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

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FORM 10-K

|/X/                                         | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    
|------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 31, 2003
|OR                                         
|/ /                                         | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|Commission file number 1-12175             

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LOGO

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

Delaware(State or other jurisdiction of
incorporation or organization)

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

76092(Zip Code)


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

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

Title of each class

Name of exchange on which registeredClass A common stock, par value $.01 per share

New York Stock Exchange


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

NONE(Title of Class)

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

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes /X/
    No / /.

The
aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2003 was approximately $2,900,342,886
based on the closing price per share of Class A common stock of $24.65 on such date.

As
of February 20, 2004, 140,096,197 shares of the registrant's Class A common stock were outstanding.

DOCUMENTS
INCORPORATED BY REFERENCE

Part III
of this Form 10-K incorporates by reference certain information from the Proxy Statement for the Annual Meeting of Stockholders to be held May 4, 2004.

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PART I

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In this Annual Report on Form 10-K, the words "Sabre Holdings," "company," "we," "our," "ours" and "us" refer to Sabre Holdings Corporation and
its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

ITEM 1.    BUSINESS

Overview

Sabre Holdings Corporation is a Delaware holding company incorporated on June 25, 1996. Sabre Inc. is the principal operating subsidiary and sole
direct subsidiary of Sabre Holdings Corporation. Sabre Inc. or its direct or indirect subsidiaries conduct all of our businesses.

We
are a world leader in travel commerce, marketing travel offerings and providing distribution and technology solutions for the travel industry. We operate in multiple travel
distribution channels: the travel agency channel, the consumer-direct channel and the business-direct channel. Through our Sabre®1
  global distribution system (the "Sabresystem" or "SabreGDS") subscribers can access
information about, and can book reservations for, among other things, airline trips, hotel stays, car rentals, cruises and tour packages. Our Sabre Travel Network business operates the SabreGDS and
markets and distributes travel-related products and services through the travel agency channel. We engage in consumer-direct and
business-direct travel marketing and distribution through our Travelocity business. In addition, our Sabre Airline Solutions business is a leading provider of technology and services, including
development and consulting services, to airlines and other travel providers.

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During
the fourth quarter of 2003 we aligned ourGetTherebusiness segment, which engaged in business direct travel services
and had previously been operated as a separate business segment, within our other three segments. This realignment resulted inGetThere®products, services and operations being integrated into the remaining three segments. Accordingly, GetThere will no longer be reported as a separate segment.

In
2003, we generated approximately 71.3% of our revenue from Sabre Travel Network, 18.1% from Travelocity and 10.6% from Sabre Airline Solutions based on segment results that include
intersegment revenues.



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TheSabreGlobal Distribution System

TheSabresystem and other global distribution systems are a primary means of air travel distribution in the
United States and in many international regions. TheSabresystem, like other global distribution systems, creates an electronic marketplace where
airlines, hotels, and other travel providers ("associates") display information about their products and services. Through theSabresystem, travel
agents and other users ("subscribers") can access information about, book reservations for and purchase travel and travel-related products and services. In 2003, over 980 associates displayed
information about their products and services through theSabresystem. We estimate that more than $70 billion of travel-related products and
services were sold through theSabresystem during 2003. During 2003, more airline bookings were made through the Sabresystem than through any other
global distribution system.

TheSabresystem provides subscribers a single rich source of travel information, allowing travel agents to search tens of thousands of
itinerary and pricing options across multiple travel providers for consumers within seconds. TheSabresystem reports transaction data about
subscriber-generated reservations to associates, allowing them to better manage inventory and revenues. TheSabresystem also allows subscribers and
airline personnel to print airline tickets and itineraries. Additionally, theSabresystem provides subscribers with travel information on matters such
as currency, medical and visa requirements, weather and sightseeing.

Associate Participation.Airlines and other associates can display and sell their inventory in the Sabresystem. Airlines are offered a wide range of participation levels. The lowest level of participation for airlines, Sabre® Basic Booking RequestSM,
provides schedules and electronic booking functionality only. Higher levels of participation
for airlines, such asSabre® Direct Connect® Availability("DCA") participation level, provide enhanced levels of communication
between theSabresystem and the associates' inventory system, giving subscribers more detailed information and associates improved inventory
management. For an associate selecting one of the higher levels of participation, theSabresystem provides subscribers with a direct connection to the
associate's internal reservation system, allowing theSabresystem to provide real-time information about inventory and confirmed
reservations and allowing the associate to optimize revenue for each flight. Car rental companies and hotel operators are provided with similar levels of participation from which to select. We also
provide associates, upon request, marketing data (in the form of anonymous, aggregated data from which all personal information has been deleted) derived from the Sabresystem bookings for fees that
vary depending on the amount and type of information provided. Associates use this marketing information in yield
optimization and other operational systems we sell to improve their revenue and profitability.

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In
October 2002 we announced a new Direct Connect Availability ("DCA") 3-Year Pricing Option to airlines. Airlines selecting this option under their SabreGDS participating carrier agreements receive
a discount of approximately 12.5% from the applicable 2003 DCA rates, and are locked into that
booking fee rate for three years. As a consequence, we will not be able to raise the booking fee rate on those bookings during that three-year period. We anticipate that by the end of
2004, approximately 50% of our global direct bookings will fall under the DCA 3-Year Pricing Option. As of the date of this report, more than 30 airlines, including American
Airlines, Inc., Delta Airlines, Inc., Northwest Airlines Corporation, Continental Airlines, Inc., United Air Lines, Inc., US Airways, Inc., British Airways and
Alitalia have elected to participate in the DCA 3-Year Pricing Option. As of February 2, 2004, we are no longer marketing the DCA 3-Year Pricing Option to carriers.
Through the Sabre DCA 3-Year Pricing Option, participating airlines agree to commit to the highest level of participation in the Sabre system (DCA level) for three years. Participating
airlines provide allSabreGDS users with broad access to schedules, seat availability and published fares, including Web fares and other promotional
fares but excluding certain fares such as "opaque" fares (where the airline's identity is not disclosed until after the sale) and private discounts. Participating airlines also furnish generally the
same customer perquisites and amenities to passengers booked through theSabreGDS as those afforded through other GDS's and websites. As a consequence,
we believe that the participation of carriers in the program may help slow the present shift of bookings away from theSabreGDS to supplier-controlled
outlets. See"Risk FactorsTravel Suppliers are Seeking to Bypass..."

Subscriber Access.Access to theSabresystem enables
subscribers to electronically locate, price, compare and purchase travel products and services provided by associates. We tailor the interface and functionality of the Sabresystem to the needs of our
different types of subscribers.

Sabre Travel Network

Sabre Travel Network markets theSabreGDS to associates and travel agency subscribers (online and brick and
mortar). As of December 31, 2003, travel agencies with approximately 53,000 locations in over 113 countries on 6 continents subscribed to the Sabresystem, which enabled these subscribers to make
reservations with approximately 430 airlines, 41 car rental companies, 220 tour operators, 9
cruise lines, 35 railroads and 249 hotel companies covering approximately 60,600 hotel properties worldwide.

Approximately
71.3%, 74.6% and 76.0% of our revenue (including intersegment revenues) from continuing operations in 2003, 2002 and 2001, respectively, was generated by the Sabre Travel
Network, primarily through booking fees paid by associates.

Travel
agents may access theSabresystem on their own hardware over communications circuits contracted from telecommunications vendors or
may contract with Sabre Travel Network for the hardware, software, technical support and other services needed to use theSabresystem. Increasingly,
travel agents are providing the majority of their own hardware. Fees for our services are payable over the term of the travel agent's agreement with us, generally five years in the United States and
Latin America, three years in Canada, and one year in Europe. In addition, we pay incentives to many travel agencies based on their booking productivity.

Because
travel agencies have differing needs, we have modified theSabresystem interface to meet the specific needs of different
categories of travel agents. TheSabresystem interfaces are available in English, Spanish, Portuguese, French, German, Italian and Japanese. Turbo Sabre®software is an advanced point-of-sale interface and application development tool that enables advanced
functionality, such as customized screens, automated quality control and database integration, and eliminates complex commands, reducing keystrokes and training requirements. In addition, we offer Sabre eVoya® Webtop,a Web-based travel agency portal combining the breadth of the Internet with the power of the SabreGDS. It provides access to the content of theSabreGDS, as well as Web-based booking
tools for cruises, restaurants, ground transportation, theatre, local events and theme parks.

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We
provide bookings solutions to serve the specific online needs of our subscribers and associates, including website development, business logic middleware and back end processing. In
addition, we offer travel agencies back-office accounting systems and a simplified method to develop and place their own marketing presence on the Internet. Subscriber and associate
product offerings range from off-the-shelf applications to fully customized solutions. License, consulting and Web hosting fees are recovered from the subscribers and vary with
the level of customization and volume generated by their sites.

Although
the substantial majority of Sabre Travel Network's revenues are derived from booking fees paid by associates, we recently entered into agreements that do not follow this
traditional business model, and are currently evaluating the desirability of similar transactions. Under such agreements, we may generally derive revenues from transaction fees based on the number of
segments booked, but the structure and source of those transaction fees may be modified to take advantage of specific market conditions. In addition, in October of 2003, we launched Jurni Network,
a unique offline travel agency consortium that combines a preferred sales network and consolidated purchasing power with
technology-driven marketing tools to sell preferred offerings.

Travelocity

Travelocity is a leading provider of consumer direct travel services for the leisure and business traveler. Through Travelocity.com and certain
co-branded Websites such as AOL and Yahoo!, individual leisure and business travelers can shop and compare prices and make travel reservations online with airlines, car rental agencies,
hotel companies and cruise and vacation providers. Travelocity is the exclusive provider of travel booking services for various America Online, Inc. services, including AOL, AOL.com, Netscape,
and CompuServe in the United States and Canada and Digital City in the United States. Travelocity is also the exclusive provider of air, car and hotel booking services on Websites operated by
Yahoo!, Inc. in the United States and Canada. In addition, we offer access to a database of information regarding specific destinations and other information of interest to travelers. During
2003, customers purchased approximately $3.9 billion in travel and related services through the Travelocity Websites.

In
addition to Travelocity's main U.S. Website, we also operateTravelocity Business. Travelocity Business is a comprehensive
travel service available for corporations and other business travelers which combines the integrated online corporate travel technology and full-service offering products of GetThere with
the expertise of Travelocity.

Travelocity
also operates multiple businesses tailored to customers outside the United States. In 2002, Travelocity and Otto Versand, a global leader in direct marketing and Europe's top
direct marketing firm, launched Travelocity Europe, a multi-channel travel company that has become one of the leading European consumer direct travel agencies. Travelocity also operates Travelocity.ca® for its Canadian customers, providing comprehensive French and English language online planning and buying choices across
air, car, hotel, rail and vacation travel vendors. Travelocity is also marketed in Asia Pacific through two joint venture arrangements, which are discussed in
"International" below.

In
November 2003, Travelocity completed the acquisition of World Choice Travel, Inc., the U.S.-based hotel room consolidation and distribution business of MyTravel Group
PLC, a global leisure travel services company based in the United Kingdom. This acquisition adds over 1,700 online affiliates operating over 2,900 websites to Travelocity's hotel distribution network
and offers another outlet for Travelocity's merchant hotel offerings.

Travelocity
receives fees from travel providers for purchases of their travel products and services made through its system. In addition, we receive advertising revenues from our
Travelocity Websites.

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Travelocity
instituted a merchant business model in 2001 for air travel and in 2002 for hotels and vacation packages. Travelocity has negotiated access to discounted travel offerings
from airlines, hotels and car rental companies. More than 10,000 hotels currently participate in the merchant model hotel program and participants are being added regularly. These components are sold
individually or combined to create vacation and last-minute deal packages for sale to end consumers at prices determined by Travelocity. Travelocity generally does not have purchase
obligations for unsold offerings. Under the Merchant Model, Travelocity recognizes as revenue the amount paid by the traveler minus its payment to the travel supplier. Travelocity recognizes merchant
revenue for stand-alone air travel at the time the travel is sold to the consumer and for vacation packages and hotel stays at the date of check-in.

On
April 8, 2002 we completed a $28 per share cash tender offer for all of the approximately 16.7 million outstanding publicly held common shares of Travelocity that we did
not previously own. Accordingly, Travelocity became our indirect 100% owned subsidiary on April 11, 2002. The Travelocity transaction supports our continuing strategy of delivering value to
suppliers and travelers across multiple distribution channels.

Sabre Airline Solutions

Sabre Airline Solutions is a global leader in providing software products, passenger management systems and consulting services to help airlines simplify
operations and lower costs. Over 200 airlines worldwide use Sabre Airline Solutions' broad portfolio of software solutions for decision-support tools to increase revenues and improve operations. More
than 90 airlines worldwide rely on Sabre Airline Solutions for airline reservation systems, with 15 new carriers added and nine carrier renewals forSabreSonic
Resadvanced reservations and departure control systems in 2003. In addition, more than 100 clients worldwide have turned to Sabre Airline Solutions consulting group for
strategic, commercial and operational consulting.

Airline Passenger Solutions.Sabre Airline Solutions provides airline reservations, inventory and
check-in hosting solutions that help airlines address the challenge of building and retaining customer loyalty through enhanced customer centric offerings and service while also reducing
costs. With support of e-ticketing and passenger self-service options, Sabre Airline Solutions' departure control systems equip airlines with the tools to increase sales
through every distribution channel. Built on open-systems technology, the recently introduced new generationSabreSonic Passenger
Solutionoffers passenger-facing systems to airlines regardless of size, location, business model, or current reservations system.

Airline Products and Services.Sabre Airline Solutions provides decision-support software and
technology necessary for airlines to improve profitability, increase revenue, streamline operations and improve workflow. We offer flexible product and service configurations to meet unique business
needs, allowing airlines to choose a single, stand-alone system for a specific operational area or a bundled solution of multiple systems to address a variety of functional requirements and increase
information sharing across a greater number of departments. Additionally, we offer theSabre® eMergo® Web-enabled and dedicated network solutions,
an applications service provider ("ASP") offering to airlines. Providing
convenient remote access to secure data, theeMergosolutions help significantly lower or eliminate expenses associated with upfront capital outlay,
staffing, data storage, ongoing maintenance and installation. Our decision-support tools are designed exclusively to meet the needs of airlines, regardless of size or business model, and assist in
every key functional area of an airline, such as crew and cargo management, flight operations and revenue management.

Consulting Services.Sabre Airline Solutions' offers a complete range of consulting services to the
airline industry. Assignments range from one time engagement to extended engagements. Typical engagements include projects such as achieving the necessary standards to join an alliance, preparing for
privatization and optimizing current operations. Clients include airlines, airports, manufacturers and governments, as well as individuals, travel agencies and members of the financial community.

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Agreements with EDS

We have an agreement with Electronic Data Systems Corporation ("EDS") through which EDS manages our information technology systems. Under a 10-year
agreement through June 2011, EDS provides us with information technology services, including data center management, applications hosting, applications development, data assurance and network
management. Among the services provided is transaction processing for our travel marketing and distribution businesses, including operation of theSabresystem. The agreement was entered into as part of the 2001 sale to EDS of our infrastructure outsourcing business and information technology infrastructure assets and the associated real estate
("Outsourcing Business"). See Note 3 to the Consolidated Financial Statements for more information related to the sale.

In
connection with the sale, we also entered into agreements with EDS to jointly market information technology services and software solutions to the travel and transportation
industries.

International

Sabre Travel Network is actively involved in marketing theSabresystem internationally directly and through joint
venture and distributorship arrangements. Our global marketing partners principally include foreign airlines that have strong relationships with travel agents in their primary markets and entities
that operate smaller global distribution systems ("GDS") or other travel-related network services.

Sabre
Travel Network has long-term agreements with ABACUS International Holdings Ltd., which created ABACUS International Ltd, a Singapore-based joint venture
company that manages travel distribution in the Asia Pacific region. We own 35% of the joint venture and provide it with transaction processing and product development services on the Sabresystem.
Sabre Travel Network also provides distribution products and services to Infini and Axess, Japan's two largest GDS travel agency marketing
companies. Infini is owned 40% by ABACUS and 60% by All Nippon Airways. Axess is owned 25% by Sabre and 75% by Japan Airlines. Sabre Travel Network also provides travel marketing and distribution
services in Mexico through our 51% owned (48% voting rights) joint venture, Sabre Sociedad Technologica S.A. de C.V.

Travelocity
is marketed internationally both directly and through joint venture arrangements. In Canada, Travelocity directly markets its Travelocity.ca site, launched in 1999. In
Europe, Travelocity has partnered with Otto Versand and established a joint venture company (Kommanditgesellschaft Travel Overland GmbH & Co.) that distributes Travelocity in the region.
Travelocity owns 50% of this joint venture. In Japan, Travelocity and Tabini Holdings, whose primary stockholders include Japan Airlines and All Nippon Airways, launched the Tabini travel Website in
2002. Travelocity has approximately a 30% equity stake in this joint venture. In the rest of the Asia Pacific region, Travelocity is distributed through Zuji Enterprises Pte. Ltd., a joint
venture established in 2002 with 16 airlines in the Asia Pacific region, of which we have approximately a 13% equity stake.

Additionally,
Sabre Airline Solutions distributes software solutions and consulting services through a sales and marketing organization that spans four continents, with primary sales
offices in the Dallas/Ft. Worth area, London, Hong Kong and Sydney. Sabre Airline Solutions also maintains agency relationships to support sales efforts in key markets, including countries in Asia and
the Middle East.

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Competition

The marketplace for travel distribution is large, multi-faceted and highly competitive. Factors affecting competitive success include: depth and breadth of
information, ease of use, reliability, service and incentives to travel agents, and the price and range of offerings available to travel providers, travel agents and consumers. Global distribution
systems such as theSabresystem continue to be important to online and offline travel distribution. Although the traditional travel agency channel
continues to be an important method of travel distribution, other rapidly growing channels are allowing travel suppliers to distribute directly to businesses and consumers, particularly via the
Internet. Our product and service offerings are well positioned to compete in all channels of travel distribution. Those include our Travelocity segment in the consumer-direct channel (through
Travelocity.com and related Websites) and in the business-direct channel (through Travelocity Business). We also offer traditional travel agencies a wide array of tools that allow them to market their
services over the Internet.

Global
competition to attract and retain travel agency subscribers is intense. Sabre Travel Network competes in the travel agency channel against other large and
well-established traditional global distribution systems, such as Amadeus Global Travel Distribution S.A., Galileo International Inc. and Worldspan, L.P. Each of these competitors
offers many products and services substantially similar to those offered by Sabre Travel Network. New competitors in this channel continue to emerge. However, the diverging price structures of
competing global distribution systems provide us with an opportunity to gain customers dissatisfied with the prices or service of their current global distribution systems.

We
face many new competitors as travel distribution channels emerge and mature, including the growing Internet-based business-direct and consumer-direct channels. Many of these
competitors continue to utilize services from a global distribution system such as theSabresystem. Our Sabresystem offers transaction processing and
other services to online travel agencies, including some that compete with the Travelocity.com and
Travelocity Business Websites.

We
market travel in the consumer-direct channel primarily through Travelocity. Competitors of Travelocity include Priceline.com and InterActiveCorp (which owns Expedia, Hotels.com and
Hotwire.com). Airline joint ventures, such as Orbitz (controlled by major U.S. airlines) and Opodo (controlled by large European carriers) provide booking services for airline travel, hotel
accommodations and other travel services offered by multiple vendors. Many travel suppliers have developed their own websites, some of which offer an array of products and services directly to
consumers. In addition, virtually all-major airlines have their own websites allowing direct bookings. Five large U.S. hotel chains, along with a hotel technology provider and
Priceline.com operate Travelweb.com, which provides booking services for hotel accommodations. Certain owners of these sites do (or appear to have the intention to) make certain discounted fares and
prices available exclusively on their proprietary or multi-vendor websites. See further discussion under "Risk FactorsOur business plans call for the significant
growth of our merchant model business...."

We
market travel in the business-direct channel principally through Travelocity Business. The corporate marketplace for Internet-based travel procurement and supply services is highly
competitive and rapidly evolving. Travelocity's competitors in the business-direct channel include travel agencies such as Carlson Wagonlit Travel, global distribution systems such as Amadeus'
E-Travel and Galileo's TravelPort and more recently, travel websites such as Orbitz.com and Expedia.com.

In
the products and services business, we compete with a number of boutique firms in specific product areas, as well as across our portfolio with vendors such as Lufthansa Systems. In
the airline passenger solutions business, we compete with Amadeus, Navitaire, Worldspan, IBM and others.

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The
marketplace for travel products and services is intensely competitive, and the travel distribution industry is currently undergoing rapid consolidation. Consolidation among our
competitors, such as the acquisitions of Expedia, Hotels.com and Hotwire by InterActiveCorp, may give these competitors increased negotiating leverage with travel suppliers. New or consolidated
competitors may emerge and rapidly acquire significant market share. The development of competing technologies or the emergence of new industry standards may also adversely affect our competitive
position. Competition could result in reduced margins on our services and products. See "Risk FactorsWe face competition..."

Another
form of competition derives from airlines, which have aggressively worked to divert travel bookings onto channels that they control. Many of those airlines have withheld
inventory from independent travel distributors, have greatly reduced commissions paid to online and traditional travel agencies and have conditioned independent distributors' access to inventory on
their acceptance of pricing offered by channels that those airlines control. Their collective efforts have resulted in travel bookings being diverted from traditional distribution channels toward
supplier-controlled channels, such as Orbitz, individual airline websites and call centers. Several hotels now have similar multi-vendor websites for booking hotels and other accommodations.
Additionally, as discussed below under "Risk FactorsRegulatory Developments..."proposed government regulations in Europe, if adopted,
could also contribute to the shift of bookings from theSabreGDS to supplier-controlled outlets. In the last two quarters of 2003, we saw a slight
slowing in the rate of channel shift, possibly due to the DCA 3-Year Pricing Option discussed below in"Management's Discussion and Analysis of Financial Condition
and Results of OperationsBusiness TrendsDCA 3-Year Pricing Option".

Merchant Model

Independent travel distributors, including our companies, are attempting to reduce their reliance on supplier-paid commissions and booking or
transaction fees by increasingly promoting a merchant model of travel retailing whereby the travel distributors obtain access to content from travel suppliers at a pre-determined price and
sell the content, either individually or in a package, to travelers at a purchase price which the distributor determines. Merchant model content can include air, hotel, vacation, and dynamically
packaged offerings (for example, via theTravelocity TotalTriporSabre
Exclusivesofferings). Merchant content is good for travelers because they can often purchase travel at a price lower than traditional offerings. For us, merchant
content generally delivers higher revenue per transaction than comparable sales under the agency/booking fee model. Under the merchant model, we recognize as revenue the amount paid by the traveler
minus our payment to the travel supplier. We generally do not have purchase obligations for unsold offerings. We are dependent on our merchant model hotel businesses as a significant source of growth
for our business. Please see "Management's Discussion and Analysis of Financial Condition and Results of OperationsBusiness TrendsMerchant
Model" and "Risk FactorsOur business model calls for the significant growth of our merchant model business...."

Computer Reservation System Industry Regulation

Aspects of our travel marketing and distribution businesses are subject to the computer reservation systems ("CRS") regulations in the United States, the European
Union, Canada and Peru. These regulations generally address the relationships among the CRSs, the airline suppliers and subscribers such as travel agencies. Generally, these regulations do not address
our relationships with non-airline suppliers. The regulations in the European Union, however, do include rail suppliers in certain circumstances. Among the topics addressed in the current
regulations are:



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As
part of its comprehensive review of its CRS rules, the U.S. Department of Transportation ("DOT") announced, on December 31, 2003, that it would not adopt the new rules that it
proposed in November 2002. Instead, the DOT will allow the existing CRS rules to expire entirely. Nearly all of the existing CRS rules expired on January 31, 2004. Two requirements will
remain in effect through July 31, 2004, at which time they too will expire. Therefore, the CRS industry in the United States will be completely deregulated by the DOT after July 31,
2004.

The
two transitional requirements effective until July 31, 2004 are:



We
believe that DOT deregulation will give us a much greater ability to find creative ways to market and promote airline services, thus enhancing our value proposition for airlines and
supporting our transition to the merchant model. The DOT indicated that our current DCA 3-Year Pricing Option Agreements, which represent three-year participation commitments
from more than 30 airlines, including the 6 largest United States airlines, are not affected by deregulation or the transition requirements. We expect that deregulation will affect our relationships
with airlines in many ways, including:



DOT
deregulation will also allow us to freely negotiate with travel agencies, which will permit us to choose to have contracts of any duration, to have exclusive agreements with travel
agents, and/or to vary incentives by the identity of the airline.

In
addition, both the European Commission and Canada are in the process of reviewing their regulations governing the CRS industry for possible changes, including eliminating some or all
of these regulations. The European Commission has not yet published any proposed rules changes, so it is not clear when the Commission may issue amended final rules or what form they may take.
Transport Canada has proposed amendments to its CRS rules that would eliminate many of the current rules, but would retain, unchanged or with modifications, certain existing rules which could continue
to limit our business flexibility, such as retaining a ban on display preferences for airlines. Transport Canada has not yet published its final rules, so it is not clear when the Department may issue
amended final rules or what form they may take.

Other Regulation

Our businesses continue to be subject to regulations affecting issues such as: exports of technology, telecommunications, data privacy and electronic commerce.
Any such regulations may vary among jurisdictions. We believe that we are capable of addressing these regulatory issues as they arise.

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Seasonality

The travel industry is seasonal in nature. Travel bookings, and the revenue we derive from those bookings, decrease significantly each year in the fourth quarter,
primarily in December. Customers generally book their November/December holiday leisure travel earlier in the year, and business travel declines during the November/December holiday season. See the
discussion on Seasonality inManagement's Discussion and Analysis of Financial Condition and Results of Operationsfor additional information.

Research and Development Expenses

Research and development costs represent costs incurred to investigate and gain new knowledge that could be useful in developing a new product or service and then
translating those findings into a plan or design for a product or service. Our research and development costs included in continuing operations approximated $48 million, $40 million and
$73 million for 2003, 2002 and 2001, respectively.

Segment Information

Financial information for our operating segments and geographical revenues and assets are included in Note 14 to the Consolidated Financial Statements.

Intellectual Property

We use software, business processes and other proprietary information to carry out our business. These assets and related patents, copyrights, trade secrets,
trademarks and other intellectual property rights are significant assets of our business. We rely on a combination of patent, copyright, trade secret and trademark laws, confidentiality procedures and
contractual provisions to protect these assets. We seek patent protection on key technology and business processes of our business. Our software and related documentation are also protected under
trade secret and copyright laws where appropriate. We also seek statutory and common-law protection of our trademarks where appropriate. The laws of some foreign jurisdictions may provide
less protection than the laws of the United States for our proprietary rights. Unauthorized use of our intellectual property could have a material adverse effect on us and there can be no assurance
that our legal remedies would adequately compensate us for the damages to our business caused by such use.

Employees

As of December 31, 2003, we had approximately 6,200 employees. A central part of our philosophy is to attract and maintain a highly capable staff. We
consider our current employee relations to be good. Our employees based in the United States are not represented by a labor union.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, we file reports, proxy and
information statements and other information with the Securities and Exchange Commission ("SEC"). Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, proxy and information statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 are available through the Investor Relations section of our Website under the links to "Financial HighlightsSEC Filings." Our internet
address is (www.sabre-holdings.com). Reports are available free of charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, our
officers and directors file with the SEC initial statements of beneficial ownership and statements of change in beneficial ownership of our securities with the SEC, which are also available on our
Website at the same location. We are not including this or any other information on our Website as a part of, nor incorporating it by reference into, this Form 10-K.

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In
addition to our Website, you may read and copy public reports we file with or furnish to the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW., Washington, DC 20549. You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains our
reports, proxy and information statements, and other information that we file electronically with the SEC at (www.sec.gov).

ITEM 2.    PROPERTIES

Our principal executive offices are located in Southlake, Texas and consist of three leased buildings. The initial term of the lease expires in 2013 with an
option to purchase these facilities prior to or upon expiration of the lease. Additionally, we lease office facilities in Westlake, Texas under leases expiring in 2008. These facilities are utilized
by each of our three business units. We also lease office facilities for our business units in approximately 90 other locations worldwide. Additionally, our lease of a Travelocity office facility in
Fort Worth, Texas, will terminate in June of 2004. We intend to let this lease expire.

In
connection with the sale of our outsourcing assets to EDS effective July 1, 2001, we assigned nine facility leases to EDS. Four of the assigned facilities are located in Tulsa,
Oklahoma and include our principal data center, a data tape archive facility, an operations center and a computer center. EDS also subleases a large office facility from us in Fort Worth, Texas, under
a sublease that will expire in 2011. Additionally, in July 2002 we purchased a data center facility constructed on our behalf in Tulsa, Oklahoma for approximately $92 million and
immediately sold it as part of the sale of the Outsourcing Business. We received proceeds of approximately $68 million in cash and realized a previously accrued loss of approximately
$24 million. See Note 3 to the Consolidated Financial Statements.

In
June 2003, Sabre Inc. refinanced the syndicated lease arrangement regarding our corporate headquarters facility in Southlake, Texas, and entered into a
ten-year master lease of that facility. We have accounted for this master lease, which is guaranteed by Sabre Holdings Corporation, as a capital lease. See Note 6 to the
Consolidated Financial Statements.

On
January 31, 2002 we sold our previous headquarters office facility in Fort Worth, Texas for proceeds of approximately $80 million and recognized a pre-tax
gain of approximately $18 million.

On
December 3, 2003 we sold one of our previous office facilities in Fort Worth, Texas for proceeds of approximately $3 million and recognized a pre-tax loss of
approximately $3 million.

We
also sublease eight small office facilities in North America to various companies.

We
believe that our office facilities will be adequate for our immediate needs and could accommodate expansion.

ITEM 3.    LEGAL PROCEEDINGS

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of the fiscal year ended December 31, 2003.

12

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PART II

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ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Class A common stock is traded on the New York Stock Exchange (symbol TSG). The approximate number of record holders of our Class A common stock
at February 20, 2004 was 12,011.

The
range of the high and low sales prices for our Class A common stock on the New York Stock Exchange by quarter for the two most recent fiscal years was:

|               |                    | High |   | Low  
|-------------- | ------------------ | ---- | - | -----
|Quarter Ended: |                    |      |   |      
|               | December 31, 2003  |      | $ | 23.00
|               | September 30, 2003 |      | $ | 27.50
|               | June 30, 2003      |      | $ | 26.68
|               | March 31, 2003     |      | $ | 20.78
|Quarter Ended: |                    |      |   |      
|               | December 31, 2002  |      | $ | 22.25
|               | September 30, 2002 |      | $ | 35.80
|               | June 30, 2002      |      | $ | 49.35
|               | March 31, 2002     |      | $ | 49.98

We
paid no dividends on our common stock during 2001 and 2002. We began paying a quarterly dividend of $.07 per share during the second quarter of 2003, and paid dividends of the same
amount during the third and fourth quarters of 2003. On January 20, 2004 we announced an increased dividend of $.075 per share for the first quarter of 2004, and subsequently paid that dividend
on February 17, 2004. If these quarterly dividends are continued, and assuming that the current number of outstanding shares of our common stock remains constant, we would expect to pay an
aggregate of $10.6 million for each dividend, or approximately $42 million on an annual basis. Our Board of Directors currently intends to consider declaring and paying comparable future
dividends on a regular quarterly basis, subject to our ability to pay dividends and to a determination of our Board of Directors that dividends continue to be in the best interests of the Company and
its stockholders.

During
2003, 2002 and 2001, we repurchased 2,159,597, 2,234,400 and 374,000 shares of Class A common stock, respectively, pursuant to authorizations by our Board of Directors. On
October 20, 2003 our Board of Directors approved a share repurchase program authorizing us to repurchase up to $100 million of our common stock. At December 31, 2003, we had
remaining authorization to repurchase approximately $72 million of our common stock under this program. On October 20, 2003 our Board of Directors authorized the purchase of shares of
our common stock to satisfy our obligations to deliver shares under our Employee Stock Purchase Plan and our Long-Term Incentive Plan (the "Alternative Share Settlement Program"). Under
these two separate authorizations, 2,159,597 shares were repurchased for approximately $46 million during the fourth quarter of 2003. The timing, volume and price of any future repurchases will
be made pursuant to 10b5-1 trading plans, unless such plans are terminated at the discretion of management.

13

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The
following table summarizes the share repurchases made during the fourth quarter of the fiscal year ended December 31, 2003:

|Period                             |  | Total Number
of Shares
Purchased |  | Weighted
Average
Price Paid
per Share |       | Total Number of
Shares Purchased
as Part of a
Publicly Announced
Program (1) |           | Maximum Dollar
Value of Shares
That May Yet be
Purchased Under
the Program
|---------------------------------- |  | -------------------------------- |  | ------------------------------------- | ----- | ---------------------------------------------------------------------------- | --------- | --------------------------------------------------------------------------
|October                            |  |                                  |  |                                       |       |                                                                              |           |                                                                           
|10/01/03-10/31/03                  |  | 231,000                          |  | $                                     | 21.57 |                                                                              | 231,000   |                                                                           
|November                           |  |                                  |  |                                       |       |                                                                              |           |                                                                           
|11/01/03-11/30/03                  |  | 813,200                          |  | $                                     | 21.53 |                                                                              | 813,200   |                                                                           
|December                           |  |                                  |  |                                       |       |                                                                              |           |                                                                           
|12/01/03-12/31/03                  |  | 1,115,397                        |  | $                                     | 20.65 |                                                                              | 265,397   | (2)                                                                       
|                                   |  |                                  |  |                                       |       |                                                                              |           |                                                                           
|Total 4th Quarter 2003 Repurchases |  | 2,159,597                        |  | $                                     | 21.08 |                                                                              | 1,309,597 |                                                                           
|                                   |  |                                  |  |                                       |       |                                                                              |           |                                                                           

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ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected financial data in conjunction with "Item 7: Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Item 8: Financial Statements and Supplementary Data." We have derived the selected financial data set forth below from our audited financial statements and related notes.



14

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The
following table presents selected historical financial data for each of the five years in the period ended December 31, 2003.

|                                                                             |                                                
|---------------------------------------------------------------------------- | -----------------------------------------------
|
|
|
|Income Statement Data (1) (2) (3) (9):                                       |                                                
|Revenues                                                                     |                                                
|Operating expenses, excluding amortization of goodwill and intangible assets |                                                
|Amortization of goodwill and intangible assets                               |                                                
|                                                                             |                                                
|Operating income (loss)                                                      |                                                
|Other income (expense), net (10)                                             |                                                
|Minority interests                                                           |                                                
|                                                                             |                                                
|Income from continuing operations before income taxes                        |                                                
|Income taxes                                                                 |                                                
|                                                                             |                                                
|Income (loss) from continuing operations                                     |                                                
|Income from discontinued operations, net (1) (5)                             |                                                
|Cumulative effect of accounting change, net (6)                              |                                                
|                                                                             |                                                
|Net earnings                                                                 |                                                
|                                                                             |                                                
|Earnings (loss) per common sharebasic:                                      |                                                
|                                                                             | Income (loss) from continuing operations (1)   
|                                                                             | Income from discontinued operations, net (1)   
|                                                                             | Cumulative effect of accounting change, net (6)
|                                                                             |                                                
|Net earnings                                                                 |                                                
|                                                                             |                                                
|Earnings (loss) per common sharediluted:                                    |                                                
|                                                                             | Income (loss) from continuing operations (1)   
|                                                                             | Income from discontinued operations, net (1)   
|                                                                             | Cumulative effect of accounting change, net (6)
|                                                                             |                                                
|Net earnings                                                                 |                                                
|                                                                             |                                                

15

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|Balance Sheet Data (at end of period) (1):                  |  |   |         |   |   |         |   |   |         |    |   |         |   |   |         |  
|----------------------------------------------------------- |  | - | ------- | - | - | ------- | - | - | ------- | -- | - | ------- | - | - | ------- | -
|Current assets                                              |  | $ | 1,368.3 |   | $ | 1,311.6 |   | $ | 1,092.2 |    | $ | 693.0   |   | $ | 976.4   |  
|Goodwill and intangible assets, net                         |  | $ | 888.2   |   | $ | 855.7   |   | $ | 672.1   |    | $ | 891.5   |   | $ |        |  
|Total assets                                                |  | $ | 2,956.2 |   | $ | 2,760.1 |   | $ | 2,376.0 |    | $ | 2,650.4 |   | $ | 1,951.2 |  
|Current liabilities                                         |  | $ | 503.4   |   | $ | 499.9   |   | $ | 564.5   |    | $ | 1,266.4 |   | $ | 525.1   |  
|Minority interests                                          |  | $ | 6.5     |   | $ | 10.3    |   | $ | 219.7   |    | $ | 239.5   |   | $ |        |  
|Long-term capital lease obligation                          |  | $ | 160.7   |   | $ |        |   | $ |        |    | $ |        |   | $ |        |  
|Notes payable                                               |  | $ | 427.4   |   | $ | 435.8   |   | $ | 400.4   |    | $ | 149.0   |   | $ |        |  
|Stockholders' equity (11)                                   |  | $ | 1,680.1 |   | $ | 1,641.6 |   | $ | 1,041.8 |    | $ | 791.0   |   | $ | 1,262.0 |  
|Other Data:                                                 |  |   |         |   |   |         |   |   |         |    |   |         |   |   |         |  
|Direct reservations booked using the Sabre system (4) (7)   |  |   | 309     |   |   | 340     |   |   | 372     |    |   | 394     |   |   | 370     |  
|Total reservations processed using the Sabre system (4) (7) |  |   | 366     |   |   | 397     |   |   | 431     |    |   | 467     |   |   | 439     |  
|Operating margin                                            |  |   | 8.1     | % |   | 15.4    | % |   | (0.4    | )% |   | 8.8     | % |   | 17.9    | %
|Ratio of earnings to fixed charges (8)                      |  |   | 5.34    |   |   | 11.69   |   |   | 0.97    |    |   | 4.75    |   |   | 29.44   |  
|Cash flows from operating activities                        |  | $ | 261.5   |   | $ | 291.7   |   | $ | 390.2   |    | $ | 310.8   |   | $ | 495.4   |  
|Capital expenditures                                        |  | $ | 71.5    |   | $ | 62.7    |   | $ | 158.4   |    | $ | 190.1   |   | $ | 168.0   |  
|                                                            | 

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking
statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated
by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed below in this Item under the sub-heading "Risk
Factors."

You
should read the following discussion and analysis in conjunction with "Item 6Selected Financial Data" and "Item 8Financial Statements and Supplementary
Data" appearing elsewhere in this report.

Overview

We are a world leader in travel commerce, marketing and distributing travel products and services and providing technology solutions to the travel industry.
During 2003, we generated revenues by providing travel marketing and distribution services to travel agencies, corporate travel departments and travel suppliers through our Sabre Travel Network
business segment, to consumers through our Travelocity business segment, and to businesses through our former GetThere business segment. We also generated revenues in 2003 by selling products and
services through our Sabre Airline Solutions business segment. During the fourth quarter of 2003 we integrated the products, services and operations of our GetThere business unit into our other three
business units. This resulted in moving GetThere's corporate trip business to Sabre Travel Network, GetThere's supplier Website to Sabre Airline Solutions, and GetThere's technology and development
infrastructure to Travelocity. Accordingly, we no longer report GetThere as a separate segment.

In
2003, approximately 71.3% of our revenue was generated from Sabre Travel Network, 18.1% from Travelocity and 10.6% from Sabre Airline Solutions based on segment results that include
intersegment revenues.

Business.We are an industry leader in multiple travel distribution channels: the travel agency channel, the consumer-direct
channel and the business-direct channel. We are a leading distributor of travel in each of those channels through the following business segments:



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We
believe that in 2003, air travel in the United States was adversely affected by a decline in travel resulting from several factors including unfavorable economic conditions in the
United States, political and economic instability abroad, ongoing travel security concerns, fear of potential terrorist attack, and travelers' fear of exposure to contagious diseases such as Severe
Acute Respiratory Syndrome ("SARS"). As further discussed in theReduced Volume of Travel BookingsSection ofBusiness
Trendsbelow, we have experienced significant decreases in bookings volumes due to reduced travel in the United States and, to a lesser degree, internationally due to these
trends.

For
the three years ended December 31, 2003, operating expenses from continuing operations have increased at a compound annual rate of 1.8%. Amortization of goodwill and
intangible assets resulting from acquisitions of GetThere, Preview, Gradient Solutions Limited (now Sabre Travel International Limited), Sabre Pacific, Dillon Communications, Site59 and the purchase
of the remaining publicly held common shares of Travelocity.com was $56 million in 2003, $53 million in 2002 and $277 million in 2001. Amortization of goodwill and certain
indefinite lived intangible assets ceased on January 1, 2002 upon our adoption of SFAS 142 (Note 2 to the Consolidated Financial
Statements),resulting in approximately $237 million less amortization expense during 2002 than in 2001. Absent the effect of the amortization of
goodwill and intangible assets, operating expenses from continuing operations have grown at a compound annual growth rate of 2.9%. Our primary operating expenses consist of salaries, benefits, other
employee-related costs, communication costs, advertising and customer incentives, representing approximately 65.8%, 66.8% and 59.5% of total operating expenses in 2003, 2002 and 2001, respectively.
Those expenses increased at a compound annual rate of 8.8% for the three years ended December 31, 2003, primarily due to higher customer incentives expenses.

Business Trends

Reduced Volume of Travel Bookings.Since 2001, we have experienced declines in year-over-year
bookings volume in our Sabre Travel Network business segment. The factors producing this trend have also affected the growth in the volume of bookings for our Travelocity business segment. We
attribute the declines to several factors that have occurred during this period, including unfavorable economic conditions in the United States, political and economic instability abroad, ongoing
travel security concerns (due to the war in Iraq and the aftermath of the September 11, 2001 terrorist attacks), fear of potential terrorist attack, travelers' fear of exposure to contagious
diseases such as SARS, and channel shift (discussed below under "Supplier Efforts to Control Travel Distribution").



19

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Supplier Efforts to Control Travel Distribution.Airlines have aggressively worked to move travel bookings onto channels that
they control. Some airlines have withheld content from independent travel distributors, have greatly reduced commissions paid to online and traditional travel agencies and have conditioned independent
distributors' access to content on their acceptance of distribution cost savings offered by channels that those airlines control. Their collective efforts have contributed to "channel shift," or
travel bookings being moved from independent GDS channels toward supplier-controlled channels, individual supplier websites and call centers. Similarly, several hotels now have similar multi-vendor
websites for booking hotels and other accommodations. Additionally, as discussed below under "Risk FactorsRegulatory Developments...,"current proposed government regulations in Europe, if adopted as proposed, could also contribute to the shift of bookings from independent computer reservation systems ("CRS") to supplier-controlled
CRSs. In the last two quarters of 2003, we saw a slight slowing in the rate of channel shift, possibly due to the DCA 3-Year Pricing Option Program discussed below. Although we see this
slight trend as an encouraging indicator, we do not know if this represents a permanent slowing in the shift of GDS bookings to supplier-direct booking channels.

DCA 3-Year Pricing Option.In October 2002, we announced a new Direct Connect Availability ("DCA")
3-Year Pricing Option to airlines. Airlines selecting this option under theirSabreGDS participating carrier agreements receive a discount
of approximately 12.5% from the applicable 2003 DCA booking fee rates, and are locked into that booking fee rate for three years. As a consequence, we will not be able to raise the booking fee rate on
those DCA bookings during that three-year period. We anticipate that by the end of 2004, approximately 50% of our global direct bookings will fall under the DCA 3-Year Option.
As of the date of this report, more than 30 airlines, including American, Delta Airlines, Inc., Northwest Airlines Corporation, Continental Airlines, Inc., United Air Lines, Inc.,
US Airways, Inc., British Airways and Alitalia have elected to participate in the DCA 3-Year Pricing Option. As of February 2, 2004, we are no longer marketing the DCA
3-Year Pricing Option to carriers. Through the Sabre DCA 3-Year Pricing Option, participating airlines commit to the highest level of participation in the Sabre system (DCA
level) for three years. Participating airlines provide allSabreGDS users with broad access to schedules, seat availability and published fares,
including Web fares and other promotional fares but excluding certain fares such as "opaque" fares (where the airline's identity is not disclosed until after the sale) and private discounts.
Participating airlines also furnish generally the same customer perquisites and amenities to passengers booked through theSabreGDS as those afforded
through other GDS's and websites. As a consequence, we believe that the participation of carriers in the program may help slow the present shift of bookings away from the SabreGDS to
supplier-controlled outlets. See "Risk FactorsTravel Suppliers are Seeking to
Bypass...."

Consolidation.The marketplace for travel products is intensely competitive, and consolidation is occurring among both online
and brick and mortar travel agencies. Consolidation among our competitors, such as the acquisitions of Expedia, Hotels.com and Hotwire consummated by InterActiveCorp, may give these competitors
increased negotiating leverage with travel suppliers. New or consolidated competitors may emerge and rapidly acquire significant market share. The development of competing technologies or the
emergence of new industry standards may also adversely affect our competitive position. Competition could result in reduced margins on our offerings and services. See "Risk
FactorsWe face competition...."

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Merchant Model.Independent travel distributors, including our companies, are attempting to reduce their reliance on
supplier-paid commissions and booking or transaction fees by increasingly promoting a merchant model of travel distribution whereby the travel distributors obtain access to content from
travel suppliers at a pre-determined price and sell the content, either individually or in a package, to travelers at a price which the distributor determines. Merchant model content can
include air, hotel, vacation, and dynamically packaged offerings (via Travelocity TotalTrip). Merchant content is good for travelers because they can often purchase travel at a lower
price than regularly published offerings. For us, merchant content generally delivers higher revenue per transaction than comparable sales under the agency/booking fee model. Under our arrangements
with travel suppliers, we generally do not have any purchase obligations for unsold offerings. Under the merchant model, we recognize as revenue the amount paid by the traveler minus our payment to
the travel supplier.

Our
business strategy depends on our merchant model offering as a significant source of revenue. We remain subject to numerous risks in the operation and growth of that business. Our
merchant model hotel strategy is particularly dependent upon our ability to obtain adequate access to hotel rooms to offer, through Travelocity or through ourSabre
Exclusivesprogram, which require pre-payment by the consumer at the time of booking. Our strategy calls for us to increase or maintain the number of hotel rooms we
can offer under our merchant model hotel program based upon merchant arrangements we make directly with individual hotel properties and hotel chains. If improved economic conditions create increased
demand for hotel rooms, hotel managers may limit the amount of hotel rooms available to us or increase the negotiated rates at which they provide rooms to us. Similarly, heightened competition from
our competitors' own merchant rate programs may result in less available rooms or increases in negotiated rates for our merchant offerings. These types of events could exert downward pressure on the
margins we expect to achieve in our merchant model offering.

Termination of Affiliation Agreement with Hotels.com.On August 29, 2003, Travelocity exercised its right, pursuant to
its affiliation agreement with Hotels.com, to expand the distribution of our own merchant hotel offerings. As a result, we subsequently agreed with Hotels.com to terminate the affiliation agreement
and settled all amounts outstanding between the parties. Due to the termination, we wrote-off an intangible asset associated with this contract of approximately $8.8 million.
Additionally, we recognized revenue of approximately $7.8 million related to warrants received from Hotels.com pursuant to this agreement, which had previously been deferred and was being
recognized over the term of the agreement. We believe that this contract termination will not have a material adverse effect on our future results of operations, and that the termination provides us
increased flexibility to control the content and pricing of our merchant model hotel offering.

AOL Agreement.In 1999, we entered into an agreement with America Online ("AOL") that provided, among other
things, that Travelocity would be the exclusive reservations engine for AOL's Internet properties. We were initially obligated for payments of up to $200 million and we shared
advertising revenues and commissions with AOL. In January 2004, we revised the terms of this agreement and extended the agreement through March 2006. Travelocity will continue to be the
exclusive reservations engine for AOL's Internet properties under the revised agreement. Under the new terms of the agreement, we will benefit from more strategically aligned terms for
placement within AOL's brands. Further, we are obligated for fixed payments of up to $28 million over the two-year term of the agreement. These fixed payments, along
with fixed payments previously paid under the original contract, are being expensed on a straight-line basis over the term of the agreement. For 2004, this expense will be approximately
$23 million. Additionally, in exchange for lower fixed annual payments, we agreed to a reduced share of advertising revenues generated through the AOL properties. The agreement also contains a
productivity component, whereby AOL is paid a percentage of the transactions services revenue generated through the AOL network. While specific operating earnings benefits from this agreement will
depend upon the volume of transactions, we anticipate approximately $10 million to $15 million in such benefits during 2004.

21

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WNS Agreement.On January 30, 2004, we entered into a multi-year master services agreement with WNS North
America, Inc. ("WNS"). Under the agreement, we will outsource to WNS a portion of our Travelocity contact center operations, primarily front-line customer service calls and
back-office fulfillment. By the end of the first quarter of 2005, WNS should be handling Travelocity's front-line customer service calls and emails, as well as some
mid- and back-office functions. WNS will transition these day-to-day operations of the customer service functions to its contact centers. Travelocity
employees will continue to handle sales calls, as well as advanced customer service issues and quality control. We do not expect any severance and related costs incurred due to this agreement to be
significant.

While
specific savings from this agreement will depend upon the volume of transactions, we anticipate approximately $10 million in such savings during 2004. We also expect these
savings to increase over the term of the agreement as transaction volumes increase. See Note 17 to the Consolidated Financial Statements.

Cost Reductions.Beginning in the fourth quarter of 2003, we have implemented plans to reduce costs in an effort to enhance
our competitive advantage, reduce our operating expense and better align expenses with revenue targets. As part of these cost management efforts, we reduced our workforce in the fourth quarter of
2003, and the full-year impact of these reductions on our financial results will be realized in 2004. The AOL and WNS agreements described above are also components of this initiative.
Through all of these initiatives we expect to generate savings of approximately $80 million in 2004. We will continue to examine numerous cost-reduction alternatives, including
global sourcing, as we seek to reduce costs to enhance our competitive advantages.

Changing Business Model.Although the substantial majority of our travel distribution revenues are derived from booking fees
paid by travel suppliers, we recently have entered into agreements that do not follow this traditional business model, and are currently evaluating the desirability of similar transactions. Under such
agreements, we may generally derive revenues from transaction fees based on the number of segments booked, but the structure and source of those transaction fees may be modified to take advantage of
specific market conditions. In addition, in October of 2003, we launched our Jurni Network consortium, a unique offline travel agency consortium that combines a preferred sales network
and consolidated purchasing power with technology-driven marketing tools to sell preferred offerings.

Computer Reservation System Industry Regulation.Aspects of our travel marketing and distribution businesses are subject to
the computer reservation systems ("CRS") regulations in the United States, the European Union, Canada and Peru. These regulations generally address the relationships among the CRSs, the airline
suppliers and subscribers such as travel agencies. Generally, these regulations do not address our relationships with non-airline suppliers. The regulations in the European Union, however,
do include rail suppliers in certain circumstances. Among the topics addressed in the current regulations are:



As
part of its comprehensive review of its CRS rules, the U.S. Department of Transportation ("DOT") announced, on December 31, 2003, that it would not adopt the new rules that it
proposed in November 2002. Instead, the DOT will allow the existing CRS rules to expire entirely. Nearly all of the existing CRS rules expired on January 31, 2004. Two requirements will
remain in effect through July 31, 2004, at which time they too will expire. Therefore, the CRS industry in the United States will be completely deregulated by the DOT after July 31,
2004.

22

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The
two transitional requirements effective until July 31, 2004, are:



We
believe that DOT deregulation will give us a much greater ability to find creative ways to market and promote airline services, thus enhancing our value proposition for airlines and
supporting our transition to the merchant model. The DOT indicated that our current DCA 3-Year Pricing Option Agreements, which represent three-year participation commitments
from more than 30 airlines, including the 6 largest United States airlines, are not affected by deregulation or the transition requirements. We expect that deregulation will affect our relationships
with airlines in many ways, including:



DOT
deregulation will also allow us to freely negotiate with travel agencies, which will permit us to choose to have contracts of any duration, to have exclusive agreements with travel
agents, and/or to vary incentives by the identity of the airline.

In
addition, both the European Commission and Canada are in the process of reviewing their regulations governing the CRS industry for possible changes, including eliminating some or all
of these regulations. The European Commission has not yet published any proposed rules changes, so it is not clear when the Commission may issue amended final rules or what form they may take.
Transport Canada has proposed amendments to its CRS rules that would eliminate many of the current rules, but would retain, unchanged or with modifications, certain existing rules which could continue
to limit our business flexibility, such as retaining a ban on display preferences for airlines. Transport Canada has not yet published its final rules, so it is not clear when the Department may issue
amended final rules or what form they may take.

The
potential effects of these trends, events and uncertainties are discussed below underRisk Factors.

23

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Components of Revenues and Expenses

Revenues.Sabre Travel Network primarily generates revenues from booking fees charged to airlines and non-air
travel-suppliers who process their bookings through theSabresystem. Sabre Travel Network also earns revenue through equipment service charges paid by
subscribers, the sale of other products and services (including GetThere offerings, merchant hotel sales in the Sabre Exclusives program and the Jurni Network) to travel-suppliers, subscribers and
other customers, as well as earnings derived from interests in joint ventures and other investments. Sabre Travel Network also earns intersegment revenues from data processing fees paid by
Travelocity. Travelocity primarily generates revenues from commissions or transaction fees from travel-suppliers for the purchase of travel products and services pursuant to reservations made through
our system. Travelocity also generates merchant revenue on a net basis, defined as the amount paid by the customer for products or services, minus our payment to the travel supplier. Additional
Travelocity revenues include other fees charged to customers and advertising revenues from our Websites. Travelocity derives intersegment revenues from Sabre Travel Network, consisting mainly of
incentives and marketing fees for Travelocity bookings made through theSabreGDS, and fees paid by Sabre Travel Network and Sabre Airline Solutions for
corporate and airline trips booked through Travelocity's online booking technology. Sabre Airline Solutions generates revenues from the sale of airline reservations hosting services, inventory and
check-in hosting solutions, decision-support software and technology, and airline consulting services.

Cost of Revenues.Sabre Travel Network cost of revenues consist primarily of customer incentives paid to subscribers, data
processing charges resulting from the operation of theSabresystem, and salaries and other operating expenses. Sabre Travel Network also incurs
intersegment expenses paid to Travelocity for incentives and marketing fees for Travelocity bookings made through theSabreGDS, as well as fees for
corporate and airline trips booked through Travelocity's online booking technology. Travelocity cost of revenues consists primarily of customer service costs, technology costs, salaries, benefits and
other employee expenses, data processing fees paid to Sabre Travel Network, credit card fees related to our merchant model and depreciation and amortization charges. Sabre Airline Solutions cost of
revenues are comprised of labor cost incurred in the development and delivery of software and consulting services, data processing charges for hosted applications, and depreciation and amortization.

Operating Expenses.Sabre Travel Network selling, general and administrative expenses and other operating expenses consist of
salaries, benefits and employee related expenses for staff functions required to support the business. Travelocity selling, general and administrative and other operating expenses consist primarily of
advertising and promotion expenses, payments made to our distribution partners and salaries, benefits and employee related expenses for staff functions required to support the business. Sabre Airline
Solutions operating expenses consist of the costs of the sales organization and the staff functions required to support the business.

24

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Financial Results

The following table presents operating results for the three years ended December 31, 2003, 2002 and 2001 (in thousands of dollars). The segment revenues
and cost of revenues are shown including intersegment activity. We have included the elimination of intersegment activity below to agree to the results of operations presented in the consolidated
financial statements:

Year Ended December 31,2003

2002

2001Segment revenues:Sabre Travel Network

$
1,560,232

$
1,630,213

$
1,714,682Travelocity


394,508


338,772


324,137Sabre Airline Solutions


232,354


216,847


216,178Elimination of intersegment revenues


(141,931
)

(129,366
)

(110,036
)Total

$
2,045,163

$
2,056,466

$
2,144,961Cost of revenues:Sabre Travel Network

$
1,031,735

$
930,860

$
1,070,727Travelocity


203,392


187,612


175,610Sabre Airline Solutions


177,769


165,674


163,609Elimination of intersegment expenses


(141,931
)

(129,366
)

(111,224
)Other corporate expenses


(1,836
)

6,505


8,754Total

$
1,269,129

$
1,161,285

$
1,307,476Selling, general and administrative:

$
553,503

$
524,257

$
568,672Amortization of acquisition intangibles:Sabre Travel Network

$
12,788

$
16,588

$
89,393Travelocity


41,554


35,042


179,473Sabre Airline Solutions


1,959


1,794


8,656Total

$
56,301

$
53,424

$
277,522Operating income (loss):

$
166,230

$
317,500

$
(8,709
)


Results of Operations: 20012003

Total revenues of $2,045 million for the year ended December 31, 2003 were $100 million, or 4.7%, lower than revenues of
$2,145 million for the year ended December 31, 2001. Cost of revenues of $1,269 million for the year ended December 31, 2003 were 2.9% lower than the cost of revenues of
$1,307 million for the year ended December 31, 2001. These reported revenues and expenses are net of intersegment revenues and expenses which were eliminated in consolidation.

25

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Management's
following discussion and analysis of revenues and cost of revenues by business segment are based upon the information contained in the above table, where segment results
include intersegment revenues and cost of revenues of approximately $142 million, $129 million and $110 million for the years ended December 31, 2003, 2002 and 2001,
respectively. We account for significant intersegment transactions as if the transactions were to third parties, that is, at estimated current market prices. The majority of the intersegment revenues
and cost of revenues are between Travelocity and Sabre Travel Network, consisting mainly of incentives and marketing fees for Travelocity bookings made through the SabreGDS, data processing fees paid
by Travelocity to Sabre Travel Network, and fees paid by Sabre Travel Network and Sabre Airline Solutions for
corporate and airline trips booked through Travelocity's online booking technology. All intersegment revenues and corresponding cost of revenues have been eliminated in consolidation. Disaggregated
results by segment are presented in Note 14 to the Consolidated Financial Statements.

Revenues.The compounded annual growth rate of revenues by segment for 2001 through 2003 was (4.6)% for Sabre Travel Network,
10.3% for Travelocity and 3.7% for Sabre Airline Solutions. Each of our business segments was negatively affected by the September 11, 2001 terrorist attacks, and a decline in the U.S. economy,
in general, and the travel industry, in particular, since that time. Other macroeconomic factors that negatively impacted our business during this period included the war and continued conflict in
Iraq, ongoing travel security concerns and fear of potential terrorist attacks and SARS. These negative impacts to the general economy and the travel industry specifically negatively impacted each of
our business segments, with the most pronounced effect being on Sabre Travel Network, where 2003 revenues remained below 2001 revenue levels.

We
have also seen continued pressure on Sabre Travel Network revenues resulting from travel bookings being diverted from independent GDS channels toward supplier-controlled channels,
individual airline websites and call centers, as well as various other travel distribution websites on the internet. The combination of channel shift, an economic downturn, and travel security
concerns has resulted in a cumulative 21.6% decrease in annual bookings processed through theSabresystem since 2000. We believe that the signing of
the DCA 3-Year Pricing Option Agreements will help slow the effects of channel shift from theSabresystem, but the DCA 3-year
Pricing Option Agreements will lower our effective yield on bookings.

Travelocity
has experienced 10.3% compounded annual growth in revenues from 2001 to 2003 due to the growth in bookings made through our Websites and increased yields stimulated by
increased merchant hotel activity and improved packaging of offerings. Although Travelocity was negatively affected by the terrorist attacks and the negative factors noted above and by declining
internet advertising revenue, the growth in the internet travel business combined with Travelocity merchant model and packaging initiatives offset the negative impacts.

Sabre
Airline Solutions' revenues increased 3.7% per year from 2001 to 2003. Although Sabre Airline Solutions and its customers were negatively affected by the terrorist attacks and the
negative factors noted above, we were able to grow revenues in each of the past two years. This increase in revenues during a turbulent time for the airline industry is the result of increased sales
of decision support products and services and web-enabled solutions that offer cost savings and more efficient operations to our customers.

26

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Expenses.From 2001 to 2003, our operating expenses decreased by approximately 12.8%. These decreases reflect lower
intangible asset amortization charges in each business unit due to the adoption of SFAS 142 effective January 1, 2002 and lower data processing costs in each business unit achieved
through the EDS contract. In addition, Sabre Travel Network hardware and communications costs have decreased as a result of the migration to lower cost solutions and the adoption of third-party
solutions by subscribers. These decreases were partially offset by increases in Sabre Travel Network technology spending due to the phased implementation of new functionality that requires running
legacy systems as well as the new technology, and increases in Sabre Travel Network customer incentives due to competitive pressures on renewals and conversions.

We
experienced growth in Travelocity cost of revenues and selling, general and administrative expenses commensurate with the growth in business. We increased our expenditures for
advertising in order to drive additional travelers to Travelocity, and expenses have increased as a result of increases in transaction volumes for our merchant offerings. Our technology infrastructure
related expenses have also increased in order to support our growth and new offerings. These increases in expenses were offset by reduced intangible asset amortization expenses resulting from our
adoption of SFAS 142 effective January 1, 2002.

Sabre
Airline Solutions operating expenses grew commensurate with the growth in revenues during the 2001 to 2003 period.

2003 Compared to 2002

Total revenues for the year ended December 31, 2003 decreased approximately $11 million, or 0.5%, compared to the year ended December 31,
2002, from $2,056 million to $2,045 million. Cost of revenues for the year ended December 31, 2003 increased approximately $108 million, or 9.3%, compared to the year ended
December 31, 2002, from $1,161 million to approximately $1,269 million.

Management's
discussion and analysis of revenues and cost of revenues by business segment are based upon segment results including intersegment revenues and cost of revenues of
approximately $142 million and $129 million for the years ended December 31, 2003 and 2002, respectively. We account for significant intersegment transactions as if the
transactions were to third parties, that is, at estimated current market prices. The majority of the intersegment revenues and cost of revenues are between Travelocity and Sabre Travel Network,
consisting mainly of incentives and marketing fees for Travelocity bookings made through theSabreGDS, data processing fees paid by Travelocity to
Sabre Travel Network, and fees paid by Sabre Travel Network for corporate and airline trips booked through Travelocity's online booking technology. All intersegment revenues and corresponding cost of
revenues have been eliminated in consolidation. Disaggregated results by segment are presented in Note 14 to the Consolidated Financial Statements.

Revenues.Total revenues (including intersegment revenues) for the year ended December 31,
2003 were flat compared to the year ended December 31, 2002, increasing approximately $1 million from $2,186 million to $2,187 million.

We
believe that 2003 revenues in each of our segments were adversely affected by a decline in travel resulting from several factors that occurred during this period; including
unfavorable economic conditions in the United States, political and economic instability abroad such as the war in Iraq and its aftermath, ongoing travel security concerns due to the continued
conflict in Iraq, fear of potential terrorist attacks, and travelers' fear of exposure to contagious diseases such as Severe Acute Respiratory Syndrome ("SARS").

Sabre Travel NetworkRevenues decreased $70 million or 4.3%, from $1,630 million in 2002 to
$1,560 million in 2003.

27

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TravelocityRevenues increased approximately $56 million or 16.5%, from $339 million to $395 million.



The
increase in stand-alone air transaction revenue was primarily due to a $5 service fee implemented on January 16, 2003 for most stand-alone air tickets, partially offset by the
growth in air tickets sold as part of packaged sales (which increased significantly and is included in non-air transaction revenues).



28

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Sabre Airline SolutionsRevenues increased approximately $15 million or 6.9%, from $217 million to
$232 million. This increase was driven primarily by the following:



Cost of Revenues.Total cost of revenues (including intersegment cost of revenues) for the year ended December 31,
2003 increased approximately $120 million or 9.3%, compared to the year ended December 31, 2002, from $1,291 million to $1,411 million.

Sabre Travel NetworkCost of revenues increased $101 million or 10.8%, from $931 million to
$1,032 million. This increase was due to a $79 million increase in technology spending, a $20 million increase in subscriber support costs and an increase in other expense of
$2 million.



29

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TravelocityCost of revenues increased $15 million or 8.0%, from $188 million to $203 million. This
increase was primarily the result of an increase of $11 million in credit card fee expense primarily associated with strong growth of our merchant model business. Data processing and technology
infrastructure related expenses also increased $5 million driven by volume growth. All other expenses decreased by $1 million.

Sabre Airline SolutionsCost of revenues increased approximately $12 million or 7.2%, from $166 million to
$178 million. This increase was the result of higher labor costs of $9 million due to increased salaries and higher employee benefit costs, increased depreciation and amortization of
$5 million as a result of continued investment in the eMergo solutions infrastructure and the reservations hosting system; increased communications and data processing costs of
$3 million due to an increase in hosted customers and passenger volumes, and a $2 million increase in other operating expenses. These increases were partially offset by a decrease in
development labor of $7 million resulting from a decline in demand for development labor because of reduced spending by airlines.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the year ended
December 31, 2003 increased $29 million or 5.5%, compared to the year ended December 31, 2002 from $524 million to $553 million. The increase is primarily due to
higher Travelocity advertising costs of $39 million to drive additional travelers to our Websites and a $16 million increase in Travelocity payments to distribution partners. Corporate
facilities costs increased approximately $10 million as a result of the facilities consolidation in 2003. These increases were partially offset by an $11 million decrease in Travelocity
salaries and benefits primarily due to a decrease in stock compensation expense. During 2002 Travelocity incurred legal expenses for our tender offer for the common stock of Travelocity which we did
not own, so that 2003 legal expenses were $7 million lower as compared to 2002. Sabre Travel Network marketing expenses decreased by $8 million resulting from the renegotiation of a
marketing agreement. Other selling, general and administrative expenses decreased $10 million.

Amortization of Goodwill and Intangible Assets.Amortization of goodwill and intangible assets increased $3 million,
or 5.7%, from $53 million for the year ended December 31, 2002 to $56 million for the year ended December 31, 2003. This increase was primarily due to a $9 million
write-off of an intangible asset resulting from the termination of the Hotels.com agreement, partially offset by decreases totaling $6 million due to the full amortization of other
intangible assets.

Operating Income.Operating income for the year ended December 31, 2003 decreased $152 million, as compared to
the year ended December 31, 2002 from $318 million to $166 million. Operating margins decreased from 15.4% in 2002 to 8.1% in 2003 due to an 8.0% increase in operating expenses
while revenues remained unchanged. Sabre Travel Network's operating income decreased $159 million or 38.1%, due primarily to decreased bookings revenues and increases in technology spending and
customer incentives during 2003 as compared to 2002. Travelocity's operating loss decreased $5 million or 4.8%, due primarily to an increase in transaction revenue which outpaced higher
advertising and customer incentives. Sabre Airline Solutions' operating income increased by $3 million due to increases in product and services revenues which outpaced the increase in operating
expenses.

30

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Interest Income.Interest income decreased by $11 million or 39.3%, from $28 million for the year ended
December 31, 2002 to $17 million for the year ended December 31, 2003, due primarily to lower average rates of return on our portfolio of cash and marketable securities investment
accounts, as well as slightly lower average balances held in these investments.

Interest Expense.Interest expense for the year ended December 31, 2003 increased $1 million or 4.3%, from
$23 million to $24 million. This increase was primarily due to an approximately $3 million increase in interest expense resulting from the capital lease on our headquarters
buildings, partially offset by a $2 million decrease resulting from lower interest rates on our LIBOR-based interest rate swaps.

Other, net.Other, net decreased $48 million or 282.4%, from other income of $17 million to other expense of
$31 million, from 2002 to 2003. Other, net during 2002 was primarily due to an $18 million gain from the sale of our former corporate headquarters building, a $7 million gain
realized from the sale of France Telecom (formerly Equant N.V.) shares and other investment gains of $3 million, partially offset by $11 million in writedowns of investments in companies
developing emerging travel technologies. During 2003 we incurred a $28 million loss relating to the required residual value guarantee payment in connection with terminating our syndicated lease
facility. We also realized a $3 million loss on the sale of a building during 2003.

Minority Interests.Minority interests include minority owners' interests in our consolidated subsidiaries. As discussed in
Note 5 to the Consolidated Financial Statements, in April 2002, we acquired the approximately 16.7 million publicly held common shares of Travelocity.com that we did not
previously own. Accordingly, minority interests during 2002 only reflect these interests in Travelocity.com for the period prior to acquisition. During the year ended December 31, 2003 the net
income allocated to minority interests was less than $1 million compared to less than $1 million of net loss allocated to remaining minority interests during the year ended
December 31, 2002.

Income Taxes.The provision for income taxes was $44 million and $125 million for 2003 and 2002, respectively.
Our effective tax rate for 2003 was approximately 34.6%, which varies from the statutory U.S. federal income tax rate of 35% primarily due to foreign tax credits that we claimed related to joint
venture activities accounted for under the equity method and for which the offsetting foreign tax expense was recorded in pre-tax income. This reduction in the tax rate was partially
offset by additional state income taxes. Our effective tax rate for 2002 of 36.8% varied from the statutory U.S. federal income tax rate of 35% primarily due to state income taxes. See Note 11
to the Consolidated Financial Statements for additional information regarding income taxes.

Net Earnings.Net earnings decreased $131 million or 61.2%, from $214 million to $83 million, primarily
due to increases in cost of revenues of $108 million, increases in selling, general and administrative expenses $29 million, a decrease in Other, net income of $48 million and a
decrease in interest income of $11 million. These decreases in net earnings were partially offset by lower income taxes of $81 million.

Results of Operations

2002 Compared to 2001

Total revenues for the year ended December 31, 2002 decreased approximately $89 million, or 4.1%, compared to the year ended December 31,
2001, from $2,145 million to $2,056 million. Cost of revenues for the year ended December 31, 2002 decreased approximately $146 million, or 11.2%, compared to the year
ended December 31, 2001, from $1,307 million to approximately $1,161 million.

31

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Management's
discussion and analysis of revenues and cost of revenues by business segment are based upon segment results including intersegment revenues and cost of revenues of
approximately $129 million and $110 million for the years ended December 31, 2002 and 2001, respectively. The majority of the intersegment revenues and cost of revenues are
between Travelocity and Sabre Travel Network, consisting mainly of incentives and marketing fees for Travelocity bookings made through theSabreGDS and
data processing fees paid by Travelocity to Sabre Travel Network, and trip fees paid by Sabre Travel Network and Sabre Airline Solutions for trips booked through Travelocity's online booking
technology. All intersegment revenues and corresponding cost of revenues have been eliminated in consolidation. Disaggregated results by segment are presented in Note 14 to the Consolidated
Financial Statements.

Revenues.Total revenues (including intersegment revenues) for the year ended December 31, 2002 decreased
approximately $69 million, or 3.1%, compared to year ended December 31, 2001, from $2,255 million to $2,186 million.

Sabre Travel NetworkRevenues decreased $85 million or 5.0%, from $1,715 million in 2001 to
$1,630 million in 2002.



TravelocityRevenues increased approximately $15 million or 4.6%, from $324 million to $339 million.



32

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Sabre Airline SolutionsRevenues increased approximately $1 million or .5%, from $216 million to
$217 million, as a result of:



Cost of Revenues.Cost of revenues (including intersegment cost of revenues) for the year ended December 31, 2002
decreased approximately $128 million or 9.0%, compared to the year ended December 31, 2001, from $1,419 million to $1,291 million.

Sabre Travel NetworkCost of revenues decreased $140 million or 13.1%, from $1,071 million to
$931 million. This decrease was primarily due to lower communications and data processing costs of $36 million resulting from lower transaction volumes and savings resulting from our IT
infrastructure outsourcing services contract with EDS, which was effective July 1, 2001. The outsourcing agreement also resulted in lower depreciation and amortization of $43 million due
to the sale of subscriber equipment to EDS in this transaction. Customer incentives decreased $21 million due to lower booking volumes attributable to the decline in travel after the terrorist
attacks in September 2001. Employee related costs decreased $27 million due to December 2001 workforce reductions and lower incentive compensation expenses and all other operating
expenses decreased $13 million.

TravelocityCost of revenues increased $12 million or 6.8%, from $176 million to $188 million. This
increase was primarily the result of approximately $7 million higher data processing and technology infrastructure related expenses, $2 million in additional call center expenses,
$2 million in additional facility expenses due to higher sales volumes and to support our growth, and $1 million increase in all other expenses.

Sabre Airline SolutionsCost of revenues increased approximately $2 million or 1.2%, from $164 million to
$166 million. This increase was primarily the result of increased labor costs.

33

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Selling, General and Administrative Expenses.Selling, general and administrative expenses for the year ended
December 31, 2002 decreased $45 million or 7.9%, compared to the year ended December 31, 2001 from $569 million to $524 million. The decrease is partially due to
lower salaries and benefits of $29 million resulting from reduced headcount in 2002. Bad debt expense decreased $18 million in 2002 compared to 2001. After nearly doubling our allowance
for bad debts in 2001 to $41 million, we reduced this allowance by $7 million, or 17.1%, to $34 million at December 31, 2002. This reduction was due, in part, to a large
payment from a customer in a bankruptcy dispute which resulted in an approximate $6 million reduction in the allowance. These expense decreases were partially offset by a net $2 million
increase in all other expenses.

Amortization of Goodwill and Intangible Assets.Amortization of goodwill and intangible assets decreased $225 million,
or 80.9%, from $278 million for the year ended December 31, 2001 to $53 million for the year ended December 31, 2002. Goodwill and intangible assets of approximately
$1 billion were recorded in connection with the merger of Travelocity.com and Preview Travel, the acquisitions of GetThere, Gradient Solutions Limited (now Sabre Travel International Limited)
and a 51% interest in Dillon Communications Systems during 2000, as well as the acquisition of Sabre Pacific in March 2001. Acquired goodwill and intangible assets were being amortized over
periods ranging from one to seven years. Amortization of this goodwill and certain indefinite lived intangible assets ceased on January 1, 2002 upon our adoption of Statement of Financial
Accounting Standards No. 142,Goodwill and Other Intangible Assets("SFAS 142"). Our adoption of SFAS 142 resulted in approximately
$237 million less of gross amortization expense related to these acquisitions during 2002 compared with 2001. This reduction was offset by an increase in amortization expense of
$12 million for intangible assets still subject to amortization due to the acquisition of Site59.com, Inc., the acquisition of the Travelocity.com minority interest and the impact of
having a full year of amortization for intangible assets related to the acquisition of Sabre Pacific. See the discussion in Note 2 of the Consolidated Financial Statements for additional
information about the effect of adopting SFAS 142 on accounting for acquired goodwill and certain intangible assets.

Operating Income.Operating income for the year ended December 31, 2002 increased $327 million, as compared to
the year ended December 31, 2001 from a $9 million operating loss to a $318 million operating income. Operating margins increased from (0.4)% in 2001 to 15.4% during 2002 due to a
19.3% decrease in operating expenses while revenues only declined 4.1%. This expense decrease was primarily due to reduced goodwill and certain indefinite lived intangible asset amortization resulting
from our adoption of SFAS 142 effective January 1, 2002. Sabre Travel Network's operating income increased $153 million or 57.8%, due primarily to decreases in communications,
data processing, depreciation and amortization, customer incentives, and salaries and benefits during 2002 as compared to 2001 that more than offset the decline in revenue. Travelocity's operating
loss decreased $112 million or 51.5%, due primarily to lower goodwill amortization charges. Sabre Airline Solutions' operating income decreased by $8 million due to increases in
operating expenses while revenues remained constant. Further, although we cannot precisely quantify the effect, we believe that 2001 and 2002 operating incomes in all operating segments were
negatively impacted by the events of September 11, 2001, and the decline in the travel industry and the general economy both domestically and internationally.

Interest Income.Interest income increased by $3 million or 12.0%, from $25 million for the year ended
December 31, 2001 to $28 million for the year ended December 31, 2002, due primarily to higher average balances maintained in our cash and marketable securities accounts,
partially offset by lower average interest rates.

Interest Expense.Interest expense for the year ended December 31, 2002 decreased $18 million or 43.9%, from
$41 million to $23 million. This decrease was primarily due to the retirement of $859 million of debt in July and August 2001, partially offset by interest on the
$400 million in aggregate principal amount of Notes we issued August 2001.

34

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Other, net.Other, net decreased $20 million or 54.1%, from $37 million to $17 million, from 2001 to
2002. Other, net during 2001 was due primarily to a $47 million gain from the sale of France Telecom (formerly Equant N.V.) shares, partially offset by writedowns of investments we had made in
companies developing emerging travel technologies totaling $10 million. The $17 million in other, net during 2002 was primarily due to an $18 million gain from the sale of our
former corporate headquarters building, a $7 million gain realized from the sale of France Telecom shares and other investment gains of $3 million, partially offset by $11 million
in writedowns of investments in companies developing emerging travel technologies.

Minority Interests.Minority interests include minority owners' interests in our consolidated subsidiaries. As discussed in
Note 5 to the Consolidated Financial Statements, in April 2002 we acquired the approximately 16.7 million publicly held common shares of Travelocity.com that we did not previously
own. Accordingly, minority interests during 2002 only reflect these interests in Travelocity.com for the period prior to acquisition. During 2001, the full year net loss of Travelocity.com resulted in
minority interests of approximately $22 million.

Income Taxes.The provision for income taxes was $125 million and $81 million for 2002 and 2001, respectively.
Our effective tax rate for 2002 was approximately 36.8% which varies from the statutory U.S. federal income tax rate of 35% due primarily to state income taxes. Our effective tax rate for 2001 was
238% primarily as a result of the effect of the recognition of non-deductible amortization expense for goodwill recorded in conjunction with the acquisitions of GetThere and Preview Travel
in 2000. Excluding the effects of the goodwill amortization, our effective tax rate for 2001 was 34.7%. See Note 11 to the Consolidated Financial Statements for additional information regarding
income taxes.

Income from Continuing Operations.Income from continuing operations increased $261 million from a loss of
$47 million during 2001 to income of $214 million in 2002. This increase is primarily due to the $327 million increase in operating income, partially offset by a
$22 million decrease in minority interests and a $44 million increase in income taxes.

Income from Discontinued Operations.As noted in Note 3 to the Consolidated Financial Statements, we sold our
information technology infrastructure outsourcing business to EDS effective July 1, 2001 which resulted in net income from discontinued operations of $75 million. There were no
discontinued operations during 2002.

Cumulative Effect of Accounting Change.We adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities("SFAS 133"), effective January 1, 2001. We recognized a
non-recurring cumulative gain in earnings for the year ended 2001 upon adoption of SFAS 133 of approximately $3 million, net of minority interests of approximately
$2 million and deferred income taxes of approximately $2 million, relating to the Hotels.com warrants. See Note 7 to the Consolidated Financial Statements.

Net Earnings.Net earnings increased $183 million or 590.3%, from $31 million to $214 million, primarily
due to decreases in operating expenses of 19.3%, which exceeded the 4.1% decrease in revenues between years.

35

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Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures, invest in our products and offerings, pay dividends, and service our debt and other
long-term liabilities. While our primary source of funds has been from our operations, we have occasionally raised external funds through the sale of stock and debt in the capital market
and in privately negotiated transactions. In assessing our liquidity, key components include our net income adjusted for non-cash and non-operating items, and current assets
and liabilities, in particular accounts receivable, accounts payable, and accrued expenses. For the longer term, our debt and long-term liabilities are also considered key to assessing our
liquidity.

Our
future minimum non-cancelable contractual obligations as of December 31, 2003 are as follows (in thousands of dollars):

|                                                      |  | Payments Due by Period |          
|----------------------------------------------------- |  | ---------------------- | ---------
|
|Notes payable (1)                                     |  | $                      | 635,200  
|Capital lease obligations (2)                         |  |                        | 251,701  
|Operating lease obligations                           |  |                        | 54,519   
|IT Outsourcing Agreement (3)                          |  |                        | 279,236  
|AOL Agreement (Note 9)                                |  |                        | 28,000   
|Yahoo Agreement (Note 9)                              |  |                        | 63,700   
|Other long-term obligations (4)                       |  |                        | 111,375  
|Amounts receivable under non-cancelable subleases (5) |  |                        | (47,833  
|                                                      |  |                        |          
|Total contractual cash obligations                    |  | $                      | 1,375,898
|                                                      |  |                        |          

---

In
the near term, we anticipate that cash flows from our operations, existing balances in cash and short-term investments of $923 million and funds available under our
revolving credit facility will be sufficient to fund our operating expenses, capital expenditures, investments in our products and offerings and interest payments on our debt. We plan to renew the
credit facility before it expires on September 14, 2004. We believe that capital expenditures in 2004 will be approximately $80 million to $90 million, approximately
$20 million higher than the $71 million that was expended in 2003, due to strategic investments in technology. However, we expect future capital expenditures to remain significantly
lower than the $158 million expended in 2001. Additionally, we sponsor The Sabre Inc. Legacy Pension Plan ("LPP"), which is a tax-qualified defined benefit pension plan for employees
meeting certain eligibility requirements. We also sponsor a defined benefit pension plan for certain of our employees in Canada. We are currently not required to make contributions to our defined
benefit pension plans in 2004.

36

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On
January 30, 2004 we entered into a multi-year master services agreement with WNS North America, Inc. ("WNS"). Under the agreement, we will outsource to WNS a portion of our
Travelocity contact center operations, primarily front-line customer service calls and back-office fulfillment. For 2004, we have minimum commitments to WNS of $18 million. Thereafter, we are
committed to minimum payments based on a calculation that considers both current and historical volumes compared to thresholds established in the agreement. For 2005 through 2010, the starting
thresholds for calculating our minimum commitment for each year ranges from approximately $17 million to $31 million, and actual commitments could be lower than these amounts, depending
on volumes. See Note 17 to the Consolidated Financial Statements.

In
the long-term, we expect to use our existing funds and cash flows from operations to satisfy our debt and other long-term liability obligations.

We
may also consider using our funds available or possibly external sources of funds for acquisitions of or investments in complementary businesses, products, services and technologies
when such opportunities become available. Such additional activities might affect our liquidity requirements or cause us to issue additional equity or debt securities.

During
2003, we began using our available funds to pay quarterly dividends to our stockholders and to repurchase our shares of stock, as approved by our Board of Directors. We have
$72 million left of a $100 million stock repurchase authorization from our Board of Directors. We also have separate authority from our Board of Directors to repurchase shares as needed
to settle our share delivery obligations under the Employee Stock Purchase Plan and to issue restricted stock under the Long Term Incentive Plan. We anticipate continuing to use our funds for such
purposes as approved by our Board. We could also use our funds to retire debt as appropriate, based on market conditions and our desired liquidity and capital structure.

Risk
factors that could possibly affect the availability of our internally generated funds include:



However,
with our strong cash position of $923 million and working capital of $865 million as of December 31, 2003, we have significant resources available to us and
we continue to implement cost controlling efforts to ensure our operating expenses are in line with the impacts of the factors listed above and other factors.

We
periodically evaluate opportunities to sell additional equity and/or debt securities, obtain credit facilities from lenders, or restructure our long-term debt for
strategic reasons or to further strengthen our financial position. We cannot be assured that financing will be available in amounts or on terms acceptable to us, if at all. Risk factors that could
possibly affect our ability to obtain cash from external sources include:



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Cash Investments

We invest cash in highly liquid instruments, including high credit quality money market mutual funds, certificates of deposit, banker's acceptances, commercial
paper, repurchase agreements, mortgage-backed and receivables-backed securities and corporate and government notes, including tax-exempt municipal securities.

We
try to invest all excess cash in marketable securities. Therefore, our annual investments will fluctuate depending on the levels of cash provided or used by all of our other
investing, operating and financing activities. We invested excess cash of approximately $242 million and $506 million in marketable securities, net of marketable securities sold, during
2002 and 2001, respectively. In 2003, we used cash from the sale of marketable securities, net of marketable securities purchased, of approximately $10 million in other investing and financing
activities.

Capital Activities

Common Stock.In April 2002, we completed an underwritten public offering of 9.43 million shares of
Class A common stock at $44.50 per share, which resulted in net proceeds to us of approximately $400 million, net of transaction fees. We are using the proceeds from the offering for
general corporate purposes.

Dividends.We paid no dividends on our common stock during 2001 and 2002. We began paying a quarterly dividend of $.07 per
share during the second quarter of 2003, and paid dividends of the same amount during the third and fourth quarters of 2003. On January 20, 2004 we announced an increased dividend of $.075 per
share for the first quarter of 2004, and subsequently paid that dividend on February 17, 2004. If quarterly dividends in that amount were to be continued, and assuming that the current number
of outstanding shares of our common stock remains constant, we would expect to pay an aggregate of $10.6 million for each dividend, or approximately $42 million on an annual basis. Our
Board of Directors currently intends to consider declaring and paying comparable future dividends on a regular quarterly basis, subject to our ability to pay dividends and to a determination of our
Board of Directors that dividends continue to be in the best interests of the Company and its stockholders.

Repurchases of Stock.During 2003, 2002 and 2001, we repurchased 2,159,597, 2,234,400 and 374,000 shares of Class A
common stock, respectively, pursuant to authorizations by our Board of Directors. On October 20, 2003 our Board of Directors approved a share repurchase program authorizing us to repurchase up
to $100 million of our common stock. At December 31, 2003, we had remaining authorization to repurchase approximately $72 million of our common stock under this program. On
October 20, 2003 our Board of Directors authorized the purchase shares of our common stock to satisfy our obligations to deliver shares under our Employee Stock Purchase Plan and our
Long-Term Incentive Plan (the "Alternative Share Settlement Program"). Under these two separate authorizations, 2,159,597 shares were repurchased for approximately $46 million
during the fourth quarter of 2003. The timing, volume and price of any future repurchases will be made pursuant to 10b5-1 trading plans, unless such plans are terminated at the discretion
of management

Financing Arrangements

Revolving Credit Agreement.In February 2000, we entered into a $300 million, senior unsecured, revolving
credit agreement that expires on September 14, 2004. We plan to renew this credit facility before it expires. Interest on this agreement is variable, based upon LIBOR or the prime rate plus a
margin, at our option. At December 31, 2003, 2002 and 2001, we did not have any outstanding borrowings under this agreement and the entire $300 million is available for us to draw upon,
if necessary. We are currently in compliance with all covenant requirements under this agreement.

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Notes Payable.During 2000, we borrowed approximately $859 million, primarily to finance the acquisition of GetThere.
We repaid these borrowings during 2001 primarily using proceeds from the sale of our Outsourcing Business and the issuance in August of 2001 by Sabre Holdings Corporation of $400 million in
unsecured notes ("Notes"), bearing interest at 7.35% and maturing August 1, 2011, in an underwritten public offering resulting in net cash proceeds to us of approximately $397 million.
We are currently in compliance with all covenant requirements under this agreement. See Note 8 to the Consolidated Financial Statements for further discussion of debt transactions.
Sabre Inc., a 100% owned subsidiary of Sabre Holdings Corporation, unconditionally guarantees all debt obligations of Sabre Holdings Corporation, as detailed in Note 16 to the
Consolidated Financial Statements. In conjunction with these Notes, we have entered into two interest rate swaps through 2011 for a total of $300 million, which pay us 7.35% and on which we pay
a variable rate based on a six-month LIBOR plus 231 basis points. See Note 7 to the Consolidated Financial Statements for more information on these swaps.

Capital Lease ObligationsIn June 2003, we entered into a ten-year master lease for our corporate
headquarters facility in Southlake, Texas, which is accounted for as a capital lease. At the inception of the lease, we recorded an asset of approximately $168 million, along with a liability
of approximately $168 million, representing the present value of the minimum lease payments due under the lease and the residual value guarantee discussed below.

At
any time during the lease term, we have the option to terminate the lease and purchase the properties for approximately $179 million, plus a make-whole amount, if
applicable. We also have the option at any time up to one year prior to lease expiration to cause the properties to be sold. If the sell option is exercised, we have guaranteed that proceeds on a sale
will be at least approximately $159 million, and we are responsible for the first dollar loss up to approximately $159 million due to a decrease in the value of the property below
approximately $179 million. If the sales proceeds exceed approximately $179 million plus any sales-related expenses, we retain the excess.

Off-Balance Sheet Arrangements

Other than presented in the table above, at December 31, 2003 we have no off-balance sheet arrangements that have or are reasonably likely to
have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Cash Flows

Year Ended December 31,2003

2002

2001Cash provided by operating activities

$
261,538

$
291,671

$
390,237Cash used for investing activities


(146,058
)

(669,022
)

(17,750
)Cash provided by (used for) financing activities


(95,794
)

379,672


(361,410
)


Operating Activities.Cash provided by operating activities declined by $30 million from 2002 to 2003 due primarily to
decreases in net earnings adjusted for non-cash and non-operating items. Cash provided by operating activities for 2003 was $262 million, which was primarily from net
earnings adjusted for non-cash and non-operating items. Non-cash adjustments to net earnings of $83 million for 2003 included depreciation and amortization
of $136 million, stock compensation expense of $12 million, and a $28 million loss on the refinancing of a facilities lease on our headquarters building.

39

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Cash
provided by operating activities for 2002 was $292 million and was primarily from net earnings adjusted for non-cash and non-operating items offset by
uses of cash for working capital items, which includes accounts receivable, prepaid expenses, accrued compensation and benefits, accounts payable and other accrued liabilities. Non-cash
adjustments to net earnings of $214 million for 2002 included depreciation and amortization of $117 million, deferred tax benefits of $53 million, tax benefits for stock options
exercised of $10 million, stock compensation expense of $31 million and an $18 million gain on the sale of our former headquarter's building.

Cash
provided by operating activities declined by $99 million from 2001 to 2002 resulting primarily from cash flows received during 2001 for accounts receivable from the
Outsourcing Business, which was sold to EDS in July 2001, with no corresponding billings and collections in 2002.

Investing Activities.The $523 million decrease in cash used for investing activities from 2002 to 2003, primarily
results from a $402 million reduction in cash spent on acquisitions. We expended cash for acquisitions of $499 million in 2002 compared to expending $96 million in 2003.
Acquisitions in 2003 included purchasing the assets of World Choice Travel, Inc. for $50 million, purchasing the remaining 49% interest that we did not own in Dillon Communication
Systems for $30 million, making $10 million in payments on outstanding shares of Travelocity.com related to the 2002 acquisition and $6 million for other miscellaneous acquisition
activity. Acquisitions in 2002 included the cash tender offer for the outstanding publicly-held common shares of Travelocity.com for $456 million, the acquisition of
Site59.com, Inc. for $44 million, including cash received of $4 million, and $3 million in other miscellaneous acquisition activity. Capital expenditures were slightly
higher in 2003 than in 2002 due to an increase in capitalized labor costs of $26 million for investments in new platforms for Sabre Travel Network, our reservations hosting software for Sabre
Airline Solutions and a dynamic packaging tool for Travelocity (TotalTrip). This increase was offset by a decrease in purchases of equipment of $13 million due to leasing equipment for our
technology enhancements rather than buying it.

The
$651 million increase in cash used for investing activities from 2001 to 2002 primarily results from the 2001 proceeds of $661 million from the sale of our Outsourcing
Business to EDS coupled with a $443 million increase in cash spent on acquisitions in 2002. The increase in cash spent on acquisitions was attributable to the cash tender offer for the
outstanding publicly-held common shares of Travelocity.com for $456 million, the acquisition of Site59 for $44 million, including cash received of $4 million, and the
purchase of the data center facility from the lessor, netted against the proceeds of selling the same data center to EDS, of $24 million in 2002. These increases in cash used during 2002 were
offset by a reduction in cash invested in marketable securities of $264 million, a reduction in capital expenditures of $96 million due to reduced acquisitions of IT assets resulting
from our IT infrastructure outsourcing services contract with EDS and $80 million of cash received from the sale of our former headquarters building in 2002. The remaining $6 million
offset to the increase in cash used for investing was due to other miscellaneous investing activities.

Financing Activities.The $475 million decrease in cash provided by financing activities from 2002 to 2003 was mainly
due to receiving $400 million in proceeds from the public offering of our common stock in 2002. The decrease in cash provided from financing activities also included $30 million in
payments during 2003 to our stockholders in dividends and $28 million to our former leaseholders to terminate a lease on our headquarters buildings. The remaining $17 million decrease
results primarily from lower proceeds from the exercise of stock options in 2003.

40

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The
$741 million increase in cash provided by financing activities from 2001 to 2002 resulted primarily from the 2001 repayment of $859 million in notes payable related to
the GetThere acquisition in 2000 coupled with the $400 million in proceeds received from the public offering of our common stock in 2002. These increases in cash provided by financing
activities were offset by the $397 million in proceeds from the issuance of the $400 million in unsecured notes in 2001 and a reduction in the proceeds received from exercise of stock
options and issuance of stock under the employee stock purchase plan of $73 million and a $48 million increase in the cash used to purchase treasury stock. During the third quarter of
2001, we made an unsecured $30 million loan to a customer in the travel industry, which was repaid in March 2002.

Critical Accounting Policies

The preparation of our financial statements requires that we adopt and follow certain accounting policies. Certain amounts presented in the financial statements
have been determined based upon estimates and assumptions. Although we believe that our estimates and assumptions are reasonable, actual results may differ.

We
have included below a discussion of the accounting policies involving material estimates and assumptions that we believe are most critical to the preparation of our financial
statements, how we apply such policies and how results differing from our estimates and assumptions would affect the amounts presented in our financial statements. We have discussed the development,
selection and disclosure of these accounting policies with our audit committee. Although we believe these policies to be the most critical, other accounting policies also have a significant effect on
our financial statements and certain of these policies also require the use of estimates and assumptions. Note 2 to the Consolidated Financial Statements discusses each of our significant
accounting policies.

Accounts Receivable:We generate a significant portion of our revenues and corresponding accounts receivable from services
provided to commercial airlines. As of December 31, 2003, approximately 66% of our accounts receivable were attributable to these customers. Our other accounts receivable are generally due from
other participants in the travel and transportation industry.

We
evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer's inability to meet its financial
obligations to us (e.g., bankruptcy filings, failure to pay amounts due to us or others), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the
amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off history (average percentage of receivables written off
historically) and the length of time the receivables are past due.

During
2003, 2002 and 2001, the commercial air travel industry in particular, and the travel and transportation industry in general, was adversely affected by a decline in travel
resulting from a softening economy. Our airline customers are negatively affected by the continuing lower levels of travel activity. Several major domestic air carriers are experiencing liquidity
problems. Some airlines have sought bankruptcy protection and others may consider bankruptcy relief. We believe that we have appropriately considered the effects of these factors, as well as any other
known customer liquidity issues, on the ability of our customers to pay amounts owed to us. However, if demand for commercial air travel softens, due to prevailing economic conditions, terrorist acts,
war or other incidents involving commercial air transport, or other factors, the financial condition of our customers may be adversely impacted. If we begin, or estimate that we will begin, to
experience higher than expected defaults on amounts due us, our estimates of the amounts that we will ultimately collect could be reduced by a material amount. In 2003, we reduced our allowance for
bad debt by $19.1 million to a balance of $15.4 million at December 31, 2003, mainly driven by the write-off of $17.4 million of aged receivables against
reserves we had established in prior years for those specific receivables. The amounts written-off related to customers who had filed for bankruptcy in previous years and we have exhausted
all methods of collection.

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Booking Fee Cancellation Reserve:We record revenue for airline travel reservations processed through the Sabresystem at the time of the booking of the reservation. However, if the booking is canceled in a later month, the booking fee must be refunded to
the customer (less a small cancellation fee). Therefore we record revenue net of an estimated amount reserved to account for future cancellations. This reserve is calculated based on historical
cancellation rates. In estimating the amount of future cancellations that will require us to refund a booking fee, we assume that a significant percentage of cancellations are followed by an immediate
re-booking, without loss of revenue. This assumption is based on historical rates of cancellations/re-bookings and has a significant impact on the amount reserved. If
circumstances change, such as higher than expected cancellation rates or changes in booking behavior, our estimates of future cancellations could be increased by a material amount and our revenue
decreased by a corresponding amount. At December 31, 2003 and 2002, our booking fee cancellation reserves were approximately $17.0 million and $18.4 million, respectively. In
2003, the cancellation reserve declined by $1.4 million due to declining booking levels and a rate change under the DCA 3-Year Pricing Option Agreements. This reserve is sensitive
to changes in booking levels and the number of bookings priced under the terms of the DCA 3-Year Pricing Option Agreements. For example, if 2003 booking volumes had been 10% lower or the
weighted-average booking fee rate had been 10% lower, the reserve balance would have been reduced by $1.7 million.

Business Combinations:During 2003, 2002 and 2001, we completed a number of acquisitions of other companies using the
purchase method of accounting. The amounts assigned to the identifiable assets and liabilities acquired in connection with these acquisitions were based on estimated fair values as of the date of the
acquisition, with the remainder recorded as goodwill. The fair values were determined by our management, generally based upon information supplied by the management of the acquired entities and
valuations prepared by independent appraisal experts. The valuations have been based primarily upon future cash flow projections for the acquired assets, discounted to present value using a
risk-adjusted discount rate. For certain classes of intangible assets, the valuations have been based upon estimated cost of replacement. In connection with these acquisitions, we have
recorded a significant amount of intangible assets, including goodwill.

Long-Lived Assets and Goodwill:Prior to January 1, 2002, we reviewed all of our long-lived
assets, including identifiable intangible assets, for impairment when changes in circumstances indicated that the carrying amount of an asset might not be recoverable. If we determined that such
indicators were present, we prepared an undiscounted future net cash flow projection for the asset. In preparing this projection, we made a number of assumptions concerning such things as future
booking volume levels, price levels, commission rates, rates of growth in our consumer and corporate direct booking businesses, rates of increase in operating expenses, etc. If our projection of
undiscounted future net cash flows was in excess of the carrying value of the recorded asset, no impairment was recorded. If the carrying value of the asset exceeded the projected undiscounted net
cash flows, an impairment was recorded. The amount of the impairment charge was determined by discounting the projected net cash flows. Intangible assets subject to amortization continue to be
evaluated for impairment as discussed above.

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Through
the end of 2001, we evaluated goodwill for impairment based on undiscounted projected future cash flows. If the carrying value of the goodwill was less than the undiscounted
projected future cash flows, no impairment would be recognized. Upon adoption of Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible
Assets("SFAS No. 142") on January 1, 2002, we began to evaluate our goodwill for impairment on an annual basis or whenever indicators of impairment exist. The
evaluation is based upon a comparison of the estimated fair value of the unit of our business to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of
that unit. The fair values used in this evaluation are estimated based upon discounted future cash flow projections for the unit. These cash flow projections are based upon a number of assumptions, as
discussed above. Under SFAS No. 142 intangible assets deemed to have indefinite lives are subject to impairment tests annually or when changes in circumstances indicate that the carrying value
may not be recoverable. If the carrying value of an indefinite lived intangible asset exceeds its fair value, as generally estimated using a discounted future net cash flow projection, the carrying
value of the asset is reduced to its fair value.

In
2003 we wrote-off an intangible asset of approximately $9 million associated with a supplier agreement that was terminated early. No other significant impairments
of our goodwill or intangible assets have been recorded. We believe that assumptions we have made in projecting future cash flows for the evaluations described above are reasonable. However, if future
actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations. See Note 2 to the
Consolidated Financial Statements for further discussion.

Seasonality

The travel industry is seasonal in nature. Bookings, and our revenues for the use of theSabresystem, decrease
significantly each year in the fourth quarter, primarily in December. Customers generally book their November and December holiday leisure travel earlier in the year, and business travel declines
during the holiday season. All quarters presented were negatively affected by unfavorable economic conditions in the United States, political and economic issues abroad, ongoing travel security
concerns and fear of potential terrorist attacks. The first half of 2003 was affected by travelers' fear of exposure to contagious diseases such as SARS. See Note 6 to the Consolidated
Financial Statements for other items impacting our quarterly results.

The
following table sets forth our quarterly financial data (in thousands, except per share data):

|                           |         | First
Quarter |         | Second
Quarter |   | Third
Quarter |     | Fourth
Quarter |        
|-------------------------- | ------- | ------------- | ------- | -------------- | - | ------------- | --- | -------------- | -------
|2003                       |         |               |         |                |   |               |     |                |        
|Revenues                   |         | $             | 543,833 |                | $ | 507,189       |     | $              | 526,793
|Operating income           |         | $             | 103,894 |                | $ | 40,392        |     | $              | 43,866 
|Net earnings               |         | $             | 64,879  |                | $ | 6,816         |     | $              | 25,449 
|Earnings per common share: |         |               |         |                |   |               |     |                |        
|                           | Basic   |               | $       | .46            |   | $             | .05 |                | $      
|                           |         |               |         |                |   |               |     |                |        
|                           | Diluted |               | $       | .45            |   | $             | .05 |                | $      
|                           |         |               |         |                |   |               |     |                |        

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|                           |         | First
Quarter |         | Second
Quarter |   | Third
Quarter |     | Fourth
Quarter
|-------------------------- | ------- | ------------- | ------- | -------------- | - | ------------- | --- | --------------
|2002                       |         |               |         |                |   |               |     |               
|Revenues                   |         | $             | 549,358 |                | $ | 536,748       |     | $             
|Operating income           |         | $             | 119,994 |                | $ | 104,304       |     | $             
|Net earnings               |         | $             | 87,387  |                | $ | 67,965        |     | $             
|Earnings per common share: |         |               |         |                |   |               |     |               
|                           | Basic   |               | $       | .66            |   | $             | .48 |               
|                           |         |               |         |                |   |               |     |               
|                           | Diluted |               | $       | .64            |   | $             | .47 |               
|                           |         |               |         |                |   |               |     |               

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities("SFAS 146"). This statement nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to
an exit or disposal plan. This statement was applicable prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of this standard did not have a significant
effect on our financial position or results of operations.

In
January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities, an interpretation of ARB
No. 51("FIN 46"). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen. FIN
46 provides a new framework for identifying variable interest entities ("VIEs") and determining when a company should include the assets, liabilities, noncontrolling interests and results of
activities of a VIE in its consolidated financial statements.

In
general, a VIE is a corporation, partnership, limited-liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either:



FIN
46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE is obligated to absorb a majority of the risk of loss from the
VIEs activities, is entitled to receive a majority of the VIEs residual returns (if no party absorbs a majority of the VIEs losses), or both. A variable interest holder that consolidates the VIE is
called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all the VIEs assets, liabilities and noncontrolling interests at fair value and subsequently
account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in
which it has a significant variable interest.

We
do not have an interest in any special purpose entity that is required to be consolidated under FIN 46. We are currently evaluating our involvement in other entities pursuant to the
revised guidance; however, we do not anticipate a significant effect as a result of its application.

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In
May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity. The standard requires companies that issue certain types of freestanding financial instruments to treat them as liabilities on their balance sheet, measured at fair
value, even though the instruments have characteristics of equity. Generally this standard is effective for the interim period beginning July 1, 2003. Currently, we do not have any financial
instruments that are impacted by the new standard.

On
December 17, 2003, the Staff of the Securities and Exchange Commission (or SEC) issued Staff Accounting Bulletin No. 104 ("SAB 104"),Revenue
Recognition, which supersedes Staff Accounting Bulletin No. 101,Revenue Recognition in Financial Statements("SAB
No. 101"). SAB 104's primary purpose is to rescind the accounting guidance contained in SAB No. 101 related to multiple-element revenue arrangements that was superseded as a result of
the issuance of EITF 00-21,Accounting for Revenue Arrangements with Multiple Deliverables. Additionally, SAB 104 rescinds the SEC's related Revenue Recognition in Financial
Statements Frequently Asked Questions and Answersissued with SAB No. 101 that had been codified in SEC Topic
13,Revenue Recognition. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles
of SAB No. 101 remain largely unchanged by the issuance of SAB 104, which was effective upon issuance. The adoption of SAB 104 did not have a material effect on our financial position or
results of operations.

Mergers and Acquisitions

During 2003 we completed the acquisition of the assets and liabilities of World Choice Travel, Inc and we acquired the 49% share of Dillon Communications that we
did not own. We also completed other acquisitions during 2003 which did not materially affect our financial statements. During 2002 we completed the tender offer for the outstanding publicly held
shares of Travelocity.com common stock that we did not previously own, completed the acquisition of Site 59.com, Inc. and completed other acquisitions which did not materially affect our
financial statements.

Inflation

We believe that inflation has not had a material effect on our results of operations.

SABRE HOLDINGS CORPORATION CAUTIONARY STATEMENT

Statements in this report which are not purely historical facts or which necessarily depend upon future events, including statements regarding our 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 us on the date of this report. We undertake 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

Risks associated with an investment in our securities, and with achieving the forward-looking statements contained in this report or in our news releases,
websites, public filings, investor and analyst conferences or 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 our business, financial condition or results of operations. We may not succeed in addressing these challenges and risks.

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Our revenues are highly dependent on the travel and transportation industries, and particularly on airlines, and a prolonged substantial decrease in travel bookings volumes
could adversely affect us.

Most of our revenue is derived from airlines, hotel operators, car rental companies, cruise operators and other suppliers in the travel and transportation
industries. Our revenue increases and decreases with the level of travel and transportation activity and is therefore highly subject to declines in or disruptions to travel and transportation due to
factors entirely out of our control. The travel industry is seasonal and our revenue varies significantly from quarter to quarter. Factors that may adversely affect travel and transportation activity
include:



The
economic downturn that preceded and was worsened by the September 11, 2001 terrorist attacks may continue to adversely affect us and the travel industry. Additionally, the
continuing conflict in Iraq, the possibility of further terrorist attacks, hostilities and war (in the Middle East, the Indian subcontinent or elsewhere) and the resulting security measures at
airports, and the financial instability of many of the air carriers may continue to adversely affect the travel industry. Airlines may reduce the number of their flights, making fewer offerings
available to us. Several major airlines are experiencing liquidity problems, some have sought bankruptcy protection and still others may consider bankruptcy relief. Travelers' perceptions of passenger
security or airlines' financial stability may have an adverse effect on demand. A prolonged substantial decrease in travel bookings volumes could have an adverse impact on our financial performance,
operations, liquidity, or capital resources and could impair our ability to recover the carrying value of certain of our assets, including capitalized software, other intangible assets and goodwill.

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We face competition from established and emerging travel distribution channels, which could divert customers to our competitors and adversely affect our results of operations.

Our business includes channels of distribution that support the travel agency, business-direct and consumer-direct segments of the global travel distribution
market. In all of these distribution channels, we face significant competition. In the travel agency channel, ourSabreglobal distribution system
competes primarily against other large and well-established global distribution systems. With the deregulation of the CRS industry in the United States, our CRS business will be competing
in a free-market system. Our current and potential customers may elect to use a competing GDS offering lower prices. Furthermore, one or more airlines (other than those participating in
our DCA 3-Year Pricing Option) may elect to discontinue or to lower their levels of participation in our global distribution system, given the expiration in the United States of
non-discriminatory CRS participation rules (although only Iberia, Lufthansa and Air France are currently subject to these rules). Losing access to supplier inventory would make our global
distribution system less attractive to travel agencies and travel purchasers, which could reduce our booking fee revenue. In order to gain access to suppliers' inventory, it might become necessary for
us to reduce the fees charged to suppliers, which could reduce our booking fee revenue. In addition, we face increasing competition in the travel agency channel, including competition from travel
suppliers that distribute directly to travel agencies.

In
the business-direct channel, Travelocity Business competes against similar offerings from other travel agencies. Some competitors market business travel systems that are bundled with
financial and other non-travel software systems that we do not offer. As a result, our current and potential customers may choose the convenience or cost-effectiveness of our
competitors' bundled products and services.

In
the consumer-direct channel, our Travelocity offering competes not only against similar offerings from affiliates of other global distribution systems, but also with a large number of
online travel agencies, including those operated by airlines and other travel suppliers.

We
expect existing competitors, business partners and new entrants to the travel business to constantly revise and improve their business models in response to challenges from competing
businesses, including ours. If these or other travel industry participants introduce changes or developments that we cannot meet in a timely or cost-effective manner, our business may be
adversely affected. In addition, consumers frequently use our Websites for route pricing and other travel information, and then choose to purchase travel offerings from a source other than our
Website, including travel suppliers' own websites. Such use may increase our costs without producing revenue.

In
addition, consolidation among our competitors may give our competitors increased negotiating leverage with travel suppliers and corresponding competitive advantages over us.
Consolidation among travel suppliers, including airline mergers, may increase competition from distribution channels related to those suppliers and place more leverage in the hands of those suppliers
to negotiate lower booking fees. If we are unable to compete effectively, competitors could divert our customers away from our travel distribution channels and, unless we substitute alternative
revenue streams, it could adversely affect our results of operations.

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Some travel suppliers are seeking to bypass intermediaries, which may have the effect of adversely affecting our results of operations.

Some travel suppliers are seeking to decrease their reliance on distribution intermediaries, including global distribution systems such as our SabreGDS. Travel suppliers may give advantages to distribution intermediaries in which they have an economic stake. For instance, airlines own a
significant stake in Amadeus and Orbitz. Various airlines, hotels, car rental companies and cruise operators have established their own travel distribution websites. Several airlines and hotels have
formed joint ventures that offer multi-supplier travel distribution websites. From time to time travel suppliers offer advantages, such as bonus miles, lower transaction fees, or discounted prices,
when their products and services are purchased from these supplier-related websites. Some of these offers have not been made to unrelated intermediaries. In addition, the airline industry has
experienced a shift in market share from full-service carriers to low-cost carriers that focus primarily on discount fares to leisure destinations. Some low-cost
carriers do not distribute their tickets through theSabreGDS or through other third-party intermediaries. These developments may have the effect of
diverting customers from our distribution system to supplier-related websites and have the potential to put downward pressure on GDS pricing.

Consolidation in the travel agency industry and increased competition for travel agency subscribers may result in increased expenses, lost bookings and reduced revenue.

The number of bookings produced by our travel agency subscriber base is an important factor in our success. Some travel suppliers have reduced or eliminated
commissions paid to travel agencies (including consumer direct travel sites like Travelocity). The loss of commissions causes travel agencies to become more dependent on other sources of revenues,
such as traveler-paid service fees and GDS-paid incentives. The reduction or elimination of supplier-paid commissions has forced some smaller travel agencies to
close or to combine with larger travel agencies. Although we have a leading share of large travel agencies, competition is particularly intense among global distribution systems for larger travel
agency subscribers. Consolidation of travel agencies may result in increased competition for these subscribers. In order to compete effectively, we may need to increase incentives, pre-pay
incentives, increase spending on marketing or product development, or make significant investments to purchase strategic assets.

Travelocity's growth cannot be assured.

The online travel space is highly competitive, with both the independent internet travel agencies and suppliers' proprietary websites competing for customers. Our
business strategy is dependent on expanding Travelocity's transaction revenues, increasing its percentage of merchant transactions, maintaining the breadth of its merchant suppliers, and increasing
its site traffic (including from Travelocity's distribution partners). Key components of this strategy include the growth of revenue from our merchant model hotel business, last-minute
packaging and the TotalTrip dynamic packaging offering. We also plan to broaden the appeal of Travelocity Business to corporate travelers. If any of these initiatives is not successful, Travelocity's
growth may be limited and it may be unable to achieve or maintain profitability.

48

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Our business plans call for the significant growth of our merchant model business, and we may be unsuccessful in managing or expanding that business.

Our business strategy is dependent upon our merchant model business, primarily our merchant model hotel business, as a significant source of revenue. We remain
subject to numerous risks in the operation and growth of this business. Our merchant model hotel strategy is particularly dependent upon our ability to obtain an adequate number of hotel rooms to
offer, through Travelocity or through ourSabre Exclusivesprogram, which require pre-payment by the consumer at the time of booking. Our
strategy calls for us to increase the number of hotel rooms we can offer under our merchant-model hotel program based upon merchant arrangements we make directly with individual hotel properties and
hotel chains. Under our merchant model hotel program, we contract with hotels for access to rooms at a negotiated rate and then we determine the price at which we offer the rooms to travelers. There
are significant risks associated with the merchant model. In particular, we cannot ensure that we will continue to be successful in signing up hotel properties in a sufficient number of domestic or
international geographic markets. Many hoteliers utilize merchant arrangements with us and with our competitors as a channel to dispose of excess hotel rooms at discounted rates. We may be unable to
achieve our financial objectives for the merchant model hotel program, especially if economic conditions improve or if competition increases. If improved economic conditions create increased demand
for hotel rooms, hotel managers may reduce the amount of merchant hotel rooms made available to us and may increase the negotiated rates at which they provide merchant hotel rooms to us. Similarly,
heightened competition from our competitors' own merchant rate programs may result in offering reductions and increases in negotiated rates for our merchant model rooms. These types of events could
exert downward pressure on the margins we expect to achieve in our merchant hotel business. Similar risks could also impact our businesses should we choose to explore applying the merchant model to
our other lines of business, such as air travel, in the future.

We may be unsuccessful in pursuing and integrating business combinations and strategic alliances, which could result in increased expenditures or cause us to fail to achieve
anticipated cost savings or revenue growth.

We plan to examine possible business combinations, investments, joint ventures or other strategic alliances with other companies in order to maintain and grow
revenue and market presence. We may be unable to successfully complete these acquisitions due to multiple factors, such as issues related to regulatory review of the proposed transactions. In
addition, there are risks inherent in these types of transactions, such as: difficulty in assimilating the operations, technology and personnel of the combined companies; disruption of our ongoing
business, including loss of management focus on existing businesses and market developments; problems retaining key technical and managerial personnel; expenses associated with the amortization of
identifiable intangible assets; additional or unanticipated operating losses, expenses or liabilities of acquired businesses; impairment of relationships with existing employees, customers and
business partners; and fluctuations in value and losses that may arise from equity investments. In addition, we may not be able to: identify suitable candidates for additional business combinations
and strategic investments; obtain financing on acceptable terms for such business combinations and strategic investments; or otherwise consummate such business combinations and strategic investments
on acceptable terms.

We cannot assure you that our ongoing cost reduction plans will be successful.

Our strategy depends, to a substantial degree, on reducing and controlling operating expenses. In furtherance of this strategy, we have engaged in ongoing,
company-wide activities intended to reduce costs. These activities included significant personnel reductions, reductions in Travelocity fulfillment costs (in part through global sourcing)
and realigning and streamlining operations and consolidating facilities. We cannot assure you that our efforts will result in the increased profitability, cost savings or other benefits that we
expect.

49

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Rapid technological changes and new distribution channels or unauthorized use of our intellectual property may adversely affect the value of our current or future technologies
to us and our customers, which could cause us to increase expenditures to upgrade and protect our technology or develop and protect competing offerings in new distribution channels.

New distribution channels and technology in our industry are evolving rapidly. Our ability to compete and our future results depend in part on our ability to make
timely and cost-effective enhancements and additions to our technology, to introduce new products and services that meet customer demands, to keep pace with rapid advancements in
technology, and to protect our technology. Unauthorized use of our intellectual property could have a material adverse effect on us, and our legal remedies may not adequately compensate us for the
damages to our business caused by such use. Maintaining flexibility to respond to technological and market dynamics may require substantial expenditures and lead-time. We cannot assure you
that we will successfully identify and develop new products or services in a timely manner, that offerings, technologies or services developed by others will not render our offerings obsolete or
noncompetitive, or that the technologies in which we focus our research and development investments will achieve acceptance in the marketplace and provide a return on our investment.

Our systems may suffer failures, capacity constraints and business interruptions, which could increase our operating costs and cause us to lose customers.

Our businesses are largely dependent on the computer data centers and network systems operated for us by Electronic Data Systems Corporation. We rely on several
communications service suppliers and on the global Internet to provide network access between our computer data center and end-users of our services. Like any company in our industry, we
occasionally experience system interruptions that make some or all of our global distribution system or other data processing services unavailable, which may prevent us from efficiently providing
services to our customers or other third parties. System capacity limits or constraints arising from unexpected increases in our volume of business could cause interruptions, outages or delays in our
services, or a deterioration in their performance, or could impair our ability to process transactions. Much of the computer and communications hardware upon which we depend is located in a single
facility. Our systems might be damaged or interrupted by fire, flood, power loss, telecommunications failure, break-ins, earthquakes, terrorist attacks, hostilities or war or similar
events. Computer viruses, physical or electronic break-ins and similar disruptions affecting the global Internet or our systems might cause service interruptions, delays and loss of
critical data, and could prevent us from providing our services. Problems affecting our systems might be expensive to remedy and could significantly diminish our reputation and brand name and prevent
us from providing services. We could be harmed by outages in, or unreliability of, the data center or network systems.

State and local tax issues have the potential to have an adverse effect on our financial condition and results of operations.

Some state and local taxing authorities impose taxes on the sale, use or occupancy of hotel room accommodations, which are called transient, occupancy,
accommodation, sales or hotel room taxes. Hotel operators generally collect and remit these occupancy taxes. Consistent with that practice, when a customer books a hotel room through one of our travel
services, we collect from the customer an amount sufficient to pay the hotel its room charge and the occupancy taxes on that charge, as well as additional amount representing our fee.

We
do not collect or remit occupancy taxes on our fee. Some tax authorities claim that occupancy taxes should be collected on some or all of that fee. We believe there are strong
arguments that our fee is not subject to occupancy taxes (although tax laws vary among the jurisdictions). We are attempting to resolve this issue with tax authorities in various jurisdictions, but we
cannot predict the resolution in any particular jurisdiction.

50

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We
have established a reserve for potential occupancy tax liability, consistent with applicable accounting principles and in light of all current facts and circumstances. The reserve
represents our best estimate of our contingent liability for occupancy taxes. A variety of factors could affect any actual liability for occupancy taxes, such as the number of jurisdictions that
prevail in either assessing additional occupancy taxes or negotiating a settlement with us, the fees potentially subject to tax in each jurisdiction, changes in applicable tax laws, and the timing of
any or all of the foregoing. We cannot assure you that the amount of our liability on occupancy taxes will not exceed that reserve and will not have a material adverse effect on our financial results.

Regulatory developments abroad could limit our ability to compete by restricting our flexibility to respond to competitive conditions, which could cause our customers to be
diverted to our competitors and adversely affect our revenue and results of operations.

The Commission of the European Union (the "Commission") and Transport Canada are engaged in a comprehensive review of their rules governing CRS systems. It is
unclear at this time when these bodies will complete their reviews and what changes, if any, will be made to their respective CRS rules. We could be unfairly and adversely affected if, for example,
these rules are retained as to traditional global distribution systems used by travel agencies but are not applied to travel distribution websites owned by more than one airline. We could also be
adversely affected if restrictions are imposed or continued on CRS advertising and displays or if additional limitations are placed upon our right to contract with travel agents or airlines.

We
could also be adversely affected if changes to any of the foregoing CRS rules increase our cost of doing business, weaken the non-discriminatory participation rules to
allow one or more large airlines owning a competing CRS to discontinue or to lower its level of participation in our global distribution system, or cause us to be subject to rules that do not also
apply to our global distribution competitors.

Our international operations are subject to other risks, which may impede our ability to grow internationally and adversely affect our overall results of operations.

We face risks inherent in international operations, such as risks of:



51

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These
risks may adversely affect our ability to conduct and grow business internationally, which could cause us to increase expenditures and costs, decrease our revenue growth or both.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2003, our exposure to interest rates relates primarily to our marketable securities portfolio. Largely offsetting this exposure are our
notes payable, as hedged with fixed to floating interest rate swaps. The objectives of our marketable securities are safety of principal, liquidity maintenance, yield maximization and full investment
of all available funds. As such, our investment portfolio consists primarily of high credit quality certificates of deposit, money market mutual funds, bankers' acceptances, commercial paper,
repurchase agreements, mortgage-backed and receivables-backed securities and corporate and government notes including tax-exempt municipal securities. If short-term interest rates average
10% lower in 2004 than they were during 2003, our interest income from marketable securities would decrease by approximately $1.2 million. In comparison, at December 31, 2002, we
estimated that if short-term interest rates averaged 10% lower in 2003 than they were during 2002, our interest income from marketable securities would have decreased by approximately
$2.9 million. These amounts were determined by applying the hypothetical interest rate change to our marketable securities balances as of December 31, 2003 and 2002.

In
addition, we had fixed rate notes of $400 million ("Notes") as of December 31, 2003. We have entered into fixed to floating interest rate swaps related to
$300 million of the outstanding Notes, effectively converting $300 million of the $400 million fixed rate Notes into floating rate obligations. If short-term interest
rates average 10% higher in 2004 than they were in 2003, our interest expense would increase by approximately $0.4 million. This amount was determined by applying the hypothetical interest rate
change to our floating rate borrowings balance at December 31, 2003.

In
addition, we had a $168 million capital lease at December 31, 2003. We have entered into fixed to floating interest rate swaps related to $100 million of the
outstanding capital lease, effectively converting $100 million of the $168 million fixed rate capital lease into a floating rate obligation. If short-term interest rates
average 10% higher in 2004 than they were in 2003, our interest expense would increase by approximately $0.1 million. This amount was determined by applying the hypothetical interest rate
change to our floating rate borrowings balance at December 31, 2003.

Foreign Currency Risk

We have various foreign operations, primarily in North America, South America, Europe, Australia and Asia. As a result of these business activities, we are
exposed to foreign currency risk. Since a significant portion of our business is transacted in the United States dollar, these exposures have historically related to a small portion of our overall
operations. However, during times of devaluation of the U.S. dollar, such as in 2003, the increase in our foreign expenses can have a negative impact on our operating results. To reduce the impact of
this earnings volatility, we hedge a portion of our foreign currency exposure by entering into foreign currency forward contracts on our three largest foreign currency exposures. These contracts,
totaling $89.0 million at December 31, 2003 and $77.8 million at December 31, 2002, represented obligations to purchase foreign currencies at a predetermined exchange rate,
to fund a portion of our expenses that are denominated in foreign currency exposures. The result of an immediate 10 percent devaluation of the U.S. dollar in 2004 from December 31, 2003
levels relative to our primary foreign currency exposures would result in an increase in the U.S. dollar-equivalent of foreign currency denominated expenses of approximately $4.7 million, net
of hedge instruments outstanding. This sensitivity analysis was prepared based upon 2004 projections of our primary foreign currency-denominated expenses and foreign currency forward contracts as of
December 31, 2003.

52

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                  |  | Page
|------------------------------------------------- |  | ----
|Report of Ernst & Young LLP, Independent Auditors |  | 54  
|Consolidated Balance Sheets                       |  | 55  
|Consolidated Statements of Income                 |  | 56  
|Consolidated Statements of Cash Flows             |  | 57  
|Consolidated Statements of Stockholders' Equity   |  | 58  
|Notes to Consolidated Financial Statements        |  | 59  

53

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The
Board of Directors and Stockholders
Sabre Holdings Corporation

We
have audited the accompanying consolidated balance sheets of Sabre Holdings Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed
under Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule
based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sabre Holdings Corporation and
subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the information set forth therein.

As
discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets.



Dallas, Texas
January 21, 2004,
except for Note 17, as to which
the date is January 30, 2004

54

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SABRE HOLDINGS CORPORATION        CONSOLIDATED BALANCE SHEETS        (in thousands)

---

|                                           |                                                                                                                                                  | December 31,                               |        
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | -------
|
|Assets                                     |                                                                                                                                                  |                                            |        
|Current assets                             |                                                                                                                                                  |                                            |        
|                                           | Cash                                                                                                                                             |                                            | $      
|                                           | Marketable securities                                                                                                                            |                                            |        
|                                           | Accounts receivable, net                                                                                                                         |                                            |        
|                                           | Prepaid expenses                                                                                                                                 |                                            |        
|                                           | Deferred income taxes                                                                                                                            |                                            |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total current assets                       |        
|Property and equipment                     |                                                                                                                                                  |                                            |        
|                                           | Buildings and leasehold improvements                                                                                                             |                                            |        
|                                           | Furniture, fixtures and equipment                                                                                                                |                                            |        
|                                           | Computer equipment and software                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  |                                            | 618,642
|                                           | Less accumulated depreciation and amortization                                                                                                   |                                            |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total property and equipment               |        
|Investments in joint ventures              |                                                                                                                                                  |                                            | 181,142
|Goodwill and intangible assets, net        |                                                                                                                                                  |                                            | 888,198
|Other assets, net                          |                                                                                                                                                  |                                            | 134,122
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total assets                               |        
|                                           |                                                                                                                                                  |                                            |        
|Liabilities and stockholders' equity       |                                                                                                                                                  |                                            |        
|Current liabilities                        |                                                                                                                                                  |                                            |        
|                                           | Accounts payable                                                                                                                                 |                                            | $      
|                                           | Accrued compensation and related benefits                                                                                                        |                                            |        
|                                           | Accrued subscriber incentives                                                                                                                    |                                            |        
|                                           | Deferred revenues                                                                                                                                |                                            |        
|                                           | Other accrued liabilities                                                                                                                        |                                            |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total current liabilities                  |        
|Deferred income taxes                      |                                                                                                                                                  |                                            | 4,420  
|Pensions and other postretirement benefits |                                                                                                                                                  |                                            | 135,099
|Other liabilities                          |                                                                                                                                                  |                                            | 38,543 
|Minority interests                         |                                                                                                                                                  |                                            | 6,463  
|Long-term capital lease obligation         |                                                                                                                                                  |                                            | 160,725
|Notes payable                              |                                                                                                                                                  |                                            | 427,400
|Commitments and contingencies (Note 9)     |                                                                                                                                                  |                                            |        
|Stockholders' equity                       |                                                                                                                                                  |                                            |        
|                                           | Preferred stock: $0.01 par value; 20,000 shares authorized; no shares issued                                                                     |                                            |        
|                                           | Common stock: Class A: $0.01 par value; 250,000 shares authorized; 145,652 and 144,775 Shares issued at December 31, 2003 and 2002, respectively |                                            |        
|                                           | Additional paid-in capital                                                                                                                       |                                            |        
|                                           | Retained earnings                                                                                                                                |                                            |        
|                                           | Accumulated other comprehensive loss                                                                                                             |                                            |        
|                                           | Less treasury stock at cost; 4,322 and 2,172 shares, respectively                                                                                |                                            |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total stockholders' equity                 |        
|                                           |                                                                                                                                                  |                                            |        
|                                           |                                                                                                                                                  | Total liabilities and stockholders' equity |        
|                                           |                                                                                                                                                  |                                            |        

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

55

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

---

|                                                                    |                                                | Year Ended December 31,      |          
|------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------- | ---------
|
|Revenues                                                            |                                                | $                            | 2,045,163
|Operating expenses                                                  |                                                |                              |          
|                                                                    | Cost of revenues                               |                              |          
|                                                                    | Selling, general and administrative            |                              |          
|                                                                    | Amortization of goodwill and intangible assets |                              |          
|                                                                    |                                                |                              |          
|                                                                    |                                                | Total operating expenses     |          
|                                                                    |                                                |                              |          
|Operating income (loss)                                             |                                                |                              | 166,230  
|Other income (expense)                                              |                                                |                              |          
|                                                                    | Interest income                                |                              |          
|                                                                    | Interest expense                               |                              |          
|                                                                    | Other, net                                     |                              |          
|                                                                    |                                                |                              |          
|                                                                    |                                                | Total other income (expense) |          
|                                                                    |                                                |                              |          
|Minority interests                                                  |                                                |                              | (365     
|                                                                    |                                                |                              |          
|Income from continuing operations before provision for income taxes |                                                |                              | 127,377  
|Provision for income taxes                                          |                                                |                              | 44,076   
|                                                                    |                                                |                              |          
|Income (loss) from continuing operations                            |                                                |                              | 83,301   
|Income from discontinued operations, net                            |                                                |                              |         
|Gain on sale of discontinued operations, net                        |                                                |                              |         
|                                                                    |                                                |                              |          
|Income before cumulative effect of accounting change                |                                                |                              | 83,301   
|Cumulative effect of accounting change, net                         |                                                |                              |         
|                                                                    |                                                |                              |          
|Net earnings                                                        |                                                | $                            | 83,301   
|                                                                    |                                                |                              |          
|Earnings (loss) per common sharebasic                              |                                                |                              |          
|                                                                    | Income (loss) from continuing operations       |                              | $        
|                                                                    | Income from discontinued operations, net       |                              |          
|                                                                    | Cumulative effect of accounting change, net    |                              |          
|                                                                    |                                                |                              |          
|                                                                    | Net earnings                                   |                              | $        
|                                                                    |                                                |                              |          
|Earnings (loss) per common sharediluted                            |                                                |                              |          
|                                                                    | Income (loss) from continuing operations       |                              | $        
|                                                                    | Income from discontinued operations, net       |                              |          
|                                                                    | Cumulative effect of Accounting change, net    |                              |          
|                                                                    |                                                |                              |          
|                                                                    | Net earnings                                   |                              | $        
|                                                                    |                                                |                              |          
|Dividends per common share                                          |                                                | $                            | .21      
|                                                                    |                                                |                              |          

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

56

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SABRE HOLDINGS CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)

---

|                                                                                                 |                                                    | Year Ended December 31,                        |           
|------------------------------------------------------------------------------------------------ | -------------------------------------------------- | ---------------------------------------------- | ----------
|
|Operating activities                                                                             |                                                    |                                                |           
|Net earnings                                                                                     |                                                    | $                                              | 83,301    
|Adjustments to reconcile net earnings to cash provided by operating activities:                  |                                                    |                                                |           
|                                                                                                 | Depreciation and amortization                      |                                                |           
|                                                                                                 | Stock compensation                                 |                                                |           
|                                                                                                 | Deferred income taxes                              |                                                |           
|                                                                                                 | Tax benefit from exercise of stock options         |                                                |           
|                                                                                                 | Minority interests                                 |                                                |           
|                                                                                                 | Loss on facilities lease refinancing               |                                                |           
|                                                                                                 | Gain on sale of former headquarters building       |                                                |           
|                                                                                                 | Gain on sale of discontinued operations, net       |                                                |           
|                                                                                                 | Gain on sale of France Telecom shares              |                                                |           
|                                                                                                 | Cumulative effect of accounting change, net of tax |                                                |           
|                                                                                                 | Loss on disposal of equipment                      |                                                |           
|                                                                                                 | Other                                              |                                                |           
|                                                                                                 | Changes in operating assets and liabilities:       |                                                |           
|                                                                                                 |                                                    | Accounts receivable                            |           
|                                                                                                 |                                                    | Prepaid expenses                               |           
|                                                                                                 |                                                    | Other assets                                   |           
|                                                                                                 |                                                    | Accrued compensation and related benefits      |           
|                                                                                                 |                                                    | Accounts payable and other accrued liabilities |           
|                                                                                                 |                                                    | Pensions and other postretirement benefits     |           
|                                                                                                 |                                                    | Other liabilities                              |           
|                                                                                                 |                                                    |                                                |           
|                                                                                                 | Cash provided by operating activities              |                                                |           
|Investing activities                                                                             |                                                    |                                                |           
|Additions to property and equipment                                                              |                                                    |                                                | (71,466   
|Business combinations, net of cash acquired                                                      |                                                    |                                                | (96,114   
|Proceeds from exercise of Travelocity.com stock options                                          |                                                    |                                                |          
|Proceeds from sale of former headquarters building                                               |                                                    |                                                |          
|Purchase of data center facility from lessor                                                     |                                                    |                                                |          
|Proceeds from sale of data center facility                                                       |                                                    |                                                |          
|Proceeds from sale of minority interest in Sabre Pacific                                         |                                                    |                                                |          
|Proceeds from sale of discontinued operations                                                    |                                                    |                                                |          
|Purchases of marketable securities                                                               |                                                    |                                                | (7,751,087
|Sales of marketable securities                                                                   |                                                    |                                                | 7,760,587 
|Proceeds from sales of investments                                                               |                                                    |                                                | 5,054     
|Purchases of Travelocity.com common stock                                                        |                                                    |                                                |          
|Other investing activities, net                                                                  |                                                    |                                                | 6,968     
|                                                                                                 |                                                    |                                                |           
|                                                                                                 | Cash used for investing activities                 |                                                |           
|Financing activities                                                                             |                                                    |                                                |           
|Proceeds from public offering of common stock                                                    |                                                    |                                                |          
|Proceeds from exercise of stock options and issuance of stock under employee stock purchase plan |                                                    |                                                | 10,541    
|Purchase of treasury stock                                                                       |                                                    |                                                | (45,596   
|Dividends paid                                                                                   |                                                    |                                                | (30,125   
|Payment for facilities lease refinancing                                                         |                                                    |                                                | (27,947   
|Issuance of notes payable                                                                        |                                                    |                                                |          
|Repayment of notes payable                                                                       |                                                    |                                                |          
|Other financing activities, net                                                                  |                                                    |                                                | (2,667    
|                                                                                                 |                                                    |                                                |           
|                                                                                                 | Cash provided by (used for) financing activities   |                                                |           
|Increase in cash                                                                                 |                                                    |                                                | 19,686    
|Cash at beginning of the period                                                                  |                                                    |                                                | 21,176    
|                                                                                                 |                                                    |                                                |           
|Cash at end of the period                                                                        |                                                    | $                                              | 40,862    
|                                                                                                 |                                                    |                                                |           
|                                                                                                 | Cash payments for income taxes                     |                                                | $         
|                                                                                                 |                                                    |                                                |           
|                                                                                                 | Cash payments for interest                         |                                                | $         
|                                                                                                 |                                                    |                                                |           

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

57

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SABRE HOLDINGS CORPORATION        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (in thousands)

---

|                                                                                                                               |                                                                                     | Class A
Common
Stock |       | Class B
Common
Stock |   | Additional
Paid-in
Capital |   | Retained
Earnings |           | Accumulated
Other
Comprehensive
Income
(Loss) |   | Treasury
Stock |         | Total |        
|------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | -------------------- | ----- | -------------------- | - | -------------------------- | - | ----------------- | --------- | --------------------------------------------- | - | -------------- | ------- | ----- | -------
|Balance at December 31, 2000                                                                                                   |                                                                                     | $                    | 1,321 |                      | $ |                           |   | $                 | 660,392   |                                               | $ | 196,759        |         | $     | 111    
|Issuance of 3,063 shares of Class A common stock pursuant to stock option, restricted stock incentive and stock purchase plans |                                                                                     |                      | 30    |                      |   |                           |   |                   | 42,081    |                                               |   |               |         |       |       
|Tax benefit from exercise of employee stock options                                                                            |                                                                                     |                      |      |                      |   |                           |   |                   | 31,126    |                                               |   |               |         |       |       
|Purchase of treasury stock                                                                                                     |                                                                                     |                      |      |                      |   |                           |   |                   |          |                                               |   |               |         |       |       
|Reclassification of US Airways options to equity instruments                                                                   |                                                                                     |                      |      |                      |   |                           |   |                   | 100,447   |                                               |   |               |         |       |       
|Change in fair value of contingent warrants to be issued to customer                                                           |                                                                                     |                      |      |                      |   |                           |   |                   | (10,977   | )                                             |   |               |         |       |       
|Comprehensive income:                                                                                                          |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               | Net earnings                                                                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                | 31,227  |       |        
|                                                                                                                               | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized gain on investments, net of deferred income taxes                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized foreign currency translation loss                                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Total comprehensive income                                                                                                     |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Other                                                                                                                          |                                                                                     |                      |      |                      |   |                           |   |                   | (4,327    | )                                             |   |               |         |       |       
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Balance at December 31, 2001                                                                                                   |                                                                                     |                      | 1,351 |                      |   |                           |   |                   | 818,742   |                                               |   | 227,986        |         |       | 3,176  
|Issuance of 1,615 shares of Class A common stock pursuant to stock option, restricted stock incentive and stock purchase plans |                                                                                     |                      | 16    |                      |   |                           |   |                   | 33,145    |                                               |   |               |         |       |       
|Issuance of 9,430 shares of Class A common stock pursuant to equity offering                                                   |                                                                                     |                      | 94    |                      |   |                           |   |                   | 399,669   |                                               |   |               |         |       |       
|Settlement of warrants issued in connection with business combination                                                          |                                                                                     |                      |      |                      |   |                           |   |                   | (15,972   | )                                             |   |               |         |       |       
|Conversion of vested stock options pursuant to the acquisition of Travelocity.com minority interest                            |                                                                                     |                      |      |                      |   |                           |   |                   | 14,209    |                                               |   |               |         |       |       
|Tax benefit from exercise of employee stock options                                                                            |                                                                                     |                      |      |                      |   |                           |   |                   | 9,687     |                                               |   |               |         |       |       
|Purchases of treasury stock                                                                                                    |                                                                                     |                      |      |                      |   |                           |   |                   |          |                                               |   |               |         |       |       
|Stock based compensation for employees and consultants                                                                         |                                                                                     |                      |      |                      |   |                           |   |                   | 16,933    |                                               |   |               |         |       |       
|Other                                                                                                                          |                                                                                     |                      | (3    | )                    |   |                           |   |                   | (7,561    | )                                             |   |               |         |       |       
|Comprehensive income:                                                                                                          |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               | Net earnings                                                                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                | 214,144 |       |        
|                                                                                                                               | Minimum pension liability adjustment, net of deferred income taxes                  |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized loss on investments, net of deferred income taxes                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized foreign currency translation gain                                        |                      |       |                     |   |                            |  |                   |           |                                               |   |                |        |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Total comprehensive income                                                                                                     |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Other                                                                                                                          |                                                                                     |                      | (10   | )                    |   |                           |   |                   | 249       |                                               |   |               |         |       |       
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Balance at December 31, 2002                                                                                                   |                                                                                     |                      | 1,448 |                      |   |                           |   |                   | 1,269,101 |                                               |   | 442,130        |         |       | (16,024
|Issuance of 885 shares of Class A common stock pursuant to stock option, restricted stock incentive and stock purchase plans   |                                                                                     |                      | 9     |                      |   |                           |   |                   | 10,306    |                                               |   |               |         |       |       
|Tax benefit from exercise of employee stock options                                                                            |                                                                                     |                      |      |                      |   |                           |   |                   | 736       |                                               |   |               |         |       |       
|Purchases of treasury stock                                                                                                    |                                                                                     |                      |      |                      |   |                           |   |                   |          |                                               |   |               |         |       |       
|Stock based compensation for employees and consultants                                                                         |                                                                                     |                      |      |                      |   |                           |   |                   | 11,586    |                                               |   |               |         |       |       
|Dividends                                                                                                                      |                                                                                     |                      |      |                      |   |                           |   |                   |          |                                               |   | (30,125        | )       |       |       
|Comprehensive income:                                                                                                          |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               | Net earnings                                                                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                | 83,301  |       |        
|                                                                                                                               | Minimum pension liability adjustment, net of deferred income taxes                  |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized loss on investments, net of deferred income taxes                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               | Unrealized foreign currency translation gain                                        |                      |       |                     |   |                            |  |                   |           |                                              |   |                |        |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Total comprehensive income                                                                                                     |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Other                                                                                                                          |                                                                                     |                      |      |                      |   |                           |   |                   | 112       |                                               |   | 66             |         |       |       
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        
|Balance at December 31, 2003                                                                                                   |                                                                                     | $                    | 1,457 |                      | $ |                           |   | $                 | 1,291,841 |                                               | $ | 495,372        |         | $     | (8,115 
|                                                                                                                               |                                                                                     |                      |       |                      |   |                            |   |                   |           |                                               |   |                |         |       |        

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

58

---



SABRE HOLDINGS CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

---

1.    General Information



---

2 Sabre,
Direct Connect, eVoya, Turbo Sabre, eMergo, Travelocity, Travelocity.com, Travelocity.ca, Site59 and GetThere are registered trademarks, and Sabre Holdings, Sabre Travel
Network, Sabre Airline Solutions, Basic Booking Request, Jurni Network, SabreSonic, Sabre Exclusives, Travelocity Business and TotalTrip are trademarks of an affiliate of Sabre Holdings Corporation.
All other trademarks are the property of their respective owners. ©2004 Sabre Holdings Corporation. All rights reserved.



2.    Summary of Significant Accounting Policies



59

---



Property and equipment:Buildings, including buildings under capital lease

Lesser of lease term or 35 yearsFurniture and fixtures

5 to 15 yearsLeasehold improvements

Lesser of lease term or useful lifeComputer/service contract equipment

3 to 5 yearsComputer software

3 to 7 yearsOther assets:Capitalized software development costs

3 to 7 yearsIntangible assets

1 to 20 yearsGoodwill (prior to January 1, 2002)

3 to 20 years




60

---



61

---



62

---



63

---



64

---



65

---



Year Ended
December 31,
2001Reported loss from continuing operations

$
(46,953
)Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interests


211,998Adjusted income from continuing operations

$
165,045Reported net earnings

$
31,227Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interests


211,998Adjusted net earnings

$
243,225Earnings per shareBasic:Reported loss from continuing operations

$
(.35
)Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interest


1.60Adjusted income from continuing operations

$
1.25Reported net earnings

$
..24Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interest


1.60Adjusted net earnings

$
1.84Diluted:Reported loss from continuing operations

$
(.35
)Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interest


1.60Adjusted income from continuing operations

$
1.25Reported net earnings

$
.24Goodwill and indefinite lived intangible assets amortization, net of income taxes and minority interests


1.60Adjusted net earnings

$
1.84




66

---



December 31, 2003

December 31, 2002Weighted
Average
Useful Lives

Gross Carrying
Amount, at Cost

Accumulated
Amortization

Gross Carrying
Amount, at Cost

Accumulated
AmortizationNot subject to amortization:Goodwill



$
872,711

$


$
819,856

$
Tradenames, trademarks and domain names




27,599





21,980


900,310





841,836


Subject to amortization:Purchased technology

4 years


146,105


(102,670
)

129,766


(68,961
)Acquired customer relationships and database

6 years


50,946


(18,140
)

36,687


(10,834
)Non-compete agreements

3 years


18,204


(14,415
)

17,059


(11,634
)Acquired contracts, supplier and distributor agreements

3 years


21,438


(19,503
)

29,369


(13,526
)236,693


(154,728
)

212,881


(104,955
)Total



$
1,137,003

$
(154,728
)
$
1,054,717

$
(104,955
)




2004

$
42,8222005


15,7882006


9,7162007


8,0102008


5,629


67

---



Sabre Travel
Network

Travelocity

Sabre Airline
Solutions

TotalBalance at December 31, 2001

$
310,126

$
289,232

$
27,427

$
626,785Goodwill acquired





198,341


1,457


199,798Goodwill adjustments


(3,160
)

(3,249
)

(318
)

(6,727
)Balance at December 31, 2002


306,966


484,324


28,566


819,856Goodwill acquired


14,496


37,353





51,849Goodwill adjustments


3,793


(4,367
)

1,580


1,006Balance at December 31, 2003

$
325,255

$
517,310

$
30,146

$
872,711




68

---



Year Ended December 31,2003

2002

2001Denominator for basic earnings per common share  weighted-average shares

142,321

140,337

132,317Dilutive effect of stock awards and options

1,086

2,222

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

143,407

142,559

132,317




69

---



Year Ended December 31,2003

2002

2001Net earnings as reported

$
83,301

$
214,144

$
31,227Add stock compensation expense, net of income taxes determined under intrinsic value method


7,531


19,794


15,934Less total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes


(48,063
)

(41,928
)

(48,373
)Pro forma net earnings (loss)

$
42,769

$
192,010

$
(1,212
)Net earnings per common share, as reported:Basic

$
.59

$
1.53

$
.24Diluted

$
.58

$
1.50

$
.24Net earnings (loss) per common share, pro forma:Basic

$
.30

$
1.37

$
(.01
)Diluted

$
.30

$
1.35

$
(.01
)


70

---

SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---



Year Ended December 31,2003

2002

2001Average risk-free interest rate


2.8
%

4.3
%

4.6
%Expected life (in years)


4.5


4.5


4.5Dividend yield


0.1
%

0.0
%

0.0
%Volatility


53.6
%

53.3
%

41.6
%Fair value

$
8.60

$
18.02

$
17.30




71

---



Minimum Pension Liability Adjustment

Unrealized Gains On Foreign Currency Forward Contracts

Unrealized
Gains/(Losses)
on Investments

Unrealized Foreign Currency Translation Gains/(Losses)

Total Accumulated Other Comprehensive Income (Loss)Balance at, December 31, 2001

$


$
802

$
2,483

$
(109
)
$
3,1762002 other comprehensive income, net of income taxes


(21,638
)

4,174


(1,867
)

131


(19,200
)Ending balance, December 31, 2002

$
(21,638
)
$
4,976

$
616

$
22

$
(16,024
)2003 other comprehensive income, net of income taxes


(1,223
)

1,437


710


6,985


7,909Ending balance, December 31, 2003

$
(22,861
)
$
6,413

$
1,326

$
7,007

$
(8,115
)




72

---





73

---



3.    EDS Transaction



74

---



Year Ended
December 31, 2001Revenues

$
370,007Income before provision for income taxes

$
59,060Provision for income taxes


22,755Income from discontinued operations, net

$
36,305




4.    Marketable Securities

Marketable securities consist of (in thousands):

December 31,2003

2002Corporate notes

$
702,422

$
465,624U.S. Government agency and treasury notes


105,850


185,602Mortgages


26,797


158,146Overnight investments and time deposits


35,028


58,495Asset-backed securities


11,652


22,717Total

$
881,749

$
890,584


75

---



December 31,2003

2002Due in one year or less

$
260,174

$
145,709Due after one year through three years


260,848


512,872Due after three years


360,727


232,003Total

$
881,749

$
890,584




5.    Mergers and Acquisitions



76

---



Current assets acquired

$
2,846Liabilities assumed


(5,198
)Other assets acquired


65Affiliate network (5 year useful life)


8,000Brand names and domain names (indefinite life)


3,600Purchased technology (3 year useful life)


2,100Other intangible assets (weighted average life of 3 years)


1,700Goodwill


37,353Total purchase price

$
50,466




77

---



Minority interest assumed

$
252,597Deferred income tax asset, net


21,665Supplier and distributor agreements (weighted-average life of 3 years)


20,208Proprietary software (weighted-average life of 3 years)


2,256Customer database (weighted-average life of 7 years)


3,739Tradenames, trademarks and domain names (indefinite life)


13,698Goodwill


160,146Total purchase price

$
474,309




78

---



Working capital acquired

$
1,770Property and equipment and other non-current assets


824Software


1,352Non-current liabilities


(75
)Supplier agreements (weighted-average life of 1.5 years)


900Tradenames, trademarks and domain names (indefinite life)


600Goodwill


38,195Total purchase price

$
43,566


79

---



Year Ended December 312002

2001(Unaudited)Revenues

$
2,056,466

$
2,144,961Income (loss) from continuing operations

$
220,777

$
(80,233
)Income (loss) before cumulative effect of change in accounting method

$
220,777

$
(5,156
)Net earnings (loss)

$
220,777

$
(2,053
)Earnings (loss) from continuing operations per common shareBasic

$
1.57

$
(.61
)Diluted

$
1.55

$
(.61
)Net earnings (loss) per common shareBasic

$
1.57

$
(.02
)Diluted

$
1.55

$
(.02
)




80

---



Working capital acquired

$
745Long term assets and liabilities


1,049Non-compete agreements (weighted average life of 4 years)


13,200Customer relationships (weighted life of 7 years)


24,800Goodwill


6,594Total purchase price

$
46,388




6.    Significant Events and Transactions



81

---



82

---



Severance

Facilities

TotalEstimated cost of 2001 workforce reduction

$
19,945

$
8,245

$
28,190Amounts paid in 2001


(3,055
)

(513
)

(3,568
)Remaining liability at December 31, 2001


16,890


7,732


24,622Estimated cost of 2002 workforce reduction


15,791





15,791Amounts paid in 2002


(17,520
)

(2,672
)

(20,192
)Revisions of estimated cost of 2001 workforce reduction


(2,365
)

(3,889
)

(6,254
)Remaining liability at December 31, 2002


12,796


1,171


13,967Estimated cost of 2003 workforce reduction


17,938





17,938Estimated cost of 2003 facilities consolidation





17,241


17,241Assets written off due to facilities consolidation





(9,844
)

(9,844
)Amounts paid in 2003


(21,868
)

(4,304
)

(26,172
)Revisions of estimated cost of 2002 workforce reduction


(925
)




(925
)Remaining liability at December 31, 2003

$
7,941

$
4,264

$
12,205




83

---



84

---



7.    Derivatives



85

---



86

---



December 31,2003

2002Foreign currency forwards

$
9,739

$
7,019Warrants





2,213Interest rate swaps


8,740


21,397Total

$
18,479

$
30,629




87

---

8.    Debt



88

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

9.    Commitments and Contingencies



Year Ending December 31,2004

$
9,6072005


9,6072006


9,6072007


9,6072008


9,6072009 and thereafter


202,531Total before interest


250,566Amounts representing interest


(83,004
)Total obligations under capital lease


167,562Less fair value of interest rate swap (Note 7)


(5,966
)Less current portion


(871
)Long-term capital lease obligation

$
160,725




89

---



2004

$
34,7002005


29,000$
63,700




2004

$
15,0002005


13,000$
28,000


90

---



Payments Due by PeriodContractual Obligations

Total

2004

2005-2006

2007-2008

2009 and
ThereafterNotes payable (1)

$
635,200

$
29,400

$
58,800

$
58,800

$
488,200Capital lease obligations (2)


251,701


10,742


19,214


19,214


202,531Operating lease obligations


54,519


15,825


18,206


12,402


8,086IT Outsourcing Agreement (3)


279,236


95,729


168,071


15,436


AOL Agreement


28,000


15,000


13,000





Yahoo Agreement


63,700


34,700


29,000





Other long-term obligations (4)


111,375


56,215


33,752


2,412


18,996Amounts receivable under non-cancelable subleases (5)


(47,833
)

(6,592
)

(13,141
)

(13,400
)

(14,700
)Total contractual cash obligations

$
1,375,898

$
251,019

$
326,902

$
94,864

$
703,113


---





91

---



10.  Employee Benefit Plans



92

---



Pension Benefits

Other Benefits2003

2002

2003

2002Change in benefit obligation:Benefit obligation at January 1

$
(315,050
)
$
(243,020
)
$
(97,966
)
$
(77,150
)Service cost


(6,153
)

(7,052
)

(3,594
)

(3,213
)Interest cost


(20,251
)

(19,219
)

(6,990
)

(5,671
)Actuarial gains (losses), net


16,391


(46,088
)

(16,549
)

(14,667
)Transfer





(4,166
)




(171
)Settlements


1,122








Benefits paid


5,156


4,495


3,687


2,906Benefit obligation at December 31

$
(318,785
)
$
(315,050
)
$
(121,412
)
$
(97,966
)Change in plan assets:Fair value of assets at January 1

$
201,778

$
186,245




$
10,949Actual return on plan assets


41,090


(14,256
)




Transfers


354


3,481





Settlements


(1,443
)







Employer contributions


15,860


30,805


3,690


(10,949
)Participant contributions








489


Benefits paid


(5,211
)

(4,495
)

(4,179
)

Fair value at December 31

$
252,428

$
201,780

$


$
Funded status:Funded status at December 31

$
(66,357
)
$
(113,270
)
$
(121,412
)
$
(97,966
)Unrecognized transition (asset) obligation


(241
)

(334
)

144


161Unrecognized prior service cost


591


652


2,423


2,743Unrecognized net losses


72,010


110,714


30,786


16,037Prepaid (accrued) cost recognized

$
6,003

$
(2,238
)
$
(88,059
)
$
(79,025
)


93

---



Pension Benefits

Other Benefits2003

2002

2003

2002Prepaid benefit cost

$
13,556

$
3,505

$


$
38Accrued benefit liability


(45,346
)

(40,785
)

(88,059
)

(79,063
)Accumulated other comprehensive income


37,793


35,042





Prepaid (accrued) cost recognized

$
6,003

$
(2,238
)
$
(88,059
)
$
(79,025
)




Pension Benefits

Other Benefits2003

2002

2003

2002Weighted-average assumptions:Discount rate

6.25
%
6.75
%
6.25
%
6.75
%Rate of compensation increase

4.50
%
6.60
%







Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Components of total periodic benefit cost:Service cost

$
6,153

$
7,052

$
9,891

$
3,594

$
3,213

$
4,047Interest cost


20,251


19,219


18,372


6,990


5,670


5,457Expected return on plan assets


(21,911
)

(20,848
)

(16,376
)







(1,003
)Amortization of transition asset


(19
)

(24
)

7


18


18


Amortization of prior service cost


61


61


57


321


321


410Amortization of net loss


2,130


332


1,045


1,801


206


156Net periodic benefit cost


6,665


5,792


12,996


12,724


9,428


9,067Settlement gain


503














Curtailment gains








(69
)







(5,491
)Total periodic benefit cost

$
7,168

$
5,792

$
12,927

$
12,724

$
9,428

$
3,576


94

---



Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Weighted-average assumptions:Discount rate

6.75
%
7.25
%
7.50
%
6.75
%
7.25
%
7.50
%Expected return on plan assets

9.00
%
9.50
%
9.50
%




Rate of compensation increase

6.60
%
6.60
%
6.60
%









One percent
increase

One percent
decreaseImpact on 2003 service and interest cost

$
1,993

$
(1,551
)Impact on postretirement benefit obligation as of December 31, 2003

$
18,902

$
(15,086
)




Asset Allocation at December 31,Asset Category:

Target 2003
Allocation

2003

2002Equity securities

53%-59
%
56
%
67
%Debt securities

41%-47
%
44
%
33
%Total plan assets

100.0
%
100.0
%
100.0
%




95

---

SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

11.    Income Taxes



Year Ended December 31,2003

2002

2001Current portion:Federal

$
29,216

$
56,045

$
66,547State


1,547


2,072


3,306Foreign


17,150


13,603


8,984Total current


47,913


71,720


78,837Deferred portion:Federal


(5,119
)

42,579


720State


1,282


10,625


1,406Total deferred


(3,837
)

53,204


2,126Total provision for income taxes

$
44,076

$
124,924

$
80,963




Year Ended December 31,2003

2002

2001Income tax provision at statutory federal income tax rate

$
44,582

$
118,674

$
11,718State income taxes, net of federal tax benefit


1,839


8,253


3,063Non-deductible goodwill amortization








69,970Other, net


(2,345
)

(2,003
)

(3,788
)Total provision for income taxes

$
44,076

$
124,924

$
80,963




96

---



December 31,2003

2002Deferred tax assets:Accrued expenses

$
47,970

$
50,982Employee benefits other than pensions


33,857


30,825Deferred revenue


1,966


2,139Pension obligations


6,776


7,139Net operating loss carryforwards


28,417


35,426Deferred costs


40,534


40,770Total deferred tax assets


159,520


167,281Deferred tax liabilities:Foreign operations


(4,991
)

(4,471
)Depreciation and amortization


(18,828
)

(28,981
)Amortization of computer software and intangible assets


(61,142
)

(73,005
)Other


(68,742
)

(58,851
)Total deferred tax liabilities


(153,703
)

(165,308
)Net deferred tax asset

$
5,817

$
1,973Current deferred income tax asset

$
10,237

$
15,728Noncurrent deferred income tax liability


(4,420
)

(13,755
)Net deferred tax asset

$
5,817

$
1,973




97

---



12. Capital Stock



98

---



13. Options and Other Stock-Based Awards



Year Ended December 31,2003

2002

2001Outstanding at January 1

342,219

447,246

841,219Granted

654,878

25,000

13,000Issued

(45,358
)
(118,423
)
(342,785
)Canceled

(220,318
)
(11,604
)
(64,188
)Outstanding at December 31

731,421

342,219

447,246


99

---



Year Ended December 31,2003

2002

2001Outstanding at January 1

145,124

292,509

466,147Awards settled in cash



(133,201
)
(153,405
)Canceled

(145,124
)
(14,184
)
(20,233
)Outstanding at December 31



145,124

292,509




100

---



|                                               |  | Year Ended December 31,
|---------------------------------------------- |  | -----------------------
|
|
|Outstanding at January 1                       |  | 14,399,181             
|Granted                                        |  | 3,290,234              
|Exercised                                      |  | (223,535               
|Canceled                                       |  | (2,310,548             
|Converted Travelocity.com options              |  |                       
|                                               |  |                        
|Outstanding at December 31                     |  | 15,155,332             
|                                               |  |                        
|Exercisable options outstanding at December 31 |  | 8,705,297              
|                                               |  |                        



|                   |  | Options Outstanding |  | Options Exercisable
|------------------ |  | ------------------- |  | -------------------
|
|$  0.16 - $  15.99 |  | 82,970              |  | 5.31               
|$16.00 - $  25.99  |  | 4,163,099           |  | 7.98               
|$26.00 - $  35.99  |  | 1,895,812           |  | 5.86               
|$36.00 - $  48.99  |  | 7,461,896           |  | 7.42               
|$49.00 - $  60.99  |  | 1,329,934           |  | 6.25               
|$61.00 - $105.06   |  | 221,621             |  | 5.98               
|                   |  |                     |  |                    
|Total              |  | 15,155,332          |  | 7.24               
|                   |  |                     |  |                    



101

---



14. Business Segments



102

---



103

---



Year Ended December 31,2003

2002

2001Revenues from external customers excluding special items:Sabre Travel Network

$
1,482,435

$
1,584,564

$
1,668,825Travelocity


286,207


242,079


241,917Sabre Airline Solutions


232,354


216,847


216,178Total

$
2,000,996

$
2,043,490

$
2,126,920Intersegment revenues:Sabre Travel Network

$
26,883

$
27,706

$
27,816Travelocity


115,048


101,660


82,220Sabre Airline Solutions








Total

$
141,931

$
129,366

$
110,036Equity in net income (loss) of equity method investees:Sabre Travel Network

$
14,456

$
17,943

$
18,041Travelocity


(14,583
)

(4,967
)

Total

$
(127
)
$
12,976

$
18,041Segment revenues, excluding special items:Sabre Travel Network

$
1,523,774

$
1,630,213

$
1,714,682Travelocity


386,672


338,772


324,137Sabre Airline Solutions


232,354


216,847


216,178Elimination of intersegment revenues


(141,931
)

(129,366
)

(110,036
)Total

$
2,000,869

$
2,056,466

$
2,144,961Revenue special items:Sabre Travel Networksettlement revenue from canceled subscriber contract

$
36,458

$


$
Travelocityrecognition of deferred warrant revenue upon termination of Hotels.com agreement


7,836





$
44,294

$


$
Consolidated revenues:Sabre Travel Network

$
1,560,232

$
1,630,213

$
1,714,682Travelocity


394,508


338,772


324,137Sabre Airline Solutions


232,354


216,847


216,178Elimination of intersegment revenues


(141,931
)

(129,366
)

(110,036
)Total

$
2,045,163

$
2,056,466

$
2,144,961


104

---



Year Ended December 31,2003

2002

2001Segment operating income (loss) excluding special items:Sabre Travel Network

$
234,731

$
437,743

$
375,209Travelocity


(54,900
)

(37,456
)

(25,524
)Sabre Airline Solutions


21,100


20,059


38,098Net corporate allocations


(2,963
)

(6,272
)

(73,826
)Total

$
197,968

$
414,074

$
313,957Impact of special items on operating income(increase)/decrease:Sabre Travel Network:Settlement revenue from canceled subscriber contract

$
(36,458
)
$


$
Other intangibles amortization


12,789


16,588


89,393Write-off of software which will not be utilized








5,975Stock compensation


735


1,015


2,725Restructuring expenses


(288
)

3,685


13,218Facilities consolidation


222





Total


(23,000
)

21,288


111,311Travelocity:Recognition of deferred revenue upon termination of Hotels.com agreement


(7,836
)




Other intangibles amortization and impairment


41,554


35,003


179,474Stock compensation


7,856


25,769


6,612Restructuring expenses


(37
)

19


5,461Facilities consolidation


3,894





Tender offer expenses





7,111


Total


45,431


67,902


191,547Sabre Airline Solutions:Other intangibles amortization





94


8,657Stock compensation


118


105


255Restructuring expenses


(231
)

2,181


3,006Facilities consolidation


42





Total


(71
)

2,380


11,918Corporate:Litigation insurance


(450
)

1,350


Restructuring expenses


(370
)

3,654


7,890Facilities consolidation


10,198





Total


9,378


5,004


7,890Total special items

$
31,738

$
96,574

$
322,666Operating income (loss):Sabre Travel Network

$
257,731

$
416,455

$
263,898Travelocity


(100,331
)

(105,358
)

(217,071
)Sabre Airline Solutions


21,171


17,679


26,180Unallocated corporate expenses


(12,341
)

(11,276
)

(81,716
)Total

$
166,230

$
317,500

$
(8,709
)


105

---



December 31,2003

2002

2001Depreciation and amortization included in income from continuing operations (in thousands):Sabre Travel Network

$
54,489

$
46,429

$
79,202Travelocity


65,988


56,850


270,992Sabre Airline Solutions


15,527


8,970


32,318Unallocated depreciation and amortization





4,699


6,426Total consolidated depreciation and amortization included in income from continuing operations

$
136,004

$
116,948

$
388,938Amortization of goodwill and intangible assets included in income from continuing operations, including special items (in thousands):Sabre Travel Network

$
12,788

$
16,588

$
89,393Travelocity


41,554


35,042


179,473Sabre Airline Solutions


1,959


1,794


8,656Total amortization of goodwill and intangible assets included in income from continuing operations

$
56,301

$
53,424

$
277,522Segment assets (in thousands):Sabre Travel Network

$
872,165

$
874,289

$
699,718Travelocity


677,965


714,436


618,321Sabre Airline Solutions


363,017


339,401


358,840Unallocated cash, investments, corporate headquarters and other


1,043,006


831,948


699,138Total consolidated assets

$
2,956,153

$
2,760,074

$
2,376,017




Year Ended December 31,2003

2002

2001Capital expenditures for segment assets:Sabre Travel Network

$
29,577

$
23,392

$
62,348Travelocity


19,169


18,054


19,557Sabre Airline Solutions


12,229


16,139


70,949Unallocated capital expenditures


10,491


5,065


5,553Total capital expenditures

$
71,466

$
62,650

$
158,407


106

---



Year Ended December 31,2003

2002

2001Revenues from continuing operations:United States

$
1,142,893

$
1,248,314

$
1,459,075Foreign


902,270


808,152


685,886Total

$
2,045,163

$
2,056,466

$
2,144,961


December 31,2003

2002

2001Long-lived assets:United States

$
1,313,023

$
1,186,873

$
1,025,923Singapore (primarily investment in joint venture)


147,741


151,399


152,733Other foreign


113,522


106,616


105,123Total

$
1,574,286

$
1,444,888

$
1,283,779


15. Quarterly Financial Information (Unaudited)



First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter2003Revenues

$
543,833

$
507,189

$
526,793

$
467,348Operating income (loss)


103,894


40,392


43,866


(21,922
)Net earnings (loss)


64,879


6,816


25,449


(13,843
)Earnings per common share:Basic

$
.46

$
.05

$
.18

$
(.10
)Diluted

$
.45

$
.05

$
.18

$
(.10
)


107

---

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter2002Revenues

$
549,358

$
536,748

$
517,374

$
452,986Operating income


119,994


104,304


87,474


5,728Net earnings


87,387


67,965


57,921


871Earnings per common share:Basic

$
.66

$
.48

$
.40

$
.01Diluted

$
.64

$
.47

$
.40

$
.01




16. Supplemental Guarantor/Non-Guarantor Financial Information



108

---



109

---





SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

CONDENSED CONSOLIDATING BALANCE SHEETS  DECEMBER 31, 2003  (in thousands)

| |                                      | Sabre Holdings                             |                                            | Sabre Inc. |           | Non-
Guarantor
Subsidiaries |           | Eliminating
Entries |           | Sabre
Consolidated
| | ------------------------------------ | ------------------------------------------ | ------------------------------------------ | ---------- | --------- | --------------------------- | --------- | ------------------- | --------- | ------------------
| | Assets                               |                                            |                                            |            |           |                             |           |                     |           |                   
| | Current assets                       |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      | Cash and marketable securities             |                                            | $          |          |                             | $         | 889,638             |           | $                 
| |                                      | Accounts receivabletrade, net             |                                            |            |          |                             |           | 254,656             |           |                   
| |                                      | Intercompany accounts receivable (payable) |                                            |            | 1,529,296 |                             |           | (1,650,772          | )         |                   
| |                                      | Prepaid expenses                           |                                            |            |          |                             |           | 42,478              |           |                   
| |                                      | Deferred income taxes                      |                                            |            |          |                             |           | 8,736               |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total current assets                       |            |           | 1,529,296                   |           |                     | (455,264  | )                 
| | Property and equipment, net          |                                            |                                            |           |           |                             | 345,930   |                     |           | 38,450            
| | Investments in joint ventures        |                                            |                                            |           |           |                             | 3,994     |                     |           | 177,148           
| | Goodwill and intangible assets, net  |                                            |                                            |           |           |                             | 10,269    |                     |           | 877,929           
| | Investments in subsidiaries          |                                            |                                            | 572,696    |           |                             | 1,260,428 |                     |           |                  
| | Other assets, net                    |                                            |                                            | 17,057     |           |                             | 79,210    |                     |           | 37,855            
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| | Total assets                         |                                            | $                                          | 2,119,049  |           | $                           | 1,244,567 |                     | $         | 1,425,661         
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| | Liabilities and stockholders' equity |                                            |                                            |            |           |                             |           |                     |           |                   
| | Current liabilities                  |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      | Accounts payable                           |                                            | $          | 2,926     |                             | $         | 124,189             |           | $                 
| |                                      | Accrued compensation and related benefits  |                                            |            |          |                             |           | 50,554              |           |                   
| |                                      | Other accrued liabilities                  |                                            |            | 7,474     |                             |           | 140,814             |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total current liabilities                  |            |           | 10,400                      |           |                     | 315,557   |                   
| |                                      | Deferred income taxes                      |                                            |            | (24       | )                           |           | 41,022              |           |                   
| |                                      | Pensions and other postretirement benefits |                                            |            |          |                             |           | 133,508             |           |                   
| |                                      | Other liabilities                          |                                            |            | 1,165     |                             |           | 21,059              |           |                   
| |                                      | Minority interests                         |                                            |            |          |                             |           |                    |           |                   
| |                                      | Capital lease obligations                  |                                            |            |          |                             |           | 160,725             |           |                   
| |                                      | Notes payable                              |                                            |            | 427,400   |                             |           |                    |           |                   
| |                                      | Stockholders' equity                       |                                            |            | 1,680,108 |                             |           | 572,696             |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total liabilities and stockholders' equity |            | $         | 2,119,049                   |           | $                   | 1,244,567 |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   

110

---

CONDENSED CONSOLIDATING BALANCE SHEETS  DECEMBER 31, 2002  (in thousands)

| |                                      | Sabre Holdings                             |                                            | Sabre Inc. |           | Non-
Guarantor
Subsidiaries |           | Eliminating
Entries |           | Sabre
Consolidated
| | ------------------------------------ | ------------------------------------------ | ------------------------------------------ | ---------- | --------- | --------------------------- | --------- | ------------------- | --------- | ------------------
| | Assets                               |                                            |                                            |            |           |                             |           |                     |           |                   
| | Current assets                       |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      | Cash and marketable securities             |                                            | $          |          |                             | $         | 898,958             |           | $                 
| |                                      | Accounts receivabletrade, net             |                                            |            |          |                             |           | 223,216             |           |                   
| |                                      | Intercompany accounts receivable (payable) |                                            |            | 1,532,426 |                             |           | (2,094,913          | )         |                   
| |                                      | Prepaid expenses                           |                                            |            |          |                             |           | 38,994              |           |                   
| |                                      | Deferred income taxes                      |                                            |            |          |                             |           | 15,678              |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total current assets                       |            |           | 1,532,426                   |           |                     | (918,067  | )                 
| | Property and equipment, net          |                                            |                                            |           |           |                             | 187,783   |                     |           | 52,289            
| | Investments in joint ventures        |                                            |                                            |           |           |                             | 4,169     |                     |           | 184,833           
| | Goodwill and intangible assets, net  |                                            |                                            |           |           |                             | 10,605    |                     |           | 845,078           
| | Investments in subsidiaries          |                                            |                                            | 529,892    |           |                             | 1,675,167 |                     |           |                  
| | Other assets, net                    |                                            |                                            | 24,058     |           |                             | 100,326   |                     |           | 39,290            
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total assets                               |            | $         | 2,086,376                   |           | $                   | 1,059,983 |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| | Liabilities and stockholders' equity |                                            |                                            |            |           |                             |           |                     |           |                   
| | Current liabilities                  |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      | Accounts payable                           |                                            | $          | 88        |                             | $         | 163,071             |           | $                 
| |                                      | Accrued compensation and related benefits  |                                            |            |          |                             |           | 44,752              |           |                   
| |                                      | Other accrued liabilities                  |                                            |            | 8,381     |                             |           | 169,783             |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total current liabilities                  |            |           | 8,469                       |           |                     | 377,606   |                   
| |                                      | Deferred income taxes                      |                                            |            |          |                             |           | 24,863              |           |                   
| |                                      | Pensions and other postretirement benefits |                                            |            |          |                             |           | 118,943             |           |                   
| |                                      | Other liabilities                          |                                            |            | 564       |                             |           | 8,679               |           |                   
| |                                      | Minority interests                         |                                            |            |          |                             |           |                    |           |                   
| |                                      | Notes payable                              |                                            |            | 435,765   |                             |           |                    |           |                   
| |                                      | Stockholders' equity                       |                                            |            | 1,641,578 |                             |           | 529,892             |           |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   
| |                                      |                                            | Total liabilities and stockholders' equity |            | $         | 2,086,376                   |           | $                   | 1,059,983 |                   
| |                                      |                                            |                                            |            |           |                             |           |                     |           |                   

111

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

CONDENSED CONSOLIDATING STATEMENTS OF INCOME  YEAR ENDED DECEMBER 31, 2003  (in thousands)

|                                  |                          | Sabre
Holdings               |         | Sabre Inc. |         | Non-
Guarantor
Subsidiaries |          | Eliminating
Entries |           | Sabre
Consolidated |      
|--------------------------------- | ------------------------ | ---------------------------- | ------- | ---------- | ------- | --------------------------- | -------- | ------------------- | --------- | ------------------ | -----
|Revenues                          |                          | $                            |        |            | $       | 1,466,162                   |          | $                   | 1,021,897 |                    | $    
|Operating expenses                |                          |                              | 2,632   |            |         | 1,327,518                   |          |                     | 991,679   |                    |      
|                                  |                          |                              |         |            |         |                             |          |                     |           |                    |      
|Operating income (loss)           |                          |                              | (2,632  | )          |         | 138,644                     |          |                     | 30,218    |                    |      
|Other income (expense)            |                          |                              |         |            |         |                             |          |                     |           |                    |      
|                                  | Interest income          |                              |         | 85,600     |         |                             | 11,612   |                     |           | 15,672             |      
|                                  | Interest expense         |                              |         | (17,004    | )       |                             | (100,798 | )                   |           | (2,682             | )    
|                                  | Income from subsidiaries |                              |         | 39,847     |         |                             | 33,872   |                     |           |                   |      
|                                  | Other, net               |                              |         |           |         |                             | (27,826  | )                   |           | (3,062             | )    
|                                  |                          |                              |         |            |         |                             |          |                     |           |                    |      
|                                  |                          | Total other income (expense) |         |            | 108,443 |                             |          | (83,140             | )         |                    | 9,928
|Minority interests                |                          |                              |        |            |         |                            |          |                     | (365      | )                  |      
|                                  |                          |                              |         |            |         |                             |          |                     |           |                    |      
|Income (loss) before income taxes |                          |                              | 105,811 |            |         | 55,504                      |          |                     | 39,781    |                    |      
|Provision for income taxes        |                          |                              | 22,510  |            |         | 15,657                      |          |                     | 5,909     |                    |      
|                                  |                          |                              |         |            |         |                             |          |                     |           |                    |      
|Net income (loss)                 |                          | $                            | 83,301  |            | $       | 39,847                      |          | $                   | 33,872    |                    | $    
|                                  |                          |                              |         |            |         |                             |          |                     |           |                    |      

112

---

CONDENSED CONSOLIDATING STATEMENTS OF INCOME  YEAR ENDED DECEMBER 31, 2002  (in thousands)

|                                  |                          | Sabre
Holdings               |         | Sabre Inc. |         | Non-
Guarantor
Subsidiaries |          | Eliminating
Entries |         | Sabre
Consolidated |       
|--------------------------------- | ------------------------ | ---------------------------- | ------- | ---------- | ------- | --------------------------- | -------- | ------------------- | ------- | ------------------ | ------
|Revenues                          |                          | $                            |        |            | $       | 1,577,252                   |          | $                   | 964,889 |                    | $     
|Operating expenses                |                          |                              | 1,389   |            |         | 1,361,926                   |          |                     | 861,326 |                    |       
|                                  |                          |                              |         |            |         |                             |          |                     |         |                    |       
|Operating income (loss)           |                          |                              | (1,389  | )          |         | 215,326                     |          |                     | 103,563 |                    |       
|Other income (expense)            |                          |                              |         |            |         |                             |          |                     |         |                    |       
|                                  | Interest income          |                              |         | 90,440     |         |                             | 22,064   |                     |         | 22,219             |       
|                                  | Interest expense         |                              |         | (19,047    | )       |                             | (108,449 | )                   |         | (2,674             | )     
|                                  | Income from subsidiaries |                              |         | 168,029    |         |                             | 85,151   |                     |         |                   |       
|                                  | Other, net               |                              |         |           |         |                             | 19,134   |                     |         | (2,333             | )     
|                                  |                          |                              |         |            |         |                             |          |                     |         |                    |       
|                                  |                          | Total other income (expense) |         |            | 239,422 |                             |          | 17,900              |         |                    | 17,212
|Minority interests                |                          |                              |        |            |         |                            |          |                     | 214     |                    |       
|                                  |                          |                              |         |            |         |                             |          |                     |         |                    |       
|Income (loss) before income taxes |                          |                              | 238,033 |            |         | 233,226                     |          |                     | 120,989 |                    |       
|Provision for income taxes        |                          |                              | 23,889  |            |         | 65,197                      |          |                     | 35,838  |                    |       
|                                  |                          |                              |         |            |         |                             |          |                     |         |                    |       
|Net income (loss)                 |                          | $                            | 214,144 |            | $       | 168,029                     |          | $                   | 85,151  |                    | $     
|                                  |                          |                              |         |            |         |                             |          |                     |         |                    |       

113

---

CONDENSED CONSOLIDATING STATEMENTS OF INCOME  YEAR ENDED DECEMBER 31, 2001  (in thousands)

|                                                                                   |                          | Sabre
Holdings               |        | Sabre Inc. |        | Non-
Guarantor
Subsidiaries |         | Eliminating
Entries |         | Sabre
Consolidated |       
|---------------------------------------------------------------------------------- | ------------------------ | ---------------------------- | ------ | ---------- | ------ | --------------------------- | ------- | ------------------- | ------- | ------------------ | ------
|Revenues                                                                           |                          | $                            |       |            | $      | 1,660,384                   |         | $                   | 891,077 |                    | $     
|Operating expenses                                                                 |                          |                              | 1,843  |            |        | 1,607,671                   |         |                     | 951,844 |                    |       
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|Operating income (loss)                                                            |                          |                              | (1,843 | )          |        | 52,713                      |         |                     | (60,767 | )                  |       
|Other income (expense)                                                             |                          |                              |        |            |        |                             |         |                     |         |                    |       
|                                                                                   | Interest income          |                              |        | 37,251     |        |                             | 18,885  |                     |         | 5,774              |       
|                                                                                   | Interest expense         |                              |        | (9,581     | )      |                             | (88,359 | )                   |         | 19,524             |       
|                                                                                   | Income from subsidiaries |                              |        | 14,214     |        |                             | (74,844 | )                   |         |                   |       
|                                                                                   | Other, net               |                              |        |           |        |                             | 42,385  |                     |         | (5,629             | )     
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|                                                                                   |                          | Total other income (expense) |        |            | 41,884 |                             |         | (101,933            | )       |                    | 19,669
|Minority interests                                                                 |                          |                              |       |            |        |                            |         |                     | 22,469  |                    |       
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|Income (loss) from continuing operations before income taxes                       |                          |                              | 40,041 |            |        | (49,220                     | )       |                     | (18,629 | )                  |       
|Provision for income taxes                                                         |                          |                              | 8,814  |            |        | 10,938                      |         |                     | 61,211  |                    |       
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|Income (loss) from continuing operations                                           |                          |                              | 31,227 |            |        | (60,158                     | )       |                     | (79,840 | )                  |       
|Income (loss) from discontinued operations, net                                    |                          |                              |       |            |        | 36,164                      |         |                     | 1,329   |                    |       
|Gain on sale of discontinued operations, net                                       |                          |                              |       |            |        | 38,208                      |         |                     | 564     |                    |       
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|Income before cumulative effect of change in accounting method                     |                          |                              | 31,227 |            |        | 14,214                      |         |                     | (77,947 | )                  |       
|Cumulative effect of accounting method, net of minority interests and income taxes |                          |                              |       |            |        |                            |         |                     | 3,103   |                    |       
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       
|Net income (loss)                                                                  |                          | $                            | 31,227 |            | $      | 14,214                      |         | $                   | (74,844 | )                  | $     
|                                                                                   |                          |                              |        |            |        |                             |         |                     |         |                    |       

114

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  YEAR ENDED DECEMBER 31, 2003  (in thousands)

| |                                                  | Sabre
Holdings                                                                                   |                                             | Sabre Inc. |         | Non-Guarantor
Subsidiaries |         | Eliminating
Entries |          | Sabre
Consolidated |         
| | ------------------------------------------------ | ------------------------------------------------------------------------------------------------ | ------------------------------------------- | ---------- | ------- | -------------------------- | ------- | ------------------- | -------- | ------------------ | --------
| | Operating Activities                             |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  | Net earnings                                                                                     |                                             | $          | 83,301  |                            | $       | 39,847              |          | $                  | 33,872  
| |                                                  | Adjustments to reconcile net earnings to cash provided by operating activities:                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  |                                                                                                  | Depreciation and amortization               |            |         |                           |         |                     | 54,767   |                    |         
| |                                                  |                                                                                                  | Stock compensation                          |            |         |                           |         |                     | 2,522    |                    |         
| |                                                  |                                                                                                  | Deferred income taxes                       |            |         |                           |         |                     | (3,837   | )                  |         
| |                                                  |                                                                                                  | Tax benefit from exercise of stock options  |            |         |                           |         |                     |         |                    |         
| |                                                  |                                                                                                  | Loss on building re-financing               |            |         |                           |         |                     | 27,947   |                    |         
| |                                                  |                                                                                                  | Minority interests                          |            |         |                           |         |                     |         |                    |         
| |                                                  |                                                                                                  | (Income) loss from subsidiaries             |            |         | (39,847                    | )       |                     | (33,872  | )                  |         
| |                                                  |                                                                                                  | Other                                       |            |         | (1,608                     | )       |                     | 6,523    |                    |         
| |                                                  |                                                                                                  | Changes in operating assets and liabilities |            |         | 13,236                     |         |                     | (458,837 | )                  |         
| |                                                  |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  | Cash provided by (used for) operating activities                                                 |                                             |            | 55,082  |                            |         | (364,940            | )        |                    | 571,396 
| | Investing Activities                             |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  | Additions to property and equipment                                                              |                                             |            |        |                            |         | (52,307             | )        |                    | (19,159 
| |                                                  | Business combinations, net of cash acquired                                                      |                                             |            |        |                            |         | (11,934             | )        |                    | (84,180 
| |                                                  | Purchases of marketable securities                                                               |                                             |            |        |                            |         | (7,750,255          | )        |                    | (832    
| |                                                  | Sales of marketable securities                                                                   |                                             |            |        |                            |         | 7,760,587           |          |                    |        
| |                                                  | Proceeds from sale of investments                                                                |                                             |            |        |                            |         |                    |          |                    | 5,054   
| |                                                  | Investments in subsidiaries, net                                                                 |                                             |            | 9,986   |                            |         | 457,129             |          |                    |        
| |                                                  | Other investing activities, net                                                                  |                                             |            |        |                            |         |                    |          |                    | 6,968   
| |                                                  |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| | Cash provided by (used for) investing activities |                                                                                                  |                                             | 9,986      |         |                            | 403,220 |                     |          | (92,149            | )       
| | Financing Activities                             |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  | Contributions from (repayments to) affiliates                                                    |                                             |            |        |                            |         | (9,986              | )        |                    | (457,129
| |                                                  | Proceeds from exercise of stock options and issuance of stock under employee stock purchase plan |                                             |            | 10,541  |                            |         |                    |          |                    |        
| |                                                  | Purchase of treasury stock                                                                       |                                             |            | (45,596 | )                          |         |                    |          |                    |        
| |                                                  | Payment to re-finance buildings                                                                  |                                             |            |        |                            |         | (27,947             | )        |                    |        
| |                                                  | Dividends paid                                                                                   |                                             |            | (30,125 | )                          |         |                    |          |                    |        
| |                                                  | Other financing activities, net                                                                  |                                             |            | 112     |                            |         |                    |          |                    | (2,779  
| |                                                  |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| | Cash provided by (used for) financing activities |                                                                                                  |                                             | (65,068    | )       |                            | (37,933 | )                   |          | (459,908           | )       
| |                                                  | Increase in cash                                                                                 |                                             |            |        |                            |         | 347                 |          |                    | 19,339  
| |                                                  | Cash at beginning of the period                                                                  |                                             |            |        |                            |         | 10,622              |          |                    | 10,554  
| |                                                  |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         
| |                                                  | Cash at end of the period                                                                        |                                             | $          |        |                            | $       | 10,969              |          | $                  | 29,893  
| |                                                  |                                                                                                  |                                             |            |         |                            |         |                     |          |                    |         

115

---

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  YEAR ENDED DECEMBER 31, 2002  (in thousands)

| |                                                  | Sabre
Holdings                                                                                   |                                              | Sabre Inc. |          | Non-Guarantor
Subsidiaries |        | Eliminating
Entries |         | Sabre
Consolidated |         
| | ------------------------------------------------ | ------------------------------------------------------------------------------------------------ | -------------------------------------------- | ---------- | -------- | -------------------------- | ------ | ------------------- | ------- | ------------------ | --------
| | Operating Activities                             |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Net earnings                                                                                     |                                              | $          | 214,144  |                            | $      | 168,029             |         | $                  | 85,151  
| |                                                  | Adjustments to reconcile net earnings to cash provided by operating activities:                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  |                                                                                                  | Depreciation and amortization                |            |          |                           |        |                     | 42,136  |                    |         
| |                                                  |                                                                                                  | Stock compensation                           |            |          |                           |        |                     |        |                    |         
| |                                                  |                                                                                                  | Deferred income taxes                        |            |          |                           |        |                     | 88,375  |                    |         
| |                                                  |                                                                                                  | Tax benefit from exercise of stock options   |            |          | 9,687                      |        |                     |        |                    |         
| |                                                  |                                                                                                  | Minority interests                           |            |          |                           |        |                     |        |                    |         
| |                                                  |                                                                                                  | (Income) loss from subsidiaries              |            |          | (168,029                   | )      |                     | (85,151 | )                  |         
| |                                                  |                                                                                                  | Gain on sale of former headquarters building |            |          |                           |        |                     | (18,308 | )                  |         
| |                                                  |                                                                                                  | Other                                        |            |          | 11,828                     |        |                     | (12,866 | )                  |         
| |                                                  |                                                                                                  | Changes in operating assets and liabilities  |            |          | (453,859                   | )      |                     | 569,039 |                    |         
| |                                                  |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Cash provided by (used for) operating activities                                                 |                                              |            | (386,229 | )                          |        | 751,254             |         |                    | (73,354 
| | Investing Activities                             |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Additions to property and equipment                                                              |                                              |            |         |                            |        | (40,654             | )       |                    | (21,996 
| |                                                  | Business combinations, net of cash acquired                                                      |                                              |            |         |                            |        | (2,963              | )       |                    | (495,545
| |                                                  | Proceeds from exercise of Travelocity.com stock options                                          |                                              |            |         |                            |        |                    |         |                    |        
| |                                                  | Proceeds from sale of former headquarters building                                               |                                              |            |         |                            |        | 80,000              |         |                    |        
| |                                                  | Purchase of data center facility from lessor                                                     |                                              |            |         |                            |        | (92,092             | )       |                    |        
| |                                                  | Proceeds from sale of data center facility                                                       |                                              |            |         |                            |        | 68,464              |         |                    |        
| |                                                  | Proceeds from sale of minority interest in Sabre Pacific                                         |                                              |            |         |                            |        |                    |         |                    | 23,466  
| |                                                  | Purchases of marketable securities                                                               |                                              |            |         |                            |        | (4,373,678          | )       |                    | (321,629
| |                                                  | Sales of marketable securities                                                                   |                                              |            |         |                            |        | 4,018,609           |         |                    | 434,453 
| |                                                  | Proceeds from sale of investments                                                                |                                              |            |         |                            |        |                    |         |                    | 8,807   
| |                                                  | Investments in subsidiaries, net                                                                 |                                              |            | (10,945  | )                          |        | (457,494            | )       |                    |        
| |                                                  | Other investing activities, net                                                                  |                                              |            |         |                            |        | 38,185              |         |                    | (26,107 
| |                                                  |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Cash provided by (used for) investing activities                                                 |                                              |            | (10,945  | )                          |        | (761,623            | )       |                    | (398,551
| | Financing Activities                             |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Contributions from (repayments to) affiliates                                                    |                                              |            |         |                            |        | 10,945              |         |                    | 457,494 
| |                                                  | Proceeds from issuance of common stock                                                           |                                              |            | 399,763  |                            |        |                    |         |                    |        
| |                                                  | Proceeds from exercise of stock options and issuance of stock under employee stock purchase plan |                                              |            | 36,609   |                            |        |                    |         |                    | 33,658  
| |                                                  | Purchase of treasury stock                                                                       |                                              |            | (56,610  | )                          |        |                    |         |                    |        
| |                                                  | Other financing activities, net                                                                  |                                              |            | 17,412   |                            |        |                    |         |                    | (17,502 
| |                                                  |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| | Cash provided by (used for) financing activities |                                                                                                  |                                              | 397,174    |          |                            | 10,945 |                     |         | 473,650            |         
| |                                                  | Increase in cash                                                                                 |                                              |            |         |                            |        | 576                 |         |                    | 1,745   
| |                                                  | Cash at beginning of the period                                                                  |                                              |            |         |                            |        | 10,046              |         |                    | 8,809   
| |                                                  |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         
| |                                                  | Cash at end of the period                                                                        |                                              | $          |         |                            | $      | 10,622              |         | $                  | 10,554  
| |                                                  |                                                                                                  |                                              |            |          |                            |        |                     |         |                    |         

116

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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  YEAR ENDED DECEMBER 31, 2001  (in thousands)

|                     |                                                  | Sabre
Holdings                                                                                   |                                              | Sabre Inc. |          | Non-Guarantor
Subsidiaries |          | Eliminating
Entries |         | Sabre
Consolidated |         
|-------------------- | ------------------------------------------------ | ------------------------------------------------------------------------------------------------ | -------------------------------------------- | ---------- | -------- | -------------------------- | -------- | ------------------- | ------- | ------------------ | --------
|Operating Activities |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  | Net earnings                                                                                     |                                              | $          | 31,227   |                            | $        | 14,214              |         | $                  | (74,844 
|                     |                                                  | Adjustments to reconcile net earnings to cash provided by operating activities:                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  |                                                                                                  | Depreciation and amortization                |            |          |                           |          |                     | 111,862 |                    |         
|                     |                                                  |                                                                                                  | Stock compensation                           |            |          |                           |          |                     |        |                    |         
|                     |                                                  |                                                                                                  | Deferred income taxes                        |            |          |                           |          |                     | (74,892 | )                  |         
|                     |                                                  |                                                                                                  | Tax benefit from exercise of stock options   |            |          | 31,126                     |          |                     |        |                    |         
|                     |                                                  |                                                                                                  | Minority interests                           |            |          |                           |          |                     |        |                    |         
|                     |                                                  |                                                                                                  | (Income) loss from subsidiaries              |            |          | (14,214                    | )        |                     | 74,844  |                    |         
|                     |                                                  |                                                                                                  | Gain on sale of discontinued operations, net |            |          |                           |          |                     | (38,208 | )                  |         
|                     |                                                  |                                                                                                  | Gain on sale of France Telecom shares        |            |          |                           |          |                     | (47,303 | )                  |         
|                     |                                                  |                                                                                                  | Cumulative effect of accounting change, net  |            |          |                           |          |                     |        |                    |         
|                     |                                                  |                                                                                                  | Loss on disposal of equipment                |            |          |                           |          |                     | 8,132   |                    |         
|                     |                                                  |                                                                                                  | Other                                        |            |          |                           |          |                     | 9,858   |                    |         
|                     |                                                  |                                                                                                  | Changes in operating assets and liabilities  |            |          | (504,030                   | )        |                     | 681,994 |                    |         
|                     |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  | Cash provided by (used for) operating activities                                                 |                                              |            | (455,891 | )                          |          | 740,501             |         |                    | 105,627 
|                     | Investing Activities                             |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  | Additions to property and equipment                                                              |                                              |            |         |                            |          | (121,196            | )       |                    | (37,211 
|                     |                                                  | Business combinations, net of cash acquired                                                      |                                              |            |         |                            |          | (9,387              | )       |                    | (45,956 
|                     |                                                  | Proceeds from exercise of Travelocity.com stock options                                          |                                              |            |         |                            |          |                    |         |                    |        
|                     |                                                  | Proceeds from sale of discontinued operations                                                    |                                              |            |         |                            |          | 607,525             |         |                    | 53,238  
|                     |                                                  | Purchases of marketable securities                                                               |                                              |            |         |                            |          | (2,883,251          | )       |                    | (456,974
|                     |                                                  | Sales of marketable securities                                                                   |                                              |            |         |                            |          | 2,466,243           |         |                    | 367,671 
|                     |                                                  | Proceeds from sale of investments                                                                |                                              |            |         |                            |          | 47,303              |         |                    | 38,950  
|                     |                                                  | Purchases of Travelocity.com common stock                                                        |                                              |            |         |                            |          |                    |         |                    | (17,908 
|                     |                                                  | Investments in subsidiaries, net                                                                 |                                              |            | (41,699  | )                          |          | 292                 |         |                    |        
|                     |                                                  | Dividends received                                                                               |                                              |            |         |                            |          | 13,758              |         |                    |        
|                     |                                                  | Other investing activities, net                                                                  |                                              |            |         |                            |          | (36,023             | )       |                    | (3,919  
|                     |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     | Cash provided by (used for) investing activities |                                                                                                  |                                              | (41,699    | )        |                            | 85,264   |                     |         | (102,109           | )       
|                     | Financing Activities                             |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  | Contributions from (repayments to) affiliates                                                    |                                              |            |         |                            |          | 41,699              |         |                    | (292    
|                     |                                                  | Proceeds from exercise of stock options and issuance of stock under employee stock purchase plan |                                              |            | 109,262  |                            |          |                    |         |                    | 13,145  
|                     |                                                  | Purchase of treasury stock                                                                       |                                              |            | (9,064   | )                          |          |                    |         |                    |        
|                     |                                                  | Dividends paid                                                                                   |                                              |            |         |                            |          |                    |         |                    | (13,758 
|                     |                                                  | Issuance of notes payable                                                                        |                                              |            | 397,392  |                            |          |                    |         |                    |        
|                     |                                                  | Repayments of notes payable                                                                      |                                              |            |         |                            |          | (859,000            | )       |                    |        
|                     |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     | Cash provided by (used for) financing activities |                                                                                                  |                                              | 497,590    |          |                            | (817,301 | )                   |         | (905               | )       
|                     |                                                  | Increase in cash                                                                                 |                                              |            |         |                            |          | 8,464               |         |                    | 2,613   
|                     |                                                  | Cash at beginning of the period                                                                  |                                              |            |         |                            |          | 1,582               |         |                    | 6,196   
|                     |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         
|                     |                                                  | Cash at end of the period                                                                        |                                              | $          |         |                            | $        | 10,046              |         | $                  | 8,809   
|                     |                                                  |                                                                                                  |                                              |            |          |                            |          |                     |         |                    |         

117

---

17.  Subsequent Events



118

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.As of the end of the period covered by this report,
our principal executive officer ("CEO") and principal financial officer ("CFO") evaluated the effectiveness of our disclosure controls and procedures. Based on these evaluations, our CEO and CFO
believe (i) that our disclosure controls and procedures have been designed to ensure that information required to be disclosed by us in this Report is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure; and (ii) that our disclosure controls and procedures are functioning as designed.

Limitations on the Effectiveness of Controls.The Company's management, including the CEO and CFO,
does not expect that the Company's disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Further, the design of any control system is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of
these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in internal controls over financial reporting.During the year ended December 31,
2003, there was no change in our internal control over financial reporting (or in other factors) that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting, including any corrective actions required with regard to significant deficiencies or material weaknesses.

Conclusions regarding disclosure controls.Based upon the required evaluation of disclosure controls,
the CEO and CFO have concluded,as of December 31, 2003,that, subject to the limitations noted
above, the Company's disclosure controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to management, including the CEO and
CFO.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Corporate Governance Policy

Sabre Holdings Corporation is committed to conducting its business in a way that reflects best practices as well as the highest standards of legal and ethical
conduct. We want to be a company of integrity and to be perceived as such by everyone who comes in contact with us.

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To
that end, the Board of Directors of the Corporation has approved a comprehensive system of corporate governance documents that collectively constitute the Corporate Governance Policyof Sabre Holdings
Corporation. These documents meet the requirements established by the New York Stock Exchange's corporate
governance listing standards and by the Securities Exchange Commission.

The
Corporate Governance Policy describes the policies, processes and practices followed by our directors, officers and employees in governing the Corporation, and serves as a flexible
framework for sound corporate governance. The Corporate Governance Policy, which includes the Charters of each of the Committees of our Board of Directors and our Business Ethics Policy, is available
on the Corporate Governance section of our Website. Stockholders may request a free copy of the Corporate Governance Guidelines from:

Sabre
Holdings Corporation
Attention: Investor Relations
3150 Sabre Drive
Southlake, TX 76092
682 605 1000

Code of Ethics

Sabre Holdings Corporation and its subsidiaries endeavor to do business according to the highest ethical and legal standards, complying with both the letter and
spirit of the law. Our Board of Directors has approved a Business Ethics Policy that applies to the Corporation's directors, officers (including our principal executive officer, principal financial
officer and controller), employees and contractors around the globe. Our Business Ethics Policy, a component of the Sabre Holdings Corporation Corporate Governance Policy (described below), is
administered by our General Counsel, who acts as the Compliance Officer for the Corporation.

Our
employees are encouraged to report any suspected violations of laws, regulations and the Business Ethics Policy, and all unethical business practices. We provide continuously
monitored hotlines for anonymous reporting by employees, and also obtain annual compliance certifications from all officers and management level employees.

Our
Business Ethics Policy is available on the Corporate Governance section of our Website and Stockholders may request a free copy of the Business Ethics Policy by contacting Investor
Relations at the phone number and address set forth above under "Corporate Governance Policy."

In
addition, within five business days of:



We
will provide information regarding any such amendment or waiver (including the nature of any waiver, the name of the person to whom the waiver was granted and the date of the waiver)
on our Website at the Internet address above, and such information will be available on our Website for at least a 12-month period. In addition, we will disclose any amendments and waivers
to our Business Ethics Policy as required by the listing standards of the New York Stock Exchange.

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ITEM 11.    EXECUTIVE COMPENSATION



ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES



PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)

The financial statements listed in the accompanying index to financial statements and the schedules are filed as part of this report.(2)

The schedules listed in the accompanying index to financial statements and schedules are filed as part of this report.(3)

Exhibits required to be filed by Item 601 of Regulation S-K. The exhibits listed in items 10.1 through 10.22 consist of management contracts or compensatory plans or arrangements.


|Exhibit Number |  | Description of Exhibit                                                                                                                                                        
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(1)                    
|2.2            |  | First Amendment to Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(2) 
|2.3            |  | Second Amendment to Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(3)
|3.1            |  | Second Restated Certificate of Incorporation of Sabre Holdings Corporation(4)                                                                                                 
|3.2            |  | Bylaws of Sabre Holdings Corporation (as amended on July 17, 2001)(5)                                                                                                         
|4.1            |  | Specimen Certificate representing Class A common stock.(6)                                                                                                                    
|4.2            |  | Indenture, dated as of August 3, 2001, between Sabre Holdings Corporation and SunTrust Bank, as Trustee, providing for issuance of debt securities in series(7)               
|               |  |                                                                                                                                                                               

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|4.3   |  | First Supplemental Indenture dated August 7, 2001, between Sabre Holdings Corporation and SunTrust Bank, as Trustee, relating to the 7.35% Notes Due 2011 of Sabre Holdings Corporation(8)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1  |  | Sabre Holdings Deferred Compensation Plan, as amended May 16, 2003(9)                                                                                                                     
|10.2  |  | Travelocity.com LP Second Amended 1999 Long-Term Incentive Plan(10)                                                                                                                       
|10.3  |  | Supplemental Executive Retirement Plan, as Amended (Restoration)(11)                                                                                                                      
|10.4  |  | Supplemental Executive Retirement Plan, as Amended (Officer)(12)                                                                                                                          
|10.5  |  | Supplemental Executive Retirement Plan, as Amended (Grandfathered)(13)                                                                                                                    
|10.6  |  | Form of Executive Termination Benefits Agreement(14)                                                                                                                                      
|10.7  |  | Forms of Addenda to Executive Termination Benefits Agreement with respect to William J. Hannigan, Jeffery M. Jackson and Eric J. Speck.(15)                                               
|10.8  |  | Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and William J. Hannigan.(16)                                                                                          
|10.9  |  | Employment Agreement Addendum between Sabre Inc. and William J. Hannigan.(17)                                                                                                             
|10.10 |  | Employment Agreement Addendum between Sabre Inc. and William J. Hannigan.(18)                                                                                                             
|10.11 |  | Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and Michael S. Gilliland.(9)                                                                                          
|10.12 |  | Form of Addenda to Executive Termination Benefits with respect to David A. Schwarte.(19)                                                                                                  
|10.13 |  | Form of Addenda to Executive Termination Benefits with respect to Michael S. Gilliland, John S. Stow and Michelle A. Peluso(20)                                                           
|10.14 |  | Form of Addenda to Executive Termination Benefits with respect to Thomas Klein(9)                                                                                                         
|10.15 |  | 2000 Stock Option Plan Amended and Restated effective November 13, 2000(21)                                                                                                               
|10.16 |  | 2003 Director Compensation and Deferred Stock Unit Plan(22)                                                                                                                               
|10.17 |  | Form of Sabre Holdings Corporation Cash Award Agreement(23)                                                                                                                               
|10.18 |  | Form of Letter Formalizing Involuntary Termination Benefits(24)                                                                                                                           
|10.19 |  | The Sabre Group Holdings, Inc. 1996 Directors Stock Incentive Plan(25)                                                                                                                    
|10.20 |  | Sabre Holdings Corporation Employee Stock Purchase Plan(26)                                                                                                                               
|10.21 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, dated January 19, 2000, as amended November 13, 2000(27)                                                   
|10.22 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, dated May 14, 2002(9)                                                                                      
|10.23 |  | Option Issuance Agreement, dated January 1, 1998 between Registrant and US Airways, Inc.(28)                                                                                              
|10.24 |  | Credit Agreement, dated as of February 4, 2000, among Sabre Inc., Bank of America, N.A., and the other banks party thereto.(29)                                                           
|10.25 |  | Amendment No. 1, to the Credit Agreement dated as of October 4, 2000, among Sabre Inc., Bank of America, N.A., and the other banks party thereto.(30)                                     
|10.26 |  | Capital Lease Facility with Various Associated Documents dated June 15, 2003, as specified below:                                                                                         
|      |  |                                                                                                                                                                                           

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|     |  | 10.26(a)                                                                                                                                                                                                           |  | Participation Agreement dated as of June 15, 2003, among Sabre Inc., as Lessee, Sabre Holdings Corporation, as Lessee Guarantor, CSL Leasing Inc., as Lessor, the Institutional Investors named therein, as Purchasers, and
Wilmington Trust Company, as Indenture Trustee.(31)                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 10.26(b)                                                                                                                                                                                                           |  | Master Lease and Deed of Trust dated as of June 15, 2003, between Sabre Inc., as Lessee, and CSL Leasing Inc., as Lessor.(31)                                                                                                                                                                                                           
|     |  | 10.26(c)                                                                                                                                                                                                           |  | Lease Supplement No. 1 (Memorandum of Lease Supplement, Memorandum of Master Lease and Deed of Trust, Fixture Filing and Memorandum of Option to Purchase) dated June 26, 2003, between Sabre Inc., as the Lessee and grantor,
 and CSL Leasing Inc., as Lessor and beneficiary, and to Jeffrey A. Rattikin, as trustee and grantee.(31)
|     |  | 10.26(d)                                                                                                                                                                                                           |  | Trust Indenture and Security Agreement dated as of June 15, 2003, between CSL Leasing Inc. and Wilmington Trust Company, as Indenture Trustee.(31)                                                                                                                                                                                      
|     |  | 10.26(e)                                                                                                                                                                                                           |  | Assignment of Lease and Rent and Security Agreement dated as of June 15, 2003, made by CSL Leasing Inc., as Assignor, in favor of Wilmington Trust Company, as Indenture Trustee.(31)                                                                                                                                                   
|     |  | 10.26(f)                                                                                                                                                                                                           |  | Deed of Trust and Security Agreement with Assignment of Rents dated as of June 15, 2003, from CSL Leasing Inc., as grantor, and Sabre Inc., as grantor, to Jeffrey A. Rattikin, as trustee, for the use and benefit of
Wilmington Trust Company, as Indenture Trustee.(31)                                                              
|     |  | 10.26(g)                                                                                                                                                                                                           |  | Lease Guaranty dated as of June 15, 2003, made by Sabre Holdings Corporation, in favor of CSL Leasing Inc., as Lessor, the parties who from time to time become Purchasers under the Operative Documents, and Wilmington
Trust Company, as Indenture Trustee.(31)                                                                       
|12.1 |  | Computation of ratio of earnings to fixed charges for the year ended December 31, 2003.(9)                                                                                                                        
|14.1 |  | Sabre Holdings Corporation Business Ethics Policy.(9)                                                                                                                                                             
|21.1 |  | Subsidiaries of Registrant.(9)                                                                                                                                                                                    
|23.1 |  | Consent of Ernst & Young LLP.(9)                                                                                                                                                                                  
|31.1 |  | Written statement to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Michael S. Gilliland as Chief Executive Officer.(9)           
|31.2 |  | Written statement pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Jeffery M. Jackson as Chief Financial Officer.(9)        
|32.1 |  | Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Michael S. Gilliland as Chief Executive Officer(32)
|     |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                         

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|32.2 |  | Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Jeffery M. Jackson as Chief Financial Officer(32)
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Pursuant
to General Instruction B.2. of Form 8-K, to the extent that the Forms 8-K listed below contain Item 9 and/or Item 12 disclosures, neither those Items of such
Forms 8-K nor any exhibits or appendices incorporated by reference into those Items are incorporated into this Form 10-K or into any other form or report filed with the
Commission into which this Form 10-K would be incorporated by reference.



125

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126

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SABRE HOLDINGS CORPORATION    INDEX TO FINANCIAL STATEMENTS AND SCHEDULES  COVERED BY REPORT OF INDEPENDENT AUDITORS    [Item 15(a)]

Financial Statements

|                                                                                                     |  | Page
|---------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                       |  | 54  
|Consolidated Balance Sheets at December 31, 2003 and 2002                                            |  | 55  
|Consolidated Statements of Income for the Years Ended December 31, 2003, 2002 and 2001               |  | 56  
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001           |  | 57  
|Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003, 2002 and 2001 |  | 58  
|Notes to Consolidated Financial Statements                                                           |  | 59  
|Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2003, 2002 and 2001   |  | 128 



127

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Sabre Holdings Corporation    Schedule IIValuation and Qualifying Accounts    For Each of the Three Years in the Period Ended December 31, 2003    (in thousands)

|                             |                                      |  |   | Additions |  |   |        |    
|---------------------------- | ------------------------------------ |  | - | --------- |  | - | ------ | ---
|
|Year Ended December 31, 2003 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 34,500    |  | $ | (495)  | (3)
|                             | Booking fee cancellation reserve     |  |   | 18,357    |  |   |       |    
|                             | Associate reserves                   |  |   | 7,170     |  |   | 21,247 |    
|Year Ended December 31, 2002 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 41,317    |  | $ | 12,812 |    
|                             | Booking fee cancellation reserve     |  |   | 21,017    |  |   |       |    
|                             | Associate reserves                   |  |   | 2,189     |  |   | 10,831 |    
|Year Ended December 31, 2001 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 21,053    |  | $ | 35,099 |    
|                             | Booking fee cancellation reserve     |  |   | 20,854    |  |   |       |    
|                             | Associate reserves                   |  |   | 1,600     |  |   | 5,283  |    

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128

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Signatures



| |  | SABRE HOLDINGS CORPORATION                                                                                                                          
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | /s/MICHAEL S. GILLILANDMichael S. Gilliland Chief Executive Officer (Principal Executive
Officer)                                                   
| |  | /s/JEFFERY M. JACKSONJeffery M. Jackson Executive Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer)
| |  | Date: February 27, 2004                                                                                                                             



|                                                |  |                                      
|----------------------------------------------- |  | -------------------------------------
|                                                |  |                                      
|/s/PAUL C. ELY, JR.Paul C. Ely, Jr., Chairman   |  | /s/BOB L. MARTINBob L. Martin        
|/s/ROYCE S. CALDWELLRoyce S. Caldwell           |  | /s/PAMELA B. STROBELPamela B. Strobel
|/s/MICHAEL S. GILLILANDMichael S. Gilliland     |  | /s/MARY ALICE TAYLORMary Alice Taylor
|/s/RICHARD G. LINDNERRichard G. Lindner         |  | /s/RICHARD L. THOMASRichard L. Thomas
|/s/GLENN W. MARSCHEL, JR.Glenn W. Marschel, Jr. |  |                                      
|Date: February 27, 2004                         |  |                                      

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INDEX TO EXHIBITS

|Exhibit Number |  | Description of Exhibit                                                                                                                                                                    
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(1)                                
|2.2            |  | First Amendment to Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(2)             
|2.3            |  | Second Amendment to Asset Purchase Agreement by and among EDS Information Services L.L.C., Electronic Data Systems Corporation, Sabre Inc., and Sabre Holdings Corporation.(3)            
|3.1            |  | Second Restated Certificate of Incorporation of Sabre Holdings Corporation(4)                                                                                                             
|3.2            |  | Bylaws of Sabre Holdings Corporation (as amended on July 17, 2001)(5)                                                                                                                     
|4.1            |  | Specimen Certificate representing Class A common stock.(6)                                                                                                                                
|4.2            |  | Indenture, dated as of August 3, 2001, between Sabre Holdings Corporation and SunTrust Bank, as Trustee, providing for issuance of debt securities in series(7)                           
|4.3            |  | First Supplemental Indenture dated August 7, 2001, between Sabre Holdings Corporation and SunTrust Bank, as Trustee, relating to the 7.35% Notes Due 2011 of Sabre Holdings Corporation(8)
|10.1           |  | Sabre Holdings Deferred Compensation Plan, as amended May 16, 2003(9)                                                                                                                     
|10.2           |  | Travelocity.com LP Second Amended 1999 Long-Term Incentive Plan(10)                                                                                                                       
|10.3           |  | Supplemental Executive Retirement Plan, as Amended (Restoration)(11)                                                                                                                      
|10.4           |  | Supplemental Executive Retirement Plan, as Amended (Officer)(12)                                                                                                                          
|10.5           |  | Supplemental Executive Retirement Plan, as Amended (Grandfathered)(13)                                                                                                                    
|10.6           |  | Form of Executive Termination Benefits Agreement(14)                                                                                                                                      
|10.7           |  | Forms of Addenda to Executive Termination Benefits Agreement with respect to William J. Hannigan, Jeffery M. Jackson and Eric J. Speck.(15)                                               
|10.8           |  | Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and William J. Hannigan.(16)                                                                                          
|10.9           |  | Employment Agreement Addendum between Sabre Inc. and William J. Hannigan.(17)                                                                                                             
|10.10          |  | Employment Agreement Addendum between Sabre Inc. and William J. Hannigan.(18)                                                                                                             
|10.11          |  | Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and Michael S. Gilliland.(9)                                                                                          
|10.12          |  | Form of Addenda to Executive Termination Benefits with respect to David A. Schwarte.(19)                                                                                                  
|10.13          |  | Form of Addenda to Executive Termination Benefits with respect to Michael S. Gilliland, John S. Stow and Michelle A. Peluso (20)                                                          
|10.14          |  | Form of Addenda to Executive Termination Benefits with respect to Thomas Klein(9)                                                                                                         
|10.15          |  | 2000 Stock Option Plan Amended and Restated effective November 13, 2000(21)                                                                                                               
|               |  |                                                                                                                                                                                           

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|10.16 |  | 2003 Director Compensation and Deferred Stock Unit Plan(22)                                                                                          
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|10.17 |  | Form of Sabre Holdings Corporation Cash Award Agreement(23)                                                                                          
|10.18 |  | Form of Letter Formalizing Involuntary Termination Benefits(24)                                                                                      
|10.19 |  | The Sabre Group Holdings, Inc. 1996 Directors Stock Incentive Plan(25)                                                                               
|10.20 |  | Sabre Holdings Corporation Employee Stock Purchase Plan(26)                                                                                          
|10.21 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, dated January 19, 2000, as amended November 13, 2000(27)              
|10.22 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, dated May 14, 2002(9)                                                 
|10.23 |  | Option Issuance Agreement, dated January 1, 1998 between Registrant and US Airways, Inc.(28)                                                         
|10.24 |  | Credit Agreement, dated as of February 4, 2000, among Sabre Inc., Bank of America, N.A., and the other banks party thereto.(29)                      
|10.25 |  | Amendment No. 1, to the Credit Agreement dated as of October 4, 2000, among Sabre Inc., Bank of America, N.A., and the other banks party thereto.(30)
|10.26 |  | Capital Lease Facility with Various Associated Documents dated June 15, 2003, as specified below:                                                    
|      |  | 10.26(a)                                                                                                                                             
|      |  | 10.26(b)                                                                                                                                             
|      |  | 10.26(c)                                                                                                                                             
|      |  | 10.26(d)                                                                                                                                             
|      |  | 10.26(e)                                                                                                                                             
|      |  | 10.26(f)                                                                                                                                             
|      |  | 10.26(g)                                                                                                                                             
|      |  |                                                                                                                                                      

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|12.1 |  | Computation of ratio of earnings to fixed charges for the year ended December 31, 2003.(9)                                                                                                                        
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|14.1 |  | Sabre Holdings Corporation Business Ethics Policy.(9)                                                                                                                                                             
|21.1 |  | Subsidiaries of Registrant.(9)                                                                                                                                                                                    
|23.1 |  | Consent of Ernst & Young LLP.(9)                                                                                                                                                                                  
|31.1 |  | Written statement to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Michael S. Gilliland as Chief Executive Officer.(9)           
|31.2 |  | Written statement pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Jeffery M. Jackson as Chief Financial Officer.(9)        
|32.1 |  | Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Michael S. Gilliland as Chief Executive Officer(32)
|32.2 |  | Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 27, 2004, signed by Jeffery M. Jackson as Chief Financial Officer(32)  

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