<Page>

===============================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                  FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001.


[ ]  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 000-30634.


                                 TRAVELOCITY.COM INC.
                ------------------------------------------------------
                (Exact name of registrant as specified in its charter)

               Delaware                                   75-2855109
   ---------------------------------      ------------------------------------
     (State or other jurisdiction         (I.R.S. Employer Identification No.)
   of incorporation or organization)

       15100 Trinity Boulevard
          Fort Worth, Texas                                     76155
   ----------------------------------------                   ----------
   (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code  (817) 785-8000
                                                  -----------------

                                  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 X     No     .
                                       ---       ---

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


Common Stock, $.001 par value - 16,921,738 as of November 9, 2001
Class A Common Stock, $.001 par value - 33,000,000 as of November 9, 2001

===============================================================================
<Page>


                                      INDEX

                              TRAVELOCITY.COM INC.

<Table>

PART I:  FINANCIAL INFORMATION

<S>      <C>
Item 1.  Financial Statements (unaudited)

   Consolidated Balance Sheets -- September 30, 2001 and December 31, 2000

   Consolidated Statements of Operations -- Three and nine months ended
   September 30, 2001 and 2000

   Consolidated Statement of Stockholders' Equity -- Nine months ended September 30, 2001

   Consolidated Statements of Cash Flows -- Nine months ended September 30, 2001 and 2000

   Notes to Consolidated Financial Statements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk


PART II:     OTHER INFORMATION

Item 2.  Changes in Securities and the Use of Proceeds

Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES

</Table>


                                       2
<Page>

<Table>
<Caption>

PART I:  FINANCIAL INFORMATION

Item 1.  Financial Statements
TRAVELOCITY.COM INC.
CONSOLIDATED  BALANCE SHEETS
(Unaudited) (In thousands)
----------------------------------------------------------------------------------------------------------------
                                                                                   September 30,   December 31,
                                                                                       2001            2000
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
ASSETS
CURRENT ASSETS
   Cash                                                                            $         58    $        859
   Marketable securities                                                                107,089          70,696
   Accounts receivable, net of allowance for doubtful accounts of $2,676 and
     $649 at September 30, 2001 and December 31, 2000, respectively                      28,479          19,196
   Prepaid expenses and other current assets                                             31,667          18,755
   Other current assets                                                                     937               -
   Receivable from affiliate                                                                115               -
                                                                                   ------------    ------------
        Total current assets                                                            168,345         109,506

PROPERTY AND EQUIPMENT
   Buildings and leasehold improvements                                                   4,799           3,692
   Furniture, fixtures and equipment                                                      4,736           3,608
   Computer equipment                                                                    40,815          22,828
                                                                                   ------------    ------------
                                                                                         50,350          30,128
   Less accumulated depreciation and amortization                                       (19,654)        (12,347)
                                                                                   ------------    ------------
        Total property and equipment                                                     30,696          17,781

Intangible assets, net of accumulated amortization of $143,214 and $75,464
   at September 30, 2001 and December 31, 2000, respectively                            130,349         198,113
Other assets                                                                              3,173           2,568
                                                                                   ------------    ------------
        TOTAL ASSETS                                                               $    332,563    $    327,968
                                                                                   ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                               $      11,052    $      6,242
   Accrued compensation and related benefits                                              4,551           3,910
   Payable to affiliates                                                                      -             191
   Deferred revenue                                                                      10,249              12
   Other accrued liabilities                                                             15,905           7,298
                                                                                   ------------    ------------
        Total current liabilities                                                        41,757          17,653

Deferred revenue                                                                         19,811           2,918
Other liabilities                                                                         6,445           1,109

STOCKHOLDERS' EQUITY
   Preferred Stock, $.001 par value; 7,000 shares authorized at
     September 30, 2001 and December 31, 2000; no shares issued                               -               -
   Common Stock, $.001 par value; 135,000 shares authorized; 16,920 and
     16,199 shares issued and outstanding at September 30, 2001 and
     December 31, 2000, respectively                                                         17              16
   Class A Common Stock, $.001 par value; 33,000 shares authorized,
     issued and outstanding at September 30, 2001 and December 31, 2000                      33              33
   Class B Common Stock, $.001 par value; 75,000 shares authorized at
     September 30, 2001 and December 31, 2000, respectively; no shares issued                 -               -
   Additional paid-in capital                                                           439,047         424,903
   Equity options outstanding                                                             9,377           4,225
   Accumulated other comprehensive income                                                   (18)            416
   Accumulated deficit                                                                 (183,906)       (123,305)
                                                                                   ------------    ------------
        Total stockholders' equity                                                      264,550         306,288
                                                                                   ------------    ------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $    332,563    $    327,968
                                                                                   ============    ============
</Table>

The accompanying notes are an integral part of these financial statements.

                                       3
<Page>

TRAVELOCITY.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share amounts)

<Table>
<Caption>
                                                     Three Months Ended September 30,      Nine Months Ended September 30,
                                                     --------------------------------      -------------------------------
                                                         2001                2000              2001               2000
                                                     ------------        ------------      ------------       ------------
<S>                                                  <C>                 <C>               <C>                <C>
REVENUES
  Transaction services revenue
    Air                                              $     37,811        $     29,232      $    118,156       $     75,964
    Non-air                                                17,592               9,062            45,200             19,841
  Advertising                                              14,629              13,795            48,674             28,785
  Other                                                     8,427               1,272            21,625              2,592
                                                     ------------        ------------      ------------       ------------
    Total revenues                                         78,459              53,361           233,655            127,182
  Cost of revenues                                         25,308              20,200            77,235             51,452
                                                     ------------        ------------      ------------       ------------
  Gross profit                                             53,151              33,161           156,420             75,730
OPERATING EXPENSES
  Selling and marketing                                    38,357              33,741           115,719             80,758
  Technology and development                                6,264               4,596            17,448             13,770
  General and administrative                                4,941               4,395            16,121             12,386
  Expenses related to integration of Preview
    Travel                                                      -                   -                 -              1,537
  Stock compensation (benefit)/expense (1)                 (4,017)              1,096             7,381              3,331
  Amortization of intangible assets and
    goodwill                                               22,424              22,424            67,238             50,278
                                                     ------------        ------------      ------------       ------------
    Total operating expenses                               67,969              66,252           223,907            162,060
                                                     ------------        ------------      ------------       ------------
OPERATING LOSS                                            (14,818)            (33,091)          (67,487)           (86,330)

OTHER INCOME (EXPENSE)
  Interest income, net                                      1,264               1,047             3,592              2,464
  Other income and expense                                    304                 758            (2,765)             1,127
                                                     ------------        ------------      ------------       ------------
Loss before Sabre's interest in Partnership               (13,250)            (31,286)          (66,660)           (82,739)
Sabre's interest in Partnership                                 -              19,095                 -             47,969
Benefit for income taxes                                   (1,119)                  -               (83)                 -

LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING METHOD                                    (14,369)            (12,191)          (66,743)           (34,770)
Cumulative effect of change in accounting
  method, net of Sabre's interest in
  Partnership and income taxes                                  -                   -             6,142                  -
                                                     ------------        ------------      ------------       ------------
NET LOSS                                             $    (14,369)       $    (12,191)     $    (60,601)      $    (34,770)
                                                     ============        ============      ============       ============
Loss per common share, basic and diluted:
  Loss before cumulative effect of change in
    accounting method                                $       (.72)       $       (.64)     $      (3.39)      $      (1.55)
  Cumulative effect of change in accounting
    method                                                      -                   -               .31                  -
                                                     ------------        ------------      ------------       ------------
  NET LOSS PER SHARE                                 $       (.72)       $       (.64)     $      (3.08)      $      (1.55)
                                                     ============        ============      ============       ============
Weighted average common shares used in loss per
common share computation:
  Basic and diluted                                        19,881              19,173            19,653             22,463
                                                     ============        ============      ============       ============


(1)  Stock compensation relates to the following:

<Caption>
                                                     Three Months Ended September 30,      Nine Months Ended September 30,
                                                     --------------------------------      -------------------------------
                                                         2001                2000              2001               2000
                                                     ------------        ------------      ------------       ------------
<S>                                                  <C>                 <C>               <C>                <C>
    Cost of revenues                                 $          2        $          2      $          6       $         23
    Selling and marketing                                    (643)                105             1,281              1,517
    Technology and development                               (267)                 74               516                 93
    General and administrative                             (3,109)                915             5,578              1,698
                                                     ------------        ------------      ------------       ------------
      Total stock compensation                       $     (4,017)       $      1,096      $      7,381       $      3,331
                                                     ============        ============      ============       ============
</Table>

The accompanying notes are an integral part of these financial statements.

                                       4
<Page>

<Table>
<Caption>

TRAVELOCITY.COM INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2001
 (Unaudited) (In thousands)
---------------------------------------------------------------------------------------------------------------------
                                                                       Class A   Class B    Additional    Equity
                                                Preferred     Common    Common    Common     Paid-in      Options
                                                  Stock       Stock     Stock      Stock     Capital    Out-standing
                                                ---------------------------------------------------------------------
<S>                                             <C>          <C>       <C>       <C>         <C>         <C>
Balance at December 31, 2000                    $        -   $   16    $   33     $    -     $ 424,903      $ 4,225
Issuance of 721 common shares pursuant to
    stock option, restricted stock incentive
    and stock purchase plans                             -        1         -          -        13,908       (1,481)
Stock based compensation for
    consultants and employees of the Company
    and Travelocity Holdings                             -        -         -          -           236        6,633

Comprehensive loss:
     Net loss                                            -        -         -          -             -            -
     Unrealized loss on investments,
       net of deferred income taxes                      -        -         -          -             -            -
     Comprehensive loss
                                                ---------------------------------------------------------------------
Balance at September 30, 2001                   $        -   $   17    $   33     $    -     $ 439,047      $ 9,377
                                                =====================================================================


<Caption>
                                                  Accumulated
                                                     Other         Accumu-
                                                  Comprehen-        lated
                                                  sive Income      Deficit         Total
                                                  ----------------------------------------
Balance at December 31, 2000                       $    416       $(123,305)    $  306,288
Issuance of 721 common shares pursuant to
    stock option, restricted stock incentive
    and stock purchase plans                              -               -         12,428
Stock based compensation for
    consultants and employees of the Company
    and Travelocity Holdings                              -               -          6,869

Comprehensive loss:
     Net loss                                             -         (60,601)       (60,601)
     Unrealized loss on investments,
       net of deferred income taxes                    (434)              -           (434)
                                                                                ----------
     Comprehensive loss                                                            (61,035)
                                                  ----------------------------------------
Balance at September 30, 2001                      $    (18)      $(183,906)    $  264,550
                                                  =========================================
</Table>

The accompanying notes are an integral part of these financial statements.

                                       5
<Page>

<Table>
<Caption>

TRAVELOCITY.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) (In thousands)
----------------------------------------------------------------------------------------------------------------------
                                                                                       Nine Months Ended September 30,
                                                                                       -------------------------------
                                                                                          2001                  2000
                                                                                       ----------           ----------
<S>                                                                                    <C>                  <C>
OPERATING ACTIVITIES
Net loss                                                                               $  (60,601)          $  (34,770)
Adjustments to reconcile net loss to cash used for operating activities
    Cumulative effect of change in accounting method                                       (6,142)                   -
    Depreciation and amortization                                                          98,194               71,953
    Fair value adjustments on HRN warrants                                                  3,256                    -
    Stock compensation                                                                      7,381                3,331
    Sabre's interest in Partnership                                                             -              (47,969)
    Other, net                                                                             (1,846)              (1,030)
    Changes in operating assets and liabilities:
       Accounts receivable and other assets                                               (11,192)              (9,873)
       Accounts payable, accrued and other liabilities                                      7,436               (1,425)
       Prepayments to strategic distribution partners                                     (40,967)             (40,000)
       Deferred revenue                                                                     2,443                3,967
       Receivable from affiliates                                                            (306)                (467)
                                                                                       ----------           ----------
    Cash used for operating activities                                                     (2,344)             (56,283)

INVESTING ACTIVITIES
Cash acquired from Preview Travel, net of direct acquisition costs                              -                  743
Additions to property and equipment                                                       (10,647)              (8,959)
Purchases of marketable securities                                                       (339,177)            (219,394)
Sales of marketable securities                                                            303,485              168,904
Sale of securities acquired upon exercise of HRN warrants                                  36,604                    -
Other investing activities                                                                      -                 (909)
                                                                                       ----------           ----------
    Cash used for investing activities                                                     (9,735)             (59,615)

FINANCING ACTIVITIES
Cash advances from Sabre affiliates                                                             -                6,818
Contribution of cash by Sabre in connection with the Merger                                     -               52,680
Proceeds from issuance of common stock                                                          -               54,000
Proceeds from exercise of stock options                                                    11,805                3,313
Other financing activities                                                                   (527)                (511)
                                                                                       ----------           ----------
    Cash provided by financing activities                                                  11,278              116,300
                                                                                       ----------           ----------
Net increase (decrease) in cash and cash equivalents                                         (801)                 402
Cash at beginning of the period                                                               859                    -
                                                                                       ----------           ----------
Cash at end of the period                                                              $       58           $      402
                                                                                       ==========           ==========
</Table>

The accompanying notes are an integral part of these financial statements.

                                       6
<Page>

TRAVELOCITY.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------

1.   GENERAL INFORMATION

   Travelocity.com Inc. ("Travelocity" or the "Company") is, after giving effect
for the merger with Preview Travel, Inc. ("Preview Travel") on March 7, 2000
(the "Merger"), the largest online travel agency in terms of gross travel
bookings. The Company was incorporated in Delaware on September 30, 1999 as a
wholly-owned subsidiary of Sabre Holdings Corporation ("Sabre").

   Travelocity is a holding company whose sole assets are units of
Travelocity.com LP (the "Partnership"), a Delaware limited partnership, formed
on September 30, 1999. Effective upon the Merger, the Partnership became the
owner and operator of the combined assets and liabilities of the former
Travelocity business unit of Sabre (the "Travelocity Division") and Preview
Travel.

   The Company, through the Partnership, is engaged in consumer-direct travel
distribution over the Internet. Through its online travel Web sites, which are
accessible free of charge through the Internet and online services, leisure and
business travelers can compare prices, make travel reservations and obtain
destination information. The Company features booking and purchase capability
for airlines, car rental and hotel companies, cruises and vacation packages, and
offers access to a database of information regarding specific destinations and
other information of interest to travelers. The Internet address for the
Company's main Web site is WWW.TRAVELOCITY.COM.

   The Company and Sabre are the partners in the Partnership. The Company
currently holds an approximate 40% equity interest in the Partnership, with the
remaining approximate 60% equity interest held by Sabre. Sabre, through
ownership of shares of the Company's common stock and Class A Common Stock, also
holds an approximate 25% equity interest in the Company. Sabre currently
beneficially holds an approximate 70% economic interest in the Partnership -
that is:

   -  an approximate 60% equity interest held directly and indirectly through
      wholly-owned subsidiaries, plus
   -  an approximate 10% equity interest held through the Company - that is, 25%
      (Sabre's equity interest in the Company) of 40% (the Company's equity
      interest in the Partnership).

   Sabre and its affiliates hold 33.0 million shares of the Company's Class A
Common Stock, which together with 30.0 million units of the Partnership held
directly by Sabre and its affiliates, are convertible into 33.0 million shares
of the Company's Common Stock. As of September 30, 2001 Sabre also held
2,033,970 shares of the Company's Common Stock.

   If Sabre exercised its right to convert its partnership units into Common
Stock, the Company would have approximately 49.9 million shares of Common Stock
outstanding, of which Sabre would own approximately 70% and non-Sabre
stockholders would own approximately 30%.

   Sabre's Common Stock and Class A Common Stock holdings represent an
approximate 70% voting interest in the Company. Through this voting interest,
Sabre is able to significantly influence the management and affairs of the
Company and all matters requiring stockholder approval.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION. The accompanying consolidated financial statements
include the accounts of the Company after elimination of all significant
intercompany balances and transactions. For periods prior to the Merger, the
financial statements have been prepared using Sabre's historical basis in the
assets and liabilities of the Travelocity Division, a division of Sabre which
conducted the business of the Company prior to the Merger. The results of
operations of Preview Travel have been included in the accompanying financial
statements beginning with the date of the Merger. The financial statements
include the results of operations, financial condition and cash flows of the
Company as a division of Sabre for periods prior to the Merger, and may not be
indicative of actual results of operations and financial position of the Company
under other ownership. Management believes the income statements include a
reasonable allocation of administrative costs incurred by Sabre on behalf of the
Company.

   The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Rule 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
these financial statements


                                       7

<Page>

contain all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position, results of operations and cash flows
for the periods indicated. The preparation of financial statements in
accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results may differ from
these estimates. The Company's quarterly financial data should be read in
conjunction with the consolidated financial statements and notes of the
Company for the year ended December 31, 2000 included in the Company's Annual
Report on Form 10-K, as amended.

   Sabre has a majority equity interest in the Partnership and the general
presumption would be for Sabre to consolidate the Partnership into its financial
statements. Although the Company does not have a majority equity interest in the
Partnership, it controls the Partnership through the Partnership's board of
directors since it has the right to appoint a majority of the directors.
Furthermore, although employees of Travelocity Holdings, Inc. ("Travelocity
Holdings"), a wholly-owned subsidiary of Sabre, manage the day to day operations
of the Partnership pursuant to a management services agreement, these employees
are subject to the direction and oversight of the Partnership's board of
directors. As such, the Partnership's board of directors has the unilateral
ability to control the management of the Partnership, thereby enabling the
Company to consolidate the Partnership in its separate financial statements.

   The Company's consolidated financial statements include the financial
statements of the Company and the Partnership, with Sabre's interest in the
Partnership's results of operations presented as a single line item, "Sabre's
interest in Partnership," in the Company's statement of operations. The amount
of loss attributable to Sabre's interest is limited to the carrying amount of
Sabre's basis in the Partnership as recorded on the date of the Merger,
approximately $62.1 million. Losses attributable to Sabre's interest in the
Partnership exceeding $62.1 million are recognized in the net loss attributable
to the Company's common stockholders. During the nine months ended September 30,
2001 the Company recognized net losses totaling approximately $35.6 million
related to losses attributable to Sabre in excess of Sabre's basis in the
Partnership. If and when the results of operations of the Partnership become
profitable, net income attributable to the Company's stockholders will be
increased by the amount of losses attributable to Sabre in excess of Sabre's
basis in the Partnership previously recognized by the Company. The Company's
consolidated results of operations and financial position consists of the total
of the Company's share of the Partnership's results and 100% of the Company's
results.

    RECLASSIFICATIONS. Certain amounts for the prior year have been reclassified
to conform to the current year presentation.

    CHANGE IN METHOD OF ACCOUNTING. The Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FAS 133") effective January 1, 2001. FAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. At January 1, 2001, the Company held
warrants received by the Partnership from Hotel Reservations Network, Inc.
("HRN") in connection with an affiliation agreement. As a result of the
cumulative effect of the adoption of FAS 133, the Company reported a gain of
$6.1 million, net of Sabre's interest in the Partnership of zero and income
taxes of approximately $1 million. The gain was calculated based on the
Black-Scholes value of the warrants at January 1, 2001. Any actual gains or
losses realized by the Company will be dependent upon HRN's stock price at the
time HRN stock acquired upon exercise of the warrants is sold (Note 6).

   RECENT ACCOUNTING PRONOUNCEMENTS. In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statements of Financial Accounting Standards No.
141 ("FAS 141"), Business Combinations, and No. 142 ("FAS 142"), Goodwill and
Other Intangible Assets, effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with these two Statements. Other intangible
assets will continue to be amortized over their useful lives.

   The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of FAS 142 is expected to result in an increase in
net income of approximately $87 million in 2002, as a result of the cessation of
amortization of existing goodwill. During 2002, the Company will perform the
first of the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002. The Company has not yet determined what
the effect of these tests will be on its earnings and financial position.

   The FASB has also recently issued FAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which will be adopted by the Company January
1, 2002. The FASB's new rules on asset impairment supersede FAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF.


                                       8

<Page>

   FAS No. 144 retains the requirements of FAS No. 121 to (a) recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows and (b) measure an impairment
loss as the difference between the carrying amount and fair value of the
asset, but removes goodwill from its scope. FAS No. 144 will primarily affect
the Company's accounting for intangible assets subject to amortization,
property and equipment and certain other long-lived assets.

   FAS No. 144 significantly changes the criteria that would have to be met to
classify an asset as held-for-sale. Under the provisions of FAS No. 144, assets
to be disposed of will be stated at the lower of their fair values or carrying
amounts and depreciation no longer recognized.

   FAS No. 144 also supersedes the provisions of Accounting Principles Board
Opinion 30 with regard to reporting the effects of a disposal of a segment of a
business, and requires expected future operating losses from discontinued
operations to be displayed in discontinued operations in the period(s) in which
the losses are incurred (rather than as of the measurement date as presently
required). In addition, more dispositions will qualify for discontinued
operations treatment in the income statement.

   The Company has not yet evaluated what the effects of adoption of FAS No. 144
will be on its financial condition and results of operations.

3.   MARKETABLE SECURITIES

   Effective with the Merger, the Company began to administer its own
investment portfolio. The Company maintains an investment policy intended to
ensure the safety and preservation of invested funds by limiting default risk,
market risk and reinvestment risk. The Company does not currently use
derivative financial instruments to manage or reduce market risk. The
Company's investment policy is to invest in high credit quality securities
such as debt instruments of the United States government and its agencies and
high quality corporate issuers, as well as money market funds. Investments
include only marketable securities with active secondary or resale markets to
ensure portfolio liquidity.

   Marketable securities, including shares of HRN Class A Common Stock (Note
6), are classified as available-for-sale securities and are carried at fair
value, based on quoted market prices, with the unrealized gains or losses, net
of tax, reported in stockholders' equity. The amortized cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity, both of which are included in interest income.

   Marketable securities represent the investment by the Company of cash
available for current operations. The Company expects that the majority of
marketable securities will be sold within one year, regardless of maturity
date. The Company primarily invests in high credit quality debt instruments
with an active resale market and money market funds to ensure liquidity and
the ability to readily convert its investments into cash to fund current
operations, or satisfy other cash requirements as needed. Accordingly, the
Company has classified all marketable securities as current assets in the
accompanying balance sheets.

4.   LOSS PER COMMON SHARE

   Net loss per common share is calculated based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
calculated based on the weighted average common shares outstanding during the
period plus any dilutive common equivalent shares outstanding.

   The weighted average shares used in the calculation of basic earnings per
share for the nine months ended September 30, 2000 have been calculated as if
the 33.0 million shares of Class A Common Stock held by Sabre were outstanding
as common shares from January 1, 2000 through the Merger with Preview Travel on
March 7, 2000. Subsequent to the Merger, basic earnings per share has been
computed as if Sabre's 33.0 million shares of Class A Common Stock had been
converted into 3.0 million shares of Common Stock. The common shares issued to
stockholders in connection with the Merger are also included in the weighted
average share calculation effective from the date of issuance.

   Outstanding employee stock options at September 30, 2001 and 2000 to purchase
approximately 6.0 and 4.8 million shares, respectively, of the Company's Common
Stock and 30.0 million shares of Class A Common Stock held by Sabre were
excluded from the computation of diluted earnings per share as their effect
would have been antidilutive.

5.   STOCK COMPENSATION

   At July 1, 2000, the Company prospectively adopted Interpretation No. 44,
ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION ("FIN 44"). FIN
44 required significant changes to previous practice regarding the accounting
for certain stock compensation arrangements. FIN 44 does not change APB 25's
intrinsic value method, under


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which compensation expense is generally not recognized for grants of stock
options to employees with an exercise price equal to the market price of the
stock at the date of grant, but it has narrowed its application.

   FIN 44 contains provisions whereby employees are defined as they are under
common law for purposes of applying APB 25. As a result, APB 25 does not apply
in the separate financial statements of a subsidiary for equity awards made by
the subsidiary to employees of the parent company, as these employees are not
considered to be employees of the grantor. Grants of equity awards made to such
employees are required to be recorded at fair value and recognized as expense
over the vesting period in the separate financial statements of the subsidiary.
Such grants are required to be revalued to fair value at each periodic reporting
date until vesting is complete, with a cumulative catch up adjustment recognized
for any changes in fair value.

   The adoption of FIN 44 required that the Company recognize expense at fair
value for grants of equity awards to employees of Travelocity Holdings
performing services for the Partnership under a management services agreement.
At September 30, 2001, unrecognized stock compensation expense relating to these
options totaled approximately $10.4 million. During the three and nine months
ended September 30, 2001 the Company recognized ($4.4) million and $6.9 million,
respectively, in stock compensation expense for options granted to employees of
Travelocity Holdings compared to $1.2 million for both the three and nine months
ended September 30, 2000.

   Additionally, certain stock compensation is recognized by the Company, based
on the intrinsic value of the awards, for options held by employees of the
Partnership relating to options which were converted at the date of the Merger
from existing unvested Sabre options into options to purchase shares of the
Company's common stock, and for options held by former officers of Preview
Travel which vest over the twelve month period following the Merger. Stock
compensation expense recognized during the three and nine months ended September
30, 2000 related to these options was approximately $66,000 and $2.2 million,
respectively. Stock compensation recognized during the three and nine months
ended September 30, 2001 related to these options was not significant.

6.   SIGNIFICANT TRANSACTIONS AND RELATIONSHIPS

   EVENTS OF SEPTEMBER 11, 2001. On September 11, 2001, the United States was
the target of terrorist attacks of unprecedented scope involving the hijacking
and use of passenger aircraft operated by commercial air carriers. These actions
have served to reduce travel in the United States and, to a lesser degree,
internationally. The Company's results of operations for the three months ended
September 30, 2001 were negatively affected by this reduction in travel.

   Although gross travel bookings decreased dramatically in the days immediately
following the attacks, there has been a steady improvement since. The Company is
currently unable to estimate when and at what level gross travel bookings will
stabilize. Any additional terrorist attacks could have a material adverse effect
on the Company's financial position and results of operations. A prolonged
substantial decrease in travel could impair the ability of the Company to
recover the carrying value of certain of its assets, including certain
intangible assets and goodwill.

   In October 2001, the Company announced the implementation of various cost
reductions as a result of the decline in travel bookings following the terrorist
attacks of September 11, 2001. The reductions included a 10 percent layoff of
the Company's non-customer service workforce and the planned closure of the
Company's call center, located in Sacromento, California, in December 2001.

   WHERETO. During July 2001, the Company acquired WhereTo, an Australian based
developer of online travel technology. WhereTo's technology will allow the
Company to more efficiently manage consolidator or "net" fares in a real time
manner, and will provide improved pricing for complicated itineraries, such as
en-route and multiple stopovers. In connection with the acquisition, the Company
recorded intellectual property totaling $1.1 million, which will be amortized
over 3 years. Additionally, the Company will recognize compensation expense
totaling approximately $1.9 million over two years relating to future payments
to be made to the owners of WhereTo under the terms of the purchase agreement.

   TRAVELOCITY EUROPE. Travelocity and European direct marketing leader Otto
announced a joint venture called Travelocity Europe. Travelocity Europe will
sell travel products and services in the growing European market, both online
and offline. It is currently expected that the joint venture will begin
operations in the first quarter of 2002. Included in Travelocity Europe will be
Air Tickets Direct Limited, a UK-based travel company acquired by the Company in
the third quarter of 2001. The cost of acquiring Air Tickets Direct Limited, and
the results of operations since acquisition, were not significant.

   HOTEL RESERVATIONS NETWORK. At January 1, 2001, the Company held warrants for
the purchase of shares of common stock of HRN, received in connection with an
affiliation agreement entered into during 2000. The warrants were recorded at


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their estimated fair value at the date of receipt of approximately $2.5
million. The Company is recognizing this amount as revenue over the
three-year term of the original agreement. During March 2001, the Company
extended its affiliation agreement with HRN through July 31, 2005 and
expanded the scope of the HRN relationship. In connection with the expanded
and extended agreement the Company received additional vested warrants to
purchase shares of HRN Class A Common Stock with a fair value of
approximately $29.9 million on the date of receipt. The Company will
recognize this amount as revenue over approximately four years. During the
three and nine months ended September 30, 2001, the Company recognized
revenue relating to amortization of the fair value of the HRN warrants
received at contract origination and modification totaling approximately $2.2
million and $5.2 million, respectively, compared to the three and nine months
ended September 30, 2000 which was $212,000 and $565,000, respectively. The
Company may also vest in additional warrants in the future based upon the
achievement of certain performance metrics. The Company recognizes revenue,
at fair value, as the additional warrants are earned. For the three and nine
months ended September 30, 2001, the Company earned additional warrants with
a fair value of approximately $714,000 and $2.5 million, respectively.

   At September 30, 2001 and December 31, 2000 the balance of deferred revenue
related to the HRN warrants was approximately $26.4 million and $1.8 million,
respectively. Approximately $17.8 million and $918,000 of deferred revenue
related to the HRN warrants was classified as long-term deferred revenue at
September 30, 2001 and December 31, 2000, respectively.

   During the nine months ended September 30, 2001, the Company completed four
cashless exercises of the HRN warrants in which it received approximately 1.1
million shares of HRN stock. Upon exercise of the warrants, the Company recorded
in other income and expense a gain of approximately $58,000 during the three
months ended September 30, 2001 and losses totaling approximately $369,000
during the nine months ended September 30, 2001. The gain and losses were
determined by the aggregate differences in the fair value of the warrants
exercised, as measured using the Black-Scholes option valuation model, compared
with the fair value of the HRN common stock received. In August 2001, the
Company completed a cashless exercise of HRN warrants in which it received
approximately 34,000 shares of HRN stock. At September 30, 2001, the shares of
HRN stock are accounted for as available-for-sale marketable equity securities,
with a carrying value of approximately $779,000, based upon the quoted market
value of HRN stock as of that date. The Company has disposed of HRN stock
received upon exercise of certain of the HRN warrants for cash proceeds totaling
approximately $36.6 million during the nine months ended September 30, 2001. No
significant gain or loss was realized relating to such disposals.

   Effective upon the adoption of FAS 133 on January 1, 2001 (Note 2), the
Company began recording the HRN warrants at fair value each reporting date. At
September 30, 2001, the fair value of the HRN warrants held by the Company
totaled approximately $714,000, which is classified as other assets in the
accompanying balance sheet. The Company recorded in other income and expense a
gain of approximately $58,000 during the three months ended September 30, 2001
and losses totaling approximately $3.3 million during the nine months ended
September 30, 2001, relating to the changes in the fair value of the warrants,
including gains and losses recorded as a result of the cashless exercises
discussed above.

   AMERICA ONLINE. On October 2, 1999, Travelocity Holdings entered into an
Interactive Services and Exclusive Channel Agreement (the "AOL Agreement")
with America Online, Inc. ("AOL"), which became effective upon consummation of
the Merger and was assigned to the Partnership. The AOL Agreement provides,
among other things, that the Travelocity.com site will be the exclusive
reservations engine for AOL's Internet properties and that payments of up to
$200 million will be made to AOL and advertising revenue and commissions will
be shared over the five year term of the agreement. In connection with this
agreement, the Company paid $40.0 million to AOL upon the closing of the
Merger on March 7, 2000.

   The Company made payments of $38.9 million to AOL during the nine months
ending September 30, 2001. The Company is amortizing the payments under the
AOL Agreement as a selling and marketing expense in accordance with the terms
of the contract. Payments are recorded as prepaid assets, which are reduced by
amortization.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

   The information provided in this Management's Discussion and Analysis of
Financial Condition and Results of Operations includes the results of the
Company from the date of the merger ("Merger") with Preview Travel, Inc.
("Preview Travel") on March 7, 2000 and beyond and the historical results of the
former Travelocity business unit (the "Travelocity Division") of Sabre Holdings
Corporation ("Sabre"), as an operating unit of Sabre for all periods prior to
the Merger. Results for the nine months ended September 30, 2001 and 2000
include the impacts of the contribution agreements and the intercompany
agreements entered into between the Partnership and Sabre for the period prior
to the Merger. Results prior to the Merger do not include financial effects of
the Merger with Preview Travel. Historical results prior to the Merger are not


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indicative of what our future financial position or results of operations
subsequent to the Merger will be. Pro forma results for the nine months ended
September 30, 2001 and 2000 are also included herein to illustrate the effect of
these agreements and the Merger transaction on our historical operations and
financial position.

   We receive transaction service revenue including, for 2001 and 2000, access
fees under the new access agreement with Sabre. For both 2001 and 2000,
transaction service revenue also includes commissions from travel suppliers for
processing of online purchases of their products and services by customers.

   Gross bookings of travel services online increased from approximately
$649.5 million in the third quarter of 2000 to $784.8 million in the third
quarter of 2001, which resulted in an increase in transaction service revenues
from $38.3 million to $55.4 million for the corresponding periods. Gross
bookings were negatively affected by the terrorist attacks of September 11,
2001. For the nine months ended September 30, 2000 and 2001, gross bookings
increased from approximately $1.7 billion to $2.5 billion, which resulted in
an increase in transaction service revenues from $95.8 million to $163.4
million for the corresponding periods. Gross bookings represent the total
purchase price of all travel services booked through our Web site. Gross
bookings are not a financial measurement in accordance with generally accepted
accounting principals ("GAAP") and should not be considered in isolation or as
a substitute for other information prepared in accordance with GAAP.
Period-to-period comparisons of gross bookings are not necessarily meaningful
as a measure of our revenues due to, among other things, changes in commission
rates. As with operating results, they should not be relied upon as an
indication of future performance.

   Prior to the Merger, advertising revenue was generated primarily through an
agreement with DoubleClick Inc. ("DoubleClick") for the placement of advertising
on our Web site and through the direct selling of advertisements on our site.
Under the agreement, DoubleClick obtained advertisers for our site, collected
the revenue paid by the advertisers, and paid us an amount that was net of fees
due to DoubleClick for its service. We recorded advertising revenue generated
through the agreement with DoubleClick on a net of fee basis in the period the
advertisements were delivered. Effective with the Merger, the majority of our
advertising revenue is generated through sales by our direct sales force.
Beginning in the second quarter of 2000, advertising revenue includes our share
of travel related advertising revenue on the America Online, Inc. ("AOL") sites
under the terms of our revenue sharing agreement with AOL.

   Costs of revenues include costs of operating our customer service centers,
data processing charges and costs associated with operating our Internet
infrastructure.

GROSS MARGINS

   Our gross margins for the three months ended September 30, 2001 and 2000 were
67.7% and 62.1%, respectively. For the nine months ended September 30, 2001 and
2000, they were 66.9% and 59.5%, respectively. This increase was due primarily
to a change in revenue mix, specifically an increase in non-air revenues during
the third quarter of 2001 compared with the same period in 2000. We expect
higher gross margins on advertising revenues than transaction service revenues,
higher commission rates on vacation packages and cruises than hotel rooms and
car rentals and higher commission rates on hotel rooms and car rentals than
airline tickets.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2000

REVENUES

   TRANSACTION SERVICE REVENUES. Transaction service revenues increased from
$38.3 million to $55.4 million for the three months ended September 30, 2000
compared to the three months ended September 30, 2001, an increase of
approximately $17.1 million, 45%. This was due to an increase in air revenues of
$8.6 million, 29%, and non-air revenues of $8.5 million, 94%, for the
corresponding periods. Non-air revenues include services for hotel, car,
vacation packages, tours and cruise providers. Gross bookings increased from
$649.5 million to $784.8 million for the three months ended September 30, 2000
compared to the three months ended September 30, 2001. Transaction service
revenues and gross bookings for the three months ended September 30, 2001 were
negatively affected by the reduction in travel caused by the terrorist attacks
of September 11, 2001.

   ADVERTISING REVENUES. Advertising revenues increased from $13.8 million to
$14.6 million for the three months ended September 30, 2000 compared to the
three months ended September 30, 2001, an increase of $834,000, 6%. This
increase was due primarily to an increase in net revenue from our advertising
revenue sharing agreement with AOL and increased revenue from the direct sale
of advertising by our internal sales force. Advertising revenues for the
three months ended September

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30, 2001 were negatively affected by the general decline in advertising
spending following the terrorist attacks of September 11, 2001.

   OTHER REVENUES. Other revenues increased from $1.3 million to $8.4 million
for the three months ended September 30, 2000 compared to the three months ended
September 30, 2001, an increase of $7.2 million, 563%. This increase was due
primarily to service charges for the handling and express delivery of certain
paper tickets. The increase was also due to the recognition of additional
revenue related to warrants received from Hotel Reservations Network, Inc.
("HRN"). This was in connection with an extended affiliation agreement that was
entered into by the Company with HRN in March 2001.

COSTS OF REVENUES

   Costs of revenues increased from $20.2 million to $25.3 million for the three
months ended September 30, 2000 compared to the three months ended September 30,
2001, an increase of approximately $5.1 million, 25%. This was due to increased
headcount costs associated with the customer service centers, including the
opening of a third customer service center during the second quarter 2001, other
administrative costs used to support the customer service centers and the
operations of our Internet infrastructure and data processing charges. Costs of
revenues declined as a percentage of total revenue from 37.9% for the three
months ended September 30, 2000 to 32.3% for the three months ended September
30, 2001 due primarily to a change in revenue mix and increased efficiencies in
the customer service centers. Certain customer service costs increased relative
to revenues due to a higher level of customer support relating to rescheduling
and refund activity following the events of September 11, 2001.

OPERATING EXPENSES

   SELLING AND MARKETING. Selling and marketing expenses consist of advertising
costs to promote the Company's Web site, the amortization of payments made to
strategic distribution partnerships with companies such as AOL, Yahoo! Inc.
("Yahoo!"), Excite, Inc. ("Excite"), and At Home Corporation, amortization of
trademarks and salaries and benefits. Selling and marketing expenses increased
from $33.7 million to $38.3 million for the three months ended September 30,
2000 compared to the three months ended September 30, 2001, an increase of $4.6
million, 14%. This was due primarily to an increase in advertising spending,
salaries, and administrative costs to support our direct selling efforts and
internal sales force.

   TECHNOLOGY AND DEVELOPMENT. Technology and development expenses consist of
salaries and related costs and charges from Sabre for development and
maintenance of our Web site, including enhancements to and maintenance of our
Web site. Technology and development expenses increased from $4.6 million to
$6.3 million for the three months ended September 30, 2000 compared to the three
months ended September 30, 2001, an increase of $1.7 million, 36%. This was due
primarily to administrative costs incurred to enhance and maintain our Web site
and salaries and benefits associated with an increase in development labor
headcount.

   GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
fees paid to Travelocity Holdings and Sabre for salaries and benefits for
Travelocity Holdings management devoted to the Company, corporate facility
services, legal services, accounting and other services. General and
administrative expense also includes salaries and benefits of management and
administrative costs of the Company. General and administrative expenses
increased from $4.4 million to $4.9 million for the three months ended September
30, 2000 compared to the three months ended September 30, 2001, an increase of
$546,000, 12%. This was due primarily to an increase in salaries and benefit
related costs.

   STOCK COMPENSATION. Stock compensation expenses represent the expenses,
measured at fair value, associated with stock options held by employees of
Travelocity Holdings. Stock compensation is recorded in accordance with
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION ("FIN 44"), which was adopted by the Company on July 1, 2000. FIN
44 required the Company to recognize stock compensation expense at fair value
for options held by employees of Travelocity Holdings. FIN 44 accounting
treatment will result in variations to stock compensation expense largely as a
result of fluctuations in market prices of the Company's common stock. In
addition, stock compensation expense includes expense associated with the
acceleration of vesting of stock options held by certain key former employees
of Preview Travel. This expense is being recognized over the shorter of the
estimated remaining service period or the twelve-month period following the
close of the Merger. Stock compensation expense also includes expense for
unvested stock options held by former employees of Sabre that were converted
into the Company's stock options on the date of the Merger and expense for
options granted to a consultant by Preview Travel which were assumed in the
Merger. Stock compensation expense was $1.1 million for the three months ended
September 30, 2000 compared to a $4.0 million benefit for the three months
ended September 30, 2001. The benefit recorded during the three months ended
September 30, 2001 resulted from a decrease in the market price of the
Company's stock.


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   AMORTIZATION OF INTANGIBLE ASSETS AND GOODWILL. Amortization of intangible
assets and goodwill represents the amortization of intangible assets and
goodwill recorded in conjunction with the Merger. Total amortization expense
for the three months ended September 30, 2000 and September 30, 2001 was $22.4
million. The goodwill is being amortized over a three-year period. In June
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 142 ("FAS 142"), Goodwill and Other Intangible
Assets, effective for fiscal years beginning after December 15, 2001. Under
the new rules, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests in
accordance with the Statement. Other intangible assets will continue to be
amortized over their useful lives. The Company will apply the new rules on
accounting for goodwill and other intangible assets beginning in the first
quarter of 2002. Application of the nonamortization provisions of FAS 142 is
expected to result in an increase in net income of approximately $87 million
in 2002, as a result of the cessation of amortization of existing goodwill.
During 2002, the Company will perform the first of the required impairment
tests of goodwill and indefinite lived intangible assets as of January 1,
2002. The Company and has not yet determined what the effect of these tests
will be on its earnings and financial position.

   INTEREST INCOME, NET. Interest income represents interest income on
marketable securities held by the Company. Interest income, net of interest
expense related to capital lease obligations, for the three months ended
September 30, 2000 and September 30, 2001 was $1.0 million and $1.3 million,
respectively.

   OTHER INCOME AND EXPENSE. Other income and expense represents gains and
losses on the sale of Company investments and assets. It also includes
unrealized gains and losses on the exercise of HRN warrants and the Company's
investments that are subject to the provisions of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities ("FAS 133") following the initial adoption January 1, 2001.
See Notes 2 and 6 to the consolidated financial statements. Other income and
expense for the three months ended September 30, 2000 and September 30, 2001
was $758,000 and $304,000, respectively.

   SABRE'S INTEREST IN PARTNERSHIP. Sabre's interest in the Partnership
represents the allocation of the Partnership's losses which consolidates with
the Company for financial reporting purposes to Sabre, based on Sabre's direct
ownership interest in the Partnership during 2000. The amount of losses which
may be allocated to Sabre are, under generally accepted accounting principles,
limited to the amount of Sabre's investment in the Partnership. Because losses
attributable to Sabre's interest exceeded Sabre's interest in the Partnership
during 2000, no losses have been allocated to Sabre for the three months ended
September 30, 2001.

   PROVISION FOR INCOME TAXES. The $1.1 million tax provision recognized
during the three months ended September 30, 2001 relates to recognition of
income taxes on the Company's proportionate share of the taxable income of the
Partnership.

   The amortization of the goodwill associated with the Preview Travel
acquisition is not deductible for tax purposes.

   Net operating losses acquired from Preview Travel will not offset the
Company's tax provision. Goodwill and non-current intangible assets recorded
in connection with the acquisition will be reduced as net operating losses are
utilized in the Company's tax return. If goodwill and non-current intangible
assets have been fully amortized or reduced to zero, income tax expense will
be reduced.

   NET LOSS. Net loss increased $2.2 million, 18%, from $12.2 million to $14.4
million, primarily due to the increase in operating expenses offset by the
increase in gross profit, net of Sabre's interest in the results of operations
of the Partnership.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2000

REVENUES

   TRANSACTION SERVICE REVENUES. Transaction service revenues increased from
$95.8 million to $163.4 million for the nine months ended September 30, 2000
compared to the nine months ended September 30, 2001, an increase of
approximately $67.6 million, 71%. This was due to an increase in air revenues of
$42.2 million, 56%, and non-air revenues of $25.4 million, 128%, for the
corresponding periods. Gross bookings increased from $1.7 billion to $2.5
billion for the nine months ended September 30, 2000 compared to the nine months
ended September 30, 2001.

   ADVERTISING REVENUES. Advertising revenues increased from $28.8 million (net
of fees paid to DoubleClick of $884,000) to $48.7 million for the nine months
ended September 30, 2000 compared to the nine months ended September 30, 2001,
an increase of $19.9 million, 69%. This increase was due primarily to an
increase in net revenue from our advertising revenue sharing agreement with AOL
and increased revenue from the direct sale of advertising by our internal sales
force. The move from using DoubleClick for advertising sales to a direct sales
force reduced fees paid for advertising services.


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<Page>

   OTHER REVENUES. Other revenues increased from $2.6 million to $21.6 million
for the nine months ended September 30, 2000 compared to the nine months ended
September 30, 2001, an increase of $19.0 million, 734%. This increase was due
primarily to service charges for the handling and express delivery of certain
paper tickets. The increase was also due to the recognition of additional
revenue related to warrants received from HRN during the nine months ended
September 30, 2001 compared with the same period in 2000. This was in connection
with an extended affiliation agreement that was entered into by the Company with
HRN in March 2001.


COSTS OF REVENUES

   Costs of revenues increased from $51.4 million to $77.2 million for the nine
months ended September 30, 2000 compared to the nine months ended September 30,
2001, an increase of approximately $25.8 million, 50%. This was due to increased
headcount costs associated with the customer service centers, including the
opening of a third customer service center during the second quarter 2001, other
administrative costs used to support the customer service centers and the
operations of our Internet infrastructure and data processing charges. Costs of
revenues declined as a percentage of total revenue from 40.5% for the nine
months ended September 30, 2000 to 33.1% for the nine months ended September 30,
2001 due primarily to a change in revenue mix and increased efficiencies in the
customer service centers.

OPERATING EXPENSES

   SELLING AND MARKETING. Selling and marketing expenses increased from $80.8
million to $115.7 million for the nine months ended September 30, 2000 compared
to the nine months ended September 30, 2001, an increase of approximately $34.9
million, 43%. This was due primarily to an increase in advertising spending, an
increase in payments made to strategic distribution partners during the nine
months ended September 30, 2001 compared with the same period in 2000, and an
increase in administrative costs to support our direct selling efforts and
internal sales force.

   TECHNOLOGY AND DEVELOPMENT. Technology and development expenses increased
from $13.8 million to $17.4 million for the nine months ended September 30, 2000
compared to the nine months ended September 30, 2001, an increase of
approximately $3.7 million, 27%. This was due primarily to administrative costs
incurred to enhance and maintain our Web site and salaries and benefits
associated with an increase in development labor headcount.

   GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $12.4 million to $16.1 million for the nine months ended September 30, 2000
compared to the nine months ended September 30, 2001, an increase of
approximately $3.7 million, 30%. This was due primarily to an increase in
various professional services and salaries and employee related costs.

   INTEGRATION RELATED EXPENSES. Integration related expenses represent costs
specifically associated with the integration of the Company and Preview
Travel. Integration related expenses were $1.5 million for the nine months
ended September 30, 2000. No comparable amounts were recorded for the nine
months ended September 30, 2001.

   STOCK COMPENSATION. Stock compensation expense increased from $3.3 million
to $7.4 million for the nine months ended September 30, 2000 compared to the
nine months ended September 30, 2001. The increase was due to FIN 44 that was
adopted by the Company on July 1, 2000. FIN 44 required the Company to
recognize stock compensation expense at fair value for options held by
employees of Travelocity Holdings. FIN 44 accounting treatment will result in
variations to stock compensation expense largely as a result of fluctuations
in market prices of the Company's common stock.

   AMORTIZATION OF INTANGIBLE ASSETS AND GOODWILL. Total amortization expense
of intangible assets and goodwill, recorded in conjunction with the Merger for
the nine months ended September 30, 2000 and September 30, 2001 was $50.3
million and $67.2 million, respectively. The goodwill is being amortized over
a three-year period. In June 2001, the Financial Accounting Standards Board
issued FAS 142, Goodwill and Other Intangible Assets, effective for fiscal
years beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statement. Other intangible assets will continue to be amortized over their
useful lives. The Company will apply the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of 2002.
Application of the nonamortization provisions FAS 142 is expected to result in
an increase in net income of approximately $87 million in 2002, as a result of
the cessation of amortization of existing goodwill. During 2002, the Company
will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. The Company has not
yet determined what the effect of these tests will be on its earnings and
financial position.


                                      15

<Page>

   INTEREST INCOME, NET. Interest income, net of interest expense related to
capital lease obligations, for the nine months ended September 30, 2000 and
September 30, 2001 was $2.5 million and $3.6 million, respectively.

   OTHER INCOME AND EXPENSE. Other income and expense represents unrealized
gains and losses incurred on the Company's investments that are subject to the
provisions of FAS 133 following the initial adoption January 1, 2001. It also
includes unrealized gains and losses on the exercise of HRN warrants and gains
and losses on the sale of Company investments and assets. See Notes 2 and 6 to
the consolidated financial statements. Other income and expense for the nine
months ended September 30, 2000 and September 30, 2001 was $1.1 million and
($2.8) million, respectively.

   SABRE'S INTEREST IN PARTNERSHIP. Sabre's interest in the Partnership
represents the allocation of the Partnership's losses which consolidates with
the Company for financial reporting purposes to Sabre, based on Sabre's direct
ownership interest in the Partnership during 2000. The amount of losses which
may be allocated to Sabre are, under generally accepted accounting principles,
limited to the amount of Sabre's investment in the Partnership. Because losses
attributable to Sabre's interest exceeded Sabre's interest in the Partnership
in 2000, no losses have been allocated to Sabre for the nine months ended
September 30, 2001.

   PROVISION FOR INCOME TAXES. The $83,000 tax provision recognized during
the nine months September 30, 2001 relates to recognition of income taxes on
the Company's proportionate share of the taxable income of the Partnership.

   The amortization of the goodwill associated with the Preview Travel
acquisition is not deductible for tax purposes.

   Net operating losses acquired from Preview Travel will not offset the
Company's tax provision. Goodwill and non-current intangible assets recorded
in connection with the acquisition will be reduced as net operating losses are
utilized in the Company's tax return. If goodwill and non-current intangible
assets have been fully amortized or reduced to zero, income tax expense will
be reduced.

   CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD. The Company adopted FAS
133 effective January 1, 2001. FAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. At January 1, 2001, the Company held
warrants received by the Partnership from HRN in connection with an
affiliation agreement. As a result of the cumulative effect of the adoption of
FAS 133, the Company reported a gain of $6.1 million, net of Sabre's interest
in the Partnership of zero and income taxes of approximately $1 million. The
gain was calculated based on the Black-Scholes value of the warrants at
January 1, 2001. Actual gains or losses realized by the Company are dependent
upon HRN's stock price at the time HRN stock acquired upon exercise of the
warrants is sold.

   NET LOSS. Net loss increased $25.8 million, 74% from $34.8 million to $60.6
million, due primarily to the increase in operating expenses offset by the
increase in gross profit, net of Sabre's interest in the results of operations
of the Partnership.

PRO FORMA STATEMENT OF OPERATIONS BEFORE SPECIAL ITEMS

   The unaudited pro forma statement of operations before special items data
in the table below outlines the results of operations before special items for
the Company for the three and nine months ended September 30, 2001 and 2000
for the combined Company (including Preview Travel). The information presented
below assumes the Merger of the Company and Preview Travel occurred on January
1, 2000. The unaudited statements of operations before special items are based
upon certain estimates and assumptions, and may not be indicative of the
Company's actual results of operations. The unaudited statements of operations
before special items exclude the recognition of certain expenses and give
effect to the use of net operating loss carryforwards acquired from Preview
Travel. Special items not recognized in the unaudited statements of operations
include the amortization of goodwill and intangible assets recorded in
connection with the acquisition of Preview Travel, certain non-recurring costs
incurred during the integration of Preview Travel, non-cash stock compensation
expenses, the cumulative effect of the adoption of FAS 133 on January 1, 2001
and unrealized changes in the fair value of HRN warrants held by the Company.
The unaudited pro forma statement of operations data should be read in
conjunction with the Financial Statements and related notes thereto included
elsewhere herein. Pro forma adjustments include the impact of intercompany
agreements and other adjustments associated with the Merger. Amounts shown
below are in thousands, except per share amounts.


                                      16

<Page>


<Table>
<Caption>

                                                            Three Months Ended           Nine Months Ended
                                                               September 30,               September 30,
                                                           --------------------------------------------------
                                                            2001           2000          2001          2000
                                                           --------------------------------------------------
         <S>                                               <C>            <C>          <C>            <C>
         Revenues
           Transaction services revenue
              Air                                          $37,811        $29,232      $118,157      $ 80,155
              Non air                                       17,592          9,062        45,199        22,500
           Advertising                                      14,629         13,795        48,674        30,607
           Other                                             8,427          1,272        21,625         2,592
                                                           -------        -------      --------      --------
                   Total revenues                           78,459         53,361       233,655       135,854
         Cost of revenues                                   25,308         20,200        77,235        55,203
                                                           -------        -------      --------      --------
         Gross profit                                       53,151         33,161       156,420        80,651
         Operating expenses
           Selling and marketing                            38,357         33,741       115,719        88,441
           Technology and development                        6,264          4,596        17,448        14,989
           General and administrative                        4,941          4,395        16,121        14,292
                                                           -------        -------      --------      --------
                   Total operating expenses                 49,562         42,732       149,288       117,722
                                                           -------        -------      --------      --------
         Operating profit/(loss)                             3,589         (9,571)        7,132       (37,071)
         Interest income, net                                1,264          1,047         3,592         2,674
         Other income, net                                       -            758             -         1,127
                                                           -------        -------      --------      --------
         Profit/(loss) before Sabre's interest
           in Partnership                                    4,853         (7,766)       10,724       (33,270)
         Sabre's interest in Partnership                    (2,918)         4,740        (6,562)       20,448
                                                           -------        -------      --------      --------
         Profit/(loss) after Sabre's interest
           in Partnership                                    1,935         (3,026)        4,162       (12,822)
         Provision for income taxes                              -              -             -             -
                                                           -------        -------      --------      --------
         Net profit/(loss) after Sabre's interest
           in Partnership                                  $ 1,935        $(3,026)     $  4,162      $(12,822)
                                                           =======        =======      ========      ========
         Net profit/(loss) per share after
           Sabre's interest in Partnership                 $  0.09        $ (0.16)     $   0.20      $  (0.69)
                                                           =======        =======      ========      ========

         Weighted average diluted shares
           outstanding                                      21,155         19,173        20,854        18,590
                                                           =======        =======      ========      ========

</Table>

GROSS MARGINS

   Pro forma gross margins for the three months ended September 30, 2001 and
2000 were 67.7% and 62.1%, respectively. For the nine months ended September 30,
2001 and 2000, they were 66.9% and 59.4%, respectively.

RESULTS OF OPERATIONS

PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO PRO FORMA THREE
MONTHS ENDED SEPTEMBER 30, 2000

REVENUES

   TRANSACTION SERVICE REVENUES. Pro forma transaction service revenues
increased from $38.3 million to $55.4 million for the three months ended
September 30, 2000 compared to the three months ended September 30, 2001, an
increase of approximately $17.1 million, 45%. This was due to an increase in air
revenues of $8.6 million, 29%, and non-air revenues of $8.5 million, 94%, for
the corresponding periods. Non-air revenues include services for hotel, car,
vacation packages, tours and cruise providers. Gross bookings increased from
$649.5 million to $784.8 million for the three months ended September 30, 2000
compared to the three months ended September 30, 2001. Pro forma transaction
service revenues and gross bookings for the three months ended September 30,
2001 were negatively affected by the reduction in travel caused by the terrorist
attacks of September 11, 2001.

   ADVERTISING REVENUES. Pro forma advertising revenues increased from $13.8
million to $14.6 million for the three months


                                      17


<Page>


ended September 30, 2000 compared to the three months ended September 30,
2001, an increase of $834,000, 6%. This increase was due primarily to an
increase in net revenue from our advertising revenue sharing agreement with
AOL and increased revenue from the direct sale of advertising by our internal
sales force. Pro forma advertising revenues for the three months ended
September 30, 2001 were negatively affected by the general decline in
advertising spending following the terrorist attacks of September 11, 2001.

   OTHER REVENUES. Pro forma other revenues increased from $1.3 million to $8.4
million for the three months ended September 30, 2000 compared to the three
months ended September 30, 2001, an increase of $7.2 million, 563%. This
increase was due primarily to service charges for the handling and express
delivery of certain paper tickets. The increase was also due to the recognition
of additional revenue related to warrants received from HRN. This was in
connection with an extended affiliation agreement that was entered into by the
Company with HRN in March 2001.

COSTS OF REVENUES

   Pro forma costs of revenues increased from $20.2 million to $25.3 million for
the three months ended September 30, 2000 compared to the three months ended
September 30, 2001, an increase of approximately $5.1 million, 25%. This was due
to increased headcount costs associated with the customer service centers,
including the opening of a third customer service center during the second
quarter 2001, other administrative costs used to support the customer service
centers and the operations of our Internet infrastructure and data processing
charges. Costs of revenues declined as a percentage of total revenue from 37.9%
for the three months ended September 30, 2000 to 32.3% for the three months
ended September 30, 2001 due primarily to a change in revenue mix and increased
efficiencies in the customer service centers. Certain customer service costs
increased relative to revenues due to a higher level of customer support
relating to rescheduling and refund activity following the events of September
11, 2001.

OPERATING EXPENSES

   SELLING AND MARKETING. Pro forma selling and marketing expenses increased
from $33.7 million to $38.3 million for the three months ended September 30,
2000 compared to the three months ended September 30, 2001, an increase of $4.6
million, 14%. This was due primarily to an increase in advertising spending,
salaries, and administrative costs to support our direct selling efforts and
internal sales force.

   TECHNOLOGY AND DEVELOPMENT. Pro forma technology and development expenses
increased from $4.6 million to $6.3 million for the three months ended September
30, 2000 compared to the three months ended September 30, 2001, an increase of
$1.7 million, 36%. This was due primarily to administrative costs incurred to
enhance and maintain our Web site and salaries and benefits associated with an
increase in development labor headcount.

   GENERAL AND ADMINISTRATIVE. Pro forma general and administrative expenses
increased from $4.4 million to $4.9 million for the three months ended September
30, 2000 compared to the three months ended September 30, 2001, an increase of
$546,000, 12%. This was due primarily to an increase in salaries and benefit
related costs.

     SABRE'S INTEREST IN PARTNERSHIP. Sabre's interest in the Partnership
represents the allocation of the Partnership's profits and losses which
consolidates with the Company for financial reporting purposes to Sabre, based
on Sabre's direct ownership interest in the Partnership during 2000 and 2001.
The allocation was approximately 61% and 60% for the three months ended
September 30, 2000 and September 30, 2001, respectively.

     PROVISION FOR INCOME TAXES. The Company's net operating loss carryforwards
shield current income for the third quarter 2001 without need for a provision
for income taxes.

PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO PRO FORMA NINE MONTHS
ENDED SEPTEMBER 30, 2000

REVENUES

   TRANSACTION SERVICE REVENUES. Pro forma transaction service revenues
increased from $102.7 million to $163.4 million for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 2001, an
increase of approximately $60.7 million, 59%. This was due to an increase in air
revenues of $38.0 million, 47%, and non-air revenues of $22.7 million, 101%, for
the corresponding periods. Gross bookings increased from $1.8 billion to $2.5
billion for the nine months ended September 30, 2000 compared to the nine months
ended September 30, 2001.

   ADVERTISING REVENUES. Pro forma advertising revenues increased from $30.6
million (net of fees paid to DoubleClick of


                                      18
<Page>


$884,000) to $48.7 million for the nine months ended September 30, 2000
compared to the nine months ended September 30, 2001, an increase of $18.1
million, 59%. This increase was due primarily to an increase in net revenue
from our advertising revenue sharing agreement with AOL and increased revenue
from the direct sale of advertising by our internal sales force. The move from
using DoubleClick for advertising sales to a direct sales force reduced fees
paid for advertising services.

   OTHER REVENUES. Pro forma other revenues increased from $2.6 million to $21.6
million for the nine months ended September 30, 2000 compared to the nine months
ended September 30, 2001, an increase of $19.0 million, 734%. This increase was
due primarily to service charges for the handling and express delivery of
certain paper tickets. The increase was also due to the recognition of
additional revenue related to warrants received from HRN during the nine months
ended September 30, 2001 compared with the same period in 2000. This was in
connection with an extended affiliation agreement that was entered into by the
Company with HRN in March 2001.

COSTS OF REVENUES

   Pro forma costs of revenues increased from $55.2 million to $77.2 million for
the nine months ended September 30, 2000 compared to the nine months ended
September 30, 2001, an increase of approximately $22.0 million, 40%. This was
due to increased headcount costs associated with the customer service centers,
including the opening of a third customer service center during the second
quarter 2001, other administrative costs used to support the customer service
centers and the operations of our Internet infrastructure and data processing
charges. Costs of revenues declined as a percentage of total revenue from 40.6%
for the nine months ended September 30, 2000 to 33.1% for the nine months ended
September 30, 2001 due primarily to a change in revenue mix and increased
efficiencies in the customer service centers.

OPERATING EXPENSES

   SELLING AND MARKETING. Pro forma selling and marketing expenses increased
from $88.4 million to $115.7 million for the nine months ended September 30,
2000 compared to the nine months ended September 30, 2001, an increase of $27.3
million, 31%. This was due primarily to an increase in advertising spending, an
increase in payments made to strategic distribution partners during the nine
months ended September 30, 2001 compared with the same period in 2000, and an
increase in administrative costs to support our direct selling efforts and
internal sales force.

   TECHNOLOGY AND DEVELOPMENT. Pro forma technology and development expenses
increased from $15.0 million to $17.4 million for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 2001, an
increase of approximately $2.5 million, 16%. This was due primarily to
administrative costs incurred to enhance and maintain our Web site and salaries
and benefits associated with an increase in development labor headcount.

   GENERAL AND ADMINISTRATIVE. Pro forma general and administrative expenses
increased from $14.3 million to $16.1 million for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 2001, an
increase of approximately $1.8 million, 13%. This was due primarily to an
increase in various professional services and salaries and employee related
costs.

     SABRE'S INTEREST IN PARTNERSHIP. Sabre's interest in the Partnership
represents the allocation of the Partnership's profits and losses which
consolidates with the Company for financial reporting purposes to Sabre, based
on Sabre's direct ownership interest in the Partnership during 2000 and 2001.
The allocation was approximately 61% for the nine months ended September 30,
2000 and September 30, 2001.

     PROVISION FOR INCOME TAXES. The Company's net operating loss carryforwards
shield current income for the third quarter 2001 without need for a provision
for income taxes.

ANTICIPATED LOSSES

   The Company has incurred significant operating losses since its inception as
an operating unit of Sabre, and has continued to incur losses, as measured by
generally accepted accounting principles, since the Merger. For the future, our
success will depend to a large extent on our ability to greatly increase sales
volume so as to realize economies of scale and to increase revenue from
advertising and higher margin products like merchant-model air and hotel
bookings, vacation packages and cruises resulting in higher gross margins. As we
increase spending for product development, advertising, customer service,
facilities, international expansion and general and administrative expenses, we
had expected to continue to incur lower costs as a percent of revenue resulting
in declining operating losses until the second quarter of 2001, by the end of
which time we expected to be at or close to profitability, excluding the effects
of non-cash stock compensation expense, the amortization of goodwill and
intangible assets and other special non-cash items (collectively, "Special
Items"). The Company, however, was


                                      19
<Page>


able to accomplish this by the end of the first quarter 2001. After accounting
for the impact of the events of September 11, 2001 on revenues, the Company
projects that fourth quarter 2001 pro forma results, which excludes Special
Items, will be the same as or slightly better than third quarter 2001 pro forma
results.

VARIABILITY OF RESULTS

   We expect to experience seasonality in our business, reflecting seasonal
fluctuations in the travel industry, Internet and commercial online service
usage and advertising expenditures. Travel bookings typically increase during
the first and second quarter in anticipation of summer travel and typically slow
in the third and fourth quarter. Due to the significant quarterly growth of our
business, this effect has not been historically evident in our operations, but
may become so in the future. Internet and commercial online service usage and
the rate of growth of such usage are expected to decline during the summer.
Depending on the extent to which the Internet and commercial online services are
accepted as an advertising medium, seasonality in the level of advertising
expenditures could become more pronounced for Internet-based advertising.
Seasonality in the travel industry, Internet and commercial online service usage
and advertising expenditures are likely to cause fluctuations in our operating
results and could have a material adverse effect on our business. The terrorist
attacks of September 11, 2001, any subsequent terrorist activity, and the
repercussions of military operations against terrorist organizations are also
likely to cause fluctuations in our operating results and could have a material
adverse effect on our business.

   Other factors that may adversely affect our operating results include:

-  the rate at which travel bookings recover following the September 11, 2001
   events;

-  our ability to retain existing customers, attract new customers and encourage
   repeat purchases;

-  our ability to adequately maintain and upgrade our Web sites and technical
   infrastructure;

-  our ability to obtain travel inventory from travel suppliers on satisfactory
   terms, particularly in competition with alliances formed by travel suppliers;

-  fluctuating gross margins due to a changing mix of revenues;

-  the amount and timing of operating costs related to expanding our operations;

-  general economic conditions or economic conditions specific to the Internet,
   online commerce and the travel industry;

-  the seasonal nature of the travel industry, Internet and commercial online
   service usage and advertising expenditures;

-  our ability to attract and retain advertisers on our Web sites; and

-  advertising revenues from our agreement with AOL may fluctuate due to the
   effects of seasonality.

Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and period-to-period comparisons of operating results
will not necessarily be meaningful and should not be relied upon as an
indication of future performance.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used for operating activities for the nine months ended September
30, 2001 was $2.3 million, which was due primarily to a net loss before
adjustments for non-cash charges, payments to strategic distribution partners
and an increase in accounts receivable and other assets. Net cash used for
operating activities for the nine months ended September 30, 2000 was $56.3
million which was due primarily to the prepayment to AOL of $40.0 million, the
net loss before adjustments for non-cash charges and Sabre's interest in the
Partnership, and an increase in accounts receivable and other assets.


                                      20
<Page>


   Net cash used for investing activities for the nine months ended September
30, 2001 was $9.7 million. Investing activities included capital expenditures,
primarily for computer equipment, purchases and sales of marketable securities,
including the sale of HRN common stock. Net cash used for investing activities
for the nine months ended September 30, 2000 was $59.6 million which included
the purchase of marketable securities with funds received from Sabre in the
Merger, as discussed below, and capital expenditures for furniture, and fixtures
and computer equipment.

   Net cash provided by financing activities for the nine months ended September
30, 2001 was $11.3 million due to the exercise of stock options. Net cash
provided by financing activities for the nine months ended September 30, 2000
was $116.3 million. Immediately prior to the Merger, Sabre contributed $52.7
million in cash to the Partnership and received partnership units in exchange.
Additionally, the Company exercised its option to cause Sabre to invest an
additional $50.0 million in the Company in exchange for 1.2 million shares of
common stock of the Company. The Company contributed these funds to the
Partnership. Sabre is under no further obligation to fund the Partnership's
capital requirements. Effective with the Merger, we began maintaining our own
cash balances.

The Company has experienced significant decreases in travel related bookings as
a consequence of terrorist activity since September 11, 2001. We expect that the
Company, the travel industry and the economy in general will continue to be
adversely affected by the terrorist attacks on New York and Washington, by any
subsequent terrorist-related activity, and the repercussions of military
operations against terrorist organizations. Decreases in travel bookings would
have an adverse impact on the Company's liquidity. It is not possible to predict
either the severity or duration of such decreases in the medium or long-term.
As of September 30, 2001 we had $107.1 million in cash and marketable
securities. The Company expects to have positive cash earnings, excluding
special items such as amortization of goodwill, intangibles and stock
compensation expense for the remainder of 2001. As a result, we anticipate that
cash requirements will be funded by cash flows from operating activities.
However, we cannot provide assurance that cash flows from operations of the
Partnership will exist or will be sufficient to meet our cash requirements, such
as contractual commitments to our strategic distribution partners, including AOL
and Yahoo!, or to make capital expenditures or other expenditures necessary to
support the anticipated growth of the business or to respond to competition. In
such event, we would be required to obtain financing from the sale of equity
securities or debt financing. We cannot assure you that any such financing will
be available or on terms acceptable to us.

   At January 1, 2001, the Company held warrants for the purchase of shares of
common stock of HRN, received in connection with an affiliation agreement
entered into during 2000. During March 2001, the Company extended its
affiliation agreement with HRN through July 31, 2005 and expanded the scope of
the HRN relationship. In connection with the expanded and extended agreement,
the Company received additional vested warrants to purchase shares of HRN Class
A Common Stock. During the nine months ended September 30, 2001, the Company
completed four cashless exercises of these warrants in which we received
approximately 1.1 million shares of HRN stock. In May 2001, the Company sold
shares of HRN common stock, realizing gross proceeds of approximately $36.6
million. Proceeds from the sale of the HRN stock were used to purchase
additional marketable securities. At September 30, 2001, the fair value of HRN
warrants held by the Company, earned during the third quarter of 2001, totaled
approximately $714,000. At September 30, 2001, the carrying value of HRN shares
held by the Company totaled approximately $779,000.

   In 2001, the Company will use funds to enhance brand awareness and supplier
relationships, to perform product development and for working capital. Payments
due under our agreements with strategic distribution partners could also affect
our liquidity. Revenues under the AOL agreement are based on performance and are
difficult to predict. Accordingly, they may not occur in the same time periods
as payments we must make to AOL. Additionally, the Company's agreement with
Yahoo! also includes guaranteed payments.

CAUTIONARY STATEMENT

   Statements in this report which are not purely historical facts, including
statements regarding the Company's anticipations, beliefs, expectations, hopes,
intentions or strategies for the future, may be forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. All forward-looking statements in this report are based upon
information available to the Company on the date of this report. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Any forward-looking statements involve risks and uncertainties that could cause
actual events or results to differ materially from the events or results
described in the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements.

RISK FACTORS


                                      21
<Page>


   Risks associated with an investment in the Company, and with achievement of
the Company's forward-looking statements in this report, its news releases, Web
sites, public filings, investor and analyst conferences and elsewhere include,
but are not limited to, the risk factors described below. Any of the risk
factors described below could have a material adverse effect on the Company's
business, financial condition or results of operations. The Company may not
succeed in addressing these challenges and risks.

THE SEPTEMBER 11, 2001 TERRORIST ATTACKS NEGATIVELY AFFECTED OUR REVENUES.

   On September 11, 2001, terrorists hijacked and crashed four passenger
aircraft operated by commercial air carriers, resulting in major loss of life
and property. Our gross travel bookings and revenues decreased dramatically in
the days following the attacks, but have since experienced steady improvement.
We are currently unable to estimate when and at what levels gross travel
bookings and revenues will stabilize. Among the events relating to the September
11, 2001 attacks that could further reduce travel and thus negatively impact our
sales and revenues are:

       -  additional terrorist attacks on United States or international
          targets;

       -  repercussions of military operations against terrorist
          organizations;

       -  increased costs and passenger waiting time due to increased airport
          security; and

       -  changes in consumer travel patterns brought about by safety concerns.

OUR STOCK PRICE COULD FLUCTUATE SIGNIFICANTLY.

   We are an Internet-related company engaged in electronic commerce. Market
prices for stocks of this type have been volatile and as a result, the market
price of our common stock could experience extreme price fluctuations. If
revenues or earnings are less than expected for any quarter, the market price
of our common stock could significantly decline, even if the decline in our
revenues or earnings is not reflective of any long-term problems with our
business, financial condition and operating results. In addition, travel
industry stocks have been volatile. The events of September 11, 2001 caused a
significant decline in the market price for our common stock and any
subsequent terrorist events, as well as the repercussions of military
operations against terrorist organizations may also cause a decline in the
market price for our common stock. The market price of our common stock could
also fluctuate significantly as a result of sales or distributions by our
investors who own a substantial number of shares of our common stock.

A DECLINE IN COMMISSION RATES OR THE ELIMINATION OF COMMISSIONS BY AIRLINES AND
OTHER TRAVEL SUPPLIERS WOULD REDUCE OUR REVENUES.

   A substantial portion of our revenue comes from the commissions paid by
travel suppliers for bookings made through our online travel services. We do not
have written commission agreements with many travel suppliers and accordingly,
consistent with industry practices, these travel suppliers are not obligated to
pay any specified commission rates for bookings made through our Web sites or to
pay commissions at all. Currently, some of the Company's travel suppliers do not
pay commissions. If a significant number of airlines, hotel chains or other
travel suppliers reduce current industry commission rates or eliminate
commissions entirely, our revenues would be significantly reduced. We cannot
provide assurances that airlines, hotel chains or other travel suppliers will
not reduce current industry commission rates or eliminate commissions entirely,
either of which could reduce our revenues and margins, and adversely affect our
business, financial condition and results of operations.


TRAVEL INDUSTRY CONSOLIDATION, INCLUDING THE FORMATION OF STRATEGIC ALLIANCES
AND CONSORTIA TO REPLACE TRAVEL AGENCIES, MAY HARM OUR COMPETITIVE POSITION.

   We depend greatly on our relationships with airlines and other travel
suppliers, and adverse changes in these relationships could affect the inventory
of travel products available on our Web sites. Travel suppliers, including
travel content providers, may not make their services and products available to
us on satisfactory terms or at all, or may choose to provide their products and
services only to our competitors. In addition, we cannot assure you that our
travel suppliers will continue to sell products and services through global
distribution systems on terms satisfactory to us. It is possible that in
connection with industry consolidation, strategic alliances or other travel
supplier consortia, airlines and other travel suppliers may choose not to
distribute their travel products and services through online distribution sites
such as ours. Airlines and other travel suppliers could decide to sell their
travel products and services exclusively through other distribution channels or
to otherwise restrict our access to their travel products and inventory. Either
situation could significantly reduce the volume or breadth of travel products
and services available on our Web sites. If we are unable to


                                      22
<Page>


maintain or expand our relationships with airlines and other travel suppliers,
our ability to offer and expand our travel service offerings or offer the
lowest-priced travel inventory could be reduced and our sales and revenues
could be materially adversely affected.

   Several major airline carriers have formed a joint sales agency known as
"Orbitz," which operates as an online travel reservations service and which
began operations in June 2001. Pursuant to agreements among the carriers and
Orbitz, Orbitz obtains favorable and in some cases exclusive access to
certain airline fares and inventory and enjoys other rights and benefits,
including "most favored nations" privileges, not currently enjoyed by
independent travel agencies such as the Company. The U.S. Department of
Justice and the Attorneys General of twenty-one States and the Territory of
Puerto Rico, are currently investigating whether these agreements and
arrangements violate antitrust or aviation laws; however, we cannot assure
you that these investigations will be resolved on terms satisfactory to the
Company. To the extent that Orbitz is able to use its agreements with such
carriers, and its other rights and benefits from them, to create a more
comprehensive product or service offering than the Company, our sales and
revenues could be materially adversely affected.

ADVERSE CHANGES OR INTERRUPTIONS IN OUR RELATIONSHIPS WITH DISTRIBUTION PARTNERS
AND OTHER THIRD PARTY SERVICE PROVIDERS COULD REDUCE OUR REVENUES.

   We rely on Yahoo!, AOL and other distribution partners for a significant
amount of our customers. If we are unable to maintain satisfactory relationships
with Yahoo! or AOL, or if these companies are unable to maintain their positive
market presence and reputation and steer online traffic to our Web sites, our
sales and revenue could decline, and our business, financial condition and
results of operations could be adversely affected.

   Any discontinuance in the services provided to us by third parties, such as
global distribution systems providers, web hosting providers and others, or any
deterioration or interruption of their services, would prevent consumers from
accessing or purchasing particular travel services through our Web sites, which
would reduce our sales and revenues and adversely impact our business, financial
condition and results of operations.

THE REVENUES DERIVED FROM OUR RELATIONSHIPS WITH COMPANIES SUCH AS YAHOO! AND
AOL MAY NOT BE SUFFICIENT TO OFFSET OUR SIGNIFICANT FINANCIAL COMMITMENTS TO
THOSE COMPANIES.

   We may not be able to achieve sufficient online traffic, travel bookings
or commissions to justify our significant financial obligations to Yahoo! and
AOL under various agreements. Under these agreements, we expect to pay at
least $28 million to Yahoo! over a three year period ending 2002 and at least
$200 million to AOL over a five year period ending 2005. In addition, our
financial obligations under these agreements may limit our operational
flexibility in the future, which could materially affect our business,
financial conditions and results of operations.

CONFLICTS OF INTEREST WITH SABRE COULD IMPEDE OUR BUSINESS STRATEGY AND HURT OUR
BUSINESS.

   Sabre Holdings Corporation and its affiliates currently own 12.0% of the
Company's issued and outstanding Common Stock and 33.0 million shares of the
Company's Class A Common Stock, which are convertible into shares of Common
Stock. If all of the Class A Common Stock were converted, Sabre Holdings
Corporation and its affiliates' ownership of the Company's issued and
outstanding Common Stock would increase from 12.0% to approximately 70.2%. There
is no limit on the ability of Sabre Holdings Corporation and its affiliates to
purchase shares of the Company's Common Stock in the open market.

   As a result of their stock ownership, Sabre Holdings Corporation and its
affiliates exercise control over the Company and have the power to influence
the election of a majority of the directors of the Company, the appointment
of the Company's management and the approval of actions requiring a vote of
the Company's stockholders or directors. Currently, five of the Company's
directors are either directors or officers of Sabre Holdings Corporation.

   Sabre Holdings Corporation and its affiliates' interests may conflict with
the interests of the Company or the Company's other stockholders. Sabre Holdings
Corporation and its affiliates could use their voting power to delay or prevent
a change in control, even if it is in the best interest of the Company to effect
such change in control or if a majority of the Company's other stockholders were
in favor of such change. Furthermore, we cannot assure you that Sabre Holdings
Corporation and its affiliates and the Company will be able to fairly resolve
any potential conflicts of interest that may arise between them, whether in
connection with the intercompany agreements between the parties or otherwise, or
that any resolution will be as favorable to the Company as if it were dealing
with an unaffiliated party.


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BECAUSE WE ARE AFFILIATED WITH SABRE HOLDINGS CORPORATION AND ITS AFFILIATES,
POTENTIAL STRATEGIC PARTNERS OR VENDORS MAY NOT WISH TO ENTER INTO STRATEGIC
RELATIONSHIPS WITH US.

   Because of our affiliation with Sabre Holdings Corporation and its
affiliates, potential strategic partners or vendors may not wish to enter, or
may be contractually prohibited from entering into or expanding strategic
relationships and distribution agreements with us. If too many potential
strategic partners were to decline strategic relationships with us, or if
vendors were to limit their dealings with us because of our affiliation with
Sabre, our business, operating results and financial condition could be
materially adversely effected.

THE SUCCESS OF OUR BUSINESS IS DEPENDENT ON THE CONTINUED USE AND GROWTH OF THE
INTERNET AND THE EXTENT OF ACCEPTANCE AND PROFITABILITY OF ONLINE COMMERCE.

   Our future revenues and profits depend upon the widespread acceptance and use
of the Internet and online services as a medium for commerce. A sufficiently
broad base of consumers may not accept, or continue to use, the Internet as a
medium of commerce. Demand for and market acceptance of products and services
over the Internet involve a high level of uncertainty. The rapid growth in the
use of the Internet and online services in recent years has slowed considerably
in the last year. If the growth of the Internet does not continue or if
consumers cease to accept the Internet as a medium of commerce, our business,
financial condition and results of operations will be adversely affected.

   Our success will also depend upon the development and maintenance of the
Internet's infrastructure to cope with future traffic. This will require a
reliable network backbone with the necessary speed, data capacity and security
and the timely development of complementary products for providing reliable
Internet access and services. Major online service providers and the Internet
itself have experienced outages and other delays as a result of software and
hardware failures and could face such outages and delays in the future. Outages
and delays are likely to adversely affect the level of Internet usage and the
processing of transactions on our Web sites. In addition, the Internet could
lose its viability because of delays in the development or adoption of new
standards to handle increased levels of activity or increased government
regulation. The adoption of new standards or government regulation may require
us to incur substantial compliance costs. Such costs may adversely affect our
business, financial condition and results of operations.

GENERAL DECLINES OR DISRUPTIONS IN THE TRAVEL INDUSTRY COULD REDUCE OUR
REVENUES.

   Our business and operations rely on the health and growth of the travel
industry. Travel is highly sensitive to business and personal discretionary
spending levels, and thus tends to decline during general economic downturns.
Our sales and revenues would be significantly reduced as a result of a decline
in travel by consumers. As discussed above, we expect that the Company, the
travel industry and the economy in general will continue to be adversely
affected by the repercussions of the September 11 terrorist attacks, any
subsequent terrorist-related activity, and hostilities relating to reprisals
against terrorist organizations or otherwise. It is not possible to predict
either the severity or duration of such effects in the medium or long-term.
Other events that tend to reduce travel would reduce our sales and revenues,
including:

-  price escalation in the airline industry or other travel-related industries;

-  airline or other travel related strikes;

-  political instability and hostilities;

-  unusual periods of bad weather;

-  fuel price escalation;

-  increased occurrence of travel-related accidents;

-  a reduction in airline capacity;

-  potential further consolidation of the airline industry; and

-  significant economic downturns and recessions.



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RAPID TECHNOLOGICAL CHANGES MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE
ATTRACTIVENESS OF OUR SERVICES TO CUSTOMERS.

   In order to remain competitive in the online travel industry, we must
continue to enhance and improve the functionality and features of our Web
sites. If we fail to continually improve our Web sites' speed,
personalization and customer service, we could lag behind competitors or our
Web sites could become obsolete. As a result, we could lose market share and
our revenues would decline, which could have a material adverse effect on our
business, financial condition and results of operations. In addition, our
services depend on complex search mechanisms to find the best available
fares. If our competitors develop technology to help consumers find the best
fares more quickly or easily, or at a cheaper cost, or help suppliers
increase their sales in ways we cannot match, then we may also lose market
share. In order to remain competitive, we may have to incur substantial costs
and expenses to respond to the increasingly sophisticated requirements of
online consumers and suppliers. Such costs and expenses may have a material
adverse effect on our business, financial condition and results of operations.

SECURITY BREACHES IN OUR SYSTEMS OR CREDIT CARD FRAUD COULD DAMAGE OUR
REPUTATION AND CAUSE US TO LOSE CUSTOMERS.

   Consumer concerns over the security of transactions conducted on the Internet
and over privacy issues may inhibit the growth of the Internet and online
commerce. The security of our customers confidential transaction data could be
jeopardized as a result of the accidental or intentional acts of Internet users,
our current and former employees or others, or computer viruses. If we
experience credit card fraud or if there is a breach in the security of our
systems, we could lose consumers' confidence and consequently, their business.
In addition, we may be liable for damages caused by security breaches. Such
liability could increase our expenses and exhaust our resources, which could
have a material adverse effect on our business, financial condition and results
of operations.

   Security breaches experienced by other electronic commerce companies could
reduce consumers' confidence in our Web sites. Although we plan to continue to
use encryption and authentication technology, these measures can be
circumvented. The costs required to continually upgrade our security measures
could be prohibitively expensive and could result in delays or interruption of
service that could result in a loss of consumers.

OUR COMPUTER SYSTEMS MAY SUFFER SYSTEM FAILURES, CAPACITY CONSTRAINTS AND
BUSINESS INTERRUPTIONS WHICH COULD INCREASE OUR OPERATING COSTS AND CAUSE US TO
LOSE CUSTOMERS.

   The interruption, impaired performance or insufficient capacity of our
systems could lead to interruptions or delays in our service, loss of data or
our inability to process reservations, which could cause us to lose customers.
Our systems and operations can be damaged or interrupted by fire, flood, power
loss, telecommunications failure, viruses, earthquake, tornado and similar
events and our redundant systems or disaster recovery plans may not be adequate.
If any of such events occur, it may have a material adverse effect on our
business, financial condition and results of operations. We must continually
devote substantial financial, technical and operational resources to expand and
upgrade our systems and infrastructure.

WE MAY CONTINUE TO INCUR NET LOSSES, AS MEASURED BY GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.

   The Company has incurred losses, as measured by generally accepted
accounting principles and may incur additional losses in the future. We
expect our operating expenses to increase significantly as we develop and
expand our services, expand our domestic and international operations, fund
site and content development and invest in operating infrastructure. We will
need to grow our revenues significantly in order to become and stay
profitable, as measured by generally accepted accounting principles. If our
revenues do not grow as expected to defray the estimated costs and expenses,
there could be a material adverse effect on our business, operating results
and financial condition.

EVOLVING GOVERNMENT REGULATION COULD IMPOSE TAXES OR OTHER BURDENS ON OUR
BUSINESS WHICH COULD INCREASE OUR COSTS OR DECREASE DEMAND FOR OUR PRODUCTS.

   Increased regulation of the Internet or different applications of existing
laws might slow the growth of the use of the Internet and commercial online
services, which could decrease demand for our services, increase the cost of
doing business or otherwise reduce our sales and revenues.


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   Federal legislation imposing limitations on the ability of states to tax
Internet-based sales was enacted in 1998. The Internet Tax Freedom Act
exempted specific types of sales transactions conducted over the Internet from
multiple or discriminatory state and local taxation. However, this legislation
expired on October 21, 2001 and has not as of yet been extended. As such,
state and local governments could impose taxes on Internet-based sales. These
taxes could decrease the demand for our products and services or increase our
costs of operations, which would have a material adverse effect on our
business, financial condition and results of operations.

   Data collection, protection and privacy issues are a growing concern in
the U.S, and many countries around the world in which the Company does
business or may do business in the future. Evolving government regulation and
enforcement initiatives in these areas could limit or restrict the Company's
ability to market its products and services to consumers, increase the
Company's costs of operation and lead to a decrease in demand for our
products and services, which would have a material adverse effect on our
business, financial condition and results of operation.

OUR CONTINUED SUCCESS DEPENDS ON THE CONTINUING EFFORTS OF KEY OFFICERS AND OUR
ABILITY TO CONTINUE TO ATTRACT, RETAIN AND MOTIVATE HIGHLY SKILLED EMPLOYEES.

   The loss of the services of Terrell B. Jones, our President and Chief
Executive Officer, could harm our ability to execute our business strategy and
expand our operations. Mr. Jones may not be able to fulfill his responsibilities
adequately or he may choose to leave us. Our success also depends on our ability
to hire, train, retain and manage highly skilled employees. We cannot assure you
that we will be able to attract and retain a sufficient number of qualified
employees or that we will successfully train and manage the employees we hire.

OUR ABILITY TO PROMOTE OUR SERVICES IN SOUTHEAST ASIA, AUSTRALIA, NEW ZEALAND,
JAPAN, INDIA AND OTHER NEARBY REGIONS IS RESTRICTED.

   An agreement between Sabre and Abacus International Pte Ltd. ("Abacus"), the
operator of a global distribution system, may restrict us from directing
promotions of our services specifically to consumers in Southeast Asia,
Australia, New Zealand, Japan, India and other nearby regions. The agreement
also provides Abacus the first opportunity to market our underlying technology
to Internet service providers in the restricted area. In addition, after we
become profitable, as measured by generally accepted accounting principles, we
will be required to transfer a proportional amount of revenues based upon the
percentage of bookings made in the restricted marketing area to a joint venture
between Sabre and Abacus. We will be able to deduct all direct and indirect
costs from bookings made from the restricted area. These restrictions may in the
future limit us from expanding our operations in Southeast Asia, Australia, New
Zealand, Japan, India and other nearby regions.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Effective with the Merger on March 7, 2000, we began maintaining our own cash
balances. Our exposure to market risk for changes in interest rates relates
primarily to our investment portfolio. The Company maintains an investment
policy intended to ensure the safety and preservation of invested funds by
limiting default risk, market risk and reinvestment risk. We do not plan to use
derivative financial instruments to manage or reduce market risk. We mitigate
default risk by investing in high credit quality securities such as debt
instruments of the United States government and its agencies and high quality
corporate issuers, as well as money market funds. Investments include only
marketable securities with active secondary or resale markets to ensure
portfolio liquidity and maintain a prudent amount of diversification.

   At January 1, 2001, the Company held warrants for the purchase of shares of
Class A Common Stock of HRN, received in connection with an affiliation
agreement entered into during 2000. During March 2001, the Company extended its
affiliation agreement with HRN through July 31, 2005 and received additional
vested warrants to purchase shares of HRN stock in connection with this extended
agreement. As a result of completing four cashless exercises of these warrants
during the nine months ended September 30, 2001, the Company received
approximately 1.1 million shares of HRN Class A Common Stock. The Company's
shares of HRN Class A Common Stock were subject to market risk. However, in May
2001, the Company sold a majority of its HRN common stock, leaving the Company
with approximately 34,000 HRN shares with a carrying value of approximately
$714,000 at September 30, 2001. Proceeds from the sale of the HRN stock were
used to purchase additional marketable securities.

   At September 30, 2001, our investments in marketable securities were $106.3
million, excluding HRN shares. If interest rates were to decline an average of
10% during the remainder of the year compared to the nine months ended September
30, 2001, our total return on these investments would decrease approximately
$407,000. This amount was determined by applying the hypothetical interest rate
change to the Company's marketable securities balance as of September 30, 2001.


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PART II: OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) Sales of equity securities during the quarter.

On July 10, 2001, the Company purchased certain intellectual property rights
from the partners of the WhereTo Travel Partnership and the Technology
Partnership, both partnerships formed under the laws of New South Wales,
Australia, in return for cash and a total of 47,805 shares of the Common Stock,
$.001 par value, of the Company. The transaction was exempt from registration
under Regulation S promulgated pursuant to the Securities Act of 1933, as
amended.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    None.

(b) Reports on Form 8-K

     On September 20, 2001, the Company filed a current report on Form 8-K to
report the issuance of a press release providing updated financial guidance in
light of the events of September 11, 2001 and actions related thereto. A copy of
the press release was attached as an exhibit thereto.

















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SIGNATURES

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.


                                    TRAVELOCITY.COM INC.




Date: November 14, 2001         BY:  /s/ Terrell B. Jones
                                    --------------------------
                                    Terrell B. Jones
                                    President, Chief Executive Officer
                                    and Director
                                    (Principal Executive Officer)


                                     /s/ Ramesh K. Punwani
                                    --------------------------
                                    Ramesh K. Punwani
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




















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