument





(9,994
)

9,994

100.0
%Other, net


(6,499
)

1,597


(8,096
)
(507.0
)%Less: Provision for income taxes


26,713


59,396


(32,683
)
(55.0
)%Net earnings

$
50,563

$
101,568

$
(51,005
)
(50.2
)%


Interest Income



Interest Expense



Gain on Sale of Investments



Loss on Derivative Instrument



Other, net



51

---





Income Taxes



Net Earnings



52

---



SABRE HOLDINGS CORPORATION

LIQUIDITY AND CAPITAL RESOURCES



53

---





Declaration Date

Payable Date

Amount per Share2005:February 1, 2005

February 28, 2005

$
0.090May 3, 2005

May 26, 2005


0.090July 26, 2005

August 18, 2005


0.090November 1, 2005

November 29, 2005


0.0902006:January 30, 2006

February 28, 2006

$
0.100May 1, 2006

May 25, 2006


0.100August 1, 2006

August 28, 2006


0.100




Date Authorized

Authorized for
Repurchase

Repurchased

Repurchased
under ASSP

Available for
RepurchaseOctober 20, 2003

$
100 million

$
100 million

$
58 million



(1)April 19, 2004

$
100 million

$
100 million






(2)October 25, 2004

$
100 million

$
100 million






(3)May 2, 2005

$
100 million







$
100 million
(4)


---



54

---







Financing Arrangements



55

---





Covenant

Requirement

Level at
June 30,
2006Consolidated Leverage Ratio (Debt to EBITDA)

3.75 to 1 maximum

2.82Consolidated Net Worth

$1.2 billion

$1.7 billion




As amended on July 22, 2005

RequirementConsolidated Leverage Ratio (Debt to EBITDA) for the quarters ended:June 30, 2006 through September 30, 2006

3.50 to 1 maximumDecember 31, 2006 through March 31, 2007

3.25 to 1 maximumJune 30, 2007 and thereafter

3.00 to 1 maximum




Six Months Ended June 30,2006

2005Cash provided by operating activities

$
291,568

$
156,672Cash provided by (used for) investing activities


84,544


(72,510
)Cash used for financing activities


(293,178
)

(84,109
)Effect of exchange rate changes on cash and cash equivalents


8,499


(2,297
)Total cash increase (decrease)

$
91,433

$
(2,244
)




56

---





57

---





Sabre Holdings initial stock price

$23.62Sabre Holdings implied volatility

27.41
%Sabre Holdings dividend yield

1.67
%Risk free rate

4.63%-4.65
%


58

---







Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk



Foreign Currency Risk



59

---





Item 4. Controls and Procedures



60

---





61

---







62

---





PART II: OTHER INFORMATION

Item 1. Legal Proceedings



Item 1A. Risk Factors



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)-(b)    None.



63

---





|Period                                |  | Total Number
of Shares
Purchased |  | Weighted
Average
Price Paid
per Share |       | Total Number of
Shares Purchased as
Part of Publicly
Announced Programs |           | Maximum Dollar Value
of Shares That May Yet
be Purchased Under
the Program(1)
|------------------------------------- |  | -------------------------------- |  | ------------------------------------- | ----- | ----------------------------------------------------------------------- | --------- | -----------------------------------------------------------------------------
|April 1, 2006-April 30, 2006          |  |                                 |  | $                                     |      |                                                                         |          |                                                                              
|May 1, 2006-May 31, 2006              |  | 590,000                          |  | $                                     | 21.36 |                                                                         | 590,000   |                                                                              
|June 1, 2006-June 30, 2006            |  | 510,000                          |  | $                                     | 21.10 |                                                                         | 510,000   |                                                                              
|                                      |  |                                  |  |                                       |       |                                                                         |           |                                                                              
|Total Second Quarter 2006 Repurchases |  | 1,100,000                        |  |                                       |       |                                                                         | 1,100,000 |                                                                              
|                                      |  |                                  |  |                                       |       |                                                                         |           |                                                                              

---

Item 3. Defaults Upon Senior Securities



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



Item 5. Other Information



64

---





Item 6. Exhibits

The
following exhibits are included herein:



---

65

---





Signature

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

|Date: August 4, 2006 |  | SABRE HOLDINGS CORPORATION
|-------------------- |  | --------------------------
|                     |  | By:                       
|                     |  | By:                       

66

---