<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
 
                                       
                                   FORM 10-Q
                                        
              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarter ended March 31, 1999        Commission file number 000-23177
================================================================================

  
                             PREVIEW TRAVEL, INC.


              Delaware                                  94-2965892
    (State or other jurisdiction                     (I.R.S. Employer 
  of incorporation or organization)                 Identification No.)

                   747 Front Street, San Francisco, CA 94111
 
                                (415) 439-1200

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


     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 [_]

     As of March 31, 1999, there were 13,811,205 shares of the registrant's
Common Stock outstanding.

                                       1
<PAGE>
 
                                     INDEX
                                     -----
                                                                            Page
                                                                            ----

PART I.   FINANCIAL INFORMATION

     Item 1.   Financial Statements.

               Condensed consolidated balance sheets at March 31, 1999
               and December 31, 1998                                           3
 
               Condensed consolidated statements of operations for the three
               months ended March 31, 1999 and 1998                            4
 
               Condensed consolidated statements of cash flows for the three
               months ended March 31, 1999 and 1998                            5

               Notes to condensed consolidated financial statements            6
 
     Item 2.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations.                                      8
 
PART II.  OTHER INFORMATION
 
     Item 1.   Legal Proceedings.                                             28
 
     Item 2.   Changes in Securities and Use of Proceeds.                     28
 
     Item 3.   Defaults Upon Senior Securities.                               28
 
     Item 4.   Submission of Matters to a Vote of Security Holders.           28
 
     Item 5.   Other Information.                                             28
 
     Item 6.   Exhibits and Reports on Form 8-K.                              28
 
SIGNATURES                                                                    29

                                       2
<PAGE>
 
PART I.    FINANCIAL INFORMATION
Item 1.    Financial Statements.


                     PREVIEW TRAVEL, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                        
<TABLE>
<CAPTION>
                                                            March 31,           December 31,
                                                              1999                 1998
                                                          -------------        -------------
                                                           (unaudited)
<S>                                                       <C>                  <C>
                       ASSETS

Cash and cash equivalents............................          $ 15,839             $ 20,363
Marketable securities................................            32,012               26,501
Accounts receivable, net.............................             2,934                2,423
Other assets.........................................             2,602                2,722
Net assets of discontinued operations................                59                  419
                                                          -------------        -------------
       Total current assets..........................            53,446               52,428
Marketable securities - noncurrent...................             8,069               14,661
Property & equipment, net............................             4,598                4,124
Other assets.........................................               961                  955
                                                          -------------        -------------
       Total assets..................................          $ 67,074             $ 72,168
                                                          =============        =============


       LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable.....................................          $    771             $  1,809
Accrued liabilities..................................             4,629                4,038
Current portion of capital lease and other
 obligations.........................................             1,417                1,379
                                                          -------------        -------------
        Total current liabilities....................             6,817                7,226
Capital lease obligations, less current portion                   1,586                1,641
Accrued liabilities, noncurrent......................               343                  614
                                                          -------------        -------------
        Total liabilities............................             8,746                9,481
                                                          -------------        -------------


Stockholders' equity:
    Common stock.....................................                14                   14
    Additional paid-in capital.......................           118,080              115,774
    Other............................................            (1,518)                (357)
    Accumulated deficit..............................           (58,248)             (52,744)
                                                          -------------        -------------
        Total stockholders' equity...................            58,328               62,687
                                                          -------------        -------------
        Total liabilities and stockholders' equity...          $ 67,074             $ 72,168
                                                          =============        =============
</TABLE>

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

                                       3
<PAGE>
 
                     PREVIEW TRAVEL, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                  (unaudited)
                                        
<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                   -----------------------
                                                                          March 31,
                                                                   -----------------------
                                                                      1999         1998
                                                                     ------       ------
Revenues:
<S>                                                                <C>           <C>
      Transaction revenue....................................        $ 3,836       $ 2,048
      Advertising revenue....................................          1,771           284
                                                                   ---------     ---------
      Total revenues.........................................          5,607         2,332

Cost of revenues                                                       2,105         1,201
                                                                   ---------     ---------

      Gross profit...........................................          3,502         1,131

Operating expenses:
      Marketing and sales....................................          6,879         3,980
      Technology operations and development..................          1,109           738
      General and administrative.............................          1,504         1,182
      Stock based compensation expense.......................            190            36
                                                                   ---------     ---------
      Total operating expenses...............................          9,682         5,936

      Loss from continuing operations before
      interest and  income tax expense.......................         (6,180)       (4,805)

Interest income (expense), net...............................            708           278
                                                                   ---------     ---------

      Loss from continuing operations
      before income tax expense..............................         (5,472)       (4,527)

Income tax expense...........................................            (32)           (7)
                                                                   ---------     ---------

      Loss from continuing operations........................         (5,504)       (4,534)

Discontinued operations:
      Loss from discontinued operations......................              -          (154)
                                                                   ---------     ---------

Net Loss.....................................................        $(5,504)      $(4,688)
                                                                   =========     =========

Basic and diluted net loss per share.........................        $ (0.40)      $ (0.41)
                                                                   =========     =========
Weighted average shares outstanding
      used in per share calculation..........................         13,743        11,353
                                                                   =========     =========

Supplemental Information:
Gross bookings...............................................        $76,701       $35,890
                                                                   =========     =========
</TABLE>

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

                                       4
<PAGE>
 
                     PREVIEW TRAVEL, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
 
                                                                                               Three Months Ended
                                                                                                   March 31,
                                                                                                   ---------
                                                                                         1999                     1998
                                                                                        ------                   ------
<S>                                                                                  <C>                    <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss...............................................................            $(5,504)                $ (4,688)
     Adjustments to reconcile net loss to net cash used in operating
      activities:
         Loss from discontinued operations..................................                  -                      154
         Depreciation and amortization......................................                464                      267
         Stock based compensation...........................................                190                       36
         Changes in operating assets and liabilities........................               (499)                     198
                                                                                      ---------              -----------
            Net cash used in continuing operating activities................             (5,349)                  (4,033)
            Net cash (used in) provided by discontinued operations..........                  -                     (264)
                                                                                      ---------              -----------
            Net cash used in operations.....................................             (5,349)                  (4,297)
                                                                                      ---------              -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of property and equipment..................................               (858)                    (201)  
     Net purchases and sales proceeds of short-term marketable securities...             (5,511)                 (10,657)
     Net sales proceeds and purchases of long-term marketable securities....              6,592                        -
                                                                                      ---------              -----------
            Net cash provided by investing activities.......................                223                  (10,858)
                                                                                      ---------              -----------
 CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments on obligations under capital leases...........................               (353)                    (268)
     Proceeds from issuance of common stock, net............................                955                      (12)
                                                                                      ---------              -----------
             Net cash provided by financing activities.......................               602                     (280)
                                                                                       ---------              -----------
Net (decrease) in cash......................................................             (4,524)                 (15,435)
Cash and cash equivalents, beginning of period..............................             20,363                   27,912
                                                                                      ---------              -----------
Cash and cash equivalents, end of the period................................            $15,839                 $ 12,477
                                                                                      =========              ===========
</TABLE>

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

                                       5
<PAGE>
 
                     PREVIEW TRAVEL, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                        
Note 1 - The Company and Basis of Presentation

     Preview Travel, Inc. (the "Company") is a leading provider of branded
online travel services for leisure and small business travelers. The Company
operates its own Web site (www.previewtravel.com), the primary travel service on
America Online, Inc. ("AOL") and co-branded travel Web sites with Excite, Inc.
("Excite") and with Lycos, Inc. ("Lycos"). In addition to its reservation and
ticketing service, the Company offers vacation and cruise packages, discount and
promotional fares, travel news and destination content, including content
licensed from Fodor's Travel Publications, Inc. Preview Travel, Inc. (formerly
Preview Media, Inc.) was incorporated in California in March 1985 and was
reincorporated in Delaware in November 1997.

     The accompanying unaudited condensed consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of the results for the period shown. The results of operations
for such periods are not necessarily indicative of the results expected for the
full fiscal year or for any future period.

     These financial statements should be read in conjunction with the financial
statements and related notes included in the Company's Annual Report on Form 10-
K for the year ended December 31, 1998.

     The Company has restated its prior financial statements to present the 
operating results of the television business as a discontinued operation.

Note 2 - Recent Accounting Pronouncements

     In April 1998, the Accounting Standards Executive Committee released
Statement of Position (SOP), 98-5, Reporting on the Costs of Start-up
Activities. SOP No. 98-5 is effective for the fiscal years beginning after
December 15, 1998 and requires companies to expense all cost incurred or
unamortized in connection with start-up activities. The new standard is
effective for the Company's fiscal year ending December 31, 1999 and is not
expected to have a material effect on the financial statements as the Company
has not capitalized such costs to date.


Note 3 - Commitments

     In September 1997, the Company entered into agreements with AOL, a related
party, and Excite under which these companies are obligated to deliver minimum
numbers of annual page views to the Company through the online areas featuring
the Company's travel services. The agreement with Excite was amended in March 
1999 to reduce the minimum payments over the term of the agreement by $500,000.
In connection with those services, the Company has made aggregate payments to
AOL and Excite totaling $14.2 million as of March 31, 1999, and is obligated
to make additional aggregate payments to AOL and Excite totaling $6.8 million
in 1999, $12.4 million in 2000 and 2001 and $9.7 million in 2002. The Company
is also obligated to pay a percentage of commissions earned by the Company in
excess of certain thresholds. To retain the right to be the primary provider
of travel services on AOL, the Company must achieve specified levels of annual
travel service bookings.

     In March 1998, the Company entered into an agreement with Lycos, a search
engine provider, for distribution and promotion of the Company's online travel
services. Over the two and a half year term of the agreement, the Company is
obligated to pay minimum amounts totaling $4.3 million, of which $2.1 million
has been paid as of March 31, 1999, as well as a portion of commissions earned
by the Company in excess of certain thresholds under the agreement.

     The Company has also entered into distribution and licensing agreements
with other third parties requiring the Company to make payments in the aggregate
of $2.7 million during the term of such agreements, of which $1.1 million has
been paid as of March 31, 1999.


Note 4 - Net Income (Loss) Per Share

     In accordance with the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," a reconciliation of the numerator and
denominator of basic and diluted EPS is provided as follows (in thousands,
except per share amounts).

                                       6
<PAGE>
 
<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                           --------------------------------
                                                                1999              1998
                                                                ----              ----
                                                                      (unaudited)
<S>                                                            <C>                <C>

Numerator--Basic and diluted EPS

     Net loss.........................................         $(5,504)           $(4,688)
                                                               =======            =======
Denominator--Basic and diluted EPS

      Weighted average common stock outstanding.......          13,743             11,353
                                                               =======            =======
Basic and diluted earnings per share..................         $ (0.40)           $ (0.41)
                                                               =======            =======
</TABLE>

                                        
Note 5 - Subsequent Event

     In April 1999, the company entered into an agreement to lease office space
for a second reservations call center.  The lease commences in May, 1999 and
expires in December, 2003 for a total commitment of $1.3 million.

                                       7
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Form 10-Q contain forward-looking
statements that involve risks and uncertainties. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and similar
expressions identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed or forecasted. Factors that might cause such a difference include, but
are not limited to, those discussed in the section entitled "Risk Factors" and
those appearing elsewhere in this Form 10-Q. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company assumes no obligation to update
these forward-looking statements to reflect actual results or changes in factors
or assumptions affecting such forward-looking statements.

Overview

     Preview Travel is a leading provider of branded online travel services for
leisure and small business travelers. From its inception in 1985 until December
1998, when it sold substantially all of the assets of its television business,
the Company operated as a producer of travel related programming for broadcast
television stations and cable networks around the world. The Company shifted its
business focus and resources to online travel services and launched its online
service on America Online ("AOL") in January 1995 and on the Web in December
1995, providing users with access to travel information and the ability to book
travel services by telephone. In May 1996, the Company launched its online
airline reservation service and, in the first half of 1997, enhanced its online
reservation service to include hotels and car rentals. In April 1997, the
Company launched its co-branded Web site for Excite's Travel Channel (City.Net).
In the third quarter of 1997, the Company expanded and extended its
relationships with Excite and AOL, respectively, by entering into new five-year
distribution agreements. In February 1998, the Company launched its Destinations
Guides feature created with content licensed from Fodor's. In March 1998, the
Company entered into an agreement with Lycos, under which the Company serves as
the exclusive multiservice provider of travel reservation services for Lycos'
Travel Web Guide and Travel Network. In July 1998, the Company began offering
real-time bookings of vacation and cruise packages through strategic
partnerships with American Airlines Vacations and Royal Caribbean Cruises Ltd.
and currently offers over 800 packages to over 100 destinations.

     Sale of Television Business. On December 31, 1998, the Company completed a
transaction with NewsNet Central, Inc. ("NNC"), pursuant to which substantially
all of the assets of the Company's television business, as operated by the
Company's wholly owned subsidiary, News Travel Network, Inc. ("NTN"), were
transferred to NNC (the "TV Disposition"). Upon the closing of the TV
Disposition, the Company contributed certain assets to NNC, including the
following: (a) cash in the amount of $88,000, (b) certain assets related to
NTN's business, including a library of travel video content, and (c) assignment
of the Company's rights and obligations under certain contracts related to NTN's
business.

     In consideration of the transfer of the assets of NTN to NNC, the Company
received from NNC the following: (a) a convertible promissory note in the
principal amount of $250,000 (the "Note"), (b) a subordinated promissory note in
the principal amount of $1,000,000 (the "Subordinated Note"), which will bear
interest at the rate of 6% per annum and will be secured by certain portions of
the assets of NNC, including its fixed assets and the video library, and (c) a
warrant to purchase up to 2,275,445 shares of Common Stock of NNC at an exercise
price of $0.45 per share (the "Warrant").  In March 1999, the Note was
automatically converted into shares of Series A Preferred Stock of NNC at a
conversion price of $4.50 per share upon the occurrence of certain conditions.

     In addition, the Company and NNC entered into a Services Agreement that
provides for, among other things, the following:  (a) the sublease to NNC of the
Company's facilities at One Beach Street in San Francisco, (b) the 

                                       8
<PAGE>
 
Company's right to act as the co-exclusive advertising sales representative for
NTN's Travel Update programs, (c) a perpetual, non-exclusive, royalty-free
license to use NTN's travel video library (including any enhancements thereto),
and (d) the continued branding of NTN's "Travel News" and "Travel Update"
programs with "Preview Travel" marks. NNC has also agreed not to provide online
travel services for a period of five years following the termination of the
Services Agreement.

     As the historical operations of the Company's television business were not
profitable, and due to the significant risks inherent in the independent
television business, the Company has attributed no value to the Subordinated
Note and the Warrant.  The net value of the Company's investment in NNC was
recorded at $250,000. As of the closing of the TV Disposition, substantially all
of the Company's employees engaged in NTN's business became employees of NNC.

     Upon the completion of the TV Disposition, the Company incurred a one-time
loss of approximately $4.2 million related to the sale of the television assets.

     Overview of Continuing Operations. The Company's revenues are predominantly
comprised of commissions paid by airlines, hotels, rental car agencies, cruise
lines and vacation packagers (collectively, "travel suppliers") for travel
services booked through the Company, segment fees received from its GDS supplier
and the sale of advertisements on the Company's online sites. In addition,
certain travel suppliers pay performance-based compensation known as "override
commissions" or "overrides." Commission revenues for air travel, hotel rooms,
car rentals and vacation packages, net of allowances for cancellations, are
recognized upon the confirmation of the reservation. Overrides are recognized on
an accrual basis once the amount has been confirmed with the travel supplier,
which generally reflects the performance for a prior quarterly period.

     The Company commenced its online airline reservation service in May 1996
and enhanced the service to include hotels and car rentals in the first half of
1997. In July 1998, the Company began offering real-time bookings of vacation
and cruise packages through strategic partnerships with leading travel 
suppliers. The Company's online travel services have experienced substantial
growth since the Company first enabled customers to book travel services
online in May 1996. Gross bookings of travel services online increased from
approximately $2.8 million in the second quarter of 1996 to $76.7 million in
the first quarter of 1999, which resulted in revenues, including advertising
revenue, of approximately $424,000 and $5.6 million, respectively, for the
corresponding periods.

     The commission rates paid by travel suppliers, in addition to overrides,
are determined by individual travel suppliers and are subject to change.
Historically, typical standard base commission rates paid by travel suppliers
have been approximately 10% for hotel reservations, 5% to 10% for car rentals
and 10% to 15% for cruises and vacation packages. During the quarter ended June
30, 1997, the commissions paid by most of the major airlines for online
reservations was changed from a typical base rate of approximately 8% to
approximately 5% (excluding overrides). In a continuation of this trend, in the
first half of 1998, two major airlines reduced their fixed rate commission for
online roundtrip ticket sales to ten dollars. These reductions were followed by
similar reductions made by other airlines. The Company expects that its weighted
average commission on online transaction revenue will decline as a result of
these reductions. Currently, the Company earns an average commission of
approximately 4% on the sale of airline tickets. During the first quarter of
1998, one hotel chain eliminated commissions paid to the Company and other
online travel service providers for online bookings. In response, the Company
discontinued offering bookings for that hotel chain. Beginning in January 1999,
the largest hotel chain whose hotels are offered by the Company started to pay a
flat commission of two dollars per completed hotel stay. As a result, the
Company expects that its commission rate from hotels will decline significantly.
There can be no assurance that other hotel chains or other travel suppliers will
not also reduce commission rates paid to the Company or eliminate such
commissions entirely, which could, individually or in the aggregate, have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors That May Affect Future Results--Reliance
on Travel Suppliers; Potential Adverse Changes in Commission Payments."

     Advertising revenue has accounted for an increasing portion of the
Company's revenues, representing 9%, 10%, 24%, and 32%, of total revenues for
1996, 1997 and 1998, and the three months ended March 31, 1999, 

                                       9
<PAGE>
 
respectively. The Company currently expects that future growth, if any, of
advertising revenue may be adversely affected by seasonality in advertising
expenditures in certain quarters by advertisers and the uncertainty of the
acceptance by the advertisers of the Company's Web sites as an advertising
medium. See "Risk Factors That May Affect Future Results--Risks Associated with
Advertising Revenues."

     Travel services sold through the AOL network (including the primary AOL
service and AOL.COM) accounted for 38%, 35%, 28%, and 33% of the Company's gross
bookings for the three months ended June 30, 1998, September 30, 1998, December
31, 1998, and March 31, 1999 respectively. Travel services sold through Excite
accounted for 18%, 15%, 16% and 13% of the Company's gross bookings for the
three months ended June 30, 1998, September 30, 1998, December 31, 1998 and
March 31, 1999 respectively. The Company's arrangements with AOL and Excite are
expected to continue to represent significant distribution channels for the
Company's travel services. Any termination of either or both of the Company's
agreement with AOL or amended agreement with Excite would likely have a
material adverse effect on the Company's business, operating results and
financial condition. Since launching its online operations, the Company's cost
of revenues and operating expenses have grown substantially and are expected
to continue to grow substantially in absolute dollars for the foreseeable
future. In particular, the Company's agreements with AOL and Excite require
minimum aggregate payments of approximately $55.5 million during the terms of
such agreements in exchange for their providing distribution, marketing and
other services. There can be no assurance that the Company will achieve
sufficient online traffic, travel bookings or commissions to realize economies
of scale that justify the Company's significant fixed financial obligations to
AOL and Excite. Further, there can be no assurance that the Company will
satisfy the minimum levels of travel services bookings, or provide
satisfactory content on the specified time schedule, required to maintain the
AOL and Excite agreements. Failure to do either of the foregoing would likely
have a material adverse effect on the Company's business, operating results
and financial condition. See "Risk Factors That May Affect Future Results--
Reliance on Distribution Agreements with America Online and Excite."

     Overview of Discontinued Operations. From inception through 1994, the
Company derived all of its revenues from its television operations. The Company
has restated its previously reported financial statements to reflect the results
of television operations as discontinued operations. Television revenues were
derived primarily from fees associated with sales of advertising time and the
licensing of travel related news and entertainment programming. Program license
revenues were recognized when all of the following conditions were met: (i) the
license period began, (ii) the license fee and the production costs were known
and (iii) the program had been accepted by the licensee and was available for
telecast. Advertising revenues were recognized when all the terms of the
advertising agreement were met, and advertising was shown on various media as
designated by the agreement.

     The Company produced travel related news inserts and news and entertainment
programs that were syndicated in exchange for either cash or commercial
advertising time. The Company also syndicated third party news inserts. The
local commercial advertising time earned for providing these programs was
aggregated and sold to advertisers seeking to reach a national audience. To
fulfill such advertisers' requirements to reach a national audience, the Company
from time to time purchased commercial advertising time for resale in selected
markets. In addition, the Company produced in-flight programs, primarily for
Northwest Airlines.

     Gross Margins. Gross margins may be impacted by a number of different
factors, including the mix of transaction revenues versus advertising revenues,
the mix of travel services sold, the mix of advertising revenues from AOL,
Excite, Lycos and the Company's Web site, the mix of airline ticket
commissions (which vary from airline to airline) and the amount of override
commissions. The Company typically realizes higher gross margins on
advertising revenues than transaction revenues, higher commissions on vacation
packages than hotel rooms and car rentals, higher commissions on hotel rooms
from certain suppliers and car rentals than airline tickets, higher gross
margins on advertising revenues from its own Web site than through AOL, Excite
or Lycos, higher commissions from certain airlines than others, and higher
gross margins in periods of higher overrides. Any change in one or more of the
foregoing factors could materially adversely affect the Company's gross
margins and operating results in future periods. In addition, the Company
expects to add a second reservations call center during 1999 that is expected
to increase cost of revenues and likely lower gross margins in the near term.
See "Risk Factors That May Affect Future Results--Unpredictability of Future
Revenues; Fluctuations in Quarterly Results."

                                       10
<PAGE>
 
     Anticipated Losses. The Company has incurred significant operating losses
and, as of March 31, 1999, had an accumulated deficit of $58.2 million. The
Company believes that its success will to a large part depend on its ability to
increase the number of registered users and customers and to increase sales
volume to realize economies of scale. As the Company increases its spending
for product development, advertising, customer service, facilities,
international expansion and general and administrative expenses, the Company
expects to continue to incur significant operating losses on a quarterly and
annual basis for the foreseeable future, and the rate at which such losses
will be incurred is expected to increase significantly from current levels,
resulting in corresponding decreases in working capital, total assets and
stockholders' equity. In particular, the Company's operating expenses are
expected to increase substantially in 1999 as compared to 1998, primarily due
to scheduled increases in the Company's payment obligations to strategic
partners and advertising and marketing expenses for the Company's online
travel services, resulting in corresponding increases in operating losses and
decreases in working capital, total assets and stockholders' equity. See "Risk
Factors That May Affect Future Results--Limited Operating History of Online
Business; History of Net Operating Losses; Accumulated Deficit" and "--
Anticipated Losses and Negative Cash Flow."

                                       11
<PAGE>
 
Results Of Operations

     The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's condensed consolidated
statement of operations to total revenues, except as indicated:

<TABLE>
<CAPTION>
                                                                       Three Months
                                                                      Ended March 31,
                                                                ----------------------------
                                                                    1999            1998
                                                                    ----            ----
                                                                        (unaudited)
<S>                                                            <C>               <C>
 Revenues:
      Transaction revenue....................................          68.4%            87.8%
      Advertising revenue....................................          31.6             12.2
                                                               ------------      -----------
      Total revenues.........................................         100.0            100.0

 Cost of revenues............................................          37.5             51.5
                                                               ------------      -----------

      Gross profit...........................................          62.5             48.5

Operating expenses:
      Marketing and sales....................................         122.7            170.7
      Technology operations and development..................          19.8             31.6
      General and administrative.............................          26.8             50.7
      Stock based compensation expense.......................           3.4              1.5
                                                               ------------      -----------
      Total operating expenses...............................         172.7            254.5

      Loss from continuing operations before
       Interest and  income tax expense......................        (110.2)          (206.0)

Interest income (expense), net...............................
                                                                       12.6             11.9
                                                               ------------      -----------

      Loss from continuing operations
       before income tax expense.............................         (97.6)          (194.1)

Income tax expense...........................................          (0.6)            (0.3)
                                                               ------------      -----------

      Loss from continuing operations........................         (98.2)          (194.4)

Discontinued operations:
      Loss from discontinued operations...................              0.0             (6.6)
                                                               ------------      -----------

Net Loss.....................................................         (98.2%)         (201.0%)
                                                               ============      ===========
</TABLE>

                                       12
<PAGE>
 
Comparison Of Three Months Ended March 31, 1999 and 1998

  Revenues

     Transaction Revenue. Transaction revenues increased from approximately $2.0
million in the first three months of 1998 to $3.8 million in the first three
months of 1999 due primarily to increases in the Company's customer base and
gross bookings. Gross bookings increased from $35.9 million in the first three
months of 1998 to $76.7 million in the first three months of 1999 as a result of
the expansion of the Company's travel service offerings, strategic relationships
and customer base, as well as repeat purchases by existing customers. Visits to
the Company's online areas increased from 19.8 million in the first quarter of
1998 to 29.9 million in the first quarter of 1999. During the three months ended
March 31, 1999, the percentage of online revenues derived from airline
commissions, nonairline commissions and the sale of advertising on the Company's
online sites was 47%, 21% and 32%, respectively, as compared to 67%, 21% and
12%, respectively, during the three months ended March 31, 1998. The Company's
database of customer profiles grew from approximately 3.4 million profiles as of
March 31, 1998 to over 7.2 million profiles as of March 31, 1999.

 
     Advertising Revenues. Online advertising revenues increased from $284,000
in the first three months of 1998 to $1,771,000 in the first three months of
1999, due primarily to the number of advertisers on the Company's Web site, and
an increase in the average revenue generated per advertiser.

  Cost of Revenues

     Cost of Revenues. Cost of revenues includes equipment and staffing costs
associated with operating the Company's transaction system and customer
reservation center, GDS charges, printing and delivery costs for tickets and
costs associated with errors in ticket fulfillment. Cost of revenues increased
from $1.2 million in the first three months of 1998 to $2.1 million in the first
three months of 1999 due to the increased volume of transactions in the first
three months of 1999. As a percentage of online revenues, cost of revenues
declined from 51.5% in the first three months of 1998 to 37.5% in the first
three months of 1999, primarily due to economies of scale resulting from
increased transaction volume. The Company's average cost per transaction
declined from approximately $10.70 in the first three months of 1998 to
approximately $8.20 in the first three months of 1999.

  Operating Expenses

     Marketing and Sales. Marketing and sales expenses consist primarily of
payroll and related expenses, consulting fees, advertising, public relations and
promotional expenditures and costs relating to the development and acquisition
of content and distribution for the Company's online sites. Marketing and sales
expenses increased 73% from $4.0 million in the first three months of 1998 to
$6.9 million in the first three months of 1999. As a percentage of total
revenues, marketing and sales expenses decreased from 171% in the first three
months of 1998 to 123% in the first three months of 1999. The increase in
marketing and sales expenses was attributable primarily to expenses associated
with the hiring of additional personnel for development of online content,
expenditures related to the Company's agreements with AOL, Excite and others and
increased advertising expenditures. The Company continues to pursue an
aggressive branding and marketing campaign, including significant advertising
expenditures. In addition, the Company is obligated to make minimum payments
totaling $55.5 million to AOL and Excite over the term of its agreements with
AOL and Excite, and $4.3 million to Lycos over the two and a half year term of
its agreement with Lycos, which payments will be accounted for as marketing and
sales expense. As a result of the foregoing the Company expects marketing and
sales expenses to increase significantly in absolute dollars in future
periods.

     Technology Operations and Development. Technology operations and
development expenses consist principally of personnel and equipment expenses and
consulting fees for development and enhancement of the Company's transaction
processing system and online services such as its Destinations Guides with
Fodor's, costs of 

                                       13
<PAGE>
 
content development in connection with the Company's strategic relationships
with Excite, AOL and Lycos, and costs associated with network operations,
systems and telecommunications infrastructure. Technology operations and
development expenses increased 50% from $738,000 in the first three months of
1998 to $1,109,000 in the first three months of 1999. As a percentage of total
revenues, technology operations and development expenses decreased from 32% in
the first three months of 1998 to 20% in the first three months of 1999. The
increase in technology operations and development expenses was attributable
primarily to increased staffing and consulting fees, as well as increased costs
related to enhancing the capacity, features, content and functionality of the
Company's online services and enhancing or updating transaction-processing
systems. The Company believes that continued investment in technology operations
and development is critical to attaining the Company's strategic objectives and,
as a result, expects technology operations and development expenses to increase
significantly in absolute dollars in future periods.

     General and Administrative. General and administrative expenses
consist of payroll and related expenses for management, accounting and
administrative personnel, recruiting, professional services, facilities,
director and officer insurance, investor relations and other general corporate
expenses. General and administrative expenses increased 27% from $1.2 million in
the first three months of 1998 to $1.5 million in the first three months of
1999. As a percentage of total revenues, general and administrative expenses
decreased from 51% in the first three months of 1998 to 27% in the first three
months of 1999. The increase in general and administrative expenses was due
primarily to increased salaries and expenses associated with the hiring of
personnel related to the expansion of the Company's operations. The Company
expects general and administrative expenses to increase in absolute dollars in
future periods as the Company expands its staff and incurs additional costs
related to the growth of its business.

     Stock based Compensation. Stock based compensation reflects the charge
to earnings for directors' and consultants' stock options that vest during the
period. Stock based compensation increased from $36,000 in the first three
months of 1998 to $190,000 in the first three months of 1999 due primarily to an
increase in the number of options granted to directors and consultants. The 
Company's calculation of stock based compensation expense was made by using 
the Black-Scholes option pricing model for option grants made in 1999. The
amount of expense to be recorded in future periods will depend on the number of
options vesting, the price of the common stock at the time of vesting and other
variables.

     Interest Income (Expense)

     Interest income, net of interest expense, was approximately $278,000 and
$708,000 in the first three months of 1998 and 1999, respectively. Interest
expense is comprised primarily of interest on capital lease obligations. The
increase in net interest income was attributable primarily to interest income
earned on higher cash balances in the first three months of 1999, primarily due
to net proceeds from the Company's secondary offering in May, 1998.

     Income Taxes

     The provision for income taxes recorded in the first three months of 1999
represents Delaware franchise tax and minimum state tax expense. The Company
expects to incur a net loss for 1999; therefore, no provision for federal income
taxes has been recorded for the first three months of 1999.

     Discontinued Operations.  

     Loss from discontinued operations include the results of the Company's
television operations prior to the TV Disposition on December 31, 1998. Loss
from discontinued operations in the three months ended March 31, 1998 of
$154,000 was comprised of television revenues of $1.7 million less cost of
television revenues of $1.2 million and operating expenses of $595,000.

Liquidity and Capital Resources

     In November 1997, the Company completed an initial public offering of its
common stock, resulting in net proceeds to the Company of approximately $24.6
million. Additionally, in May 1998, the Company completed a secondary public
offering of its common stock, resulting in net proceeds to the Company of
approximately $52.4 million.  Prior to the two public offerings, the Company had
financed its operations primarily through private sales of common stock,
convertible preferred stock and convertible notes, which totaled $34.7 million
in aggregate net proceeds through 1997.

                                       14
<PAGE>
 
     Cash used in operating activities in the first three months of 1999 of
$5.3 million was attributable primarily to a net loss of $5.5 million. Cash
used in operating activities in the first three months of 1998 of $4.3 million
was attributable primarily to a net loss of $4.7 million offset by depreciation 
and amortization and net changes in operating assets and liabilities.

     Cash provided by investing activities in the first three months of 1999 of
$223,000 was comprised of net sales proceeds and purchases of long-term
marketable securities of $6.6 million offset by net purchases and sales proceeds
of sort-term marketable securities of $5.5 million and acquisitions of property
and equipment of $858,000. Cash used in investing activities in the first three
months of 1998 of $10.9 million was comprised of net purchases and sales
proceeds of short-term marketable securities of $10.7 million offset by
acquisitions of property and equipment of $201,000.

     Cash provided by financing activities in the first three months of 1999 of
$602,000 was attributable to net proceeds from issuance of common stock of
$955,000 offset by payments on obligations under capital leases of $353,000.
Cash used in financing activities in the first three months of 1998 of $280,000
was attributable primarily to payments on obligations under capital leases.

     As of March 31, 1999, the Company had $55.9 million of cash, cash
equivalents and marketable securities. As of that date, the Company's principal
commitments consisted of obligations outstanding under the agreements with AOL,
Excite, Lycos and others and lease obligations. Although the Company has no
material commitments for capital expenditures, it anticipates an increase in its
capital expenditures and lease commitments consistent with anticipated growth in
operations, infrastructure and personnel. In addition, pursuant to its
arrangement with AOL, the Company is obligated to make minimum payments totaling
$32 million, of which $10.7 million had been paid as of March 31, 1999, and to
pay a percentage of commissions earned by the Company in excess of certain
thresholds. Pursuant to its arrangement with Excite, the Company is obligated to
make minimum payments totaling $23.5 million, of which $3.5 million had been
paid as of March 31, 1999, and to pay a percentage of commissions earned by the
Company in excess of certain thresholds. Pursuant to its arrangement with Lycos,
the Company is obligated to make minimum payments totaling $4.3 million, of
which $2.1 million had been paid as of March 31, 1999 and to pay a percentage of
commissions earned by the Company in excess of certain thresholds. In addition,
the Company is required to continue to develop content areas featured on AOL,
Excite and Lycos sponsored primarily by advertising revenues, of which the
Company is entitled to receive a share. However, there can be no assurance that
the Company will receive significant revenues, if any, from such payments. See
"Risk Factors That May Affect Future Results--Reliance on Distribution
Agreements with America Online and Excite."

     The Company believes that its current cash, cash equivalents and marketable
securities will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures through the end of March 2000.  However, the
Company could be required, or could elect, to seek to raise additional financing
during such period or thereafter, through the sale of equity or debt securities
or by obtaining credit facilities. The sale of additional equity or convertible
debt  securities could result in additional dilution to the Company's
stockholders. There can be no assurance that financing will be available in
sufficient amounts or on terms acceptable to the Company, if at all. See "Risk
Factors That May Affect Future Results--Need for Additional Capital."

Year 2000

     The Year 2000 issue relates to computer systems that have time and date-
sensitive programs that may not properly recognize the Year 2000. If a computer
system or software application used by the Company or a third party dealing with
the Company fails because of the inability of the system or application to
properly read the year "2000," the results could include, among other things,
the inability to process transactions or conduct normal business activities and
could have a material adverse effect on the Company.

     The Company's process towards Year 2000 readiness includes planning,
assessment, testing and remediation. The Company has engaged an outside
consultant to assist in this process. The Company is in the process of
undertaking Year 2000 assessment and testing and anticipates completing this
process by June 30, 1999. Based on its review to date, the Company has not
uncovered any significant computer programs or systems which would not become
Year 2000 compliant in a timely manner. The Company continues to review its
systems for Year 2000 issues. The Company expects to spend up to $200,000 for
contractors, consultants and software involved in the planning, assessment and
testing phases of the Year 2000 process. The Company also expects to utilize
significant internal resources and personnel in the Year 2000 process. The
extent of any remedial efforts and other additional costs of the Year 2000
process will not be known until the testing and assessment phase has been
completed. 

                                       15
<PAGE>
 
However, the costs to complete the Year 2000 process are not expected to have a
material adverse effect on the Company's business, operating results or
financial condition.

     The Company has also initiated contact with key suppliers whose computer
systems' functionality could impact the Company's ability to conduct business.
The Company is dependent upon certain third party service providers including,
without limitation, the Apollo GDS system, AOL, Level 3 Communications,
Pegasus and major travel suppliers. Any interruption of such services due to
such providers' failure to be Year 2000 compliant would be disruptive to the
Company's business and could have a material adverse effect on the Company's
business, operating results and financial condition. In particular, the Company
is substantially dependent on the Year 2000 compliance of the Apollo GDS system,
the failure of which could, in the worst case, prevent the Company's customers
from being able to reserve airline tickets, car rentals and other travel
services, which would have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the Company believes it
could take up to six months and require substantial expenditures to fully
transition the Company's travel services to an alternative GDS System.
Similarly, the failure by Pegasus to be Year 2000 compliant could prevent the
Company's customers from being able to reserve hotel rooms, which could have a
material adverse effect on the Company's business, operating results and
financial condition. Currently, the Company has not yet developed a contingency
plan to address the risk of failure of such service providers to be Year 2000
compliant.

     The foregoing assessment of the impact of the Year 2000 problem on the
Company is based on management's best estimates at the present time and could
change substantially. The assessment is based upon numerous assumptions as to
future events. There can be no guarantee that these estimates will prove
accurate, and actual results could differ from those estimated if these
assumptions prove inaccurate.


Recently Issued Accounting Standards

     In April 1998, the Accounting Standards Executive Committee released
Statement of Position (SOP), 98-5, Reporting on the Costs of start-up
Activities. SOP No. 98-5 is effective for the fiscal years beginning after
December 15, 1998 and requires companies to expense all cost incurred or
unamortized in connection with start-up activities. The new standard is
effective for the Company's fiscal year ending December 31, 1999 and is not
expected to have a material effect on the financial statements as the Company
has not capitalized such costs to date.



Risk Factors That May Affect Future Results

          In addition to the other information in this Report, the following
factors should be considered carefully in evaluating the Company's business and
prospects:
 
     Limited Operating History of Online Business; History of Net Operating
Losses; Accumulated Deficit. The Company incurred net losses of $5.6 million,
$10.2 million, $27.0 million and $5.5 million in 1996, 1997, 1998 and the three
months ended March 31, 1999, respectively. As of March 31, 1999, the Company had
an accumulated deficit of approximately $58.2 million. The Company believes that
its future success depends on its ability to significantly increase revenues
from its Internet and commercial online service operations, for which it has a
limited operating history. The Company initiated its reservations operations in
1994, first recognized revenues from its reservations operations in the first
quarter of 1995 and booked its first airline ticket reservations online in the
second quarter of 1996. Accordingly, the Company's prospects must be considered
in light of the risks, expenses and difficulties frequently encountered by
companies in an early stage of development, particularly companies engaged in
new and rapidly evolving markets such as online commerce. There can be no
assurance that the Company will be successful in addressing such risks, and the
failure to do so could have a material adverse effect on the Company's business,
operating results and financial condition.

                                       16
<PAGE>
 
     Anticipated Losses and Negative Cash Flow. The Company believes that its
success will depend in large part on, among other things, its ability to attract
and retain registered users, to generate sufficient sales volume to achieve
profitability and effectively maintain existing relationships and develop new
relationships with travel suppliers, strategic partners and advertising
customers. Accordingly, the Company intends to expend significant financial and
management resources on brand development, marketing and promotion, site and
content development, strategic relationships and technology and operating
infrastructure. As a result, the Company expects to incur additional losses and
continued negative cash flow from operations for the foreseeable future, and
such losses are anticipated to increase significantly from current levels. There
can be no assurance that the Company's revenues will increase or even continue
at their current level or that the Company will achieve or maintain
profitability or generate cash from operations in future periods. In view of the
rapidly evolving nature of the Company's business and its limited operating
history in the online business, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and should
not be relied upon as an indication of future performance.

     Unpredictability of Future Revenues; Fluctuations in Quarterly Results. As
a result of the Company's limited operating history in online commerce and the
emerging nature of the markets in which the Company competes, the Company is
unable to accurately forecast its revenues. The Company's current and future
expense levels are based predominantly on its operating plans and estimates of
future revenues and are to a large extent fixed. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would likely have
an immediate material adverse effect on the Company's business, operating
results and financial condition. Further, the Company currently intends to
substantially increase its operating expenses to develop and offer new and
expanded travel services, to fund increased sales and marketing, including
obligations under its distribution agreements, and customer service operations
and to develop its technology and transaction processing systems. To the extent
such expenses precede or are not subsequently followed by increased revenues,
the Company's operating results will fluctuate and net anticipated losses in a
given quarter may be greater than expected.

     The Company expects that it will experience seasonality in its business,
reflecting seasonal fluctuations in the travel industry, Internet and commercial
online service usage and advertising expenditures. The Company anticipates that
travel bookings will typically increase during the first and second quarter in
anticipation of summer travel and will typically decline during the fourth
quarter. Internet and commercial online service usage and the rate of growth of
such usage may be expected typically to decline during the summer. Depending on
the extent to which the Internet and commercial online services are accepted as
an advertising medium, seasonality in the level of advertising expenditures
could become more pronounced for Internet based advertising. Seasonality in the
travel industry, Internet and commercial online service usage and advertising
expenditures are likely to cause quarterly fluctuations in the Company's
operating results and could have a material adverse effect on the Company's
business, operating results and financial condition.

     The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of other factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include, but are not limited to: (i) the Company's
ability to retain existing customers, attract new customers at a steady rate and
maintain customer satisfaction, (ii) changes in inventory availability from
third party suppliers or commission rates paid by travel suppliers, such as the
reduction in commissions paid by major airlines for online bookings implemented
during 1997 and the first half of 1998, (iii) the announcement or introduction
of new or enhanced sites, services and products by the Company or its
competitors, (iv) general economic conditions and economic conditions specific
to the Internet, online commerce or the travel industry, (v) the level of use of
online services and consumer acceptance of the Internet and commercial online
services for the purchase of consumer products and services such as those
offered by the Company, (vi) the Company's ability to upgrade and develop its
systems and infrastructure and to attract new personnel in a timely and
effective manner, (vii) the level of traffic on the Company's online sites,
(viii) technical difficulties, system downtime or Internet brownouts, (ix) the
amount and timing of operating costs and capital expenditures relating to
expansion of the Company's business, operations and infrastructure, (x)
governmental regulation and (xi) unforeseen events affecting the travel
industry.

                                       17
<PAGE>
 
     Gross margins may be impacted by a number of different factors including
the mix of transaction revenues versus advertising revenues, the mix of travel
services sold, the mix of advertising revenues from AOL, Excite, Lycos and the
Company's Web site, the mix of airline ticket commissions (which vary from
airline to airline) and the amount of override commissions. The Company
typically realizes higher gross margins on advertising revenues than
commission revenues, higher commissions on vacation packages than hotel rooms
and car rentals, higher commissions on hotel rooms and car rentals than
airline tickets, higher gross margins on advertising revenues from the
Company's own Web site than through AOL, Excite or Lycos, higher commissions
from certain airlines than others and higher gross margins in periods of
higher overrides. Any change in one or more of the foregoing factors could
materially adversely affect the Company's gross margins and operating results
in future periods.

     As a result of the foregoing factors, the Company's annual or quarterly
operating results may be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock would likely
be materially and adversely affected.

     Dependence on the Travel Industry. The Company derives a significant
portion of its revenues directly or indirectly from the travel industry, and the
Company's future growth is dependent on the travel industry. The travel
industry, especially leisure travel, which is dependent on personal
discretionary spending levels, is sensitive to changes in economic conditions
and tends to decline during general economic downturns and recessions. The
travel industry is also highly susceptible to unforeseen events, such as
political instability, regional hostilities, fuel price escalation, travel
related accidents, unusual weather patterns or other adverse occurrences. Any
event that results in decreased travel generally would likely have a material
adverse effect on the Company's business, operating results and financial
condition.

     Uncertain Acceptance of the Preview Travel Brand; Dependence on Increased
Bookings. The Company believes that establishing, maintaining and enhancing the
Preview Travel brand is a critical aspect of its efforts to attract and expand
its online traffic. The number of Internet sites that offer competing services,
many of which already have well established brands in online services or the
travel industry generally, increases the importance of establishing and
maintaining brand name recognition. Promotion of the Preview Travel brand will
depend largely on the Company's success in providing a high quality online
experience supported by a high level of customer service, which cannot be
assured. In addition, to attract and retain online users, and to promote and
maintain the Preview Travel brand in response to competitive pressures, the
Company may find it necessary to increase substantially its financial commitment
to creating and maintaining a strong brand loyalty among customers. If the
Company is unable to provide high quality online services or customer support,
or otherwise fails to promote and maintain its brand, or if the Company incurs
excessive expenses in an attempt to promote and maintain its brand, the
Company's business, operating results and financial condition would be
materially adversely affected.

     The Company's future success, and in particular its revenues and operating
results, depends upon its ability to successfully execute several key aspects of
its business plan. The Company must increase the dollar volume of transactions
booked through its online sites, either by generating significantly higher and
continuously increasing levels of traffic to its online sites or by increasing
the percentage of visitors to its online sites who purchase travel services, or
through some combination thereof. The Company must also increase the number of
repeat purchasers of travel services through its online sites. In addition, the
Company must deliver a high level of customer service and compelling content in
order to attract users with demographic characteristics valuable to advertisers.
Although the Company has implemented strategies designed to accomplish these
objectives, including its relationships with AOL, Excite, Lycos and other
strategic partners, as well as advertising the Company's services in online and
traditional media, there can be no assurance that these strategies will be
effective in increasing the dollar volume of transactions booked through its
online sites, increasing traffic to its online sites, increasing the percentage
of visitors who purchase travel services, increasing the number of repeat
purchasers or increasing its advertising revenues. The failure to do one or more
of the foregoing would likely have a material adverse effect on the Company's
business, operating results and financial condition.

     Reliance on Distribution Agreements with America Online and Excite. The
Company has entered into agreements with AOL and Excite establishing the Company
as the primary and preferred provider of travel services on AOL and the
exclusive provider of travel reservations services on Excite's Travel Channel
(City.Net) until 

                                       18
<PAGE>
 
September 2002. Under these agreements, as amended, AOL and Excite are obligated
to promote the Company and to deliver minimum numbers of annual page views or
impressions to the online areas featuring the Company's travel services. In
addition, the Company is eligible to receive payments from Excite representing a
share of advertising revenues received by Excite in connection with the online
areas featuring the Company's travel services; however, there can be no
assurance that such payments, if any, will be significant. During the terms of
these agreements, the Company is obligated to make minimum payments totaling
$55.5 million to AOL and Excite as well as pay to AOL and Excite a percentage of
certain commissions earned by the Company in excess of specified thresholds. The
Company is also obligated to share certain advertising revenues with each of AOL
and Excite, as specified in their respective agreements. Moreover, the Company's
agreement with AOL is conditioned upon the Company achieving specified levels of
travel services bookings, which will require the Company to significantly
increase such bookings from current levels. There can be no assurance that the
Company will achieve sufficient online traffic, travel bookings or commissions
to realize economies of scale that justify the Company's significant fixed
financial obligations to AOL and Excite or that the Company will satisfy the
minimum levels of travel services bookings required to maintain the AOL
agreement, and failure to do so would likely have a material adverse effect on
the Company's business, operating results and financial condition. In addition,
the agreements with AOL and Excite do not provide the Company with renewal
rights upon expiration of their respective terms. The AOL agreement provides AOL
with the right to renew the AOL agreement for successive one-year terms on a 
non-exclusive basis during which period AOL would continue to receive a
percentage of commissions and share in advertising revenues, but the Company
would not be obligated to make any additional minimum payments. There can be no
assurance that such agreements will be renewed on commercially acceptable terms,
or at all.

     In addition, the Company is a party to a database services agreement with
AOL to develop and manage a travel related destinations database for AOL with
content that is reasonably satisfactory to AOL. The Company has committed to an
aggressive schedule to develop and maintain the destinations database which will
require significant efforts and resources on the Company's part. There can be no
assurance that the Company will be able to fulfill its commitments to AOL on the
agreed upon schedule, and failure to do so could result in a breach of the
distribution agreement with AOL, as well as the database services agreement,
which would likely have a material adverse effect on the Company's business,
operating results and financial condition.

     Furthermore, the Company's significant investment in the AOL and Excite
relationships is based on the continued positive market presence, reputation and
anticipated growth of AOL and Excite, as well as the commitment by each of AOL
and Excite to deliver specified numbers of annual page views or impressions. Any
decline in the significant market presence, business or reputation of AOL or
Excite, or the failure of AOL or Excite to deliver the specified numbers of
annual page views, will reduce the value of these strategic agreements to the
Company and will likely have a material adverse effect on the business,
operating results and financial condition of the Company. In addition, while the
Company and Excite have agreed to cooperate on advertising, AOL and the Company
have the right to separately pursue and sell advertising in the Company's
content areas distributed through AOL. There can be no assurance that the
Company and AOL will not compete for limited travel supplier advertising
revenues. Travel services sold through the AOL network (including the primary
AOL service and AOL.COM) accounted for 38%, 35%, 28% and 33% of the Company's
gross bookings for the three months ended June 30, 1998, September 30, 1998,
December 31, 1998 and March 31, 1999, respectively. Travel services sold through
Excite accounted for 18%, 15%, 16% and 13% of the Company's gross bookings for
the three months ended June 30, 1998, September 30, 1998, December 31, 1998 and
March 31, 1999, respectively. The Company's arrangements with AOL and Excite are
expected to continue to represent significant distribution channels for the
Company's travel services. Any termination of either or both of the Company's
agreements with AOL or Excite would likely have a material adverse effect on the
Company's business, operating results and financial condition.

     Except for its arrangements with AOL and Excite, the Company has no other
significant long-term distribution arrangements with any other service provider
on the Internet or commercial online services and accordingly must rely on
search engines, directories and other navigational tools which significantly
affect traffic to the Company's online sites. There can be no assurance that
such cooperation will be available to the Company on acceptable commercial terms
or at all or that such relationships will not already be established with the
Company's competitors. If the Company is unable to maintain satisfactory
relationships with AOL or Excite, or if the Company is unable to develop and
maintain satisfactory relationships with additional third parties on acceptable
commercial terms, or if 

                                       19
<PAGE>
 
the Company's competitors are better able to leverage such relationships, the
Company's business, operating results and financial condition could be
materially adversely affected.

     Reliance on Travel Suppliers; Potential Adverse Changes in Commission
Payments. The Company is dependent on airlines, hotels and other providers of
travel services ("travel suppliers") in order to offer its customers
comprehensive access to travel services and products. Consistent with industry
practices, the Company currently has no agreements with its travel suppliers
that obligate such suppliers to sell services or products through the Company.
In addition, travel suppliers may be unable or choose not to make their
inventory of services and products available through online distribution,
including those services offered by the Company. Accordingly, travel suppliers
could elect to sell exclusively through other sales and distribution channels or
to restrict the Company's access to their inventory, which could significantly
decrease the amount or breadth of the Company's inventory of available travel
offerings and could have a material adverse effect on the Company's business,
operating results and financial condition.

     In addition, a substantial majority of the Company's revenue is dependent
on the commissions customarily paid by travel suppliers for bookings made
through the Company's online travel service. Consistent with industry practices,
these travel suppliers are not obligated to pay any specified commission rate
for bookings made through the Company or to pay commissions at all. For example,
during the first quarter of 1998, a major hotel chain eliminated commissions
paid to the Company and other online travel service providers for online
bookings. Beginning in January 1999, the largest hotel chain whose hotels are
offered by the Company started to pay a flat commission of two dollars per
completed hotel stay. As a result, the Company expects that its average
commission rate received from hotels will decline. There can be no assurance
that other hotel chains or other travel suppliers will not reduce current
industry commission rates or eliminate such commissions entirely, which could,
individually or in the aggregate, have a material adverse effect on the
Company's business, operating results and financial condition. For example, in
1995, most of the major airlines placed a cap on per-ticket commissions payable
to all travel agencies for domestic airline travel. In September 1997, the major
U.S. airlines reduced the commission rate payable to traditional travel agencies
from 10% to 8%.

     In 1997, the major U.S. airlines reduced the commission rate payable for
online reservations from approximately 8% to approximately 5%, which had a
material adverse effect on the Company's results of operations. In addition, in
the first half of 1998 two major airlines reduced their fixed rate commission
for online roundtrip ticket sales to ten dollars. These reductions were followed
by similar reductions made by other smaller airlines.  The Company expects that
its weighted average commission on online transaction revenue will decline as a
result of these reductions. There can be no assurance that airlines or other of
the Company's travel suppliers will not further reduce the amount of
compensation payable to the Company and other online service providers.

     In addition, certain travel suppliers have initiated direct online
distribution channels and, in some cases, have offered negotiated rates directly
to major corporate customers. Further, the Company's travel service offerings
are limited to those travel suppliers whose services and products are available
through the global distribution services ("GDS") systems accessed by the
Company, namely, the Apollo GDS system ("Apollo") operated by Galileo
International Partnership ("Galileo") for airlines and car rentals and the GDS
system operated by Pegasus Systems, Inc. ("Pegasus") for hotel reservations. For
example, Southwest Airlines is currently unavailable in the Apollo GDS system,
and, therefore, the Company is unable to offer access to Southwest Airline's
inventory. There can be no assurance that the Company's current travel suppliers
will continue to sell services or products through Apollo or Pegasus on current
terms with adequate compensation to the Company, or at all, or that the Company
will be able to establish new or extend current travel supplier relationships to
ensure uninterrupted access to a comprehensive supply of the travel services.
The Company's failure to do so would likely result in a material adverse effect
on its business, operating results and financial condition.

     Reliance on Third Party Systems. The Company is dependent upon certain
third party service providers, including, without limitation, the following: AOL
and Level 3 Communications, the Company's Internet service provider which
provides the Company with a T3 data communication line; Pegasus, which provides
the Company with access to a global hotel reservation system and which operates
an online travel service competitive with the 

                                       20
<PAGE>
 
Company; Galileo, which provides the Company with access to the Apollo GDS
system; and AT&T, which provides the Company with data connectivity to the
Apollo GDS System.

     The Company is dependent on these third party providers to continue to
offer and maintain these services. Any discontinuation of such services, or any
reduction in performance that requires the Company to replace such services,
would be disruptive to the Company's business. In particular, if the Company
were required to replace services provided by the Apollo GDS system, the Company
believes it could take up to one year and require substantial expenditures to
fully transition the Company's travel services to an alternative service
provider. In the past, these third party providers have experienced
interruptions or failures in their systems or services, which have temporarily
prevented the Company's customers from accessing or purchasing certain travel
services through the Company's online sites. Any reduction in performance,
disruption in Internet or online access or discontinuation of services provided
by AOL, Level 3 Communications or any other Internet service provider, or any
disruption in the Company's ability to access the Apollo GDS system, Pegasus or
any other travel reservation systems, could have a material adverse effect on
the Company's business, operating results and financial condition.

     In addition, the Company is dependent on Apollo and Pegasus to ensure that
all software used in connection with their GDS systems will manage and
manipulate data involving the transition of dates from 1999 to 2000 without
functional or data abnormality and without inaccurate results related to such
dates. Any failure by Galileo or Pegasus to ensure that such software complies
with year 2000 requirements could have a material adverse effect on the
Company's business, operating results and financial condition. The Company's
agreements with its third party service providers have terms of, or expire
within, one year or less and in some cases are subject to cancellation for any
reason or no reason upon short notice. Specifically, the Company does not have a
written agreement with Pegasus. Any cancellation of services, or failure to
renew such services upon expiration, by any of such third party providers
without notice sufficient to allow the Company to transition to a new service
provider in a timely and cost effective manner would have a material adverse
effect on the Company's business, operating results and financial condition. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations "Year 2000."

     Competition. The online travel services market is new, rapidly evolving and
intensely competitive, and the Company expects such competition to intensify in
the future. The Company competes primarily with traditional travel agency and
online travel reservation services. In the online travel services market, the
Company competes with other entities that maintain similar commercial Web sites,
such as Expedia (operated by Microsoft Corporation), Travelocity (operated by
SABREGroup Holdings Inc., a majority owned subsidiary of American Airlines),
Cendant Corporation, TravelWeb (operated by Pegasus), Internet Travel Network,
Biztravel.com, Cheap Tickets and TheTrip.com, among others. Several traditional
travel agencies, including larger travel agencies such as American Express
Travel Related Services Co. Inc., Uniglobe Travel and Carlson Wagonlit Travel,
have established, or may establish in the future, commercial Web sites offering
online travel services. Additionally, companies such as Priceline.com operate
Web sites that allow users to bid on air tickets and hotel rooms.

     In addition to the traditional travel agency channel, most travel suppliers
also sell their services directly to customers, predominantly by telephone. As
the market for online travel services grows, the Company believes that the range
of companies involved in the online travel services industry, including travel
suppliers, traditional travel agencies and travel industry information
providers, will increase their efforts to develop services that compete with the
Company's services. Most major airlines, car rental companies and hotel chains
offer travel services directly through their own Web sites, including travel
services from other travel suppliers, eliminating the need to pay commissions to
third parties such as the Company. The Company is unable to anticipate which
other companies are likely to offer competitive services in the future.  There
can be no assurance that the Company's online operations will compete
successfully with any current or future competitors.

     Many of the Company's current and potential competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the Company
and may enter into strategic or commercial relationships with larger, more
established and well financed companies. Certain of the Company's competitors
may be able to secure services and products from travel suppliers on more
favorable terms, devote greater resources to marketing and promotional campaigns
and devote substantially more resources to Web site and systems development than
the Company. In addition, new technologies and the expansion 

                                       21
<PAGE>
 
of existing technologies may increase competitive pressures on the Company. In
particular, Microsoft Corporation has publicly announced its intent to continue
to invest heavily in the area of travel technology and services. Increased
competition may result in reduced operating margins, as well as loss of market
share and brand recognition. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, and
competitive pressures faced by the Company could have a material adverse effect
on the Company's business, operating results and financial condition.

     Dependence on Continued Growth of Online Commerce. The Company's future
revenues and any future profits are substantially dependent upon the widespread
acceptance and use of the Internet and commercial online services as an
effective medium of commerce by consumers. For the Company to be successful,
these consumers must accept and utilize novel ways of conducting business and
exchanging information. Convincing consumers to purchase travel services online
may be particularly difficult, as such consumers have traditionally relied on
travel agents for advice and recommendations as to destinations and
accommodations as well as bookings, and are accustomed to a high degree of human
interaction in purchasing travel services. Rapid growth in the use of and
interest in the Web, the Internet and commercial online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Internet and commercial online services as a medium of
commerce, particularly for purchases of travel services.

     Demand for recently introduced services and products over the Internet and
commercial online services is subject to a high level of uncertainty and there
exist few proven services and products. The development of the Internet and
commercial online services as a viable commercial marketplace is subject to a
number of factors, including continued growth in the number of users of such
services, concerns about transaction security, continued development of the
necessary technological infrastructure and the development of complementary
services and products. If the Internet and commercial online services do not
become a viable commercial marketplace, the Company's business, operating
results and financial condition would be materially adversely affected.

     Risks Associated with Advertising Revenues. During 1996, 1997, 1998 and the
three months ended March 31, 1999 approximately 9%, 10%, 24% and 32%,
respectively, of the Company's total revenues were derived from the sale of
advertising on its online sites. The Company's advertising customers may
terminate their advertising commitments at any time without penalty.
Consequently, the Company's advertising customers may move their advertising to
competing online sites or to other traditional media quickly and at low cost,
thereby increasing the Company's exposure to competitive pressures and
fluctuations in net revenues and operating results. If the Company loses
advertising customers, fails to attract new customers or is forced to reduce
advertising rates in order to retain or attract advertising customers, the
Company's business, operating results and financial condition could be
materially adversely affected.

     Management of Potential Growth. The Company has rapidly and significantly
expanded its operations, and anticipates that further significant expansion will
be required to address potential growth in its customer base and market
opportunities. The Company has also recently added a number of key managerial
and technical employees, and the Company expects to add additional key personnel
in the future. This expansion has placed, and is expected to continue to place,
a significant strain on the Company's management, operational and financial
resources. To manage the expected growth of its operations and personnel, the
Company will be required to improve existing and implement new transaction
processing, operational, customer service and financial systems, procedures and
controls, implement a formal disaster recovery program and expand, train and
manage the Company's growing employee base. The Company also will be required to
expand its finance, administrative and operations staff. Further, the Company's
management will be required to maintain and expand its relationships with
various travel service suppliers, other Web sites and other Web service
providers, Internet and commercial online service providers and other third
parties necessary to the Company's business. There can be no assurance that the
Company's current and planned personnel, systems, procedures and controls will
be adequate to support the Company's future operations, that management will be
able to hire, train, retain, motivate and manage required personnel or that the
Company's management will be able to successfully identify, manage and exploit
existing and potential market opportunities. If the Company is unable to manage
growth effectively, its business, operating results and financial condition
could be materially adversely affected.

                                       22
<PAGE>
 
     Dependence on Attraction and Retention of Key Employees. The Company's
performance is substantially dependent on the continued services and on the
performance of its senior management and certain other key personnel. The loss
of the services of any of its executive officers or other key employees could
have a material adverse effect on the Company's business, operating results and
financial condition. In particular, the Company is currently seeking to hire a
new chief executive officer due to the resignation of the Company's previous
chief executive officer in February 1999. The Company does not have long-term
employment agreements with any of its key personnel. The Company's future
success also depends on its ability to identify, attract, hire, train, retain
and motivate other highly skilled technical, managerial, editorial, marketing
and customer service personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to successfully attract,
assimilate or retain sufficiently qualified personnel. In particular, the
Company may encounter difficulties in attracting a sufficient number of
qualified software developers for its online services and transaction processing
systems, and there can be no assurance that the Company will be able to retain
and attract such developers. The failure to retain and attract necessary
technical, managerial, editorial, merchandising, marketing and customer service
personnel could have a material adverse effect on the Company's business,
operating results and financial condition.

     Although none of the Company's employees is represented by a labor union,
there can be no assurance that the Company's employees will not join or form a
labor union or that the Company, for certain purposes, will not be required to
become a union signatory.

     Risk of Capacity Constraints; Reliance on Internally Developed Systems;
System Development Risks. The Company's revenues depend on the number of
customers who use its online travel sites to book their travel reservations.
Accordingly, the satisfactory performance, reliability and availability of the
Company's online sites, transaction processing systems and network
infrastructure are critical to the Company's operating results, as well as its
ability to attract and retain customers and maintain adequate customer service
levels. Any system interruptions that result in the unavailability of the
Company's online sites or reduced performance of the reservation system would
reduce the volume of reservations and the attractiveness of the Company's
service offerings, which could have a material adverse effect on the Company's
business, operating results and financial condition.

     The Company uses an internally developed system for its online sites and
substantially all aspects of transaction processing, including customer
profiling, making reservations, credit card verification and confirmations.  The
Company has experienced periodic system interruptions, which it believes will
continue to occur from time to time. Any substantial increase in the volume of
traffic on the Company's online sites or the number of reservations made by
customers will require the Company to expand and upgrade further its technology,
transaction processing systems and network infrastructure. The Company has
experienced and expects to continue to experience temporary capacity constraints
due to sharply increased traffic during "fare wars" or other promotions, which
may cause unanticipated system disruptions, slower response times, degradation
in levels of customer service, impaired quality and speed of reservations and
confirmations and delays in reporting accurate financial information.

     There can be no assurance that the Company's transaction processing systems
and network infrastructure will be able to accommodate such increases in traffic
in the future, or that the Company will, in general, be able to accurately
project the rate or timing of such increases or upgrade its systems and
infrastructure to accommodate future traffic levels on its online sites.  In
addition, there can be no assurance that the Company will be able in a timely
manner to effectively upgrade and expand its transaction processing systems or
to successfully integrate any newly developed or purchased modules with its
existing systems. Any inability to do so could have a material adverse effect on
the Company's business, operating results and financial condition.

     Risk of System Failure; Single Site. The Company's success, in particular
its ability to successfully receive and fulfill orders online and provide high
quality customer service, largely depends on the efficient and uninterrupted
operation of its computer and communications hardware systems. Substantially all
of the Company's computer and communications systems are located at a single
facility in San Francisco, California. The Company's systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-

                                       23
<PAGE>
 
ins, earthquake and similar events. The Company currently does not have
redundant systems or a formal disaster recovery plan. Despite the implementation
of network security measures by the Company, its servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
accept and confirm customer reservations. The occurrence of any of the foregoing
risks could have a material adverse effect on the Company's business, operating
results and financial condition.

     Rapid Technological Change. The Internet and the online commerce industry
are characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing online sites and proprietary
technology and systems obsolete. The emerging nature of these products and
services and their rapid evolution will require that the Company continually
improve the performance, features and reliability of its online services,
particularly in response to competitive offerings. The Company's success will
depend, in part, on its ability to enhance its existing services, to develop new
services and technology that address the increasingly sophisticated and varied
needs of its prospective customers and to respond to technological advances and
emerging industry standards and practices on a cost effective and timely basis.
The development of online sites and other proprietary technology entails
significant technical and business risks and requires substantial expenditures
and lead time. There can be no assurance that the Company will successfully use
new technologies effectively or adapt its online sites, proprietary technology
and transaction processing systems to customer requirements or emerging industry
standards. If the Company is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to changing market conditions
or customer requirements, its business, operating results and financial
condition could be materially adversely affected.

     Online Commerce and Database Security Risks. A fundamental requirement for
online commerce and communications is the secure transmission of confidential
information over public networks. The Company relies on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. In addition, the Company
maintains an extensive confidential database of customer profiles and
transaction information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments will not result in a compromise or breach of the algorithms used by
the Company to protect customer transaction and personal data contained in the
Company's customer database. If any such compromise of the Company's security
were to occur, it could have a material adverse effect on the Company's
reputation, business, operating results and financial condition. A party who is
able to circumvent the Company's security measures could misappropriate
proprietary information or cause interruptions in the Company's operations. The
Company may be required to expend significant capital and other resources to
protect against such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of transactions conducted on the Internet
and commercial online services and the privacy of users may also inhibit the
growth of the Internet and commercial online services, especially as a means of
conducting commercial transactions. To the extent that activities of the Company
or third party contractors involve the storage and transmission of proprietary
information, such as credit card numbers or other personal information, security
breaches could expose the Company to a risk of loss or litigation and possible
liability. There can be no assurance that the Company's security measures will
prevent security breaches or that failure to prevent such security breaches will
not have a material adverse effect on the Company's business, operating results
and financial condition.

     Need for Additional Capital. The Company requires substantial working
capital to fund its business and expects to use a portion of the net proceeds of
its initial public offering and secondary offering to fund its operating losses.
In the last three years, the Company has experienced negative cash flow from
operations and expects to continue to experience significant negative cash flow
from operations for the foreseeable future. The Company currently anticipates
that the net proceeds of its initial public offering and secondary offering,
together with its existing capital resources, will be sufficient to meet the
Company's capital requirements through the end of 1999, although the Company
could be required, or could elect, to seek to raise additional financing during
such period or thereafter, in part to fund its financial obligations to AOL,
Excite and Lycos or for other purposes. There can be no assurance that such
financing will be available in sufficient amounts or on terms acceptable to the
Company, if at all.

                                       24
<PAGE>
 
     Risks Associated with Offering New Services. The Company plans to introduce
new and expanded services and to enter into new relationships with third parties
in order to generate additional revenues, attract more consumers and respond to
competition. For example, the Company may offer travel insurance and  travel
financing services. There can be no assurance that the Company would be able to
offer such services in a cost effective or timely manner or that any such
efforts would be successful.  Furthermore, any new service launched by the
Company that is not favorably received by consumers could damage the Company's
reputation or its brand name. Expansion of the Company's services in this manner
would also require significant additional expenses and development and may
strain the Company's management, financial and operational resources. The
Company's inability to generate revenues from such expanded services or products
sufficient to offset their cost could have a material adverse effect on the
Company's business, operating results and financial condition.

     Liability for Internet Content. As a publisher and distributor of online
content, the Company faces potential liability for defamation, negligence,
copyright, patent or trademark infringement and other claims based on the nature
and content of the materials that the Company publishes or distributes. Such
claims have been brought, and sometimes successfully pressed, against online
services. In addition, the Company does not and cannot practically screen all of
the content generated by its users on the bulletin board system on the Company's
online sites, and the Company could be exposed to liability with respect to such
content. Although the Company carries general liability insurance, the Company's
insurance may not cover claims of these types or may not be adequate to
indemnify the Company for all liability that may be imposed. Any imposition of
liability, particularly liability that is not covered by insurance or is in
excess of insurance coverage, could have a material adverse effect on the
Company's reputation and its business, operating results and financial
condition.

     Uncertain Protection of Intellectual Property; Risks of Third Party
Licenses. The Company regards its copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to its
success, and relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with the Company's employees,
customers, partners and others to protect its proprietary rights. The Company
pursues the registration of certain of its key trademarks and service marks in
the United States and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which the Company's products and services are made available online. The Company
has licensed in the past, and expects that it may license in the future, certain
of its proprietary rights, such as trademarks or copyrighted material, to third
parties. While the Company attempts to ensure that the quality of its brand is
maintained by such licensees, there can be no assurance that such licensees will
not take actions that might materially adversely affect the value of the
Company's proprietary rights or reputation, which could have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks, trade dress and similar
proprietary rights. In addition, there can be no assurance that other parties
will not assert infringement claims against the Company. The Company may be
subject to legal proceedings and claims from time to time in the ordinary course
of its business, including claims of alleged infringement of the trademarks and
other intellectual property rights of third parties by the Company and its
licensees. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.

     The Company also intends to continue to strategically license certain
content for its online sites from third parties, as it did with Fodor's,
including content which is integrated with internally developed content and used
on the Company's online sites to provide key services. There can be no assurance
that these third party content licenses will be available to the Company on
commercially reasonable terms or that the Company will be able to successfully
integrate such third party content. Such content licenses may expose the Company
to increased risks, including risks associated with the assimilation of new
content, the diversion of resources from the development of the Company's
content, the inability to generate revenues from new content sufficient to
offset associated acquisition costs and the maintenance of uniform, appealing
content. The inability to obtain any of these licenses could result in delays in
site development or services until equivalent content can be identified,
licensed and integrated. Any such delays in site development or services could
have a material adverse effect on the Company's business, operating results and
financial condition.

                                       25
<PAGE>
 
     Governmental Regulation and Legal Uncertainties. Certain segments of the
travel industry are heavily regulated by the United States and international
governments, and accordingly, certain services offered by the Company are
affected by such regulations. For example, the Company is subject to United
States Department of Transportation ("DOT") regulations prohibiting unfair and
deceptive practices. In addition, DOT regulations concerning the display and
presentation of information that are currently applicable to the GDS services
accessed by the Company could be extended to the Company in the future, as well
as other laws and regulations aimed at protecting consumers accessing online
travel services or otherwise. In California, under the Seller of Travel Act, the
Company is required to register as a seller of travel, comply with certain
disclosure requirements and participate in the State's restitution fund. The
television industry is also subject to extensive regulation at federal, state
and local levels, including the Federal Communications Act and rules and
regulations of the Federal Communications Commission. In addition, legislative
and regulatory proposals under ongoing consideration by Congress and federal
agencies may materially affect the television industry and the Company's ability
to obtain distribution for its television programming.

     The Company is also subject to regulations applicable to businesses
generally and laws or regulations directly applicable to access to online
commerce. Although there are currently few laws and regulations directly
applicable to the Internet and commercial online services, it is possible that a
number of laws and regulations may be adopted with respect to the Internet or
commercial online services covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or commercial online services, which could, in turn,
decrease the demand for the Company's products and services and increase the
Company's cost of doing business, or otherwise have a material adverse effect on
the Company's business, operating results and financial condition.

     Moreover, the applicability to the Internet and commercial online services
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject the Company to
additional state sales and income taxes. Any such new legislation or regulation,
the application of laws and regulations from jurisdictions whose laws do not
currently apply to the Company's business, or the application of existing laws
and regulations to the Internet and commercial online services could have a
material adverse effect on the Company's business, operating results and
financial condition.

     Risks Associated with International Expansion. A component of the Company's
strategy is to evaluate expanding its operations into international markets. The
Company may expend significant financial and management resources to establish
offices overseas, create localized user interfaces and comply with local customs
and regulations. If the revenues generated by these international operations are
insufficient to offset the expense of establishing and maintaining such
operations, the Company's business, operating results and financial condition
could be materially adversely affected. To date, the Company has no experience
in developing localized versions of its online sites and marketing and
distributing its travel services internationally. There can be no assurance that
the Company will be able to successfully market or sell its services in these
international markets. In addition to the uncertainty as to the Company's
ability to expand its international presence, there are certain risks inherent
in conducting business on an international level, such as unexpected changes in
regulatory requirements, tariffs and other trade barriers, difficulties in
staffing and managing foreign operations, political instability, currency rate
fluctuations, seasonality in leisure travel in certain countries and potentially
adverse tax consequences. There can be no assurance that one or more of the
foregoing factors will not have a material adverse effect on the Company's
future international operations and, consequently, on its business, operating
results and financial condition.

     Risks Associated with Potential Acquisitions. The Company's current
strategy is to broaden the scope and content of its online sites through the
acquisition of existing online services and businesses specializing in travel
related content, as well as through internally developed new travel services
offerings. Any future acquisitions would expose the Company to increased risks,
including risks associated with the assimilation of new operations, sites and

                                       26
<PAGE>
 
personnel,the diversion of resources from the Company's existing businesses,
sites and technologies, the inability to generate revenues from new sites or
content sufficient to offset associated acquisition costs, the maintenance of
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of any integration of new
management personnel. Acquisitions may also result in additional expenses
associated with amortization of acquired intangible assets or potential
businesses. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with such
acquisitions, and its inability to overcome such risks could have a material
adverse effect on the Company's business, operating results and financial
condition.

     Volatility of Stock Price. The market price of the Common Stock of the
Company could be subject to significant fluctuations in response to quarter-to-
quarter variations in the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors, and
other events or factors. For example, a shortfall in revenue or net income, or
increase in losses from levels expected by securities analysts, could have an
immediate and significant adverse effect on the market price of the Company's
Common Stock. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have particularly affected the market
prices of many high technology companies and that have often been unrelated or
disproportionate to the operating performance of companies. These fluctuations,
as well as general economic and market conditions, may adversely affect the
market price for the Common Stock.

     Antitakeover Effect of Certain Charter Provisions; Stockholder Rights Plan.
The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of Common Stock may be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change of
control of the Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of Common Stock,
which could have an adverse impact on the market price of the Common Stock.  The
Company has no present plans to issue shares of Preferred Stock. Further,
certain provisions of the Company's charter documents, including provisions
eliminating the ability of stockholders to take action by written consent and
limiting the ability of stockholders to raise matters at a meeting of
stockholders without giving advance notice, may have the effect of delaying or
preventing changes in control or management of the Company, which could have an
adverse effect on the market price of the Company's Common Stock.

     In October 1998, the Company's Board of Directors adopted a stockholder
rights plan. This plan provides stockholders with special purchase rights under
certain circumstances, including if any person or group acquires 20 percent or
more of the Company's common stock. This plan could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, or of making the Company less attractive to a
potential acquiror of, a majority of the outstanding voting stock of the
Company, and may complicate or discourage a takeover of the Company.

                                       27
<PAGE>
 
PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings - Not Applicable.

Item 2.    Changes in Securities and Use of Proceeds.

     On November 19, 1997, in connection with the Company's initial public
offering, a Registration Statement on Form S-1 (No. 333-37183) was declared
effective by the Securities and Exchange Commission, pursuant to which 2,500,000
shares of the Company's Common Stock were offered and sold for the account of
the Company at a price of $11.00 per share, generating gross offering proceeds
of $27.5 million. The managing underwriters were Hambrecht & Quist LLC and
NationsBanc Montgomery Securities, Inc. After deducting approximately $1.9
million in underwriting discounts and $1.0 million in other related expenses,
the net proceeds of the offering were approximately $24.6 million. As of March
31, 1999, the Company has used $9.6 million of the net proceeds of the offering
for payments to AOL under the distribution agreement with AOL, $2.5 million for
payments to Excite under the distribution agreement with Excite and $2.2 million
for payments to Lycos under the distribution agreement with Lycos. The remaining
$10.3 million has been invested in investment grade, interest bearing
securities. The Company intends to use such remaining proceeds for capital
expenditures, for payment of its obligations to AOL, Excite and Lycos and for
general corporate purposes, including working capital to fund anticipated
operating losses.

Item 3.    Defaults Upon Senior Securities - Not Applicable.

Item 4.    Submission of Matters to a Vote of Security Holders - Not Applicable.

Item 5.    Other Information - Not Applicable.
 
Item 6.    Exhibits and Reports on Form 8-K.
           (a)      Exhibits:
 
                    Exhibit 27.1 - Financial Data Schedule

(b)  Reports on Form 8-K - The Company filed a Form 8-K/A on January 12, 1999 in
     connection with the sale of the Company's television business.

                                       28
<PAGE>
 
                                   SIGNATURES

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

                                 Preview Travel, Inc.

 
                                 By:  /s/  THOMAS W. CARDY
                                     -------------------------------------------
                                      Thomas W. Cardy
                                      Executive Vice President, Chief Financial
                                      Officer (Principal Financial Officer) and
                                      Director




                                 By:  /s/  BRUCE E. CARMEDELLE
                                     -------------------------------------------
                                      Bruce E. Carmedelle
                                      Vice President and Corporate Controller
                                      (Principal Accounting Officer)


Date:  May 17, 1999

                                       29
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

27.1   Financial Data Schedule

                                       30