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

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, 2004
|OR                                         
|/ /                                         | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|Commission file number 1-12175             

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 common stock held by non-affiliates of the registrant as of June 30, 2004 was approximately
$3,784,300,471 based on the closing price per share of Class A common stock of $27.71 on such date.

As
of February 28, 2005, 131,526,251 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 17, 2005.



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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 products 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 corporate or business-direct channel. Through our Sabre®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. OurSabre Travel Networkbusiness operates theSabreGDS and
markets and distributes travel-related products and services through the travel agency and corporate channels. We engage in consumer-direct and business-direct travel marketing and distribution
through ourTravelocity®business. In addition, ourSabre Airline Solutionsbusiness is a leading provider of technology and services, including development and consulting services, to airlines and other travel providers.

In
2004, approximately 67.5% of our revenue was generated from Sabre Travel Network, 21.9% from Travelocity and 10.6% from Sabre Airline Solutions based on segment results that include
intersegment revenues. Compared to the year-ago period, revenues (including intersegment revenue) for the twelve months ended December 31, 2004 decreased 0.5% for Sabre Travel
Network, while revenues increased 27.3% for Travelocity and 4.7% for Sabre Airline Solutions.

Business.    We operate our business through the following business segments:

Sabre Travel Network:Our Sabre Travel Network segment markets and distributes travel-related products and services through
the travel agency and corporate channels. Travel agencies, both online and brick and mortar, as well as corporations subscribe to our services. Our services provide subscribers information about and
the ability to purchase travel-related products and services from airlines, hotels, car rental companies, cruise lines and others. We also provide travel agency office automation tools, enable travel
agencies to provide services via the Internet and provide reservation management, distribution and technology services to hotel properties.

Travelocity:Our Travelocity segment markets and distributes travel-related products and services directly to individuals,
including leisure travelers and business travelers, through Travelocity branded websites and contact centers and websites owned by its supplier and distribution partners. Travelocity customers can
access offerings, pricing and information about airlines, hotels, car rental companies, cruise lines, vacation and last-minute travel packages and other travel-related services. For
business travelers, ourTravelocity BusinessSMonline corporate travel agency provides the integrated online corporate travel technology
and full-service offering of ourGetThere®product along with the online expertise of Travelocity.

Sabre Airline Solutions:Sabre Airline Solutions is a global leader in providing passenger management solutions, software
products and related services, and consulting services to help airlines simplify operations and lower costs. Over 200 airlines worldwide use one or more products in Sabre Airline Solutions' portfolio
to increase revenues and improve operations. More than 100 airlines worldwide rely on Sabre Airline Solutions for its airline reservation suite products, with nine new carriers added and four carrier
renewals in 2004 for ourSabreSonicpassenger reservations product suite. In addition, more than 100 clients worldwide have turned to Sabre
Airline Solutions consulting group for strategic, commercial and operational consulting.

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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 2004, more than 900 associates displayed
information about their products and services through theSabresystem. We estimate that nearly $70 billion of travel-related products and
services were sold through theSabresystem during 2004. During 2004, 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 and Pricing Options.Airlines and other associates can display and sell their
inventory in theSabresystem. 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.

Primarily
to ensure that our customers had access to the most comprehensive airline fares, in 2002 and 2003 we introduced alternative booking fee pricing options to airlines that
participate in theSabreGDS. Through the DCA 3-Year Pricing Option ("DCA 3-Year Option"), for example, participating airlines
committed to the highest level of participation in theSabresystem for three years. Participating airlines provide all SabreGDS 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. Airlines selecting this option
under theirSabreGDS participating carrier agreements receive a discount from our standard DCA booking fee rates which is fixed for the term of the
agreement. Our DCA 3-Year Option agreements prepared us for GDS industry deregulation in the United States, by giving us access to virtually all of a participating carrier's content and
eliminating "fare confusion" in the marketplace.See "Computer Reservation System Industry Regulation"below and "Risk
FactorsTravel Suppliers are Seeking to Bypass...."

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With
the deregulation of the GDS industry in mid-2004, (described below underComputer Reservation System Industry
Regulation), we have new flexibility to price our services based upon a variety of factors. We have already implemented new pricing models for some suppliers. For example,
during the second quarter of 2004, we completed two "opt-in" agreements with international carriers that are generally similar to our DCA 3-Year Pricing Option agreements. For
bookings created in the participating carriers' home countries, those opt-in agreements offer a deeper discount than under the DCA 3-Year Pricing Option, which offers
participating airlines smaller discounts across multiple regions. These agreements provide improved booking capability only to thoseSabreGDS
subscribers that accept lowered customer incentive rates. As of December 31, 2004, approximately 50% of our global direct air bookings were subject to our current discount pricing options (DCA
3-Year Pricing Option and "Opt-In" agreements).

We
are evaluating various other options for pricing our services to suppliers. Pricing options might be offered to airlines according to their operational needs, such as pricing that
varies with the volume of an airline's bookings through theSabreGDS or pricing that differs between long-haul or short-haul
trips. We will offer airlines a choice of multiple pricing schedules. Our goal with any new models will be to match our pricing programs with the value that we provide to suppliers while maintaining a
neutral impact to the average unit revenue in the Sabre Travel Network business. Our goal is to have these new models, and new agreements with many airlines, in place before the expiration of our DCA
3-Year Pricing Option agreements in 2005 and 2006.See"Risk FactorsSome Travel Suppliers are Seeking
Alternative Distribution Models...."

Sabre Travel Network

Sabre Travel Network markets theSabreGDS to associates and travel agency subscribers (online and brick and
mortar) and corporations. As of December 31, 2004, travel agencies with approximately 50,000 locations in over 113 countries on 6 continents subscribed to the Sabresystem, which enabled these
subscribers to make reservations with over 400 airlines, 32 car rental companies, 220 tour operators, 9 cruise lines,
35 railroads and 239 hotel companies covering over 64,000 hotel properties worldwide.

Approximately
67.5%, 71.3% and 74.6% of our revenue (including intersegment revenues) in 2004, 2003 and 2002, respectively, was generated by Sabre Travel Network, primarily through
booking fees paid by associates.

Subscribers
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 the MySabreweb-based travel agency portal, which combines the breadth of the Internet with the power of theSabreGDS. 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.

In
addition to theSabresystem described above, Sabre Travel Network also provides 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.

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Changing Business Model.We are also taking actions to both strengthen our core SabreGDS business with enhanced content and capabilities and to take advantage of the opportunities available in merchandising as we benefit from the
insight we gain from having travel distribution and travel marketing assets in one integrated portfolio:



Travelocity

Travelocity is a leading provider of consumer direct travel services for the leisure and business traveler. Through the Travelocity.com® website,
Travelocity's international websites, its contact centers, and itsTravelocity Partner Networkoffering, individual leisure and business travelers can
shop and compare prices and make travel reservations online with airlines, car rental agencies, hotel companies and cruise providers. TheTravelocity Partner
Networkoffering expands Travelocity's distribution reach through agreements with several leading online retailers, including: Yahoo! Travel, America Online, American Express,
Southwest Airlines, US Airways, and AARP. Additionally, Travelocity continues to leverage Site59's experience as an applications service provider (an "ASP") (from powering last-minute
sections of Travelocity, AOL Travel, Cheap Tickets, Yahoo! Travel, American Airlines Vacations, Delta Air Lines Vacations, Continental Airlines Vacations, Northwest's nwa.com, and Bestfares.com, among
others). In addition, we offer access to a database of information regarding specific destinations and other information of interest to travelers.

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Travelocity
facilitates transactions between travel suppliers and consumers for the booking of and payment for travel accommodations. Travelocity generates revenue from providing such
facilitation services equal to the total amount paid by the customer for products and services, minus its payment to the travel supplier. Travelocity also 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. Additionally, Travelocity revenues include service fees
charged to customers and advertising revenues. Travelocity revenues also include, as a contra-revenue item, losses derived from interests in joint ventures, which are described under "International"
below. Travelocity derives intersegment revenues from Sabre Travel Network, consisting mainly of incentives for Travelocity bookings made through the SabreGDS, and fees paid by Sabre Travel Network and
Sabre Airline Solutions for corporate and airline trips booked through Travelocity's online booking
technology. During 2004, customers transacted for approximately $5 billion in travel and related services through Travelocity.

In
addition to Travelocity's primary 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 online expertise of Travelocity. Travelocity also operates multiple businesses tailored to customers outside the United States, as described under
"International"below.

Investments in Travelocity.The development of Travelocity continues to be a strategic focus for us.
For example, during the second quarter of 2003, we launched a new technology platform (TravelocityTotalTripSM) to enable the marketing of
higher margin packaged travel products. In addition, during the first quarter of 2004, we implemented a complete rebranding and redesign of Travelocity's website, offering consumers greater
ease-of-use.

We
are also investing in developing products and segments that we believe offer rapid growth opportunities, such as in the business-direct segment and online distribution in Europe and
Asia. For example:



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Net Rate Hotel Program.In an effort to provide additional choices to consumers, Travelocity is
increasingly promoting our net rate hotel program, commonly referred to in the industry as our "merchant model hotel program" due to the fact that Travelocity is the merchant of record for credit card
purposes. Under the merchant model, we facilitate transactions between travel suppliers and travelers for the booking of and payment for travel accommodations. To facilitate the provision of travel
accommodations to travelers, we enter into agreements with travel suppliers for the right to market their products, services and other content offerings at pre-determined net rates.
Merchant model travel offerings can include air travel, hotel stays, and dynamically packaged combinations (via TravelocityTotalTripand Last Minute
Deals). We market those offerings to travelers at a price that includes an amount sufficient to pay the travel supplier for its charge for providing the travel accommodations, along with any
applicable taxes on that charge, as well as additional amounts representing our service fees. For this type of business model, we require pre-payment by the traveler at the time of
booking. Merchant content is beneficial for travelers because they can often book travel at a price lower than regularly published offerings. For us, the merchant model generally delivers higher
service fee revenue per transaction than comparable transactions under an agency commission booking fee model and we experience improved operating cash flows as a result of receiving
pre-payments from customers while paying suppliers after the travel occurs. We generally do not purchase and resell travel accommodations and do not have any obligations with respect to
travel accommodations listed online that do not sell. For merchant model transactions, we recognize as revenue the amount paid by the traveler for products, fees and services minus the amount paid to
the travel supplier.

Our
business strategy depends on merchant model bookings as a significant source of future revenue growth and increased margins. Our strategy calls for us to increase or maintain the
number of hotel rooms we can market under our merchant model hotel program, based upon arrangements we make directly with individual hotel properties and hotel chains. Because of Travelocity's
supplier friendly approach, which includes timely payment to suppliers and a two-way seamless connectivity to hotels' property management systems so that reservations aren't lost, its
hotel program has become successful even though it was started later than some competing programs. One example of the success of this approach was Travelocity's selection by InterContinental Hotels
Group (IHG) as the first online third party intermediary to be certified for IHG's more than 3,500 hotels worldwide, including InterContinental Hotels and Resorts, Crowne Plaza, Holiday Inn, Holiday
Inn Express, Staybridge Suites and Candlewood Suites. Please see "Management's Discussion and Analysis of Financial Condition and Results of OperationsBusiness
TrendsMerchant Model" and "Risk FactorsOur business plans call for the significant growth of our merchant model
business...."

Sabre Airline Solutions

Sabre Airline Solutions is a global leader in providing passenger management solutions, software products and related services, and consulting services to help
airlines simplify operations and lower costs. Over 200 airlines worldwide use one or more products in Sabre Airline Solutions' broad portfolio to increase revenues and improve operations. More than
100 airlines worldwide rely on Sabre Airline Solutions for its airline reservation suite products, with nine new carriers added and four carrier renewals in 2004 for our SabreSonicpassenger
reservations product suite. In addition, more than 100 clients worldwide have utilized 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.

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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,
as well as an 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 a 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.

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"). 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 computer reservation systems or other travel-related network services.

Sabre
Travel Network has long-term agreements with ABACUS International Holdings Ltd., which created ABACUS International PTE Ltd ("Abacus"), 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. Sabre Travel Network Middle East, a joint venture owned 60% by Sabre Travel Network
and 40% by Gulf Air, provides technology services, bookable travel products and distribution services for travel agencies, corporations and travel suppliers in the region.

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Travelocity
is marketed internationally both directly and through joint venture arrangements. In Canada, Travelocity directly markets its Travelocity.caSMsite, launched in 1999. In the United Kingdom,
Sweden, Denmark, Norway, and France, Travelocity is marketed directly
through Travelocity Europe, which includes Travelocity.co.uk in the United Kingdom,resfeber.seSMandBox
OfficeSMin Sweden,rejsefeber.dkSMandArte
UdlandSMin Denmark,reisefeber.noSMandTicket
ServiceSMin Norway, andOdysia.frSMandBoomerang
VoyagesSMin France. Travelocity also partners with Otto Versand through joint venture company (Kommanditgesellschaft Travel Overland GmbH & Co.) that
distributes Travelocity in Germany. 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 49% equity stake in this joint venture as of January 2005. Zuji Holdings Limited ("Zuji"), a joint venture
established in 2002 with 16 Asia Pacific airlines, operates in the rest of the Asia Pacific region. Zuji is hosted by Travelocity and utilizes Travelocity technology. Through direct and indirect
ownership, we have an approximately 13% equity stake in Zuji. Travelocity is a direct equity holder of a 10.13% interest in Zuji. Abacus (in which we have a 35% ownership interest) holds a 9.87%
equity interest in Zuji. The remaining 80% equity stake in Zuji is owned by AGC Holdings Limited ("AGC"). AGC and Abacus are indirectly majority-owned by several Asia Pacific airlines. On
January 18, 2005, Travelocity entered into a put option agreement pursuant to which it may gain control of 100% of Zuji.See"Financial
Statements and Supplementary DataSubsequent Events (Note 16)Zuji Agreement."

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. Through Stockholm, Sweden-based RM Rocade, Sabre Airline Solutions provides software solutions, including a fully functional flight operations product suite, to international small,
medium-size and low cost carriers.

Competition

The marketplace for travel marketing and distribution is large, multi-faceted and intensely competitive. Factors affecting competitive success include: depth and
breadth of information, level of marketing spend to acquire and retain customers, ease of use, reliability, service, 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 market
and distribute directly to businesses and consumers, particularly via the Internet. We face many new competitors as travel marketing and distribution channels emerge and mature, including the growing
Internet-based business-direct and consumer-direct channels. Suppliers and third parties are seeking to create alternative marketing and distribution systems that book directly with travel suppliers
at a reduced cost. Some of these alternative marketing and travel distribution channels are developing, but have yet to fully define their functionality and costs. Many of these competitors continue
to utilize services from a global distribution system such as theSabresystem.See"Management's
Discussion and AnalysisBusiness TrendsSupplier Efforts to Control Travel Distribution." In addition, a new breed of
competitors is entering the online travel marketplace. Both well-established search engine companies as well as start ups are attempting to enter the online travel marketplace by
leveraging search technology to aggregate travel search results across supplier, travel agent and other travel-related websites. These search engines and alternative travel marketing and distribution
channels may have the effect of diverting customers from our online sites and ourSabreGDS, putting pressure on our revenues, pricing and operating
margins. They may also contribute to "channel shift," or the efforts of suppliers to divert bookings away from independent distributors (such as online and conventional agencies using our SabreGDS)
towards supplier-direct booking channels (such as supplier-controlled websites and call centers). See"Risk FactorsSome travel suppliers are seeking alternative distribution
models...."

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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. ("Amadeus"), Galileo International Inc. (owned by Cendant Corporation) 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 in the form of alternative distribution
channels. 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.

Our
product and service offerings are well positioned to compete in all channels of travel marketing and distribution. Those include our Travelocity segment in the consumer-direct
channel (throughTravelocity.comand related websites) and in the business-direct channel (throughTravelocity
Business). We also offer traditional travel agencies a wide array of tools that allow them to market their services over the Internet.

We
market travel in the consumer-direct channel primarily through Travelocity. Competitors of Travelocity include Priceline.com, Orbitz (owned by Cendant Corporation) InterActiveCorp
(which owns Expedia, Hotels.com and Hotwire.com), Opodo (owned by 9 European airlines and Amadeus) and Lastminute.com. Priceline.com also operates Travelweb.com, which provides booking services for
hotel accommodations. Airline joint ventures 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. Certain owners of these sites may 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 throughTravelocity Businessand our GetThere®product. 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 traditional global distribution systems such as Amadeus' E-Travel and Galileo's TravelPort and more recently,
online travel agents such as Orbitz.com and Expedia.com.

In
the products and services business, Sabre Airline Solutions competes 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, Sabre Airline Solutions competes with Amadeus, Navitaire, Worldspan, IBM and others.

The
travel industry is currently undergoing rapid consolidation. Consolidation among our competitors may give these competitors increased negotiating leverage with travel suppliers and
greater resources for use in marketing to subscribers and other customers. 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 individual airline websites and call centers. In 2004, we saw a slowing in the rate of channel shift, discussed below in"Management's
Discussion and Analysis of Financial Condition and Results of OperationsBusiness TrendsDCA 3-Year Pricing Option."

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Computer Reservation System Industry Regulation

Aspects of our travel marketing and distribution businesses are subject to the Computer Reservation Systems ("CRS") regulations in the European Union, Canada and
Peru. These regulations generally govern GDS services for airlines and travel agencies, but not for non-airline suppliers (except rail suppliers in limited circumstances). Among the topics
addressed in some of the current regulations are:



All
CRS regulations promulgated by the US Department of Transportation that were applicable in the United States expired on July 31, 2004. We believe that this deregulation in the
United States will enhance our opportunities to creatively market airline services and freely negotiate with travel agencies. However, deregulation also presents challenges associated with maintaining
participation levels in theSabreGDS by travel suppliers who are no longer subject to equal participation regulations.

Transport
Canada issued final rules on May 7, 2004, eliminating all CRS regulations in Canada except rules prohibiting screen preference and discrimination in providing the right
to participate in service enhancements. In addition, regulators in the European Commission are reviewing their CRS regulations for possible changes, which may include some level of deregulation. It is
not clear whether or when any amendments in the European Union will take effect nor what form they may take.

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

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.

Seasonality

The travel industry is seasonal in nature. Travel bookings for our Sabre Travel Network business, and the revenue we derive from those bookings, 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. Travel bookings for our Travelocity business decrease each year in the fourth quarter, primarily in December. Customers generally book their holiday leisure travel earlier
in the year. Travelocity revenues are also impacted by the seasonality of travel bookings, but to a lesser extent since commissions from car and hotel travel providers and merchant revenue for
vacation packages and hotel stays are recognized upon date of consumption. 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 approximated $32 million, $48 million and $40 million for 2004, 2003
and 2002, respectively.

11

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Segment Information

Financial information for our operating segments and geographical revenues and assets are included in Note 13 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, 2004, we had approximately 6,700 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 Information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, 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 or any of our other SEC
filings.

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

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, accounted for as a capital lease. 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 120 other locations worldwide. See Notes 5 and 8 to the Consolidated Financial Statements for additional information on our capital lease.

12

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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.

EDS
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.

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 five 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

The litigation matters described below involve issues or claims that may be of particular interest to the Company's stockholders, regardless of whether any of
these matters may be material to the financial position or operations of the Company based upon the standard set forth in the SEC's rules.

We
are party to two lawsuits (which as described below have now been consolidated in federal court in Fort Worth, Texas) against Northwest Airlines, Inc. ("Northwest") related to
Northwest's August 24, 2004 announcement and implementation on September 1, 2004 of a fare supplement for travel reservation bookings made through a GDS (including the SabreGDS) by
traditional travel agencies and some online travel sites (such as Travelocity). We notified Northwest that it was in breach of the
parties' Participating Carrier Distribution and Services Agreement ("PCA"), as amended by the DCA 3-Year Option Agreement. We also took commercial steps, which we believed were reasonable
under the DCA 3-Year Option Agreement and PCA, in order to enforce both agreements.

The
Company sued Northwest on August 24, 2004 in Sabre Inc. v. Northwest Airlines, Inc., Civil Action 4-04-CV-612-Y
in the Fort Worth Division of the United States District Court for the Northern District of Texas (hereinafter the "Fort Worth Action"). We allege that Northwest breached the PCA, as amended by the
DCA 3-Year Option Agreement. Among other things, the DCA 3-Year Option Agreement requires that Northwest provide us with fares and other content for the SabreGDS that Northwest makes available through
other channels of ticket distribution. We believe that Northwest breached the DCA 3-Year
Option Agreement by imposing a charge on tickets booked on theSabreGDS but not on other channels of ticket distribution. We seek monetary damages,
attorneys fees, and to compel Northwest to adhere to the terms of their agreements.

On
August 25, 2004, Northwest sued Sabre Holdings Corporation, Sabre Inc. and Sabre Travel International Ltd. in a separate action styled Northwest Airlines
Corporation v. Sabre Inc. et al., Cause No. 04-CV-03889 in Minneapolis federal court (hereinafter the "Minneapolis Action"). The Minneapolis Action related to the
same factual events described above. In its complaint filed on August 25, 2004, Northwest asserted that we breached our PCA with Northwest by our commercial actions in response to Northwest's
August 24, 2004 breach of the PCA. On September 27, 2004, Northwest filed an amended complaint in the same cause number adding allegations that we had violated Section 2 of the
Sherman Act, claiming that we had monopoly power, and also asserting claims against us for alleged interference with prospective contractual relations, deceptive trade practices, fraud, false
advertising under the federal Lanham Act, and for a declaratory judgment that Sabre, and not Northwest, is in breach of the PCA. Northwest alleges that it has suffered unspecified damages. Northwest
seeks treble damages under the antitrust laws, attorneys fees, to have the court declare that we breached the parties' agreement and violated federal and state statutes, and to enjoin us from certain
conduct.

13

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On
November 9, 2004, the Court in the Fort Worth Action rejected Northwest's motion to transfer that case to the federal court in Minneapolis, following which Northwest agreed to
have the Minneapolis Action transferred to Forth Worth. The two cases have now been consolidated before the Court in Fort Worth. On January 13, 2005, the Company filed a motion with the Court
to dismiss Northwest's antitrust claims and its claims under various Minnesota state statutes and tort law theories.

We
are unable to estimate the amount of the loss, if any, that might arise from this litigation.

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, 2004.

14

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PART II

---

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 28, 2005 was 10,458

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, 2004  |      | $ | 25.81
|               | September 30, 2004 |      | $ | 27.99
|               | June 30, 2004      |      | $ | 28.85
|               | March 31, 2004     |      | $ | 24.96
|Quarter Ended: |                    |      |   |      
|               | December 31, 2003  |      | $ | 23.00
|               | September 30, 2003 |      | $ | 27.50
|               | June 30, 2003      |      | $ | 26.68
|               | March 31, 2003     |      | $ | 20.78

We paid no dividends on our common stock during 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 resulting in total dividend payments for 2003 of $30 million. On January 20, 2004 we announced an increased dividend of
$.075 per share. We paid dividends of that same amount in each quarter during 2004 resulting in total dividend payments of approximately $41 million. On February 1, 2005, our Board of
Directors approved an increased dividend of $.09 per share of common stock payable on February 28, 2005 to stockholders of record on February 11, 2005. Based on a quarterly dividend of
$.09 per share, and assuming that the current number of outstanding shares of our common stock remains constant for the remainder of 2005, we expect to pay an aggregate of approximately $45 to
$50 million in dividends during the fiscal year 2005. 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 by management and our Board of Directors that dividends continue to be in the Company's best interests and those of our stockholders.

During
2004, 2003 and 2002, we repurchased 9,891,312, 2,159,597 and 2,234,400 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. We purchased the amount remaining under this authorization during the first three months
of 2004. On April 19, 2004 our Board of Directors approved another share repurchase program authorizing us to repurchase up to an additional $100 million of our Common Stock, which we
completed during 2004. On October 25, 2004, our Board of Directors approved another share repurchase program authorizing us to repurchase up to an additional $100 million of our Common
Stock. At December 31, 2004, we had remaining authorization to repurchase approximately $43 million of our common stock under this program. As of the date of this filing, we had
remaining authorization to repurchase approximately $1 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"). Although this authorization remains in force, we did not repurchase any shares of our Common Stock under
this authorization during 2004. We purchased 840,000 shares under this authorization in January 2005.

15

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We
expect that the timing, volume and price of the current and any future repurchases of our Common Stock will be made pursuant to trading plans that we intend as qualifying under
Rule 10b5-1, unless such plans are terminated at the discretion of management.

The
following table summarizes the share repurchases made during the fourth quarter of the fiscal year ended December 31, 2004:

|Period                             |  | Total Number
of Shares
Purchased |  | Weighted
Average
Price Paid
per Share |       | Total Number of
Shares Purchased
as Part of a
Publicly Announced
Program |           | Maximum Dollar
Value of Shares
That May Yet be
Purchased Under
such Programs
|---------------------------------- |  | -------------------------------- |  | ------------------------------------- | ----- | ------------------------------------------------------------------------ | --------- | ----------------------------------------------------------------------------
|October                            |  |                                  |  |                                       |       |                                                                          |           |                                                                             
|10/01/04-10/31/04                  |  |                                 |  |                                       | N/A   |                                                                          |          |                                                                             
|November                           |  |                                  |  |                                       |       |                                                                          |           |                                                                             
|11/01/04-11/30/04                  |  | 1,483,150                        |  | $                                     | 22.36 |                                                                          | 1,483,150 |                                                                             
|December                           |  |                                  |  |                                       |       |                                                                          |           |                                                                             
|12/01/04-12/31/04                  |  | 1,078,300                        |  | $                                     | 22.67 |                                                                          | 1,078,300 |                                                                             
|                                   |  |                                  |  |                                       |       |                                                                          |           |                                                                             
|Total 4th Quarter 2004 Repurchases |  | 2,561,450                        |  | $                                     | 22.50 |                                                                          | 2,561,450 |                                                                             
|                                   |  |                                  |  |                                       |       |                                                                          |           |                                                                             

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data should be read 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.



Year
acquired

Entity

Purchase price
($000s)2004

RM Rocade AB and RM Rocade Assist AB

$
15,000All State Tours, Inc.


25,000Travelocity Europe50% of the non-German operations


33,0002003

Dillon Communications Systems GmbH ("Dillon")remaining 49% interest


30,000World Choice Travel, Inc.


50,0002002

Site59.com, Inc.


44,0002001

Sabre Pacific


46,0002000

GetThere, Inc.


753,000Preview Travel, Inc.


287,000Gradient Solutions Limited (now known as Sabre Travel International Limited)


39,000Dilloninitial 51% ownership interest


24,000




16

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The following table presents selected historical financial data for each of the five years in the period ended December 31, 2004.

|                                                                             |                                                
|---------------------------------------------------------------------------- | -----------------------------------------------
|
|
|
|Income Statement Data (1) (2) (3) (9):                                       |                                                
|Revenues                                                                     |                                                
|Operating expenses, excluding amortization of goodwill and intangible assets |                                                
|Amortization of goodwill and intangible assets (3)                           |                                                
|                                                                             |                                                
|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                                                                 |                                                
|                                                                             |                                                
|Dividends per common share (11)                                              |                                                
|                                                                             |                                                

17

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|                                                          | 
|--------------------------------------------------------- | 
|
|
|
|Balance Sheet Data
(at end of period) (1) (9):            | 
|Current assets                                            | 
|Goodwill and intangible assets, net (3)                   | 
|Total assets                                              | 
|Current liabilities                                       | 
|Minority interests                                        | 
|Long-term capital lease obligation                        | 
|Public and other notes payable                            | 
|Stockholders' equity (11)                                 | 
|Other Data:                                               | 
|Direct reservations booked using theSabresystem (4) (7)   | 
|Total reservations processed using theSabresystem (4) (7) | 
|Operating margin                                          | 
|Ratio of earnings to fixed charges (8)                    | 
|Cash flows from operating activities                      | 
|Capital expenditures                                      | 
|                                                          | 

18

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19

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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 travel products 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 corporate or business-direct channel. Through our Sabre®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. OurSabre Travel Networkbusiness operates theSabreGDS and
markets and distributes travel-related products and services through the travel agency and corporate channels. We engage in consumer-direct and business-direct travel marketing and distribution
through ourTravelocity®business. In addition, ourSabre Airline Solutionsbusiness is a leading provider of technology and services, including development and consulting services, to airlines and other travel providers.

In
2004, approximately 67.5% of our revenue was generated from Sabre Travel Network, 21.9% from Travelocity and 10.6% from Sabre Airline Solutions based on segment results that include
intersegment revenues. Compared to the year-ago period, revenues (including intersegment revenue) for the twelve months ended December 31, 2004 decreased 0.5% for Sabre Travel
Network, while revenues increased 27.3% for Travelocity and 4.7% for Sabre Airline Solutions.

Business.    We operate our business through the following business segments:

Sabre Travel Network:Our Sabre Travel Network segment markets and distributes travel-related products and services through
the travel agency and corporate channels. Travel agencies, both online and brick and mortar, subscribe to our services. Our services provide travel agency subscribers information about and the ability
to purchase travel-related products and services from airlines, hotels, car rental companies, cruise lines and others. We also provide travel agency office automation tools, enable travel agencies to
provide services via the Internet and provide reservation management, distribution and technology services to hotel properties.

Travelocity:Our Travelocity segment markets and distributes travel-related products and services directly to individuals,
including leisure travelers and business travelers, through Travelocity websites and contact centers, and websites owned by its supplier and distribution partners. Travelocity customers can access
offerings, pricing and information about airlines, hotels, car rental companies, cruise lines, vacation and last-minute travel packages and other travel-related services. For business
travelers,Travelocity Businessprovides the integrated online corporate travel technology and full-service offering of our GetThere®product
along with the online expertise of Travelocity.

Sabre Airline Solutions:Sabre Airline Solutions is a global leader in providing passenger management solutions, software
products and related services, and consulting services to help airlines simplify operations and lower costs. Over 200 airlines worldwide use one or more products in Sabre Airline Solutions' portfolio
to increase revenues and improve operations. More than 100 airlines worldwide rely on Sabre Airline Solutions for its airline reservation suite products, with nine new carriers added and four carrier
renewals in 2004 for ourSabreSonicpassenger reservations product suite. In addition, more than 100 clients worldwide have turned to Sabre
Airline Solutions consulting group for strategic, commercial and operational consulting.

20

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Business Trends

Potential effects of the following trends, events and uncertainties are discussed inRisk Factors.

Increased Travel Booking Volumes Through our Channels.During the twelve months ended December 31, 2004, we
experienced increased travel bookings through all of our channels. We attribute this year-over-year increase in bookings to improved demand for travel services as compared to
2003. We believe that a significant portion of this improvement results from travel demand having been depressed in 2003 because of traveler concerns about the war in Iraq and Severe Acute Respiratory
Syndrome ("SARS"). During 2004, booking volumes through our Sabre Travel Network business segment improved as a result of the rebound in travel demand. The table below details the
year-over-year percentage increases in Sabre Travel Network booking volumes for the year ended December 31, 2004.

Twelve Months Ended
December 31, 2004Year-over-year Increase

Air
Bookings

Total
BookingsUnited States

4.5
%
5.0
%Global

6.3
%
6.9
%


Factors Influencing the Travel Industry, Particularly Airlines.Our revenues are highly dependent on the travel and
transportation industries, and particularly on airlines. 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 transactions processed by our systems. Consequently, our revenues are highly subject to
declines in or disruptions to travel and transportation due to factors entirely out of our control, such as the recent tsunami that devastated large parts of Southeast Asia. In addition, we depend on
a relatively small number of major airlines for a significant portion of our revenues. Several of these airlines are experiencing financial difficulty, some (including United Air Lines, Inc.,
U.S. Airways, Inc. and ATA Holdings Corporation) have sought bankruptcy protection and still others may consider bankruptcy relief. See "Risk FactorsOur
Revenues Are Highly Dependent...."

Supplier Efforts to Control Travel Distribution.Airlines have been working aggressively for several years to divert travel
bookings away from GDS networks and towards alternative travel distribution channels, including websites that they control and online travel agencies that book directly with those airlines. See
"Risk FactorsSome Travel Suppliers are Seeking Alternative Distribution Models...." The efforts of suppliers to divert bookings away from
independent distributors (such as online and conventional travel agencies using ourSabreGDS) towards supplier-direct booking channels (such as
supplier-controlled websites and call centers) is referred to as "channel shift." Over the last eighteen months, we have experienced a slowing in the rate of channel shift, which we attribute partly
to our current Pricing Options for suppliers, discussed below, and partly due to a rebound in corporate travel. The slowing of channel shift is an encouraging indicator, but it is not clear if this
pattern will continue over the long-term.

21

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During
the third quarter of 2004, Northwest Airlines, Inc. ("Northwest") implemented a fare supplement for travel reservation bookings made through a GDS by traditional travel
agencies and online travel sites (including Travelocity). In response to Northwest's announcement, Sabre Travel Network filed a lawsuit against Northwest for noncompliance with its Participating
Carrier Distribution and Services Agreement with us. Sabre Travel Network also implemented a series of actions under its Fare Parity Policy, in order to cause Northwest to honor its contract to
provide fare parity for users of theSabreGDS. Northwest countersued us the following day. On September 2, 2004, Northwest discontinued the fare
supplement, and Sabre Travel Network discontinued application of its Fare Parity Policy to Northwest.SeePart IItem 3: "Legal
Proceedings."

Competition and Consolidation.The marketplace for travel distribution is intensely competitive. We routinely face new
competitors and new methods of travel distribution. Suppliers and third parties seek to create distribution systems that book directly with travel suppliers at a reduced cost. Many of these
alternative travel distribution channels are in start-up or developing mode, are well-financed and have yet to fully define their functionality and costs. These new travel
distribution technologies may contribute to "channel shift." (See Supplier Efforts to Control Travel Distribution, above). In addition, a new breed of
competitors is entering the travel marketplace. Both established and start up search engine companies are attempting to enter the travel marketplace by leveraging search technology to aggregate travel
search results across supplier, travel agent and other websites. These search engines and alternative travel distribution channels pose a threat to our businesses as they may have the effect of
diverting customers from our online sites and ourSabreGDS, putting pressure on our revenues, pricing and operating margins. We also face consolidation
among suppliers, travel marketing and distribution competitors, and online and conventional travel agencies, which may offer them negotiating leverage and other advantages of scale. See
"Risk FactorsWe face competition..."and"Risk FactorsConsolidation...."

Pricing Options for Suppliers.To ensure that our customers had access to the most comprehensive airline fares, in 2002 and
2003 we introduced alternative booking fee pricing options, such as theDirect Connect® Availability("DCA") 3-Year Pricing
Option, to airlines that participate in theSabreGDS.See "Item
1BusinessAssociate Participation and Pricing Options." Through the DCA 3-Year Pricing Option, for example, participating airlines committed to the highest level
of participation in theSabresystem for three years. Our DCA 3-Year Pricing Option agreements were a first step in preparation for being a
leader in a deregulated industry by giving us access to virtually all of a carrier's content, eliminating "fare confusion" in the marketplace. See "Risk
FactorsTravel Suppliers are Seeking to Bypass...."

With
the recent deregulation of the GDS industry, we have new flexibility to price our services based upon a variety of factors. We have already implemented new pricing models for some
suppliers.See"Item 1 BusinessComputer Reservation System Industry Regulation." For
example, during the second quarter of 2004, we completed two "opt-in" agreements with international carriers that are generally similar to our DCA 3-Year Pricing Option
agreements.See"Item 1 BusinessAssociate Participation and Pricing Options." We are also evaluating various other options for pricing our
services to suppliers. Pricing options might be offered to airlines according to their operational needs, such as pricing that varies with the volume of an airline's bookings through the SabreGDS or
pricing that differs between long-haul or short-haul trips. We will offer airlines a choice of multiple pricing
schedules. Our goal with any new models will be to match our pricing programs with the value that we provide to suppliers while maintaining a neutral impact to the average unit revenue in the Sabre
Travel Network business. Our goal is to have these new models, and corresponding new agreements with many airlines, in place before the expiration of our DCA 3-Year Pricing Option
agreements in 2005 and 2006.See"Risk FactorsAdverse Changes In Or Interruptions To...."

22

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Changing our Sabre Travel Network Business Model.We are also taking actions to both strengthen our core SabreGDS business with enhanced content and capabilities and to take advantage of the opportunities available in merchandising as we benefit from the
insight we gain from having travel distribution and travel marketing assets in one integrated portfolio:



Investments in Travelocity.The development of Travelocity continues to be a strategic focus for us. For example, during the
second quarter of 2003, we launched a new technology platform (TravelocityTotalTripSM) to enable the marketing of higher margin packaging
products. In addition, during the first quarter of 2004, we implemented a complete rebranding and redesign of Travelocity's website, offering consumers greater ease-of-use.

We
are also investing in developing products and segments that we believe offer rapid growth opportunities, such as in the business-direct segment and online distribution in Europe and
Asia. For example:



23

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Cost Reductions and Expense Savings.In the fourth quarter of 2003, we began implementing plans to enhance our competitive
position by reducing our operating expenses and better aligning expenses with revenue targets. Through these initiatives, we realized over $80 million in cost savings in 2004. Further, as part
of our cost leadership strategy we are, as a standard practice, evaluating efficiency opportunities across the company to ensure that we optimally manage our operational costs. Some of these
cost-saving opportunities may involve globally-sourcing some of our operations (either by contracting with companies that work for us or by expanding our own operations abroad). We will
continue to pursue opportunities to reduce our operating expenses throughout 2005.

Computer Reservation System Industry Regulation.Aspects of our travel marketing and distribution businesses are subject to
the Computer Reservation Systems ("CRS") regulations in the European Union, Canada and Peru. These regulations generally govern GDS services for airlines and travel agencies, but not for
non-airline suppliers (except rail suppliers in limited circumstances). Among the topics addressed in some of the current regulations are:



All
CRS regulations promulgated by the US Department of Transportation that were applicable in the United States expired on July 31, 2004. We believe that this deregulation in the
United States will enhance our opportunities to creatively market airline services and freely negotiate with travel agencies. However, deregulation also presents challenges associated with maintaining
participation levels in theSabreGDS by travel suppliers who are no longer subject to equal participation regulations.

Transport
Canada issued final rules on May 7, 2004, eliminating all CRS regulations in Canada except rules prohibiting screen preference and discrimination in providing the right
to participate in service enhancements. In addition, regulators in the European Commission are reviewing their CRS regulations for possible changes, which may include some level of deregulation. It is
not clear whether or when any amendments in the European Union will take effect nor what form they may take.

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

24

---



Components of Revenues and Expenses

Revenues.Sabre Travel Network primarily generates revenues from booking fees charged to airlines and non-air
travel-suppliers who distribute their products and services through theSabresystem. Sabre Travel Network earns revenue through equipment service
charges paid by subscribers and has also begun to generate revenue from transaction fees charged to certain subscribers that use theSabresystem. In
addition, Sabre Travel Network earns revenue through the sale of other products and services (includingGetThereofferings, the Sabre Hotel Spotlightprogram, which offers premium marketing opportunities to hoteliers through the SabreGDS, and theJurni Networkconsortium) to travel-suppliers,
subscribers and other customers.
Earnings derived from interests in joint ventures and other investments are also included in revenues. Sabre Travel Network 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 revenue from providing facilitation services equal to the amount paid by the customer for products and services, minus its 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 of incentives
earned for Travelocity bookings made through theSabreGDS, and fees paid by Sabre Travel Network for corporate trips and Sabre Airline Solutions for
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 for Travelocity bookings made through theSabreGDS, as well as fees for corporate 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. Sabre Airline Solutions also
incurs intersegment expenses paid to Travelocity for airline trips booked through Travelocity's online booking technology.

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.

25

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Financial Results

The following table presents operating results for the three years ended December 31, 2004, 2003 and 2002 (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 31,2004

2003

2002Segment revenues:Sabre Travel Network

$
1,552,832

$
1,560,232

$
1,630,213Travelocity


502,549


394,508


338,772Sabre Airline Solutions


243,470


232,354


216,847Subtotal segment revenues


2,298,851


2,187,094


2,185,832Elimination of intersegment revenues


(167,880
)

(141,931
)

(129,366
)Total

$
2,130,971

$
2,045,163

$
2,056,466Cost of revenues:Sabre Travel Network

$
1,004,236

$
1,031,735

$
930,860Travelocity


224,386


203,392


187,612Sabre Airline Solutions


176,902


177,769


165,674Corporate


2,536


(1,836
)

6,505Subtotal segment cost of revenues


1,408,060


1,411,060


1,290,651Elimination of intersegment expenses


(167,880
)

(141,931
)

(129,366
)Total

$
1,240,180

$
1,269,129

$
1,161,285Gross profit:Sabre Travel Network

$
548,596

$
528,497

$
699,353Travelocity


278,163


191,116


151,160Sabre Airline Solutions


66,568


54,585


51,173Corporate


(2,536
)

1,836


(6,505
)Total

$
890,791

$
776,034

$
895,181Selling, general and administrative:Sabre Travel Network

$
260,083

$
262,029

$
271,690Travelocity


273,189


249,893


221,477Sabre Airline Solutions


50,026


31,454


31,699Corporate


1,884


10,127


(609
)Total

$
585,182

$
553,503

$
524,257Amortization of acquired intangibles:Sabre Travel Network

$
18,607

$
12,788

$
16,588Travelocity


25,472


41,554


35,042Sabre Airline Solutions


2,800


1,959


1,794Total

$
46,879

$
56,301

$
53,424Operating income (loss):Sabre Travel Network

$
269,906

$
253,680

$
411,075Travelocity


(20,498
)

(100,331
)

(105,359
)Sabre Airline Solutions


13,742


21,172


17,680Corporate


(4,420
)

(8,291
)

(5,896
)Total

$
258,730

$
166,230

$
317,500


26

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Results of Operations: 2002-2004

Total revenues of $2,131 million for the year ended December 31, 2004 were $86 million, or 4.2% higher than revenues of $2,045 million
for the year ended December 31, 2003. Cost of revenues of $1,240 million for the year ended December 31, 2004 were $29 million or 2.3% lower than the cost of revenues of
$1,269 million for the year ended December 31, 2003. These reported revenues and expenses are net of intersegment revenues and expenses which were eliminated in consolidation.

Management's
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 $168 million, $142 million and $129 million for the years ended December 31, 2004, 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 paid by Sabre Travel Network to Travelocity for 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 13 to the Consolidated Financial Statements.

Revenues.The compounded annual growth rate of revenues by segment for the three years ended December 31, 2004 was a
reduction of 3.3% for Sabre Travel Network, and growth of 15.7% for Travelocity and 4.0% for Sabre Airline Solutions. Each of our business segments was negatively affected by the September 11,
2001 terrorist attacks, and the resulting decline in the U.S. economy in general and the travel industry in particular. 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 2004 revenues remained below 2002 revenue levels.

The
combination of an economic downturn, travel security concerns and channel shift has resulted in a compounded 3.2% decrease in annual bookings processed through the Sabresystem since 2001. 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. We believe that the
discounted pricing agreements (such as the DCA 3-Year Pricing Option Agreements) are helping to slow the effects of channel shift from the Sabresystem, but these types of agreements have also lowered
our effective yield on bookings.

For
the three years ended December 31, 2004, Travelocity has experienced 15.7% compounded annual growth in revenues due to the growth in bookings made through our websites and
contact centers, 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 has experienced 4.0% compounded annual growth in revenues for the three years ended December 31, 2004. 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. Additionally, this increase was driven by growth in airline reservation hosting revenues.

27

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Expenses.Our primary operating expenses consist of salaries, benefits, other employee-related costs, data processing costs,
communication costs, advertising and customer incentives, representing approximately 78.7%, 77.8% and 77.0% of total operating expenses in 2004, 2003 and 2002, respectively. Since 2001, we have
realized a compounded decrease in our operating expenses of approximately 4.6%. These decreases reflect reduced amortization expense resulting from goodwill no longer being amortized beginning in 2002
and lower operating costs in each business unit achieved through the EDS contract.

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 and continuing expansion 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.

Travelocity
cost of revenues and selling, general and administrative expenses have increased due to growth in the business. We increased our expenditures for advertising in order to
drive additional travelers to Travelocity's websites, 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.

Sabre
Airline Solutions operating expenses have generally grown at a rate commensurate with the growth in revenues during the 2002 to 2004 period although bad debt expense increased
significantly in 2004 due to the economic state of the airline industry and the bankruptcy filings of several key customers.

2004 Compared to 2003

Total revenues for the year ended December 31, 2004 increased approximately $86 million, or 4.2%, compared to the year ended December 31,
2003, from $2,045 million to $2,131 million. Cost of revenues for the year ended December 31, 2004 decreased approximately $29 million, or 2.3%, compared to the year ended
December 31, 2003, from $1,269 million to approximately $1,240 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 $168 million and $142 million for the years ended December 31, 2004 and 2003, 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 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 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 13 to the Consolidated Financial Statements.

Revenues.Total revenues (including intersegment revenues) for the year ended December 31,
2004 increased approximately $112 million compared to the year ended December 31, 2003, from $2,187 million to $2,299 million.

The
increase in total revenues reflects improved travel demand and travel bookings in 2004. 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 resulting in part from
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 SARS.

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Sabre Travel NetworkRevenues decreased $7 million or 0.5%, from $1,560 million in 2003 to $1,553 million
in 2004.



TravelocityRevenues increased approximately $108 million or 27.3%, from $395 million to $503 million.



29

---





Sabre Airline SolutionsRevenues increased approximately $11 million or 4.7%, from $232 million to
$243 million. This increase was driven primarily by a $20 million increase in airline reservation hosting revenue. This $20 million increase includes $11 million due to a
shift towards online bookings for our customers and the sale of enhanced functionality to our existing hosted carrier base. The remaining $9 million is driven by increased transaction fees due
to newly signed carriers and organic growth from our existing customers. Airline consulting services revenues increased $3 million due to a higher number of customer engagements. These
increases were offset by an $8 million decrease in development labor revenues and a $4 million decrease in software products and services revenue driven by an elongated sales cycle.

Cost of Revenues.Total cost of revenues (including intersegment cost of revenues) for the year ended December 31,
2004 decreased approximately $3 million compared to the year ended December 31, 2003, from $1,411 million to $1,408 million.

Sabre Travel NetworkCost of revenues decreased $28 million or 2.7%, from $1,032 million to
$1,004 million. The primary drivers of this change were a $22 million decrease in headcount related expenses resulting from workforce reductions and a $9 million decrease in
technology spending. Other cost of revenue expenses for Sabre Travel Network decreased $5 million, but were offset by a $8 million increase in subscriber support costs.



30

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TravelocityCost of revenues increased $21 million or 10.3%, from $203 million to $224 million. Expenses
related to our merchant model offerings increased $23 million due primarily to volume growth which is referenced above in the explanation for the 46.5% increase in transaction revenue. However,
expenses related to our merchant model offerings also increased due to the fact that in 2004, we incurred credit card fees, merchant credit card chargebacks, fraud charges and other expenses that we
did not incur at similar levels in 2003 due to our relationship with a third-party supplier of merchant hotel content, which was terminated in September 2003. Data processing expenses increased
by approximately $6 million due to higher booking volumes and other cost of revenue expenses increased approximately $3 million. These increases were offset by approximately
$11 million of savings resulting from our contact center operations agreement with WNS (see Note 5 to the Consolidated Financial Statements).

Sabre Airline SolutionsCost of revenues decreased approximately $1 million or 0.6%, from $178 million to
$177 million. This decrease was driven by reduced direct headcount related expenses of $8 million and a $7 million reduction in indirect headcount related expenses driven by a
year over year change in the allocation of corporate resources (offset by a corresponding increase in Sabre Airlines Solutions selling, general and administrative expenses below). These decreases were
offset by increases in travel expenses of approximately $5 million partly due to the recognition of invoiced travel as revenue beginning in 2004 as opposed to an offset to cost of revenue in
prior periods. Data processing expenses increased $3 million related to Internet booking engine volumes. Services purchased increased $3 million to support reservations hosting
implementations and consulting engagements and development labor increased $2 million due to growth in web hosting related revenues. Other cost of revenue expenses increased $1 million.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the year ended
December 31, 2004 increased $31 million or 5.6%, as compared to the year ended December 31, 2003, from $554 million to $585 million due to increases for Travelocity
and Sabre Airline Solutions offset by an $8 million decrease in general and administrative costs at the corporate level due to facilities consolidation charges that we incurred in 2003 that we
did not incur in 2004.

Sabre Travel NetworkSelling, general and administrative expenses for Sabre Travel Network decreased by $2 million
driven primarily by a $12 million decrease in services purchased, which were higher in 2003 due to our efforts as an advocate for the deregulation of the U.S. CRS industry. This decrease was
offset by an increase in bad debt reserves of $8 million resulting from the increased aging of receivables due from a few large customers. Other selling, general and administrative expenses for
Sabre Travel Network increased $2 million.

TravelocityTravelocity's selling, general and administrative expenses increased $23 million, primarily due to
increased advertising and customer acquisition costs of $14 million to drive additional travelers to our websites. The increase also includes payments to our WCT affiliates but is offset
partially by savings from the AOL agreement renegotiation (see Note 5 to the Consolidated Financial Statements). Other selling, general and administrative expense increases for Travelocity
include $4 million driven by higher corporate allocations, $2 million in services purchased, $2 million in direct headcount related expenses and other increases totaling
$1 million.

Sabre Airline SolutionsSelling, general and administrative expenses for Sabre Airline Solutions increased $19 million.
This increase was driven by a $9 million increase in bad debt expense attributable to the economic state of the airline industry and the bankruptcy filings of several key customers. In
addition, indirect headcount related expenses increased $7 million driven by a year over year change in the allocation of corporate resources (offset by a corresponding decrease in Sabre
Airline Solutions cost of revenues above). Direct headcount related expenses and development labor increased $3 million.

31

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Amortization of Intangible Assets.Amortization of intangible assets for the year ended December 31, 2004 was
$47 million, a decrease of approximately $9 million as compared to the year ended December 31, 2003. Sabre Travel Network amortization increased approximately $6 million
primarily due to a $3 million impairment write-down of technology related intangible assets in 2004 and a $3 million increase resulting from the acquisition of the remaining
49% of Dillon Communications Systems GmbH in December 2003. Travelocity amortization decreased by approximately $16 million due to an approximately $9 million
write-off in 2003 of an intangible asset resulting from the termination of an agreement with a former hotel supplier in 2003. Also, there was an $11 million decrease due to the
completion of amortization of intangible assets during 2003 and 2004, partially offset by approximately $3 million of increased amortization resulting from the acquisition of assets of WCT in
the fourth quarter of 2003 and the acquisition of All State Tours in the third quarter of 2004. Amortization expense related to our fourth quarter 2004 acquisition of the non-German
operations of TEU was insignificant. Amortization of intangible assets for Sabre Airline Solutions increased approximately $1 million resulting from several small acquisitions during 2004.

Interest Income.Interest income decreased approximately $1 million for the year ended December 31, 2004 from
$16 million to $15 million due primarily to lower average balances of certain short-term investments and loans receivable.

Interest Expense.Interest expense increased $3 million for the year ended December 31, 2004 from
$24 million to $27 million resulting from the capital lease we entered into at the end of June 2003 for our headquarters buildings.

Other, net.Other, net changed approximately $41 million from net other expense of approximately $31 million
for the year ended December 31, 2003 to net other income of approximately $10 million for the year ended December 31, 2004. The change is primarily due to the $28 million
loss we incurred in 2003 relating to the required residual value guarantee payment in connection with terminating our syndicated lease facility and entering into a capital lease facility for our
corporate headquarters. Other net income for the year ended December 31, 2004 also includes a $6 million gain from settling a contract dispute. Other changes include year over year
changes in net income allocated to minority interests as well as 2003 impairment charges on certain non-operating assets.

Income Taxes.The provision for income taxes for the year ended December 31, 2004 increased $23 million as
compared to the year ended December 31, 2003, from $44 million to $67 million. This increase resulted from the approximately $130 million increase in pre-tax
income between periods offset by a reversal of previously accrued taxes of $23 million due to a change in our federal income tax treatment of certain subscriber contract payments and the
expiration of certain state income tax statutes of limitations. Our effective tax rate prior to the reversal was 35%. See Note 10 to the Consolidated Financial Statements for additional
information regarding income taxes.

Net Earnings.Stronger travel demand, merchant model revenue growth and the successful implementation of cost reduction
initiatives exceeded increases in customer incentives, advertising and bad debt expense resulting in an increase to net earnings of $84 million for the year ended December 31, 2004
compared to the year ended December 31, 2003. The remaining year over year increase relates to the $23 million reversal of previously accrued taxes discussed above.

Results of Operations

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.

32

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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 $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 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 13 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 SARS.

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



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



33

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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).



Sabre Airline SolutionsRevenues increased approximately $15 million or 6.9%, from $217 million to
$232 million. This increase was driven primarily by a $17 million increase in revenues from decision support products and services provided to various travel providers. Key components of
this increase included revenues from a large resource management contract and growth in theeMergo®offering, which is a
web-enabled application service provider (ASP) product line. In addition, airline reservation hosting revenue improved $6 million due to an increase in the number of signed carriers
as well as transaction fees linked to an increase in passenger volumes on existing airline customers. Revenues from airline consulting services improved $3 million due to additional service
offerings that we acquired during the fourth quarter of 2002. These increases were offset by an $11 million decrease in development revenues from major customers as those airlines slowed
purchases to reduce costs during the industry downturn.

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.

34

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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 theeMergosolutions 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 $30 million or 5.7%, compared to the year ended December 31, 2002 from $524 million to $554 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, which resulted in 2003 legal expenses being $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 Intangible Assets.Amortization of 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 agreement with a former hotel supplier, partially offset by decreases totaling $6 million due to the full
amortization of other intangible assets.

Interest Income.Interest income decreased in excess of $11 million, from $28 million for the year ended
December 31, 2002 to $16 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.

35

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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 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 write downs 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. Other changes include insignificant year over year changes in net income allocated to
minority interests.

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.

Net Earnings.In 2003, travel demand dropped significantly due to a slow economy, the war in Iraq and SARS. These factors
coupled with higher customer incentive and advertising costs resulted in a $131 million or 61.2% decrease in net earnings for the twelve months ended December 31, 2003 compared to the
twelve months ended December 31, 2002.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures, invest in our products and offerings, pay dividends, complete share repurchases and
service our debt and other long-term liabilities. Although 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 markets and through 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 long-term, our debt and
long-term liabilities are also considered key to assessing our liquidity.

36

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Our
future minimum non-cancelable contractual obligations as of December 31, 2004 are as follows (in thousands of dollars):

|                                                      |  | Payments Due by Year |          
|----------------------------------------------------- |  | -------------------- | ---------
|
|Notes payable (1)                                     |  | $                    | 605,800  
|Capital lease obligations (2)                         |  |                      | 240,959  
|Operating lease obligations                           |  |                      | 86,588   
|IT outsourcing agreement (3)                          |  |                      | 183,507  
|AOL agreement (4)                                     |  |                      | 13,000   
|Yahoo! agreement (5)                                  |  |                      | 30,400   
|WNS agreement (6)                                     |  |                      | 151,541  
|Pension and other benefit obligations (7)             |  |                      | 165,397  
|Other long-term obligations (8)                       |  |                      | 116,478  
|Amounts receivable under non-cancelable subleases (9) |  |                      | (40,179  
|                                                      |  |                      |          
|Total contractual cash obligations                    |  | $                    | 1,553,491
|                                                      |  |                      |          

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In the near-term, we anticipate that cash flows from our operations, existing balances in cash and short-term investments of
$837 million as of December 31, 2004 and funds available under our revolving credit facility of up to $400 million will be sufficient to fund our planned expenditures which
include operating expenses, capital expenditures, investments in our products and offerings, interest payments on our debt, dividends and share repurchases.

37

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In
the long-term, we expect to use our existing funds and cash flows from operations to satisfy our debt and other long-term obligations. We may also use our
funds to retire debt as appropriate, based upon market conditions and our desired liquidity and capital structure. 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. These types of additional activities might affect our
liquidity requirements or cause us to issue additional equity or debt securities.

Risk
factors that could possibly affect the availability of our internally generated funds include, among other things:



See
"Risk Factors" for a more complete discussion of risk factors that might affect the availability of our internally generated funds.
Nonetheless, with our strong cash and short-term investments position of $837 million and working capital of $672 million as of December 31, 2004, along with our
investment grade credit ratings from S&P and Moody's of BBB+ and Baa2, respectively, 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 risk factors.

Cash Investments

We generally invest excess 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 of our 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.

Capital Activities

Dividends.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 resulting in total dividend payments for 2003 of $30 million. On January 20, 2004 we announced an increased dividend of $.075
per share. We paid dividends of that same amount throughout 2004 resulting in total dividend payments for 2004 of approximately $41 million. On February 1, 2005, we announced a dividend
of $.09 per share to be paid on February 28, 2005 to stockholders of record on February 11, 2005. Based on a quarterly dividend of $.09 per share, and assuming that the current number of
outstanding shares of our common stock remains constant for the remainder of 2005, we expect to pay an aggregate of approximately $45 to $50 million in dividends during the fiscal year 2005.
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 by
management and our Board of Directors that dividends continue to be in the Company's best interests and those of our stockholders.

38

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Repurchases of Stock.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. During the three months ended March 31, 2004, we repurchased 3,336,862 shares of our Common Stock for approximately $72 million, thereby completing the remaining authorization
to repurchase shares under that program. On April 19, 2004 our Board of Directors approved another share repurchase program authorizing us to repurchase up to an additional $100 million
of our Common Stock. This authorization was completed on November 1, 2004. On October 25, 2004, our Board of Directors approved another share repurchase program authorizing us to
repurchase up to an additional $100 million of our Common Stock. At December 31, 2004, we had remaining authorization to repurchase approximately $43 million of our common stock
under this program. As of the date of this filing, we had remaining authorization to repurchase approximately $1 million of our common stock under this program.

In
addition, 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. Although this authorization remains in force, we did not repurchase any shares of our Common Stock under this program during the year ended
December 31, 2004. We purchased 840,00 shares under this authorization in January 2005.

We
expect that the timing, volume and price of the current and any future repurchases of our Common Stock will be made pursuant to trading plans that we intend as qualifying under
Rule 10b5-1, unless such plans are terminated at the discretion of management.

Financing Arrangements

Revolving Credit Agreement.On June 15, 2004, we replaced a $300 million revolving credit agreement that was
set to expire on September 14, 2004, with a new $300 million, senior unsecured revolving credit agreement that expires June 15, 2009. Under certain conditions, we can request an
additional $100 million under this new agreement. Interest on this agreement is variable, based on either the London Interbank Offered Rate ("LIBOR") or the prime rate, at our discretion, and
is sensitive to our credit rating. The LIBOR margin at the current credit rating is equal to 0.50%. We would also pay an a additional 0.125% on all borrowings outstanding during any period in which we
have utilized more than half of the total amount available under the agreement. As of December 31, 2004 there are no borrowings outstanding under this agreement. Under this agreement, we are
subject to covenants that could, among other things, restrict our ability to incur additional debt and that limit our ability to pay dividends or repurchase our stock in excess of $150 million
per fiscal year (unless, after giving effect to such dividends and/or repurchases, we have more than $400 million in cash and marketable securities domiciled in the United States). As of
December 31, 2004 we are in compliance with all covenants under this agreement including the following financial covenants:

Requirement

Level at
December 31, 2004Consolidated Leverage Ratio (Debt to EBITDA)

3 to 1 maximum

1.4 to 1Consolidated Net Worth

$1.3 billion

$1.6 billion


Public Notes.In August 2001, we issued through Sabre Holdings Corporation $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. The Notes include
certain non-financial covenants including restrictions on incurring certain types of debt or entering into certain sale and leaseback transactions. As of December 31, 2004, we are
in compliance with all covenant requirements under this agreement. Sabre Inc., a 100% owned subsidiary of Sabre Holdings Corporation, unconditionally guarantees all debt obligations of Sabre
Holdings Corporation under the Notes. 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.

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Capital Lease Obligation.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. The interest rate on the capital lease financing is fixed at 5.37%. 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 this 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. In conjunction with this lease, we have entered
into a $100 million interest rate swap which pays us 5.37% and on which we pay a variable rate based on a six-month LIBOR plus 153 basis points. Under the lease agreement, we are
subject to certain covenants. As of December 31, 2004 we are in compliance with all covenants under this agreement including the following financial covenant:

Requirement

Level at
December 31, 2004Consolidated Net Worth

$1.0 billion

$1.6 billion


Cash Flows (in thousands)

Year Ended December 31,2004

2003

2002Cash provided by operating activities

$
363,194

$
279,326

$
303,565Cash used for investing activities


(98,992
)

(165,203
)

(680,916
)Cash provided by/(used for) financing activities


(255,393
)

(94,437
)

379,672Total cash increase

$
8,809

$
19,686

$
2,321


Operating Activities.Cash flows from operating activities increased by $84 million in the year ended
December 31, 2004 as compared to the year-ago period. This year over year increase was primarily due to improved earnings and favorable changes in working capital. Net earnings
including adjustments for non-cash and non-operating items improved $49 million. Favorable changes in working capital included the collection of $20 million
related to the 2003 cancellation of two subscriber contracts and $20 million in expedited collections in our merchant model due to changing service providers. These positive changes in working
capital were offset by $5 million in other working capital changes primarily due to timing differences in accruals and payments.

Cash
provided by operating activities during year ended December 31, 2004 was $363 million, which was primarily from net earnings of $190 million adjusted for
non-cash and non-operating items. In addition, cash provided by operating activities includes favorable changes in working capital. Non-cash adjustments to net
earnings of $128 million were driven primarily by depreciation and amortization of $117 million, bad debt expense of $19 million, equity losses in unconsolidated joint ventures of
$5 million and stock compensation expense of $11 million, offset by deferred taxes of $24 million. The favorable changes in working capital include an increase in merchant
supplier liabilities of approximately $28 million, a reduction in accounts receivable in 2004 due to the collection of $20 million related to the 2003 cancellations of two subscriber
contracts, the receipt of approximately $16 million in 2004 of dividends from our Sabre Travel Network unconsolidated joint ventures and lower prepaid expenses, net of amortization of
$8 million related to the renegotiation of our contract with AOL.

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Cash
provided by operating activities for the year ended December 31, 2003 was $279 million and was primarily from net earnings of $83 million plus
non-cash and non-operating items as well as favorable changes in working capital items. Non-cash and non-operating adjustments to net earnings of
$186 million for the year ended December 31, 2003 included depreciation and amortization of $127 million, a $9 million impairment of an intangible asset related to our
agreement with a former hotel supplier, $12 million in losses from asset disposals, a $28 million charge relating to the termination of our syndicated lease facility, and stock
compensation expense of $12 million, offset by deferred taxes of $4 million.

Cash
provided by operating activities for the year ended December 31, 2002 was $304 million and was primarily from net earnings adjusted for non-cash and
non-operating activity. Non-cash and non-operating adjustments to net earnings of $181 million for the year ended December 31, 2002 included
depreciation and amortization of $114 million, stock compensation expense of $31 million, deferred income taxes of $53 million, a tax benefit from the exercise of stock options of
$10 million and bad debt expense of $17 million. These expenses were offset by joint venture equity income of $13 million and a gain on sale of assets of $18 million
related to the sale of our former corporate headquarter facilities.

Investing Activities.The $66 million decrease in cash used for investing activities in the year ended
December 31, 2004 as compared to the year-ago period primarily results from an $85 million net increase in sales of marketable securities for our short-term
investment portfolio. The net increase in sales of marketable securities is partially offset by $36 million in investments in unconsolidated joint ventures and $10 million in loans to
business partners during the year ended December 31, 2004 compared to a net use of $12 million for similar activities in the same period a year ago. In addition, during the year ended
December 31, 2004 we utilized $70 million, net of cash acquired, for acquisitions compared to $96 million in 2003.

Investing
activities declined $516 million between 2002 and 2003. The reduction resulted from a use of cash of $499 million for acquisitions, net of cash received, in 2002,
primarily for the acquisition of Travelocity.com, compared to $96 million in 2003. Additionally, in 2002 net purchases of short-term marketable securities was $242 million
compared to net sales of short-term marketable securities of $10 million in 2003.

Financing Activities.The $161 million increase in cash used for financing activities in the year ended
December 31, 2004 as compared to the same period a year ago was mainly due to dividends of $41 million paid in 2004 compared to $30 million for 2003 and $228 million used
to repurchase our Common Stock during the year ended December 31, 2004 compared to $44 million for the same period in 2003. Proceeds from the exercise of stock options in 2004 as
compared to 2003 increased $5 million due to a generally higher stock price. In 2003, $28 million was used related to the termination of our syndicated lease facility on our headquarters
buildings. For the year ended December 31, 2004, cash used in financing activities of $228 million related to common stock repurchases differs from the comparable change in Stockholder's
Equity of $229 million due to timing differences between the recognition of share repurchase transactions and their settlement for cash.

In
2002, financing activities provided cash of $380 million due to a public offering of our common stock which brought in proceeds of $400 million and cash received from
the exercise of stock options of $37 million. These proceeds were offset by common stock repurchases of $57 million.

Off Balance Sheet Arrangements

We do not have any relationships or agreements as of December 31, 2004 that would be considered an off balance sheet arrangement as defined by Item
303(a)4ii of Regulation S-K.

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.

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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.

Revenue Recognition:

Sabre Travel Network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 both December 31, 2004 and 2003, our booking fee cancellation reserves were approximately $17 million. In 2004, the cancellation reserve remained
the same due to increasing booking levels offset by a reduced rate per booking. 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 2004 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 approximately $2 million.

TravelocityWe receive commissions from travel suppliers for air travel, hotel rooms, car rentals, vacation packages and
cruises booked through our Travelocity websites and advertising revenues from the delivery of advertising impressions on our Travelocity websites. Commissions from air travel providers are recognized
at the time of booking the reservation, net of cancellations for the period. Commissions from car and hotel travel providers are recognized upon the scheduled date of travel consumption. We estimate
cancellations, including no-shows, for car and hotel commissions and record these revenues net of an estimated reserve. If circumstances should change such that the cancellation rates are
significantly higher than expected, it could have a significant impact on the amount reserved. At December 31, 2004 our reserve for car and hotel commissions was approximately
$6 million.

For
our Travelocity merchant hotel and TotalTrip offerings, we record merchant revenues based on the total amount paid by the customer for products and services, minus our payment the
travel supplier. We recognize merchant revenue for stand-alone air travel at the time the travel is marketed to the consumer and for vacation packages and hotel stays at the date of
check-in.

Sabre Airline SolutionsOur software is generally sold as part of agreements which also require us to provide customization
and implementation services. Such agreements are accounted for using contract accounting under the provisions of Statement of Position 97-2,Software Revenue
Recognition. Revenue from license fees, when software is sold without associated customization or implementation services, is recognized when the software is delivered, fees
are fixed and determinable, no undelivered elements are essential to the functionality of delivered software and collection is probable. At times, determining if all of these elements have been met
requires judgment. Fees for software maintenance are recognized ratably over the life of the contract. The fees for software maintenance included in initial software license agreements is based on the
vendor specific objective evidence of the fair value of the services determined using actual renewal rates for software maintenance services. The process of allocating fees based on vendor specific
evidence of fair value can require judgment.

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Accounts Receivable:We generate a significant portion of our revenues and corresponding accounts receivable from services
provided to commercial airlines. As of December 31, 2004, approximately 68% of our trade 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.

Several
of our airline customers are experiencing financial difficulty, some (including United Air Lines, Inc., U.S. Airways, Inc. and ATA Holdings Corporation) have sought
bankruptcy protection and still 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.

Business Combinations:During 2004, 2003 and 2002, 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.

Goodwill and Long-Lived Assets:Pursuant to Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets("SFAS 142"), we evaluate goodwill and indefinite lived intangible assets for impairment on an annual basis
or if impairment indicators exist. For indefinite lived intangible assets, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. 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. For goodwill, the evaluation requires a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the
assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the fair value of that reporting unit, the carrying value of the
reporting unit's goodwill is reduced to its implied fair value through an adjustment to the goodwill balance, resulting in an impairment charge. We evaluate four reporting units under SFAS 142,
which include Sabre Travel Network, Travelocity, Sabre Airline Solutions and Emerging Businesses. Our Emerging Businesses reporting unit is included with Sabre Travel Network for segment reporting
purposes.

The
fair values used in our SFAS 142 evaluation are estimated based upon discounted future cash flow projections. These cash flow projections are based upon a number of
assumptions, including risk-adjusted discount rates, future booking and transaction volume levels, future price levels, rates of growth in our consumer and corporate direct booking
businesses and rates of increase in operating expenses. We believe that the 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.

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Intangible
assets subject to amortization are evaluated for impairment pursuant to Statement of Financial Accounting Standards No. 144,Accounting for the
Impairment or Disposal of Long-Lived Assets("SFAS 144"), which requires impairment testing whenever events or changes in circumstances indicate that the
carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the
expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset,
no impairment charge is recorded. If our projection of undiscounted cash flows is less than the carrying value of the intangible asset, an impairment charge is recorded to reduce the intangible asset
to its fair value.

In
2004, we recorded an impairment charge of approximately $3 million on technology-related assets. In 2003, we wrote-off an intangible asset of approximately
$9 million associated with a supplier agreement that was terminated early. In 2002, we recorded an impairment charge of approximately $3 million associated with a customer contract. No
other significant impairments of our goodwill or intangible assets have been recorded.

Income Taxes:The calculation of our tax liabilities involves significant judgment and evaluation of uncertainties in the
interpretation of complex tax regulations. As a result, we have established reserves for taxes and associated interest that may become payable in future years as a result of audits by tax authorities.
Tax reserves are reviewed regularly pursuant to Statement of Financial Accounting Standard No. 5 "Accounting for Contingencies". Tax reserves are
adjusted as events occur that affect our potential liability for additional taxes and associated interest, such as the expiration of statutes of limitations, conclusion of tax audits, identification
of additional exposure based on current calculations, identification of new issues, or the issuance of statutory or administrative guidance or rendering of a court decision affecting a particular
issue. Accordingly, we may experience significant changes in our tax reserves in the future if or when such events occur.

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. Travelocity revenues are also impacted by the seasonality of travel bookings, but to a lesser extent since commissions from car and hotel travel providers and merchant
revenue for vacation packages and hotel stays are recognized upon date of consumption. See Note 5 to the Consolidated Financial Statements for other items impacting our quarterly results.
Relative to the table below, the first half of 2003 was affected by the conflict in Iraq and travelers' fear of exposure to contagious diseases such as SARS. However, bookings improved in the second
half of 2003 and continued to improve in 2004.

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

|                           |         | First
Quarter |         | Second
Quarter |   | Third
Quarter |      | Fourth
Quarter
|-------------------------- | ------- | ------------- | ------- | -------------- | - | ------------- | ---- | --------------
|2004                       |         |               |         |                |   |               |      |               
|Revenues                   |         | $             | 539,753 |                | $ | 550,903       |      | $             
|Gross Profit               |         |               | 228,238 |                |   | 243,126       |      |               
|Operating income           |         |               | 69,488  |                |   | 88,443        |      |               
|Net earnings               |         | $             | 43,037  |                | $ | 58,937        |      | $             
|Earnings per common share: |         |               |         |                |   |               |      |               
|                           | Basic   |               | $       | 0.31           |   | $             | 0.43 |               
|                           |         |               |         |                |   |               |      |               
|                           | Diluted |               | $       | 0.31           |   | $             | 0.42 |               
|                           |         |               |         |                |   |               |      |               

|                                  |         | First
Quarter |         | Second
Quarter |   | Third
Quarter |     | Fourth
Quarter |        
|--------------------------------- | ------- | ------------- | ------- | -------------- | - | ------------- | --- | -------------- | -------
|2003                              |         |               |         |                |   |               |     |                |        
|Revenues                          |         | $             | 543,833 |                | $ | 507,189       |     | $              | 526,793
|Gross Profit                      |         |               | 232,228 |                |   | 188,886       |     |                | 203,126
|Operating income                  |         |               | 103,894 |                |   | 40,392        |     |                | 43,866 
|Net earnings (loss)               |         | $             | 64,879  |                | $ | 6,816         |     | $              | 25,449 
|Earnings (loss) per common share: |         |               |         |                |   |               |     |                |        
|                                  | Basic   |               | $       | .46            |   | $             | .05 |                | $      
|                                  |         |               |         |                |   |               |     |                |        
|                                  | Diluted |               | $       | .45            |   | $             | .05 |                | $      
|                                  |         |               |         |                |   |               |     |                |        

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.

We
do not have an interest in any entity that is required to be consolidated pursuant to the provisions of FIN 46. We completed an initial evaluation of and continue to monitor our
involvement in other entities, including joint ventures and other investments pursuant to the provisions of FIN 46, and have determined that none of these entities are required to be consolidated
under FIN 46.

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.

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In
December 2003, the Staff of the Securities and Exchange Commission ("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.

Effective
July 1, 2004, we adopted Financial Accounting Standard Board Staff Position ("FSP") No. 106-2Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003("Act"). This FSP provided guidance on the accounting for the effects of the
Act for employers that sponsor postretirement health care plans that provide prescription drug benefits, and requires employers to provide certain disclosures regarding the effect of the federal
subsidy provided by the Act (See Note 9 to the Consolidated Financial Statements).

On
December 16, 2004, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 123 (revised 2004), ("FAS 123(R)"), Share-Based Payment,which is a revision of FASB
Statement No. 123,Accounting for Stock-Based
Compensation.FAS 123(R) supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees,and amends FASB
Statement No. 95,Statement of Cash Flows.Generally, the approach in FAS 123(R) is similar to the approach described in Statement 123.
However, FAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative.

Statement
123(R) must be adopted no later than July 1, 2005. We expect to adopt FAS 123(R) on July 1, 2005 and we intend to use the modified prospective method. We
currently account for share-based payments using APB 25's intrinsic value method whereby we generally recognize no compensation expense for employee stock options. Accordingly, the adoption of
FAS 123(R) will have a significant impact on our results of operations, although it will have no impact on our overall financial position. FAS 123(R) also requires that the benefits of
tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current guidance. The impact of the
adoption of FAS 123(R) cannot be predicted at this time as it will depend on levels of share-based payments granted in the future.

In
December 2004, the FASB issued Statement of Financial Accounting No. 153,Exchanges of Nonmonetary Assets. The statement
amends Accounting Principles Board ("APB") Opinion No. 29,Accounting for Nonmonetary Transactionsby replacing the exception from fair value
measurement for nonmonetary exchanges of similar productive assets with a general exception for exchanges of nonmonetary assets that do not have a commercial substance. We anticipate that adoption of
this statement will not have a significant effect on our financial position or results of operations.

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Mergers and Acquisitions

Acquisition of RM RocadeOn August 16, 2004, we completed the acquisition of Stockholm,
Sweden-based RM Rocade AB and RM Assist AB ("RM Rocade") for approximately $15 million in cash. The acquisition of RM Rocade expands the ability of our Sabre Airline Solutions business segment
to provide software solutions, including a fully functional flight operations product suite at a compelling price and value point to international small, medium-size and low cost carriers.
The results of operations of RM Rocade have been included in our consolidated statements of income and the results of operations of our Sabre Airline Solutions segment from the date of acquisition.
Assets acquired and liabilities assumed have been recorded at their estimated fair values and the $11 million excess of cost over the estimated fair value of the net assets has been recorded as
goodwill. The acquired goodwill is not deductible for tax purposes. The fair values were determined by management based on a valuation of the net assets acquired, including intangible assets of
$3 million. Intangible assets subject to amortization are being amortized over a weighted average of 3 years and relate primarily to technology and customer relationships.

Acquisition of All State Tours, Inc.On August 30, 2004 we completed the acquisition of All State
Tours, Inc. ("Allstate Ticketing"), a leading distributor of show tickets and tours in Las Vegas, for approximately $25 million in cash. The acquisition of Allstate Ticketing enhances
the ability of our Travelocity business segment to sell show tickets, attraction passes and other travel extras for this popular destination. The results of operations of Allstate Ticketing have been
included in our consolidated statements of income and the results of operations of our Travelocity segment from the date of acquisition. Assets acquired and liabilities assumed have been recorded at
their estimated fair values and the $15 million excess of cost over the estimated fair value of the net assets has been recorded as goodwill. The acquired goodwill is deductible for tax
purposes. The fair values were determined by management based on a valuation of the net assets acquired including an independent valuation of the intangible assets acquired of $10 million.
Intangible assets subject to amortization are being amortized over a weighted average of 5 years and relate primarily to customer relationships and technology.

Acquisition of Travelocity EuropeOn October 4, 2004, we completed the acquisition of certain entities in the United
Kingdom, Sweden, Denmark, Norway and France, which were previously owned jointly by the Travelocity Europe joint venture. We purchased the 50% of these entities that we did not indirectly already own
from the Otto Group's Otto Freizeit and Touristik GmbH for approximately $33 million (26.6 million Euros) in cash. The remaining 50% of these entities that we did already own indirectly
through the Travelocity Europe joint venture was distributed to us by the joint venture so that we now directly own 100% of these entities. The entities acquired include Travelocity.co.uk in the
United Kingdom, Resfeber.se and Box Office in Sweden, Rejsefeber.dk and Arte Udland in Denmark, Reisefeber.no and Ticket Service in Norway and Usit Connections SAS, Boomerang SAS and Travelocity SAS
in France. Travelocity and The Otto Group will continue their joint (50/50) ownership of the German operations of Travelocity Europe, which include Travelchannel.de, Travelocity.de, Travel Overland
and Flug.de. Our decision to take full ownership of Travelocity Europe outside of Germany will enable us to invest more heavily and efficiently in the products, technology and marketing necessary to
grow in this key region. The results of operations of the acquired entities are included in our consolidated statements of income and the results of operations of our Travelocity segment from the date
of acquisition. Because we previously owned 50% of these entities (accounted for using the equity method), the acquisition was accounted for as a step-acquisition. The purchase price was
allocated based on 50% of the estimated fair value of the net assets acquired, including intangible assets acquired. After adding our original 50% cost basis in the entities to the 50% of the fair
value of the assets acquired, our total investment in Travelocity Europe is $55 million, including $52 million of goodwill. The acquired goodwill is deductible for tax purposes. The fair
values of the net assets acquired were determined by management based on an independent valuation of the intangible assets acquired. Intangible assets subject to amortization are being amortized over
a weighted average period of 5 years and relate primarily to supplier relationships.

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Gulf Air Joint VentureOn December 31, 2004, we entered into a joint venture with Gulf Air, a leading airline carrier
in the Middle East, for which we will pay $31 million throughout 2005. The joint venture, Sabre Travel Network Middle East, is owned 60% by Sabre Travel Network and 40% by Gulf Air and will
further extend our travel network products and services into the Middle East region. The joint venture will provide technology services, bookable travel products and distribution services for travel
agencies, corporations and travel suppliers in the region. In addition, Sabre Airline Solutions entered into a five-year revised contract with Gulf Air to provide the SabreSonicsuite of products
for passenger management, as well as additional operational software and consulting services. The
determination of the fair values of the assets of the joint venture entity has not been finalized and as a result, we initially recorded the $31 million of consideration primarily as goodwill.
We expect that the final allocation will consist primarily of goodwill and amortizable intangible assets. The goodwill resulting from this transaction is not deductible for tax purposes.

We
also completed other acquisitions during 2004 which did not materially affect our financial position or results of operations.

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
possibility of further terrorist attacks, hostilities and war, 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. We depend on a relatively small number of airlines for a significant
portion of our revenues. Several major airlines are experiencing liquidity problems, some (including United Air lines, Inc., U.S. Airways, Inc., and ATA Holdings Corporation) 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. The financial
instability of airlines or 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.

We will also encounter risks and difficulties frequently experienced in rapidly evolving industries such as the travel industry, and particularly the
online travel industry. Some of these risks relate to our ability to:



If
we are unsuccessful in addressing these risks or in executing our business strategy, our business, financial condition or results of operations may suffer.

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We face competition from established and emerging travel distribution channels, risks related to deregulation of the CRS industry and possible internal
channel conflict, 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, ourSabreGDS competes primarily against
other large and well-established global distribution systems, but new GDS alternatives are also being promoted in the marketplace. 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 or a GDS alternative 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 the SabreGDS. Losing access to
inventory from one or more major suppliers would make theSabreGDS less
attractive to travel agencies and travel purchasers, which could reduce our booking fee revenue. In order to gain access to suppliers' inventory (including suppliers for whom DCA 3-Year
Pricing Option contracts will be expiring in 2005 and 2006), it might become necessary for us to reduce further the fees charged to suppliers, which could reduce our booking fee revenue. In addition,
we face increasing competition in the travel agency channel from travel suppliers that distribute directly to travel agencies as well as to consumers.

In
the business-direct channel,Travelocity Businessand our Sabre Travel Network's GetThereproduct compete 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, which may increase the pricing pressure on ourGetThereofferings.

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

Our
Sabre Airline Solutions business unit competes against several organizations offering internal reservation system and related technology services to airlines. This segment is highly
competitive. If we cannot compete effectively to keep and grow this segment of business, we risk losing customers and economies of scale, which could have a negative impact on our operating results.

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 greater marketing resources, thereby providing
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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In
certain limited circumstances, our business segments may conflict with each other. For example, both ourTravelocity.comand Travelocity Businesswebsites
may compete with the travel-agency customers of Sabre Travel Network to distribute travel to corporate or business
customers. Although we believe that our participation in both the traveler-direct and distribution intermediary businesses is a distinct advantage for Sabre Holdings due to synergies including greater
scale of our technology, customer conflicts between our offerings across businesses could create issues that have the potential to adversely affect our results of operations. For example, such
conflict could cause some of our current or potential travel agency customers to consider competing GDS providers (or online websites) or other direct or indirect channels of travel distribution.

Some travel suppliers are seeking alternative distribution models, and alternative models of travel distribution are emerging, which may adversely
affect 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 or may create or expand commercial
relationships with online and traditional travel agencies that work with travel suppliers to directly book travel with those suppliers. Many airlines, hotels, car rental companies and cruise operators
have established their own travel distribution websites. Several suppliers 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 offerings are not
available to unrelated intermediaries, or those intermediaries must provide lower distribution pricing in exchange for access to the offerings. In addition, the airline industry has experienced a
shift in segment share from full-service carriers to low-price carriers. Some low-cost carriers do not distribute their tickets through the SabreGDS or through other third-party intermediaries. In
addition, a new breed of competitors is entering the online travel marketplace. Both
well-established search engine companies as well as start ups are attempting to enter the online travel marketplace by leveraging search technology to aggregate travel search results
across supplier, travel agent and other travel-related websites. These search engines and alternative travel distribution channels have the potential to divert customers from our online sites and our SabreGDS thereby putting pressure on our revenues, pricing and operating margins. See "Business TrendsSupplier
Efforts to Control Travel Distribution"and"Item 1 BusinessThe SabreGlobal Distribution SystemAssociate Participation
and Pricing Options."

Adverse changes in or interruptions to our relationships with travel suppliers could affect our access to travel offerings and reduce our revenues.

We rely on participating carrier agreements, such as our DCA 3-Year Pricing Option, with our airline suppliers, and these agreements contain terms
that reduce our revenues by providing discounted pricing. None of these arrangements is exclusive and airline suppliers could enter into, and in some cases may have entered into, similar agreements
with our competitors. In addition, most of the agreements we have with airline suppliers will expire by their terms within the next two years unless they are extended or replaced. See "Item 1
BusinessTheSabreGlobal
Distribution SystemAssociate Participation and Pricing Options."

We
cannot assure you that our arrangements with travel suppliers will remain in effect, that the net impact of these pricing options will not adversely impact revenue, or that any of
these suppliers will continue to supply us with the same level of access to inventory of travel offerings in the future. Additionally, we cannot assure you that potential disputes with our travel
suppliers (such as our litigation with Northwest Airlines) will not affect our businesses. See "Item 3Legal Proceedings." Because our major airline relationships represent such a large
part of our business, the loss of any of our major airline relationships, including due to the bankruptcy of an airline, could have a material negative impact on our business. If our access to
inventory or features is affected, or our ability to offer their inventory on comparatively favorable economic terms is diminished, it could have a material adverse effect on our business, financial
condition or results of operations.

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

GDSs compete to attract and retain travel agencies. 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 theSabreGDS has 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. In addition, consolidation among travel suppliers, such as major hotels and airline mergers and alliances, may increase competition from these supplier-related
distribution channels or give them additional leverage to negotiate lower booking fees payable to GDS operators like Sabre Travel Network.See "Item 1
BusinessCompetition."

Travelocity's growth cannot be assured.

The online travel marketplace is highly competitive, with both independent online 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, developing its
brand in a cost-effective manner and increasing its site traffic (including direct distribution as well as through current and future distribution partners). Key components of this
strategy include the growth of revenue from our merchant model hotel business, last-minute packaging and theTotalTripdynamic packaging
offering. We also plan to expand the appeal ofTravelocity Businessto corporate travelers and to invest strategically in growth opportunities such as
the European and Asian marketplaces. If any of these initiatives is not successful, Travelocity's growth may be limited and it may be unable to achieve or maintain profitability. In addition,
Travelocity's growth strategy relies on the continuing growth in the travel industry of the internet as a distribution channel. If consumers do not continue to book more travel online than they
currently do today or if the use of the internet as a medium of commerce for travel bookings does not continue to grow or grows more slowly than expected, our revenues and profit may be adversely
affected.

Our business plans call for the significant growth of our net rate hotel and packaging businesses, and we may be unsuccessful in managing or expanding
that business.

Our business strategy is dependent upon what is commonly referred to in the industry as our "merchant model" business, primarily our net rate hotel program, as a
significant source of revenue growth and increased margins. Our net rate hotel strategy is particularly dependent upon our ability to obtain the right to market adequate hotel rooms. We remain subject
to numerous risks in the operation and growth of the merchant model business. In particular, we cannot ensure that we will continue to be successful in adding and retaining hotel properties or other
suppliers in a sufficient number of domestic or international geographic markets. Many hoteliers utilize merchant model arrangements with us and with our competitors as a channel to dispose of excess
hotel rooms at discounted rates. Demand for supplier offerings may increase as a result of increased travel and competition from merchant model offerings by our competitors. If demand increases for
suppliers' products, services and other content offerings, suppliers may limit our right to market their offerings or may increase the cost of those offerings. These types of events could exert
downward pressure on the margins we expect to achieve in our merchant hotel business. We may be unable to achieve our financial objectives for the merchant model hotel program, especially if economic
conditions improve or if competition increases. Similar risks could also impact any future merchant model programs we might explore for other types of supplier offerings, such as air travel.

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

We are currently seeking to integrate the completed acquisitions described herein, including our acquisitions of the non-German operations of
Travelocity Europe and of SynXis Corporation. In addition, we plan to continue 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. As a result of these completed or proposed transactions, our businesses will be subject to new or increased risks related to the nature of
the transactions. We may be unable to successfully complete potential 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 or integrating the operations, technology and personnel of the combined companies; disruption of our ongoing
business, including loss of management focus on existing businesses and marketplace 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. To consummate such transactions, we may need to raise external funds through the sale of stock and/or debt in the capital markets or through private placements, which might affect
our liquidity requirements.

We are not certain that our ongoing cost reduction plans will continue to 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 include personnel reductions, reductions in personnel-related costs, programs designed to reduce the growth rate of
incentive payments to travel agencies, and realigning and streamlining operations and consolidating facilities. We cannot assure you that our efforts will continue to result in the increased
profitability, cost savings or other benefits that we expect.

Part
of our cost reduction strategy involves leveraging our status as a global company to conduct some of our operations outside the United States, such as customer call centers and
software development, either by contracting with foreign companies that work for us or by expanding our own operations outside the United States. These foreign operations are subject to unique risks,
including: business, political and economic instability in foreign locations; governments policies that could adversely affect business and economic conditions related to our operations or business;
adverse political or consumer reactions in the United States; disruptions to communication and transportation services supporting globalization; actual or threatened terrorist activities; and military
action overseas. Risks such as these could adversely affect our ability to effectively implement global sourcing.

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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 continued
ability to maintain and to make timely and cost-effective enhancements, upgrades and additions to our technology in response to changes in consumer preferences and increased demand for our
products and services. We must also keep pace with rapid advancements in industry technology, standards and practices, and protect our technology. Additionally, we must maintain our ability to ensure
the security and privacy of personal information transmitted through our websites and other distribution channels. 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. Protecting our intellectual property from unauthorized use could be expensive and time
consuming. Maintaining flexibility to respond to technological and market dynamics or to respond to evolving security and privacy requirements 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 and on the global
telecommunications infrastructure. We rely on several communications service suppliers and on the global Internet to provide network access between our computer data center and call centers and
end-users of our services. Travelocity and Site59 are dependent upon GDS's (theSabreGDS and a third-party provider, respectively) to
process their travel bookings. 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 and which could result in a material adverse effect upon our businesses, financial condition or results of operations
(particularly if such events occur at Travelocity). 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.

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Our success depends on maintaining the integrity of, and upgrading the quality of, our systems and infrastructure.

In order to be successful, we must provide reliable, real-time access to our systems for our customers and suppliers while also pursuing a
low-cost model. As our operations grow in both size and scope, we will continuously need to improve and upgrade our systems and infrastructure to offer an increasing number of customers
and travel suppliers enhanced products, services, features and functionalityall while maintaining the reliability and integrity of our systems and infrastructure and while pursuing the
lowest cost per transaction. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of business
increases, with no assurance that the volume of business will increase. Consumers and suppliers will not tolerate a service hampered by slow delivery times, unreliable service levels, service outages
due to the installation of upgrades, or insufficient capacity, any of which could have a material adverse effect on our business, financial condition or results of operations.

Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal
requirements or differing views of personal privacy rights.

In our processing of travel transactions, we receive and store a large volume of personally identifiable data. This data is increasingly subject to legislation
and regulations in numerous jurisdictions around the world, including the Commission of the European Union ("E.U. Commission") through its Data Protection Directive and variations of that directive in
the member states of the European Union ("E.U."). This government action is typically intended to protect the privacy of personal data that is collected, processed and transmitted in or from the
governing jurisdiction. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement
their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.

In
addition, in the aftermath of the terrorist attacks of September 11, 2001 in the United States, government agencies have been contemplating or developing initiatives to enhance
national and aviation security, including the Transportation Security Administration's Computer-Assisted Passenger Prescreening System, known as CAPPS II. These initiatives may result in conflicting
legal requirements with respect to data handling. As privacy and data protection has become a more sensitive issue, we may also become exposed to potential liabilities as a result of differing views
on the privacy of travel data. Travel businesses have also been subjected to investigations, lawsuits and adverse publicity due to allegedly improper disclosure of passenger information. These and
other privacy developments that are difficult to anticipate could adversely impact our business, financial condition and results of operations.

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 net rate, or "merchant," 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 amounts
representing our fees.

We
do not collect or remit occupancy taxes on our fees. Some tax authorities claim that occupancy taxes should be collected on some or all of the fees. We believe there are strong
arguments that our fees are 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.

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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. The amount of our liability on occupancy taxes could exceed that reserve, which could 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 E.U. Commission is engaged in a comprehensive review of its rules governing CRS systems. It is unclear when the E.U. Commission will complete its review and
what changes, if any, will be made to its 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 or 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.

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
continually seek to expand the reach of our various businesses into international markets as well as to successfully integrate, operate and manage our existing and future
international operations. Our international operations are subject to a number of risks, including, but not limited to, the following:



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.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2004, our exposure to interest rates relates primarily to our marketable securities portfolio. Largely offsetting this exposure are our
notes payable and capital lease obligation, 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 2005 than they were during 2004, our interest income from marketable securities would decrease by approximately $1 million. In
comparison, at December 31, 2003, we estimated that if short-term interest rates averaged 10% lower in 2004 than they were during 2003, our interest income from marketable
securities would have decreased by approximately $1 million. These amounts were determined by applying the hypothetical interest rate change to our average marketable securities invested during
2004 and 2003.

In
addition, we had fixed rate senior notes of $400 million ("Notes") outstanding as of December 31, 2004. 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 2005 than they were in 2004, our interest expense would increase by approximately $0.5 million. This amount was determined by
applying the hypothetical interest rate change to our floating rate swap notional value of $300 million at December 31, 2004.

In
addition, we had a $168 million capital lease at December 31, 2004. 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 2005 than they were in 2004, our interest expense would increase by approximately $0.2 million. This amount was determined by applying the hypothetical interest rate
change to our floating rate swap notional value of $100 million at December 31, 2004.

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Foreign Currency Risk

We have various operations outside of the United States, primarily in North America, South America, Europe, Australia and Asia. As a result of these business
activities, we are exposed to foreign currency risk. Because 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. Nevertheless, during times of devaluation of the U.S. dollar, such as in 2003 and 2004, 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 forward contracts, totaling $115 million at December 31, 2004 and $89 million at December 31, 2003, represent obligations to purchase
foreign currencies at a predetermined exchange rate, to fund a portion of our expenses that are denominated in foreign currencies. In March 2004 we also hedged a portion of our 2004 foreign
currency exposure using call option contracts, which gave us the right to purchase foreign currencies at predetermined exchange rates to fund a portion of our expenses that are denominated in foreign
currencies. As of December 31, 2004, there were no call option contracts outstanding. In December 2004, we purchased foreign currency denominated government bonds to function as a hedge
of a portion of our 2005 foreign currency exposure. To protect these bond investments from foreign currency risk, we purchased put options on the currencies in which the government bonds are
denominated. These options give us the right to sell the foreign currencies at predetermined prices. The result of an immediate 10 percent devaluation of the U.S. dollar in 2005 from
December 31, 2004 levels relative to our primary foreign currency exposures would result in a negative U.S. dollar impact of approximately $5 million in 2005, net of hedge instruments
outstanding. This sensitivity analysis was prepared based upon 2005 projections of our primary foreign currency-denominated expenses and foreign currency forwards and foreign currency denominated
bonds outstanding as of December 31, 2004.

58

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Management's Report on the Assessment of Internal Controls

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control system was designed to provide reasonable assurance to the
Company's management and board of directors regarding the reliability, preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting
principles. All internal control systems, no matter how well designed, have inherent limitations. Because of these inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Sabre Holdings management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2004. In making this assessment,
the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on these criteria,
management believes that the Company maintained effective internal controls over financial reporting as of December 31, 2004.

Ernst &
Young LLP, Independent Registered Public Accounting Firm, that audited the Company's consolidated financial statements has issued an attestation report on management's
assessment of the Company's internal control over financial reporting which is included in this annual report on Form 10-K.

59

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL  CONTROLS OVER FINANCIAL REPORTING

The
Board of Directors and Stockholders
Sabre Holdings Corporation

We
have audited management's assessment, included in the accompanying Management's Assessment of the Effectiveness of Internal Controls, that Sabre Holdings Corporation maintained
effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Sabre Holdings Corporation's management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, management's assessment that Sabre Holdings Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated,
in all material respects, based on the COSO criteria. Also, in our opinion, Sabre Holdings Corporation maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2004, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sabre Holdings Corporation and
subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended
December 31, 2004 of Sabre Holdings Corporation and subsidiaries and our report dated March 10, 2005 expressed an unqualified opinion thereon.



Dallas,
Texas
March 10, 2005

60

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                        |  | Page
|------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm |  | 62  
|Consolidated Balance Sheets                             |  | 63  
|Consolidated Statements of Income                       |  | 64  
|Consolidated Statements of Cash Flows                   |  | 65  
|Consolidated Statements of Stockholders' Equity         |  | 66  
|Notes to Consolidated Financial Statements              |  | 67  

61

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004 and 2003, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (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, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles. 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.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Sabre Holdings Corporation's internal
control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated March 10, 2005 expressed an unqualified opinion thereon.



Dallas,
Texas
March 10, 2005

62

---





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                                                                                                                              |                                            |        
|                                           | Internally developed software                                                                                                                   |                                            |        
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 |                                            | 659,367
|                                           | Less accumulated depreciation and amortization                                                                                                  |                                            |        
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 | Total property and equipment               |        
|Deferred income taxes                      |                                                                                                                                                 |                                            | 9,955  
|Investments in joint ventures              |                                                                                                                                                 |                                            | 176,249
|Goodwill and intangible assets, net        |                                                                                                                                                 |                                            | 988,600
|Other assets, net                          |                                                                                                                                                 |                                            | 175,872
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 | Total assets                               |        
|                                           |                                                                                                                                                 |                                            |        
|Liabilities and stockholders' equity       |                                                                                                                                                 |                                            |        
|Current liabilities                        |                                                                                                                                                 |                                            |        
|Accounts payable                           |                                                                                                                                                 | $                                          | 226,925
|Accrued compensation and related benefits  |                                                                                                                                                 |                                            | 80,448 
|Accrued subscriber incentives              |                                                                                                                                                 |                                            | 84,357 
|Deferred revenues                          |                                                                                                                                                 |                                            | 33,501 
|Other accrued liabilities                  |                                                                                                                                                 |                                            | 183,061
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 | Total current liabilities                  |        
|Deferred income taxes                      |                                                                                                                                                 |                                            |       
|Pensions and other postretirement benefits |                                                                                                                                                 |                                            | 154,537
|Other liabilities                          |                                                                                                                                                 |                                            | 23,101 
|Minority interests                         |                                                                                                                                                 |                                            | 5,143  
|Long-term capital lease obligation         |                                                                                                                                                 |                                            | 161,114
|Public and other notes payable             |                                                                                                                                                 |                                            | 439,309
|Commitments and contingencies (Note 8)     |                                                                                                                                                 |                                            |        
|Stockholders' equity                       |                                                                                                                                                 |                                            |        
|                                           | Preferred stock: $0.01 par value; 20,000 shares authorized; no shares issued                                                                    |                                            |        
|                                           | Class A Common Stock: $0.01 par value; 250,000 shares authorized; 145,855 and 145,652 shares issued at December 31, 2004 and 2003, respectively |                                            |        
|                                           | Additional paid-in capital                                                                                                                      |                                            |        
|                                           | Retained earnings                                                                                                                               |                                            |        
|                                           | Accumulated other comprehensive loss                                                                                                            |                                            |        
|                                           | Less treasury stock at cost; 12,913 and 4,322 shares, respectively                                                                              |                                            |        
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 | Total stockholders' equity                 |        
|                                           |                                                                                                                                                 |                                            |        
|                                           |                                                                                                                                                 | Total liabilities and stockholders' equity |        
|                                           |                                                                                                                                                 |                                            |        

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

63

---



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

---

|                                         |                  | Year Ended December 31,      |          
|---------------------------------------- | ---------------- | ---------------------------- | ---------
|
|Revenues                                 |                  | $                            | 2,130,971
|Cost of revenues                         |                  |                              | 1,240,180
|                                         |                  |                              |          
|Gross profit                             |                  |                              | 890,791  
|Other operating expenses                 |                  |                              |          
|Selling, general and administrative      |                  |                              | 585,182  
|Amortization of intangible assets        |                  |                              | 46,879   
|                                         |                  |                              |          
|Total other operating expenses           |                  |                              | 632,061  
|Operating income                         |                  |                              | 258,730  
|Other income (expense)                   |                  |                              |          
|                                         | Interest income  |                              |          
|                                         | Interest expense |                              |          
|                                         | Other, net       |                              |          
|                                         |                  |                              |          
|                                         |                  | Total other income (expense) |          
|                                         |                  |                              |          
|Income before provision for income taxes |                  |                              | 257,061  
|Provision for income taxes               |                  |                              | 66,642   
|                                         |                  |                              |          
|Net earnings                             |                  | $                            | 190,419  
|Net earnings per common sharebasic      |                  | $                            | 1.40     
|Net earnings per common sharediluted    |                  | $                            | 1.38     
|                                         |                  |                              |          

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

64

---





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

---

|                                                                                                 |                                                  | Year Ended December 31,                        |            
|------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ---------------------------------------------- | -----------
|
|Operating activities                                                                             |                                                  |                                                |            
|Net earnings                                                                                     |                                                  | $                                              | 190,419    
|Adjustments to reconcile net earnings to cash provided by operating activities:                  |                                                  |                                                |            
|                                                                                                 | Depreciation and amortization                    |                                                |            
|                                                                                                 | Loss on impaired intangible assets               |                                                |            
|                                                                                                 | Loss on sales leaseback                          |                                                |            
|                                                                                                 | Stock compensation                               |                                                |            
|                                                                                                 | Deferred income taxes                            |                                                |            
|                                                                                                 | Tax benefit from exercise of stock options       |                                                |            
|                                                                                                 | Loss on facilities lease refinancing             |                                                |            
|                                                                                                 | Gain on sale of former headquarters building     |                                                |            
|                                                                                                 | Allowance for doubtful accounts                  |                                                |            
|                                                                                                 | Joint venture equity loss/(income)               |                                                |            
|                                                                                                 | 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                                                              |                                                  |                                                | (77,998    
|Business combinations, net of cash acquired                                                      |                                                  |                                                | (69,744    
|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                                         |                                                  |                                                |           
|Purchases of marketable securities                                                               |                                                  |                                                | (10,208,282
|Sales of marketable securities                                                                   |                                                  |                                                | 10,302,619 
|Proceeds from sales of investments                                                               |                                                  |                                                |           
|Investments in joint ventures                                                                    |                                                  |                                                | (35,853    
|Other investing activities, net                                                                  |                                                  |                                                | (9,734     
|                                                                                                 |                                                  |                                                |            
|                                                                                                 | 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 |                                                  |                                                | 15,744     
|Purchase of treasury stock                                                                       |                                                  |                                                | (227,814   
|Dividends paid                                                                                   |                                                  |                                                | (41,431    
|Payment for facilities lease refinancing                                                         |                                                  |                                                |           
|Other financing activities, net                                                                  |                                                  |                                                | (1,892     
|                                                                                                 |                                                  |                                                |            
|                                                                                                 | Cash provided by (used for) financing activities |                                                |            
|Increase in cash                                                                                 |                                                  |                                                | 8,809      
|Cash at beginning of the period                                                                  |                                                  |                                                | 40,862     
|                                                                                                 |                                                  |                                                |            
|Cash at end of the period                                                                        |                                                  | $                                              | 49,671     
|                                                                                                 |                                                  |                                                |            
|                                                                                                 | Cash payments for income taxes                   |                                                | $          
|                                                                                                 |                                                  |                                                |            
|                                                                                                 | Cash payments for interest                       |                                                | $          
|                                                                                                 |                                                  |                                                |            

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

65

---



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

---

|                                                                                                                         |                                                                                     | Class A
Common
Stock |       | Additional
Paid-in
Capital |   | Retained
Earnings |        | Accumulated
Other
Comprehensive
Income
(Loss) |         | Treasury
Stock |   | Total   |        
|------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | -------------------- | ----- | -------------------------- | - | ----------------- | ------ | --------------------------------------------- | ------- | -------------- | - | ------- | -------
|Balance at December 31, 2001                                                                                             |                                                                                     | $                    | 1,351 |                            | $ | 818,742           |        | $                                             | 227,986 |                | $ | 3,176   |        
|Issuance of shares of Class A common stock pursuant to stock option, restricted stock incentive and stock purchase plans |                                                                                     |                      | 16    |                            |   | 33,145            |        |                                               |        |                |   |        |        
|Issuance of 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                  |                      |       |                           |   |                   |       |                                               |         |               |   |         | (21,638
|                                                                                                                         | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                           |   |                   |       |                                               |         |               |   |         | 4,174  
|                                                                                                                         | Unrealized loss on investments, net of deferred income taxes                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | (1,867 
|                                                                                                                         | Unrealized foreign currency translation gain                                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | 131    
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Total comprehensive income                                                                                               |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Other                                                                                                                    |                                                                                     |                      | (10   | )                          |   | 249               |        |                                               |        |                |   |        |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Balance at December 31, 2002                                                                                             |                                                                                     | $                    | 1,448 |                            | $ | 1,269,101         |        | $                                             | 442,130 |                | $ | (16,024 | )      
|Issuance of 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, $0.21 per common share                                                                                        |                                                                                     |                      |      |                            |   |                  |        |                                               | (30,125 | )              |   |        |        
|Comprehensive income:                                                                                                    |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         | Net earnings                                                                        |                      |       |                           |   |                   |       |                                               |         | 83,301         |   |         |       
|                                                                                                                         | Minimum pension liability adjustment, net of deferred income taxes                  |                      |       |                           |   |                   |       |                                               |         |               |   |         | (1,223 
|                                                                                                                         | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                           |   |                   |       |                                               |         |               |   |         | 1,437  
|                                                                                                                         | Unrealized loss on investments, net of deferred income taxes                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | 710    
|                                                                                                                         | Unrealized foreign currency translation gain                                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | 6,985  
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Total comprehensive income                                                                                               |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Other                                                                                                                    |                                                                                     |                      |      |                            |   | 112               |        |                                               | 66      |                |   |        |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Balance at December 31, 2003                                                                                             |                                                                                     | $                    | 1,457 |                            | $ | 1,291,841         |        | $                                             | 495,372 |                | $ | (8,115  | )      
|Issuance of shares of Class A common stock pursuant to:                                                                  |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         | Stock option plans                                                                  |                      |       | 1                          |   |                   | (2,251 | )                                             |         |               |   |         |       
|                                                                                                                         | Restricted stock plan                                                               |                      |       | 1                          |   |                   | (9,902 | )                                             |         |               |   |         |       
|                                                                                                                         | Employee stock purchase plan                                                        |                      |       |                           |   |                   | (1,748 | )                                             |         |               |   |         |       
|Tax benefit from exercise of employee stock options                                                                      |                                                                                     |                      |      |                            |   | 1,173             |        |                                               |        |                |   |        |        
|Purchases of treasury stock                                                                                              |                                                                                     |                      |      |                            |   |                  |        |                                               |        |                |   |        |        
|Stock based compensation for employees and consultants                                                                   |                                                                                     |                      |      |                            |   | 11,328            |        |                                               |        |                |   |        |        
|Dividends, $0.30 per common share                                                                                        |                                                                                     |                      |      |                            |   |                  |        |                                               | (41,431 | )              |   |        |        
|Comprehensive income:                                                                                                    |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         | Net earnings                                                                        |                      |       |                           |   |                   |       |                                               |         | 190,419        |   |         |       
|                                                                                                                         | Minimum pension liability adjustment, net of deferred income taxes                  |                      |       |                           |   |                   |       |                                               |         |               |   |         | (8,330 
|                                                                                                                         | Unrealized gain on foreign currency forward contracts, net of deferred income taxes |                      |       |                           |   |                   |       |                                               |         |               |   |         | 519    
|                                                                                                                         | Unrealized loss on investments, net of deferred income taxes                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | (1,422 
|                                                                                                                         | Unrealized foreign currency translation gain                                        |                      |       |                           |   |                   |       |                                               |         |               |   |         | 7,922  
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Total comprehensive income                                                                                               |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Other                                                                                                                    |                                                                                     |                      |      |                            |   | (867              | )      |                                               |        |                |   |        |        
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        
|Balance at December 31, 2004                                                                                             |                                                                                     | $                    | 1,459 |                            | $ | 1,289,574         |        | $                                             | 644,360 |                | $ | (9,426  | )      
|                                                                                                                         |                                                                                     |                      |       |                            |   |                   |        |                                               |         |                |   |         |        

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

66

---





SABRE HOLDINGS CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

---

1.    General Information



---

1 Sabre,
Sabre Holdings, the Sabre Holdings logo, Sabre Travel Network, Sabre Airline Solutions, Sabre Pacific, Travelocity, Travelocity.com, Travelocity.ca, Travelocity Business,
GetThere, Site59, Site59.com, Agent59, Jurni Network, Nexion, World Choice Travel, Allstate Ticketing, Showtickets.com, SynXis, Direct Connect, eMergo, MySabre, SabreSonic, Turbo Sabre, Basic Booking
Request, Sabre Hotel Spotlight, Assured Advantage, Total Trip, Travelocity Partner Network, Resfeber.se, Box Office, rejsefeber.dk, Arte Udland, reisefeber.no, Ticket Service, Odysia.fr, and Boomerang
Voyages are trademarks or service marks of an affiliate of Sabre Holdings Corporation. All other trademarks are the property of their respective owners. ©2005 Sabre Holdings Corporation.
All rights reserved.



2.    Summary of Significant Accounting Policies



67

---





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 amortizable assets:Capitalized software development costs

3 to 7 yearsIntangible assets

1 to 20 years




68

---





69

---





70

---





71

---





72

---





73

---





December 31, 2004

December 31, 2003Weighted-Average
Useful Lives

Gross Carrying
Amount, at Cost

Accumulated
Amortization

Gross Carrying
Amount, at Cost

Accumulated
AmortizationNot subject to amortization:Goodwill



$
993,481

$


$
872,711

$
Tradenames, trademarks and domain names




30,608





27,599


1,024,089





900,310


Subject to amortization:Purchased technology

4 years


149,820


(134,874
)

146,105


(102,670
)Acquired customer relationships and database

6 years


57,145


(27,270
)

50,946


(18,140
)Non-compete agreements

7 years


24,009


(19,581
)

18,204


(14,415
)Acquired contracts, supplier and distributor agreements

3 years


30,967


(21,634
)

21,438


(19,503
)261,941


(203,359
)

236,693


(154,728
)Total



$
1,286,030

$
(203,359
)
$
1,137,003

$
(154,728
)




2005

$
19,9862006


14,9202007


11,9402008


8,5602009


2,196Total

$
57,602


74

---





Sabre Travel
Network

Travelocity

Sabre Airline
Solutions

TotalBalance at December 31, 2002

$
296,871

$
484,324

$
38,661

$
819,856Goodwill acquired


14,496


37,353





51,849Goodwill adjustments


3,793


(4,367
)

1,580


1,006Balance at December 31, 2003


315,160


517,310


40,241


872,711Goodwill acquired


31,247


71,587


10,814


113,648Goodwill adjustments


4,977


450


1,695


7,122Balance at December 31, 2004

$
351,384

$
589,347

$
52,750

$
993,481




75

---





Year Ended December 31,2004

2003

2002Denominator for basic earnings per common shareweighted-average shares

136,326

142,321

140,337Dilutive effect of stock awards and options

1,605

1,086

2,222Denominator for diluted earnings per common shareadjusted weighted-average shares

137,931

143,407

142,559




76

---





Year Ended December 31,2004

2003

2002Net earnings as reported

$
190,419

$
83,301

$
214,144Add stock compensation expense, net of income taxes determined under intrinsic value method


6,995


7,531


19,794Less total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes


(31,094
)

(48,063
)

(41,928
)Pro forma net earnings

$
166,320

$
42,769

$
192,010Net earnings per common share, as reported:Basic

$
1.40

$
.59

$
1.53Diluted

$
1.38

$
.58

$
1.50Net earnings per common share, pro forma:Basic

$
1.22

$
.30

$
1.37Diluted

$
1.21

$
.30

$
1.35


77

---





Year Ended December 31,2004

2003

2002Average risk-free interest rate


3.3
%

2.8
%

4.3
%Expected life (in years)


4.5


4.5


4.5Dividend yield


1.3
%

0.1
%

0.0
%Volatility


51.6
%

53.6
%

53.3
%Fair value

$
9.81

$
8.60

$
18.02




Minimum
Pension
Liability
Adjustment

Unrealized Gains
On Foreign
Currency
Forward
Contracts

Unrealized
Gains/(Losses)
on Investments

Unrealized
Foreign
Currency
Translation
Gains

Total
Accumulated
Other
Comprehensive
Income (Loss)Balance at 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


7,909Balance at December 31, 2003


(22,861
)

6,413


1,326


7,007


(8,115
)2004 other comprehensive income, net of income taxes


(8,330
)

519


(1,422
)

7,922


(1,311
)Balance at December 31, 2004

$
(31,191
)
$
6,932

$
(96
)
$
14,929

$
(9,426
)




78

---





79

---





80

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

3.    Marketable Securities



December 31,2004

2003Corporate notes

$
603,157

$
702,422U.S. and foreign government agency and treasury notes


78,831


105,850Overnight investments and time deposits


62,539


35,028Mortgages


41,788


26,797Asset-backed securities


1,038


11,652Total

$
787,353

$
881,749




December 31,2004

2003Due in one year or less

$
461,674

$
260,174Due after one year through three years


1,038


260,848Due after three years


324,641


360,727Total

$
787,353

$
881,749




4.    Mergers and Acquisitions



81

---





82

---





Net liabilities assumed

$
(3,145
)Contracts (5 year useful life)


3,970Tradenames


2,206Goodwill


52,058Total

$
55,089




83

---





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


84

---





85

---





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




86

---





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




Year Ended
December 31, 2002Pro forma revenues

$
2,056,466Pro forma net earnings

$
220,777Pro forma net earnings per common shareBasic

$
1.57Diluted

$
1.55


87

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

5.    Significant Transactions and Events



88

---





89

---





2001
Restructuring Plan

2002
Restructuring
Plan

2003
Restructuring Plan

2004
Restructuring
PlanSeverance
and
Benefits

Facilities
Related

Severance
and
Benefits

Severance
and
Benefits

Facilities
Related

Severance
and
Benefits

TotalRemaining liability at December 31, 2001

$
16,890

$
7,732

$


$


$


$


$
24,622Revisions of estimated cost of 2001 workforce reduction


(2,365
)

(3,889
)













(6,254
)Estimated cost of 2002 workforce reduction








15,791











15,791Amounts paid in 2002


(13,143
)

(2,672
)

(4,377
)










(20,192
)Remaining liability at December 31, 2002


1,382


1,171


11,414











13,967Revisions of estimated cost of 2002 workforce reduction








(925
)










(925
)Estimated 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


(1,382
)

(197
)

(9,880
)

(10,606
)

(4,107
)




(26,172
)Remaining liability at December 31, 2003





974


609


7,332


3,290





12,205Estimated cost of 2004 workforce reduction

















4,411


4,411Amounts paid in 2004





(808
)

(473
)

(6,412
)

(1,929
)

(1,368
)

(10,990
)Remaining liability at December 31, 2004

$


$
166

$
136

$
920

$
1,361

$
3,043

$
5,626




90

---





91

---





92

---





93

---





6.    Derivatives



94

---





95

---





December 31,2004

2003Foreign currency forwards and options

$
11,825

$
9,739Interest rate swaps


17,918


8,740Total

$
29,743

$
18,479




7.    Debt



Requirement

Level at
December 31, 2004Consolidated Leverage Ratio (Debt to EBITDA)

3 to 1 maximum

1.4 to 1Consolidated Net Worth

$1.3 billion

$1.6 billion


96

---





8.    Commitments and Contingencies



Requirement

Level at
December 31, 2004Consolidated Net Worth

$1.0 billion

$1.6 billion


97

---





Year Ending December 31,2005

$
9,6072006


9,6072007


9,6072008


9,6072009


9,6072010 and thereafter


192,924Total before interest


240,959Amounts representing interest


(74,269
)Total obligations under capital lease


166,690Less fair value of interest rate swap (Note 6)


(4,705
)Less current portion


(871
)Long-term capital lease obligation

$
161,114




98

---





Payments Due by Year
For the Years Ended December 31,Contractual Obligations

Total

Less than
one year

1-3
years

3-5
years

More than
5 yearsNotes payable (1)

$
605,800

$
29,400

$
58,800

$
58,800

$
458,800Capital lease obligations (2)


240,959


9,607


19,214


19,214


192,924Operating lease obligations


86,588


25,627


33,269


13,061


14,631IT outsourcing agreement (3)


183,507


75,967


107,540





AOL agreement


13,000


13,000








Yahoo! agreement


30,400


30,400








WNS agreement (Note 5)


151,541


17,000


44,796


58,942


30,803Pension and other benefit obligations (Note 9)


165,397


12,004


25,811


37,167


90,415Other long-term obligations (4)


116,478


66,180


29,146


2,458


18,694Amounts receivable under non-cancelable subleases (5)


(40,179
)

(6,272
)

(12,455
)

(12,294
)

(9,158
)Total contractual cash obligations

$
1,553,491

$
272,913

$
306,121

$
177,348

$
797,109


---





99

---





9.    Employee Benefit Plans



100

---





Pension Benefits

Other Benefits2004

2003

2004

2003Change in benefit obligation:Benefit obligation at January 1

$
(318,785
)
$
(315,050
)
$
(121,412
)
$
(97,966
)Service cost


(5,556
)

(6,153
)

(2,924
)

(3,594
)Interest cost


(20,476
)

(20,251
)

(7,051
)

(6,990
)Participant contributions








(731
)

Actuarial gains (losses), net


(27,990
)

16,391


(4,452
)

(16,549
)Plan Amendments


(1,282
)




58,503


Settlements


1,020


1,122





Benefits paid


6,788


5,156


5,626


3,687Benefit obligation at December 31

$
(366,281
)
$
(318,785
)
$
(72,441
)
$
(121,412
)Change in plan assets:Fair value of assets at January 1

$
252,428

$
201,778

$


$
Actual return on plan assets


25,089


41,090





Transfers


171


354





Settlements


(976
)

(1,443
)




Employer contributions


15,691


15,860


4,896


3,690Participant contributions








731


489Benefits paid


(6,788
)

(5,211
)

(5,627
)

(4,179
)Fair value at December 31

$
285,615

$
252,428

$


$
Funded status:Funded status at December 31

$
(80,666
)
$
(66,357
)
$
(72,441
)
$
(121,412
)Unrecognized transition (asset) obligation


(157
)

(241
)

127


144Unrecognized prior service cost


1,813


591


(56,506
)

2,423Unrecognized net losses


93,578


72,010


33,469


30,786Prepaid (accrued) cost recognized

$
14,568

$
6,003

$
(95,351
)
$
(88,059
)




Pension Benefits

Other Benefits2004

2003

2004

2003Prepaid benefit cost

$
23,666

$
13,556

$


$
Accrued benefit liability


(59,186
)

(45,346
)

(95,351
)

(88,059
)Accumulated other comprehensive income


50,088


37,793


Prepaid (accrued) cost recognized

$
14,568

$
6,003

$
(95,351
)
$
(88,059
)




101

---





Pension Benefits

Other Benefits2004

2003

2004

2003Weighted-average assumptions:Discount rate

6.00
%
6.25
%
6.00
%
6.25
%Rate of compensation increase

4.50
%
4.50
%







Pension Benefits

Other Benefits2004

2003

2002

2004

2003

2002Components of total periodic benefit cost:Service cost

$
5,556

$
6,153

$
7,052

$
2,924

$
3,594

$
3,213Interest cost


20,476


20,251


19,219


7,051


6,990


5,670Expected return on plan assets


(22,745
)

(21,911
)

(20,848
)







Amortization of transition asset


(19
)

(19
)

(24
)

18


18


18Amortization of prior service cost


61


61


61


299


321


321Amortization of net loss


3,458


2,130


332


1,770


1,801


206Net periodic benefit cost


6,787


6,665


5,792


12,062


12,724


9,428Settlement gain


339


503











Curtailment gains











126





Total periodic benefit cost

$
7,126

$
7,168

$
5,792

$
12,188

$
12,724

$
9,428




Pension Benefits

Other Benefits2004

2003

2002

2004

2003

2002Weighted-average assumptions:Discount rate

6.25
%
6.75
%
7.25
%
6.25
%
6.75
%
7.25
%Expected return on plan assets

8.75
%
9.00
%
9.50
%




Rate of compensation increase

4.50
%
6.60
%
6.60
%







102

---





One percent
increase

One percent
decreaseImpact on 2004 service and interest cost

1,863

(1,459
)Impact on postretirement benefit obligation as of December 31, 2004

8

(48
)




Asset Allocation at December 31,Asset Category

Target 2004
Allocation2004

2003Equity securities

52%-58
%
58
%
56
%Debt securities

42%-48
%
42
%
44
%Total plan assets



100
%
100
%




Pension

Other Benefits2005

$
8,064

$
3,9402006


10,100


4,1772007


7,216


4,3182008


9,097


11,7312009


11,951


4,3882010-2014

$
66,361

$
24,054


103

---



SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

10.    Income Taxes



Year Ended December 31,2004

2003

2002Current portion:Federal

$
72,414

$
29,216

$
56,045State and Local


4,301


1,547


2,072Foreign


13,535


17,150


13,603Total current


90,250


47,913


71,720Deferred portion:Federal


(9,548
)

(5,119
)

42,579State


(14,060
)

1,282


10,625Total deferred


(23,608
)

(3,837
)

53,204Total provision for income taxes

$
66,642

$
44,076

$
124,924




Year Ended December 31,2004

2003

2002Income tax provision at statutory federal income tax rate

$
89,971

$
44,582

$
118,674State income taxes, net of federal tax benefit


2,387


1,839


8,253Reversal of previously accrued tax


(23,438
)




Other, net


(2,278
)

(2,345
)

(2,003
)Total provision for income taxes

$
66,642

$
44,076

$
124,924




104

---





December 31,2004

2003Deferred tax assets:Accrued expenses

$
61,377

$
47,970Employee benefits other than pensions


36,046


33,857Deferred revenue


1,263


1,966Pension obligations


15,173


6,776Net operating loss carryforwards


19,726


28,417Deferred costs


40,298


40,534Total deferred tax assets


173,883


159,520Deferred tax liabilities:Foreign operations


(6,099
)

(4,991
)Depreciation and amortization


(24,269
)

(18,828
)Amortization of computer software and intangible assets


(60,013
)

(61,142
)Other


(50,198
)

(68,742
)Total deferred tax liabilities


(140,579
)

(153,703
)Net deferred tax asset

$
33,304

$
5,817Current deferred income tax asset

$
23,349

$
20,557Noncurrent deferred income tax asset (liability)


9,955


(14,740
)Net deferred tax asset

$
33,304

$
5,817




105

---





11.    Capital Stock



106

---





12.    Options and Other Stock-Based Awards



107

---





Year Ended December 31,2004

2003

2002Outstanding at January 1

731,421

342,219

447,246Granted

753,500

654,878

25,000Issued

(135,317
)
(45,358
)
(118,423
)Canceled

(99,301
)
(220,318
)
(11,604
)Outstanding at December 31

1,250,303

731,421

342,219




Year Ended December 31,2003

2002Outstanding at January 1

145,124

292,509Awards settled in cash



(133,201
)Canceled

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



145,124




108

---





|                                               |  | Year Ended December 31,
|---------------------------------------------- |  | -----------------------
|
|
|Outstanding at January 1                       |  | 15,155,332             
|Granted                                        |  | 3,329,750              
|Exercised                                      |  | (540,634               
|Canceled                                       |  | (2,062,555             
|Converted Travelocity.com options              |  |                       
|                                               |  |                        
|Outstanding at December 31                     |  | 15,881,893             
|                                               |  |                        
|Exercisable options outstanding at December 31 |  | 10,021,689             
|                                               |  |                        

109

---





|                   |  | Options Outstanding |  | Options Exercisable
|------------------ |  | ------------------- |  | -------------------
|
|$  0.16 - $  15.99 |  | 40,350              |  | 5.01               
|$16.00 - $  25.99  |  | 6,502,443           |  | 8.04               
|$26.00 - $  35.99  |  | 1,583,460           |  | 4.88               
|$36.00 - $  48.99  |  | 6,406,047           |  | 6.40               
|$49.00 - $  60.99  |  | 1,163,812           |  | 5.24               
|$61.00 - $105.06   |  | 185,781             |  | 4.95               
|                   |  |                     |  |                    
|Total              |  | 15,881,893          |  | 6.81               
|                   |  |                     |  |                    



110

---





13.    Business Segments



111

---





Year Ended December 31,2004

2003

2002Revenues from external customers excluding adjusting items:Sabre Travel Network

$
1,505,192

$
1,482,435

$
1,584,564Travelocity


387,507


286,207


242,079Sabre Airline Solutions


243,470


232,354


216,847Total

$
2,136,169

$
2,000,996

$
2,043,490Intersegment revenues:Sabre Travel Network

$
30,117

$
26,883

$
27,706Travelocity


137,763


115,048


101,660Sabre Airline Solutions








Total

$
167,880

$
141,931

$
129,366Equity in net income (loss) of equity method investees:Sabre Travel Network

$
17,523

$
14,456

$
17,943Travelocity


(22,721
)

(14,583
)

(4,967
)Total

$
(5,198
)
$
(127
)
$
12,976Segment revenues, excluding adjusting items:Sabre Travel Network

$
1,552,832

$
1,523,774

$
1,630,213Travelocity


502,549


386,672


338,772Sabre Airline Solutions


243,470


232,354


216,847Elimination of intersegment revenues


(167,880
)

(141,931
)

(129,366
)Total

$
2,130,971

$
2,000,869

$
2,056,466Revenue adjusting items:Sabre Travel Networksettlement revenue from canceled subscriber contract

$


$
36,458

$
Travelocityrecognition of deferred warrant revenue upon termination of hotel supplier agreement





7,836


$


$
44,294

$
Consolidated revenues:Sabre Travel Network

$
1,552,832

$
1,560,232

$
1,630,213Travelocity


502,549


394,508


338,772Sabre Airline Solutions


243,470


232,354


216,847Elimination of intersegment revenues


(167,880
)

(141,931
)

(129,366
)Total

$
2,130,971

$
2,045,163

$
2,056,466


112

---





Year Ended December 31,2004

2003

2002Segment operating income (loss) excluding adjusting items:Sabre Travel Network

$
288,709

$
230,617

$
431,967Travelocity


12,600


(54,900
)

(37,456
)Sabre Airline Solutions


15,729


21,101


20,060Corporate


(912
)

1,150


(498
)Total

$
316,126

$
197,968

$
414,073Impact of adjusting items on operating income(increase)/decrease:Sabre Travel Network:Settlement revenue from canceled subscriber contract

$


$
(36,458
)
$
Other intangibles amortization


18,526


12,789


16,588Loss on sale of equipment


277





Stock compensation





672


1,015Restructuring expenses





(288
)

3,289Facilities consolidation





222


Total

$
18,803

$
(23,063
)
$
20,892Travelocity:Recognition of deferred revenue upon termination of hotel supplier agreement

$


$
(7,836
)
$
Other intangibles amortization and impairment


25,472


41,554


35,005Stock compensation


5,183


7,856


25,769Loss on sale of equipment


2,443





Restructuring expenses





(37
)

18Facilities consolidation





3,894


Tender offer expenses








7,111Total

$
33,098

$
45,431

$
67,903Sabre Airline Solutions:Other intangibles amortization

$
895

$


$
94Loss on sale of equipment


1,092





Stock compensation





118


105Restructuring expenses





(231
)

2,181Facilities consolidation





42


Total

$
1,987

$
(71
)
$
2,380Corporate:Loss on sale of equipment

$
3,491

$


$
Stock compensation


17


63


Litigation insurance





(450
)

1,350Restructuring expenses





(370
)

4,048Facilities consolidation





10,198


Total

$
3,508

$
9,441

$
5,398Total adjusting items

$
57,396

$
31,738

$
96,573Operating income (loss):Sabre Travel Network

$
269,906

$
253,680

$
411,075Travelocity


(20,498
)

(100,331
)

(105,359
)Sabre Airline Solutions


13,742


21,172


17,680Corporate


(4,420
)

(8,291
)

(5,896
)Total

$
258,730

$
166,230

$
317,500


113

---





December 31,2004

2003

2002Depreciation and amortization included in income (in thousands):Sabre Travel Network

$
59,120

$
54,489

$
46,429Travelocity


45,516


65,988


56,850Sabre Airline Solutions


19,085


15,527


8,970Unallocated depreciation and amortization


3,491





4,699Total consolidated depreciation and amortization included in income

$
127,212

$
136,004

$
116,948Segment assets (in thousands):Sabre Travel Network

$
986,695

$
882,485

$
886,112Travelocity


775,685


677,965


714,436Sabre Airline Solutions


441,625


363,017


339,401Unallocated cash, investments, corporate headquarters and other


813,972


1,043,006


831,948Total consolidated assets

$
3,017,977

$
2,966,473

$
2,771,897




Year Ended December 31,2004

2003

2002Capital expenditures for segment assets:Sabre Travel Network

$
45,168

$
37,512

$
27,877Travelocity


21,850


19,960


18,054Sabre Airline Solutions


9,740


13,263


16,719Unallocated capital expenditures


1,240


731


Total capital expenditures

$
77,998

$
71,466

$
62,650


114

---





Year Ended December 31,2004

2003

2002Revenues:United States

$
1,407,677

$
1,345,917

$
1,407,661Foreign


723,294


699,246


648,805Total

$
2,130,971

$
2,045,163

$
2,056,466


December 31,2004

2003

2002Long-lived assets:United States

$
1,350,587

$
1,349,657

$
1,215,214Singapore (primarily investment in joint venture)


149,592


155,565


162,043Other foreign


237,838


113,522


106,616Total

$
1,738,017

$
1,618,744

$
1,483,873


115

---





SABRE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

---

14.    Quarterly Financial Information (Unaudited)



First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter2004Revenues

$
539,753

$
550,903

$
544,390

$
495,925Gross profit


228,238


243,126


242,375


177,052Operating income


69,488


88,443


77,167


23,632Net earnings

$
43,037

$
58,937

$
67,426

$
21,019Earnings per common share:Basic

$
0.31

$
0.43

$
0.50

$
0.16Diluted

$
0.31

$
0.42

$
0.49

$
0.16


First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter2003Revenues

$
543,833

$
507,189

$
526,793

$
467,348Gross profit


232,228


188,886


203,126


151,794Operating income (loss)


103,894


40,392


43,866


(21,922
)Net earnings

$
64,879

$
6,816

$
25,449

$
(13,843
)Earnings per common share:Basic

$
.46

$
.05

$
.18

$
(.10
)Diluted

$
.45

$
.05

$
.18

$
(.10
)




116

---



15.    Supplemental Guarantor/Non-Guarantor Financial Information



117

---





CONDENSED CONSOLIDATING BALANCE SHEETS  DECEMBER 31, 2004  (in thousands)

| |                                      | Sabre
Holdings                             |                           | Sabre Inc. |           | Non-Guarantor
Subsidiaries |            | Eliminations
Entries |         | Sabre
Consolidated
| | ------------------------------------ | ------------------------------------------ | ------------------------- | ---------- | --------- | -------------------------- | ---------- | -------------------- | ------- | ------------------
| | Assets                               |                                            |                           |            |           |                            |            |                      |         |                   
| | Current assets                       |                                            |                           |            |           |                            |            |                      |         |                   
| |                                      | Cash and marketable securities             |                           | $          |          |                            | $          | 766,401              |         | $                 
| |                                      | Accounts receivabletrade, net             |                           |            |          |                            |            | 236,160              |         |                   
| |                                      | Intercompany accounts receivable (payable) |                           |            |          |                            |            | (159,414             | )       |                   
| |                                      | Other current assets                       |                           |            |          |                            |            | 22,288               |         |                   
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   
| |                                      |                                            | Total current assets      |            |           |                           |            |                      | 865,435 |                   
| | Property and equipment, net          |                                            |                           |           |           |                            | 340,964    |                      |         | 46,377            
| | Investment in subsidiaries           |                                            |                           | 692,122    |           |                            | 1,331,046  |                      |         |                  
| | Intercompany notes                   |                                            |                           | 1,361,035  |           |                            | (1,361,035 | )                    |         |                  
| | Investment in joint ventures         |                                            |                           |           |           |                            | 4,348      |                      |         | 171,901           
| | Goodwill and intangible assets, net  |                                            |                           |           |           |                            | 12,209     |                      |         | 976,391           
| | Other assets, net                    |                                            |                           | 15,200     |           |                            | 109,312    |                      |         | 61,315            
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   
| | Total assets                         |                                            | $                         | 2,068,357  |           | $                          | 1,302,279  |                      | $       | 1,670,509         
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   
| | Liabilities and stockholders' equity |                                            |                           |            |           |                            |            |                      |         |                   
| | Current liabilties                   |                                            |                           |            |           |                            |            |                      |         |                   
| |                                      | Accounts payable                           |                           | $          | 7,790     |                            | $          | 105,146              |         | $                 
| |                                      | Accrued compensation and related benefits  |                           |            |          |                            |            | 64,386               |         |                   
| |                                      | Other accrued liabilities                  |                           |            | 8,504     |                            |            | 128,412              |         |                   
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   
| |                                      |                                            | Total current liabilities |            |           | 16,294                     |            |                      | 297,944 |                   
| |                                      | Pensions and other postretirement benefits |                           |            |          |                            |            | 153,695              |         |                   
| |                                      | Public and other notes payable             |                           |            | 424,233   |                            |            |                     |         |                   
| |                                      | Long-term capital lease obligation         |                           |            |          |                            |            | 161,114              |         |                   
| |                                      | Other liabilities                          |                           |            | 1,349     |                            |            | (2,596               | )       |                   
| |                                      | Minority interests                         |                           |            |          |                            |            |                     |         |                   
| |                                      | Stockholders' equity                       |                           |            | 1,626,481 |                            |            | 692,122              |         |                   
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   
| |                                      | Total liabilities and stockholders' equity |                           | $          | 2,068,357 |                            | $          | 1,302,279            |         | $                 
| |                                      |                                            |                           |            |           |                            |            |                      |         |                   

118

---



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

| |                                      | Sabre
Holdings                             |                           | Sabre Inc. |           | Non-Guarantor
Subsidiaries |            | Eliminations
Entries |           | Sabre
Consolidated
| | ------------------------------------ | ------------------------------------------ | ------------------------- | ---------- | --------- | -------------------------- | ---------- | -------------------- | --------- | ------------------
| | Assets                               |                                            |                           |            |           |                            |            |                      |           |                   
| | Current assets                       |                                            |                           |            |           |                            |            |                      |           |                   
| |                                      | Cash and marketable securities             |                           | $          |          |                            | $          | 889,638              |           | $                 
| |                                      | Accounts receivabletrade, net             |                           |            |          |                            |            | 254,656              |           |                   
| |                                      | Intercompany accounts receivable (payable) |                           |            |          |                            |            | (121,476             | )         |                   
| |                                      | Other current assets                       |                           |            |          |                            |            | 28,136               |           |                   
| |                                      |                                            |                           |            |           |                            |            |                      |           |                   
| |                                      |                                            | Total current assets      |            |           |                           |            |                      | 1,050,954 |                   
| | Property and equipment, net          |                                            |                           |           |           |                            | 345,930    |                      |           | 38,450            
| | Investment in subsidiaries           |                                            |                           | 572,696    |           |                            | 1,260,428  |                      |           |                  
| | Intercompany notes                   |                                            |                           | 1,529,296  |           |                            | (1,529,296 | )                    |           |                  
| | Investment in joint ventures         |                                            |                           |           |           |                            | 3,994      |                      |           | 177,148           
| | Goodwill and intangible assets, net  |                                            |                           |           |           |                            | 13,811     |                      |           | 877,929           
| | Other assets, net                    |                                            |                           | 17,057     |           |                            | 98,746     |                      |           | 45,679            
| |                                      |                                            |                           |            |           |                            |            |                      |           |                   
| |                                      |                                            | Total assets              |            | $         | 2,119,049                  |            | $                    | 1,244,567 |                   
| |                                      |                                            |                           |            |           |                            |            |                      |           |                   
| | 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              |           |                   
| |                                      | Public and other notes payable             |                           |            | 427,400   |                            |            |                     |           |                   
| |                                      | Long-term capital lease obligation         |                           |            |          |                            |            | 160,725              |           |                   
| |                                      | Other liabilities                          |                           |            | 1,165     |                            |            | 21,059               |           |                   
| |                                      | Minority interests                         |                           |            |          |                            |            |                     |           |                   
| |                                      | Stockholders' equity                       |                           |            | 1,680,108 |                            |            | 572,696              |           |                   
| |                                      |                                            |                           |            |           |                            |            |                      |           |                   
| |                                      | Total liabilities and stockholders' equity |                           | $          | 2,119,049 |                            | $          | 1,244,567            |           | $                 
| |                                      |                                            |                           |            |           |                            |            |                      |           |                   

119

---



CONDENSED CONSOLIDATING STATEMENTS OF INCOME  YEAR ENDED DECEMBER 31, 2004  (in thousands)

Sabre
Holdings

Sabre Inc.

Non-Guarantor
Subsidiaries

Eliminating
Entries

Sabre
ConsolidatedRevenues

$


$
1,438,988

$
1,210,180

$
(518,197
)
$
2,130,971Operating expenses


3,429


1,305,074


1,081,935


(518,197
)

1,872,241Operating income (loss)


(3,429
)

133,914


128,245





258,730Other income (expense)Interest income


104,336


12,108


8,470


(109,760
)

15,154Interest expense


(17,689
)

(117,605
)

(1,328
)

109,760


(26,862
)Income from subsidiaries


135,895


105,376





(241,271
)

Other, net





8,360


1,679





10,039Total other income (expense)


222,542


8,239


8,821


(241,271
)

(1,669
)Income before provision for income taxes


219,113


142,153


137,066


(241,271
)

257,061Provision for income taxes


28,694


6,258


31,690





66,642Net earnings

$
190,419

$
135,895

$
105,376

$
(241,271
)
$
190,419


120

---



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

Sabre
Holdings

Sabre Inc.

Non-Guarantor
Subsidiaries

Eliminating
Entries

Sabre
ConsolidatedRevenues

$


$
1,466,162

$
1,021,897

$
(442,896
)
$
2,045,163Operating expenses


2,632


1,327,518


991,679


(442,896
)

1,878,933Operating income (loss)


(2,632
)

138,644


30,218





166,230Other income (expense)Interest income


85,600


11,612


15,672


(96,407
)

16,477Interest expense


(17,004
)

(100,798
)

(2,682
)

96,407


(24,077
)Income from subsidiaries


39,847


33,872





(73,719
)

Other, net





(27,826
)

(3,427
)




(31,253
)Total other income (expense)


108,443


(83,140
)

9,563


(73,719
)

(38,853
)Income before provision for income taxes


105,811


55,504


39,781


(73,719
)

127,377Provision for income taxes


22,510


15,657


5,909





44,076Net earnings

$
83,301

$
39,847

$
33,872

$
(73,719
)
$
83,301


121

---



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

Sabre
Holdings

Sabre Inc.

Non-Guarantor
Subsidiaries

Eliminating
Entries

Sabre
ConsolidatedRevenues

$


$
1,577,252

$
964,889

$
(485,675
)
$
2,056,466Operating expenses


1,389


1,361,926


861,326


(485,675
)

1,738,966Operating income (loss)


(1,389
)

215,326


103,563





317,500Other income (expense)Interest income


90,440


22,064


22,219


(106,820
)

27,903Interest expense


(19,047
)

(108,449
)

(2,674
)

106,820


(23,350
)Income from subsidiaries


168,029


85,151





(253,180
)

Other, net





19,134


(2,119
)




17,015Total other income


239,422


17,900


17,426


(253,180
)

21,568Income before provision for income taxes


238,033


233,226


120,989


(253,180
)

339,068Provision for income taxes


23,889


65,197


35,838





124,924Net earnings

$
214,144

$
168,029

$
85,151

$
(253,180
)
$
214,144


122

---



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  YEAR ENDED DECEMBER 31, 2004  (in thousands)

| |                                                      | Sabre
Holdings                                  |   | Sabre
Incorporated |          | Non-Guarantor
Subsidiaries |        | Eliminating
Entries |   | Sabre
Consolidated |         
| | ---------------------------------------------------- | ----------------------------------------------- | - | ------------------ | -------- | -------------------------- | ------ | ------------------- | - | ------------------ | --------
| | Cash provided by operating activities                |                                                 | $ |                   |          | $                          | 89,154 |                     | $ | 274,040            |         
| | Investing Activities                                 |                                                 |   |                    |          |                            |        |                     |   |                    |         
| |                                                      | Additions to property and equipment             |   |                    |         |                            |        | (56,036             | ) |                    | (21,962 
| |                                                      | Purchases of marketable securities              |   |                    |         |                            |        | (10,181,554         | ) |                    | (26,728 
| |                                                      | Sales of marketable securities                  |   |                    |         |                            |        | 10,302,619          |   |                    |        
| |                                                      | Proceeds from sales of investments              |   |                    |         |                            |        |                    |   |                    |        
| |                                                      | Other investing activities, net                 |   |                    |         |                            |        | 397                 |   |                    | (10,131 
| |                                                      | Investments and loans to joint venture partners |   |                    |         |                            |        |                    |   |                    | (35,853 
| |                                                      | Acquisitions                                    |   |                    |         |                            |        | (69,744             | ) |                    |        
| |                                                      |                                                 |   |                    |          |                            |        |                     |   |                    |         
| |                                                      | Cash (used for) investing activities            |   |                    |         |                            |        | (4,318              | ) |                    | (94,674 
| | Financing Activities                                 |                                                 |   |                    |          |                            |        |                     |   |                    |         
| |                                                      | Intercompany contributions and distributions    |   |                    | 253,501  |                            |        | (87,501             | ) |                    | (166,000
| |                                                      | Proceeds from exercise of stock options         |   |                    | 15,744   |                            |        |                    |   |                    |        
| |                                                      | Purchases of treasury stock                     |   |                    | (227,814 | )                          |        |                    |   |                    |        
| |                                                      | Other financing activities, net                 |   |                    |         |                            |        | (836                | ) |                    | (1,056  
| |                                                      | Dividends paid                                  |   |                    | (41,431  | )                          |        |                    |   |                    |        
| |                                                      |                                                 |   |                    |          |                            |        |                     |   |                    |         
| |                                                      | Cash (used for) financing activities            |   |                    |         |                            |        | (88,337             | ) |                    | (167,056
| | Increase (decrease) in cash and cash equivalents     |                                                 |   |                   |          |                            | (3,501 | )                   |   | 12,310             |         
| | Cash and cash equivalents at beginning of the period |                                                 |   |                   |          |                            | 10,969 |                     |   | 29,893             |         
| |                                                      |                                                 |   |                    |          |                            |        |                     |   |                    |         
| | Cash and cash equivalents at end of the period       |                                                 | $ |                   |          | $                          | 7,468  |                     | $ | 42,203             |         
| |                                                      |                                                 |   |                    |          |                            |        |                     |   |                    |         

123

---



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

| |                                                      | Sabre
Holdings                                   |   | Sabre
Incorporated |         | Non-Guarantor
Subsidiaries |          | Eliminating
Entries |   | Sabre
Consolidated |         
| | ---------------------------------------------------- | ------------------------------------------------ | - | ------------------ | ------- | -------------------------- | -------- | ------------------- | - | ------------------ | --------
| | Cash provided by (used for) operating activities     |                                                  | $ |                   |         | $                          | (148,906 | )                   | $ | 428,232            |         
| | Investing Activities                                 |                                                  |   |                    |         |                            |          |                     |   |                    |         
| |                                                      | Additions to property and equipment              |   |                    |        |                            |          | (52,307             | ) |                    | (19,159 
| |                                                      | Purchases of marketable securities               |   |                    |        |                            |          | (7,750,255          | ) |                    | (832    
| |                                                      | Sales of marketable securities                   |   |                    |        |                            |          | 7,760,587           |   |                    |        
| |                                                      | Proceeds from sales of investments               |   |                    |        |                            |          |                    |   |                    | 5,054   
| |                                                      | Other investing activities, net                  |   |                    |        |                            |          |                    |   |                    | (12,177 
| |                                                      | Acquisitions                                     |   |                    |        |                            |          | (96,114             | ) |                    |        
| |                                                      |                                                  |   |                    |         |                            |          |                     |   |                    |         
| |                                                      | Cash (used for) investing activities             |   |                    |        |                            |          | (138,089            | ) |                    | (27,114 
| | Financing Activities                                 |                                                  |   |                    |         |                            |          |                     |   |                    |         
| |                                                      | Intercompany contributions and distributions     |   |                    | 63,711  |                            |          | 315,289             |   |                    | (379,000
| |                                                      | Proceeds from exercise of stock options          |   |                    | 10,541  |                            |          |                    |   |                    |        
| |                                                      | Purchases of treasury stock                      |   |                    | (44,239 | )                          |          |                    |   |                    |        
| |                                                      | Payment to re-finance buildings                  |   |                    |        |                            |          | (27,947             | ) |                    |        
| |                                                      | Other financing activities, net                  |   |                    | 112     |                            |          |                    |   |                    | (2,779  
| |                                                      | Dividends paid                                   |   |                    | (30,125 | )                          |          |                    |   |                    |        
| |                                                      |                                                  |   |                    |         |                            |          |                     |   |                    |         
| |                                                      | Cash provided by (used for) financing activities |   |                    |        |                            |          | 287,342             |   |                    | (381,779
| | Increase in cash and cash equivalents                |                                                  |   |                   |         |                            | 347      |                     |   | 19,339             |         
| | Cash and cash equivalents at beginning of the period |                                                  |   |                   |         |                            | 10,622   |                     |   | 10,554             |         
| |                                                      |                                                  |   |                    |         |                            |          |                     |   |                    |         
| | Cash and cash equivalents at end of the period       |                                                  | $ |                   |         | $                          | 10,969   |                     | $ | 29,893             |         
| |                                                      |                                                  |   |                    |         |                            |          |                     |   |                    |         

124

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

| |                                                      | Sabre
Holdings                                          |   | Sabre
Incorporated |          | Non-Guarantor
Subsidiaries |         | Eliminating
Entries |   | Sabre
Consolidated |         
| | ---------------------------------------------------- | ------------------------------------------------------- | - | ------------------ | -------- | -------------------------- | ------- | ------------------- | - | ------------------ | --------
| | Cash provided by operating activities                |                                                         | $ |                   |          | $                          | 251,261 |                     | $ | 52,304             |         
| | Investing Activities                                 |                                                         |   |                    |          |                            |         |                     |   |                    |         
| |                                                      | Additions to property and equipment                     |   |                    |         |                            |         | (40,654             | ) |                    | (21,996 
| |                                                      | Purchases of marketable securities                      |   |                    |         |                            |         | (4,373,678          | ) |                    | (321,629
| |                                                      | Sales of marketable securities                          |   |                    |         |                            |         | 4,018,609           |   |                    | 434,453 
| |                                                      | Proceeds from sales of investments                      |   |                    |         |                            |         |                    |   |                    | 8,807   
| |                                                      | Investments in joint ventures                           |   |                    |         |                            |         |                    |   |                    | (29,816 
| |                                                      | Other investing activities, net                         |   |                    |         |                            |         | 30,000              |   |                    |        
| |                                                      | Proceeds from sale of equipment                         |   |                    |         |                            |         | 80,000              |   |                    |        
| |                                                      | Purchase of data center facility from lessor            |   |                    |         |                            |         | (92,092             | ) |                    |        
| |                                                      | Proceeds from sale of data center facility              |   |                    |         |                            |         | 68,464              |   |                    |        
| |                                                      | Proceeds from exercise of Travelocity.com stock options |   |                    |         |                            |         |                    |   |                    | 33,658  
| |                                                      | Acquisitions                                            |   |                    |         |                            |         | (498,508            | ) |                    |        
| |                                                      | Proceeds from sale of subsidiary                        |   |                    |         |                            |         |                    |   |                    | 23,466  
| |                                                      |                                                         |   |                    |          |                            |         |                     |   |                    |         
| |                                                      | Cash provided by (used for) investing activities        |   |                    |         |                            |         | (807,859            | ) |                    | 126,943 
| | Financing Activities                                 |                                                         |   |                    |          |                            |         |                     |   |                    |         
| |                                                      | Intercompany contributions and distributions            |   |                    | (397,174 | )                          |         | 557,174             |   |                    | (160,000
| |                                                      | Proceeds from issuance of stock                         |   |                    | 399,763  |                            |         |                    |   |                    |        
| |                                                      | Proceeds from exercise of stock options                 |   |                    | 36,609   |                            |         |                    |   |                    |        
| |                                                      | Purchases of treasury stock                             |   |                    | (56,610  | )                          |         |                    |   |                    |        
| |                                                      | Other financing activities, net                         |   |                    | 17,412   |                            |         |                    |   |                    | (17,502 
| |                                                      |                                                         |   |                    |          |                            |         |                     |   |                    |         
| |                                                      | Cash provided by (used for) financing activities        |   |                    |         |                            |         | 557,174             |   |                    | (177,502
| | Increase in cash and cash equivalents                |                                                         |   |                   |          |                            | 576     |                     |   | 1,745              |         
| | Cash and cash equivalents at beginning of the period |                                                         |   |                   |          |                            | 10,046  |                     |   | 8,809              |         
| |                                                      |                                                         |   |                    |          |                            |         |                     |   |                    |         
| | Cash and cash equivalents at end of the period       |                                                         | $ |                   |          | $                          | 10,622  |                     | $ | 10,554             |         
| |                                                      |                                                         |   |                    |          |                            |         |                     |   |                    |         

125

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16.    Subsequent Events



126

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



ITEM 9A.    CONTROLS AND PROCEDURES

Controls Evaluation and Related CEO and CFO Certifications.Our management, with the participation of
our principal executive officer ("CEO") and principal financial officer ("CFO") conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of
the end of the period covered by this Annual Report. The controls evaluation was conducted by our Disclosure Controls Council, comprised of senior representatives from our Finance, Accounting,
Internal Audit, Tax, Investor Relations, Corporate Communications and Legal Departments under the supervision of our CEO and CFO.

Attached
as exhibits to this Annual Report are certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"). This "Controls and Procedures" section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in
conjunction with the certifications for a more complete understanding of the topics presented.

Limitations on the Effectiveness of Controls.We do not expect that our disclosure controls and
procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. Furthermore, the design of any system of controls and procedures 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, regardless of how unlikely. Because of these inherent limitations in a
cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation.The evaluation of our disclosure controls and procedures included a
review of their objectives and design, the Company's implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Annual
Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process
improvements, were being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can
be reported in our Quarterly Reports on Form 10-Q, which supplement our disclosures made in our Annual Report on Form 10-K. Many of the components of our
disclosure controls and procedures are also evaluated by our Internal Audit Department, our Legal Department and by personnel in our Finance organization. The overall goals of these various evaluation
activities are to monitor our disclosure controls and procedures on an ongoing basis, and to maintain them as dynamic systems that change as conditions warrant.

Conclusions regarding disclosure controls.Based on the required evaluation of our disclosure
controls and procedures, our CEO and CFO have concluded that, as of December 31, 2004, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that
information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, 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 our CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.

Changes in internal controls over financial reporting.During the three months ended
December 31, 2004, 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.

ITEM 9B.    OTHER INFORMATION



127

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PART III

---

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated herein by reference is the information set forth under the headings "Nominees for Election as Directors," "Continuing Directors," "Information
Regarding the Board and Its Committees," "Director Nomination Process" and information concerning the executive officers set forth under the heading "Executive Officers of the Registrant" in our
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 17, 2005.

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.

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 and 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

128

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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 above), 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 at:

http://www.sabre-holdings.com/governance/documents/busEthics.html

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.

ITEM 11.    EXECUTIVE COMPENSATION

Incorporated herein by reference is the information set forth under the heading "Executive Compensation" in our definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on May 17, 2005.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated herein by reference is the information set forth under the heading "Ownership of Securities" from our definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 17, 2005.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated herein by reference is the information set forth under the heading "Proposal 2Ratification of Selection of AuditorsFees
Paid to Ernst & Young LLP" from our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 17, 2005.

129

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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 10.29 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)                                              
|4.3            |  | First Supplemental Indenture dated August 7, 2001, between Sabre Holdings Corporation and SunTrust Bank, as Trustee, relating to the 400,000,000 7.35% Senior 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 effective July 18, 2000. (Restoration).(11)                                                                                                                
|10.4           |  | Supplemental Executive Retirement Plan, as Amended effective July 18, 2000. (Officer).(12)                                                                                                                    
|10.5           |  | Supplemental Executive Retirement Plan, as Amended (Grandfathered).(13)                                                                                                                                       
|10.6           |  | Form of Executive Termination Benefits Agreement.(14)                                                                                                                                                         
|10.7           |  | Form of Addenda to Executive Termination Benefits Agreement with respect to Michael S. Gilliland, Jeffery M. Jackson and Eric J. Speck.(15)                                                                   
|10.8           |  | Form of Addendum to Executive Termination Benefits Agreement with respect to David A. Schwarte.(16)                                                                                                           
|10.9           |  | Forms of Addendum to Executive Termination Benefits Agreement with respect to John S. Stow.(17)                                                                                                               
|               |  |                                                                                                                                                                                                               

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|10.10 |  | Form of Addendum to Executive Termination Benefits Agreement with respect to Thomas Klein.(18)                                                                                                                                                                                                                                                                         
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.11 |  | Form of Addendum to Executive Termination Benefits with respect to Michelle A. Peluso (19)                                                                                                                                                                                                                                                                             
|10.12 |  | Form of Letter Formalizing Involuntary Termination Benefits.(20)                                                                                                                                                                                                                                                                                                       
|10.13 |  | Form of Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and Michael S. Gilliland.(21)                                                                                                                                                                                                                                                              
|10.14 |  | Form of Employment Agreement between Sabre Holdings Corporation, Sabre Inc. and Michelle A. Peluso.(9)                                                                                                                                                                                                                                                                 
|10.15 |  | Form of Employee Intellectual Property and Confidentiality Agreement for Mark K. Miller.(22)                                                                                                                                                                                                                                                                           
|10.16 |  | Form of Severance Agreement with respect to Thomas Klein.(9)                                                                                                                                                                                                                                                                                                           
|10.17 |  | Bonus Criteria for Executive Officers.(23)                                                                                                                                                                                                                                                                                                                             
|10.18 |  | Information regarding the Compensation of Directors.(24)                                                                                                                                                                                                                                                                                                               
|10.19 |  | 2000 Stock Option Plan Amended and Restated effective November 13, 2000.(9)                                                                                                                                                                                                                                                                                            
|10.20 |  | 2003 Directors Deferred Compensation and Deferred Stock Unit Plan.(25)                                                                                                                                                                                                                                                                                                 
|10.21 |  | Form of Sabre Holdings Corporation Cash Award Agreement.(26)                                                                                                                                                                                                                                                                                                           
|10.22 |  | The Sabre Group Holdings, Inc. 1996 Directors Stock Incentive Plan.(27)                                                                                                                                                                                                                                                                                                
|10.23 |  | Sabre Holdings Corporation Employee Stock Purchase Plan Amended and Restated Effective as of January 1, 2005.(9)                                                                                                                                                                                                                                                       
|10.24 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, as amended November 13, 2000.(28)                                                                                                                                                                                                                                                       
|10.25 |  | Sabre Holdings Corporation Amended and Restated 1996 Long-Term Incentive Plan, as amended May 14, 2002.(29)                                                                                                                                                                                                                                                            
|10.26 |  | Form of Sabre Holdings Corporation 2005 Restricted Stock Agreement for Executive Officers.(30)                                                                                                                                                                                                                                                                         
|10.27 |  | Form of Sabre Holdings Corporation 2005 Stock Option Agreement for Executive Officers.(31)                                                                                                                                                                                                                                                                             
|10.28 |  | Information Regarding the Compensation of Directors of Sabre Holdings Corporation.(32)                                                                                                                                                                                                                                                                                 
|10.29 |  | 2005 Bonus Criteria for Executive Officers (33)                                                                                                                                                                                                                                                                                                                        
|10.30 |  | Option Issuance Agreement, dated January 1, 1998 between The SABRE Group Holdings, Inc. and US Airways, Inc.(34)                                                                                                                                                                                                                                                       
|10.31 |  | Credit Agreement, dated as of June 15, 2004, by and among Sabre Inc., Bank of America, N.A., as Administrative Agent, Citibank, N.A., Sumitomo Mitsui Banking Corp., New York, UFJ Bank Limited, and JPMorgan Chase Bank, as Co-Syndication Agents, Banc
of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, and the other banks party thereto.(35)
|10.32 |  | Capital Lease Facility with Various Associated Documents dated June 15, 2003, as specified below:                                                                                                                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                        

131

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|      |  | 10.32 (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 on Schedule 2, as Purchasers, and Wilmington
Trust Company, as Indenture Trustee.(36)                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | 10.32 (b) Master Lease and Deed of Trust dated as of June 15, 2003, between Sabre Inc., as Lessee, and CSL Leasing Inc., as Lessor.(36)                                                                                                                                                                                                          
|      |  | 10.32 (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.(36)
|      |  | 10.32 (d) Trust Indenture and Security Agreement dated as of June 15, 2003, between CSL Leasing Inc. and Wilmington Trust Company, as Indenture Trustee.(36)                                                                                                                                                                                     
|      |  | 10.32 (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.(36)                                                                                                                                                  
|      |  | 10.32 (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 Deed of Trust trustee, for the use and benefit of Wilmington
Trust Company, as Indenture Trustee. (36)                                              
|      |  | 10.32 (g) Lease Guaranty dated as of June 15, 2003, made by Sabre Holdings Corporation, as Lessee, Guarantor, 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. (36)                                               
|10.33 |  | Master Agreement dated August 20, 2004 by and between Otto (GmbH & Co KG), Otto Freizeit und Touristik GmbH, Travelocity.com LP, Travelocity GmbH, Kommanditgesellschaft Travel Overland Flugreisen GmbH & Co., and Travelocity Holdings
Gmbh.(37)                                                                                               
|10.34 |  | Share Transfer Agreement dated October 1, 2004 by Travelocity Holdings GmbH and Travelocity Sabre GmbH.(38)                                                                                                                                                                                                                                      
|10.35 |  | Share Purchase and Transfer Agreement dated October 1, 2004 between Travelocity Holdings GmbH and Kommanditgesellschaft Travel Overland Flugreisen GmbH & Co.(39)                                                                                                                                                                                
|10.36 |  | Share Transfer Agreement dated October 1, 2004 between Kommanditgesellschaft Travel Overland Flugreisen GmbH & Co., Otto Freizeit und Touristik GmbH and Travelocity GmbH.(40)                                                                                                                                                                   
|10.37 |  | Share Purchase and Transfer Agreement dated October 1, 2004 between Otto Freizeit und Touristik GmbH and Travelocity GmbH.(41)                                                                                                                                                                                                                   
|10.38 |  | Put Option Agreement among AGC Holdings Limited, Abacus International Pte Ltd., Travelocity.com L.P., and Zuji Holdings Limited dated January 17, 2005.(9)                                                                                                                                                                                       
|12.1  |  | Computation of ratio of earnings to fixed charges for the year ended December 31, 2004.(9)                                                                                                                                                                                                                                                       
|14.1  |  | Sabre Holdings Corporation Business Ethics Policy revised January 25, 2005.(9)                                                                                                                                                                                                                                                                   
|21.1  |  | Subsidiaries of Registrant.(9)                                                                                                                                                                                                                                                                                                                   
|23.1  |  | Consent of Ernst & Young LLP.(9)                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                  

132

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|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 March 11, 2005, 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 March 11, 2005, 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 March 11, 2005, signed by Michael S. Gilliland as Chief Executive Officer.(42)
|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 March 11, 2005, signed by Jeffery M. Jackson as Chief Financial Officer.(42)  

---

133

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134

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|(b) |  | A list of exhibits filed or furnished with this report on Form 10-K (or incorporated by reference to exhibits previously filed or furnished by us) is provided above under Item 15(a)(3) of this Report. We shall
furnish a copy of this Form 10-K and/or copies of exhibits for a reasonable fee (covering the expense of furnishing copies) upon request. Stockholders may request exhibits copies by contacting:
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | Sabre Holdings Corporation
Attn: Investor Relations
3150 Sabre Drive
Southlake, Texas 76092
682-605-1000                                                                                                                                                                                                                                                                                                           

PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be contained in agreements or other documents
filed as exhibits to this report. Any such covenants, representations or warranties: may have been qualified or superseded by disclosures contained in separate schedules not filed with this report,
may reflect the parties' negotiated risk allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities law purposes, and may not
be true as of the date of this report or any other date.

135

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

Financial Statements

|                                                                                                     |  | Page
|---------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm                                              |  | 62  
|Consolidated Balance Sheets at December 31, 2004 and 2003                                            |  | 63  
|Consolidated Statements of Income for the Years Ended
December 31, 2004, 2003 and 2002               |  | 64  
|Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2003 and 2002           |  | 65  
|Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2004, 2003 and 2002 |  | 66  
|Notes to Consolidated Financial Statements                                                           |  | 67  
|Schedule IIValuation and Qualifying Accounts for the Years
Ended December 31, 2004, 2003 and 2003   |  | 137 



136

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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, 2004    (in thousands)

|                             |                                      |  |   | Additions |  |   |        |    
|---------------------------- | ------------------------------------ |  | - | --------- |  | - | ------ | ---
|
|Year Ended December 31, 2004 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 15,415    |  | $ | 19,176 |    
|                             | Booking fee cancellation reserve     |  |   | 16,953    |  |   |       |    
|                             | Associate reserves                   |  |   | 10,252    |  |   | 29,368 |    
|Year Ended December 31, 2003 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 34,500    |  | $ | (101)  | (3)
|                             | Booking fee cancellation reserve     |  |   | 18,357    |  |   |       |    
|                             | Associate reserves                   |  |   | 7,170     |  |   | 21,247 |    
|Year Ended December 31, 2002 |                                      |  |   |           |  |   |        |    
|                             | Allowance for uncollectible accounts |  | $ | 41,317    |  | $ | 17,424 |    
|                             | Booking fee cancellation reserve     |  |   | 21,017    |  |   |       |    
|                             | Associate reserves                   |  |   | 2,189     |  |   | 10,831 |    

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137

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Signatures



|Date: March 11, 2005 |  | SABRE HOLDINGS CORPORATION                                                                                                           
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|                     |  | /s/Michael S. GillilandMichael S. Gilliland President and Chief Executive Officer (Principal
Executive Officer)                      
|                     |  | /s/Jeffery M. JacksonJeffery M. Jackson Executive Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)
|                     |  | /s/Mark K. MillerMark K. Miller Senior Vice President and Controller (Principal Accounting
Officer)                                  



|                                                      |  |                                      
|----------------------------------------------------- |  | -------------------------------------
|                                                      |  |                                      
|/s/Paul C. Ely, Jr.Paul C. Ely, Jr.                   |  | /s/Bob L. MartinBob L. Martin        
|/s/Royce S. CaldwellRoyce S. Caldwell                 |  | /s/Pamela B. StrobelPamela B. Strobel
|/s/Michael S. GillilandMichael S. Gilliland, Chairman |  | /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.       |  |                                      

138

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