Back to GetFilings.com

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

FORM 10-K

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

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

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

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

NONE
(Title of Class)

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

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

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

        The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 6, 2003 was approximately $2,269,751,962, based on the closing price per share of Class A common stock of $15.81 on such date. As of March 6, 2003, 143,564,324 shares of the registrant's Class A common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Part III of this Form 10-K incorporates by reference certain information from the Proxy Statement for the Annual Meeting of Stockholders to be held May 13, 2003.

PART I

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

ITEM 1.    BUSINESS

        We are a world leader in travel commerce, providing distribution and retailing of travel products and technology solutions for the travel industry. We serve travel agents, individual travelers, companies managing business travelers and travel suppliers through our Sabre Travel Network™ (formerly Travel Marketing & Distribution), Travelocity™, GetThere™ and Sabre Airline Solutions™ (formerly Airline Solutions) business segments.

        Sabre Holdings Corporation is a Delaware holding company. Sabre Inc. is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings Corporation. All of our businesses are conducted by Sabre Inc. or its direct or indirect subsidiaries.

        Three of our four business segments market and distribute travel-related services and products. Through our Sabre®¹ global distribution system (the "Sabre system"), travel agencies, corporate travel departments and individual consumers ("subscribers") can access information about and can book reservations for airline trips, hotel stays, car rentals, cruises and tour packages, among other things. We principally market and distribute products and services for third party suppliers in exchange for a fee paid by the supplier. Increasingly, however, we acquire travel services and products on consignment from suppliers, which we then offer as the merchant to the travel purchaser—either on a standalone basis or as part of a travel package.

¹

Sabre, Direct Connect, eVoya, Turbo Sabre, Travelocity, Travelocity.com, Travelocity.ca, and GetThere are registered trademarks, and Sabre Holdings, Sabre Travel Network, Sabre Airline Solutions, Basic Booking Request and eMergo are trademarks of an affiliate of Sabre Holdings Corporation. All other trademarks are the property of their respective owners. (c)2003 Sabre Holdings Corporation. All rights reserved.

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

•

Sabre Travel Network: Our Sabre Travel Network business markets and distributes travel-related products and services through the travel agency channel. Travel agencies, both on-line and brick and mortar, subscribe to our services. Those services provide travel agency subscribers access to travel-related products from airlines, hotels, car rental companies, cruise lines and others. We also provide travel agency office automation tools and enable travel agencies to provide services via the Internet.



•

Travelocity: Our Travelocity business markets and distributes travel-related products and services directly to individuals, including leisure travelers and unmanaged business travelers. Travelocity customers can access inventory and information for airlines, hotels, car rental companies, cruise lines, vacation packages and last minute travel options through the Internet and telephone call centers. Through the Travelocity Websites, individuals can compare prices, make travel reservations and obtain destination information.

2

•

GetThere: Our GetThere business is a provider of Web-based travel reservation systems for companies that manage their business travelers and for airlines. GetThere offers its business clients Web-enabled software that provides the clients' employees a convenient way to book travel and meeting arrangements through their company intranets. The GetThere system is designed to include the corporate client's travel policies and supplier agreements and integrate travel expenses with their company expense reporting system. GetThere is offered both in conjunction with corporate travel agencies and on a standalone basis. GetThere also provides a Web interface for reservation systems operated by airlines or others.



•

Sabre Airline Solutions: Our Sabre Airline Solutions business is a global leader in providing airline software systems and airline and airport consulting services. Sabre Airline Solutions' comprehensive software portfolio provides integrated technology and services to airlines. Sabre Airline Solutions hosts airline reservation systems for dozens of airlines. It also offers systems ranging from inventory and departure control to decision support software that enable airlines to improve operational efficiency and maximize revenues. Sabre Airline Solutions also provides consulting services to optimize airline and airport operations.

The Sabre Global Distribution System

        The Sabre system and other global distribution systems are a primary means of air travel distribution in the United States and in many international regions. During 2002, more airline bookings in North America, Latin America and Asia were made through the Sabre system than through any other global distribution system. The Sabre system, like other global distribution systems, creates an electronic marketplace where travel providers display information about their products and warehouse and manage inventory. Through the Sabre system, subscribers can access information about and book reservations with airlines and other providers of travel and travel-related products and services ("associates"). In 2002, over 950 associates displayed information about their products and services through the Sabre system. We estimate that more than $80 billion of travel-related products and services were sold through the Sabre system.

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

3

Associate Participation

        Airlines and other associates can display, warehouse, manage and sell their inventory in the Sabre system. Airlines are offered a wide range of participation levels. The lowest level of participation for airlines, Sabre® Basic Booking Request^SM participation level, provides schedules and electronic booking functionality only. Higher levels of participation for airlines, such as Sabre® Direct Connect® Availability ("DCA") participation level, provide enhanced levels of communication with the Sabre system, giving subscribers more detailed information and associates improved inventory management. In October 2002 we announced a new DCA 3-Year Pricing Option to airlines with United States points of sale. If they elect this option under their Sabre GDS participating carrier agreements, they will receive an approximate 10% to 12% discount from the standard DCA rates. For an associate selecting one of the higher levels of participation, the Sabre system provides subscribers with a direct connection to the associate's internal reservation system, allowing the Sabre system to provide real-time information and allowing the associate to optimize revenue for each flight. Car rental companies and hotel operators are provided with similar levels of participation from which to select. We also provide associates, upon request, marketing data (in the form of anonymous, aggregated data from which all personal information has been deleted) derived from the Sabre system bookings for fees that vary depending on the amount and type of information provided. Associates use this marketing information in yield optimization and other operational systems we sell to improve their revenue and profitability.

Subscriber Access

        Access to the Sabre system enables subscribers to electronically locate, price, compare and purchase travel products and services provided by associates. We tailor the interface and functionality of the Sabre system to the needs of our different types of subscribers. Marketing is targeted by channel to travel agencies, individual travelers, business users and travel suppliers.

Sabre Travel Network

        The Sabre® system and other global distribution systems are a primary means of air travel distribution in the United States and in many international regions. Through the Sabre system, subscribers can access information about and book reservations with airlines and other providers of travel and travel-related products and services ("associates"). As of December 31, 2002, travel agencies with approximately 56,000 locations in over 113 countries on 6 continents subscribed to the Sabre system, which enabled these subscribers to make reservations with approximately 423 airlines, 50 car rental companies, 232 tour operators, 9 cruise lines, 36 railroads and 234 hotel companies covering approximately 60,000 hotel properties worldwide.

        During 2002, more airline bookings in North America, Latin America and Asia were made through the Sabre system than through any other global distribution system. Approximately 76.5%, 78.0% and 82.9% of our revenue from continuing operations in 2002, 2001 and 2000, respectively, was generated by the marketing and distribution of travel, primarily through booking fees paid by associates.

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

4

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

        We provide bookings solutions to serve the specific online needs of travel agencies and associate customers, including Website development, business logic middleware and backend processing. In addition, we offer travel agencies back-office accounting systems and further support to travel agencies by offering a simplified method to develop and place their own marketing presence on the Internet. The end consumer accesses the agency and associate-specific Websites via the Internet to locate, price, compare and purchase travel products and services. Travel agent and associate product offerings range from off-the-shelf applications to fully customized solutions. License, consulting and Web hosting fees are recovered from the subscribers and vary with the level of customization and volume generated by the site. We currently provide Web hosting services for over 1,000 sites.

Travelocity

        Travelocity is a leading provider of consumer direct travel services for the leisure traveler and the unmanaged business traveler. Travelocity is the exclusive provider of travel booking services for various America Online, Inc. services, including AOL, AOL.com, Netscape, CompuServe and Digital City in the United States and Canada. Travelocity is also an exclusive provider of some of the travel booking services on Websites operated by Yahoo!, Inc. in the United States and Canada. Through the Travelocity Websites and certain co-branded sites such as AOL and Yahoo!, individual leisure and business travelers can shop and compare prices and make travel reservations online with airlines, car rental agencies, hotel companies and cruise and vacation providers. In addition, we offer access to a database of information regarding specific destinations and other information of interest to travelers. During 2002, members purchased approximately $3.5 billion in travel services from associates through the Travelocity Websites.

        In addition to Travelocity's main U.S. Website, it operates multiple Websites tailored to customers outside the United States. In 2001, Travelocity and Otto Versand, a global leader in direct marketing and Europe's top direct marketing firm, consummated plans to launch Travelocity Europe, a new multi-channel travel company, making Travelocity Europe one of the leading European consumer direct agencies. Finally, Travelocity also operates Travelocity.ca® en francais for its Canadian customers, providing the most comprehensive French and English language online planning and buying choices across air, car, hotel, rail and vacation travel vendors.

        Travelocity receives fees from travel providers for purchases of their travel products and services pursuant to reservations made through its Websites. In addition, we receive advertising revenues from the delivery of advertising impressions on the Travelocity Websites. Travelocity's services are generally provided free of charge except for a $5 customer service fee charged for most air tickets, not including merchant transactions, that was instituted on January 16, 2003.

5

        Travelocity instituted a merchant business model through its own travel supplier agreements in 2001 for air travel and in 2002 for vacation packages and hotels whereby it has access to travel inventory at discounted wholesale prices from air carriers, hotels and car rental companies. These components are combined to create packages for sale to end consumers at a retail price which Travelocity determines for both traditional vacation destination packages and last-minute deals. Additionally, certain air tickets are sold on a standalone basis as merchant offerings, as are certain standalone hotel reservations. In October 2002, Travelocity launched its own merchant model hotel ("MMH") offering to complement the inventory from Hotels.com which provides certain merchant hotel inventory to Travelocity Websites. Approximately, 1,400 hotels currently participate in the MMH program and participants are being added regularly. Travelocity does not have purchase obligations for unsold inventory. Revenue from such transactions is recorded on a net basis, which is defined as the price to the consumer less the cost of the inventory obtained from the supplier, at the time the travel is sold to the consumer for air travel and at the date of check-out for vacation packages and hotel stays.

        In 2000, we merged our subsidiary, Travelocity, with Preview Travel, Inc. ("Preview"), an independent publicly-traded company engaged in consumer direct travel distribution over the Internet, retaining an approximate 70% ownership interest in the combined company. On April 8, 2002 we completed a $28 per share cash tender offer for all of the approximately 16.7 million outstanding publicly-held common shares of Travelocity that we did not previously own. Accordingly, Travelocity became our indirect 100% owned subsidiary on April 11, 2002. The Travelocity transaction supports our continuing strategy of delivering value to suppliers and travelers across multiple distribution channels. We believe it makes sense to combine the strengths of our businesses to pursue new revenue opportunities, while optimizing investment decisions across segments.

GetThere

        GetThere provides Web-based travel booking systems designed for managed business travelers, travel arrangers and travel managers. Through our GetThere system, companies provide their employees with a convenient way to make travel and meetings reservations via their company intranet. We believe that GetThere can significantly reduce costs to the employer as a result of lower service fees, better policy adherence, lower average ticket prices and real-time data on spending. Many companies save more than 20% on travel costs, often representing millions of dollars in bottom-line savings. Through major agency and supplier partners, GetThere is delivering sophisticated corporate travel features to small and medium-sized companies that make up a significant percentage of the industry's business travel expenditures. A significant portion of GetThere's transaction volume is from distributor agreements with leading travel agencies. As of December 31, 2002 more than 1,000 corporations, including over half of the Fortune 200, use GetThere technology.

        GetThere also provides a Web interface for reservation systems operated by airlines or other suppliers. Suppliers can also incorporate value-added services to promote loyalty, such as complete air, car and hotel reservations, awards programs and redemption, and flight status alerts and information. GetThere provides these Web-based booking systems to several major airlines including Air New Zealand, Alitalia, All Nippon Airways, Aloha Air, British Airways, Cathay Pacific Airways and United Airlines.

        We receive trip fees for transactions booked through GetThere's travel booking systems from company and airline customers and also recognize revenue for certain up-front fees, such as implementation, over the term of the related contract.

6

Sabre Airline Solutions

        Software Development and Licensing.    Sabre Airline Solutions' suite of software products provides industry-specific applications that help airlines and other travel providers increase their revenues, streamline their operations, improve workflow and raise productivity. Some of the most popular products support planning and scheduling, flight operations, pricing and revenue management, crew management, cargo revenue management, passenger systems and frequent flyer programs. We currently provide both custom and off-the-shelf software solutions to more than 200 airlines.

        We began expanding our existing software products and solutions in 2000 by launching Sabre®eMergo™ Web-enabled solutions, a new application service provider offering that simplifies delivery options and positions us for growth into new market segments. We are in the process of integrating over 23 products into the eMergo environment. The offering allows carriers access to our leading technological solutions that feature delivery through shorter implementations, 24-hour data center support, and fewer complications than running an internal system. Most products offered within eMergo are Web-enabled and provide users with secure access for a pre-defined, usage-based fee.

        Reservations Hosting.    Sabre Airline Solutions is a leading provider of airline reservations and departure control hosting services. We offer a fully integrated system that effectively manages reservations and airport functions for airlines of all sizes and in all stages of growth. These services support maintenance and storage of an airline's schedules, fares and inventory, as well as airport and customer relationship management functions such as check-in, ticketing, car and hotel reservations and frequent flyer programs. We currently provide reservations hosting services to over 70 airlines from 23 countries around the world, boarding over 300 million passengers annually. Our customers range in size from fewer than 25 thousand passengers boarded annually to over 80 million, and range in growth stage from low cost start-ups to full service airlines. Our reservations and departure control hosting services allow the airlines to easily integrate our leading software solutions to expand and complement their capabilities.

        Consulting Services.    Sabre Airline Solutions' consulting services provide solutions for customers in the travel and transportation industries, focusing on commercial, operations and management and strategic areas. As part of the Sabre Airline Solutions business, the consulting group helps clients during the implementation of Sabre's software products, transferring knowledge and improving work processes to derive direct value from products by working in partnership to solve business problems using Sabre's tools. In addition to assisting with product implementation, we offer consulting services in pricing and revenue management; airline planning (scheduling, route and profitability analysis, and fleet planning); sales (reservations, distribution, customer relationship management, sales and marketing); and data services. Consulting services offered in operations are crew planning and scheduling, maintenance and engineering, and safety and security. Consulting services in management and strategic areas include start-up assistance, alliance analysis, merger and acquisitions, privatization assistance, turnaround services and management consulting on business transformation. The client base for our consulting services are airlines, airports, manufacturers and governments, as well as individuals, travel agencies and members of the financial community.

Agreements with EDS

        We have an agreement with Electronic Data Systems Corporation ("EDS") through which EDS manages our information technology systems. Under the 10-year agreement, effective July 1, 2001, EDS provides us with information technology services, including data center management, applications hosting, applications development, data assurance and network management. Among the services provided is transaction processing for our travel marketing and distribution businesses, including operation of the Sabre system. The agreement was entered into as part of the 2001 sale to EDS of our infrastructure outsourcing business and information technology infrastructure assets and the associated real estate. See Note 3 to the Consolidated Financial Statements for more information related to the sale.

7

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

International Marketing

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

        Sabre Travel Network has long-term agreements with ABACUS International Holdings Ltd., which created ABACUS International Ltd, a Singapore-based joint venture company that manages travel distribution in the Asia Pacific region. We own 35% of the joint venture and provide it with transaction processing and product development services on the Sabre system. Sabre Travel Network also provides distribution products and services to Infini and Axess, Japan's two largest GDS travel agency marketing companies. Infini is owned 35% by ABACUS and 65% by All Nippon Airways. Axess is owned 25% by Sabre and 75% by Japan Airlines. Sabre Travel Network also provides travel marketing and distribution services through our 51% owned (48% voting rights) joint venture, Sabre Sociedad Technologica S.A. de C.V. in Mexico.

        Travelocity is marketed internationally either directly or through joint venture arrangements. In Europe, Travelocity has partnered with Otto Versand and established a joint venture company (Kommanditgesellschaft Travel Overland GmbH & Co.) which distributes Travelocity in the region. Travelocity owns 50% of this joint venture. In Japan, Travelocity and Tabini Holdings, whose primary shareholders include Japan Airlines and All Nippon Airways, launched the Tabini travel Website in 2002. Travelocity has approximately a 34% equity stake in this joint venture. In the rest of the Asia Pacific region, Travelocity is distributed through Zuji Enterprises Pte. Ltd., a joint venture with 16 airlines in the Asia Pacific region established in 2002, of which Travelocity has approximately a 13% equity stake. In Canada, Travelocity directly markets its Travelocity.ca site, which was launched in 1999.

        GetThere is marketed internationally directly in Europe and through ABACUS in the Asia Pacific region. GetThere pursues large corporate account opportunities in the major European countries and serves to facilitate the extension of GetThere's services to the region. We are actively involved in growing our direct presence in Europe and extending our distributor arrangements.

        Additionally, Sabre Airline Solutions distributes software solutions and consulting services through a sales and marketing organization that spans 4 continents, with primary sales offices in the Dallas/Ft. Worth area, London, Hong Kong and Sydney. Sabre Airline Solutions also maintains agency relationships to support sales efforts in key markets, including countries in Asia and the Middle East.

Competition

        The marketplace for travel distribution is large, multi-faceted and highly competitive. A significant channel for travel distribution continues to be through the global distribution systems such as the Sabre system. Although the traditional travel agency channel continues to be important to travel distribution, other rapidly-growing channels are allowing travel distribution directly to businesses and consumers, particularly via the Internet. Our product and service offerings are well positioned to compete in all channels of travel distribution. Those include our Travelocity business in the consumer-direct channel and our GetThere business in the business-direct channel. We also offer traditional travel agencies a wide array of tools that allow them to market their services over the Internet.

8

        Global competition to attract and retain travel agency subscribers is intense. Factors affecting competitive success include: depth and breadth of information, ease of use, reliability, service and incentives to travel agents and range of products available to travel providers, travel agents and consumers. Sabre Travel Network competes in the travel agency channel against other large and well-established traditional global distribution systems, such as Amadeus Global Travel Distribution S.A., Galileo International Inc. and Worldspan, L.P. Each of these competitors offers many products and services substantially similar to those offered by Sabre Travel Network. New competitors in this channel are emerging, however. For example, Orbitz.com has announced plans to offer Internet travel booking services to travel agents.

        We face many new competitors as travel distribution channels emerge and mature, including the growing Internet-based business-direct and consumer-direct channels. Many of these channels continue to utilize services from a global distribution system such as the Sabre system. Our Sabre system provides transaction processing and other services to parties that compete with the Travelocity Website and GetThere.

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

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

Merchant Model

        Independent travel distributors, including our travel marketing and distribution companies, are attempting to reduce their reliance on supplier-paid commissions and booking fees by increasingly promoting a merchant model of travel distribution. Under this model, the distributor recognizes as revenue the sale price to the traveler less the cost of the inventory, rather than a supplier-paid booking fee or commission. Merchant model content can include air, hotel and vacation offerings. However, other travel suppliers are starting to offer their content on a merchant basis as well through independent travel distributors. Merchant content is good for travelers because they can generally book their travel at a lower price than regularly published offerings. For us, the merchant business generally delivers higher revenue per transaction than comparable sales under the agency/booking fee model.

9

Computer Reservation System Industry Regulation

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

•

unbiased computer reservation system displays of airline information,



•

fair treatment of airline suppliers by computer reservation systems,



•

equal participation by airlines in computer reservation systems and



•

fair competition for subscribers.

        The CRS regulations in the United States are currently under review. On November 12, 2002, the United States Department of Transportation ("DOT") issued a notice of proposed rule-making to revise the existing regulations governing air travel distribution through computer reservations systems. We believe that many of the facts and conclusions discussed in the notice of proposed rule-making are erroneous. The comment period for the proposed rules is scheduled to conclude on May 15, 2003. The DOT has proposed that the current rules be extended until January 31, 2004, to allow sufficient time for the DOT to review the comments filed by May 15, 2003. It is not clear when the DOT may issue final rules or what form they may take. See further discussion under Risk Factors.

        The European Commission also has begun the process of reviewing its CRS Code of Conduct for possible changes, including eliminating some or all of the Code. The Commission has not yet published any proposed rules, so it is not clear when the Commission may issue final rules or what form they may take. See further discussion under Risk Factors.

Other Regulation

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

Seasonality

        The travel industry is seasonal in nature. Bookings, and thus fees charged for the use of the Sabre system, decrease significantly each year in the fourth quarter, primarily in December, due to early bookings by customers for travel during the holiday season and a decline in business travel during the holiday season. See the discussion on Seasonality in the Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

Research and Development Expenses

        Research and development costs in continuing operations approximated $40 million, $73 million and $57 million for 2002, 2001 and 2000, respectively.

Segment Information

        Financial information for our operating segments and geographical revenues and assets are included in Note 15 to the Consolidated Financial Statements.

10

Intellectual Property

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

Employees

        As of December 31, 2002, we had approximately 6,300 employees. A central part of our philosophy is to attract and maintain a highly capable staff. We consider our current employee relations to be good. Our employees based in the United States are not represented by a labor union.

Website

        We offer access to our documents filed with, or furnished to, the United States Securities and Exchange Commission at no charge on the investor relations section of our Website at www.sabre.com. These documents are generally available as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

ITEM 2.    PROPERTIES

        Our principal executive offices are located in Southlake, Texas and consist of three leased buildings. The initial term of the lease expires in 2004 with two one-year renewal periods thereafter, subject to certain lessor and lessee approvals. We also have an option to purchase these facilities prior to or upon expiration of the lease. Additionally, we lease office facilities in Westlake, Texas under leases expiring in 2008; office facilities in Fort Worth, Texas for Travelocity under a lease expiring in 2005 and office facilities in Irving, Texas for GetThere under a lease expiring in 2006. We also lease office facilities in approximately 90 other locations worldwide.

        In connection with the sale of our outsourcing assets to EDS effective July 1, 2001, we assigned nine facility leases to EDS. Four of the assigned facilities are located in Tulsa, Oklahoma and include our principal data center, a data tape archive facility, an operations center and a computer center. EDS also subleases a large office facility from us in Fort Worth, Texas, under a sublease that will expire in 2011. Additionally, in July 2002, we purchased a data center facility constructed on our behalf in Tulsa, Oklahoma from the lessor under the provisions of the lease agreement for approximately $92 million and immediately sold it to a third party. This sale of the data center was contemplated as part of the sale of the Outsourcing Business. We received proceeds of approximately $68 million in cash and realized a loss of approximately $24 million, which had been previously accrued in 2001 in connection with the EDS transaction. See Note 3 to the Consolidated Financial Statements. On January 31, 2002 we sold our previous headquarters office facility in Fort Worth, Texas to American Airlines for proceeds of approximately $80 million and recognized a pre-tax gain of approximately $18 million.

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

11

ITEM 3.    LEGAL PROCEEDINGS

        Sabre Holdings Corporation, its subsidiary Travelocity.com Inc., and the directors of Travelocity.com Inc. are named as defendants in eleven separate lawsuits brought by twelve individual former shareholders of Travelocity.com Inc. ("Travelocity.com"). Nine of these lawsuits were filed in the Delaware Court of Chancery in and for New Castle County on February 19, 2002 and one lawsuit was filed in the District Court of Tarrant County, Texas on February 21, 2002 and a second suit filed in the same court on February 25, 2002. The plaintiffs generally allege that our tender offer for the publicly-held shares of Travelocity.com, which we announced on February 19, 2002, was unfair to Travelocity.com's former minority shareholders, that our tender offer price was inadequate, that we breached our fiduciary duties to Travelocity.com's minority shareholders and other related allegations. On March 20, 2002, Sabre Holdings Corporation and Travelocity.com signed a memorandum of understanding with the plaintiffs to settle all pending stockholder litigation relating to the tender offer. Under the terms of the memorandum, we stated our intention to agree to an offer price of no less than $28 per share and not to object to an award of attorneys' fees and costs to counsel to the putative plaintiff class in an amount not to exceed $1.9 million. Under the terms of the memorandum, the plaintiffs stated an intention to have all pending stockholder litigation settled and dismissed as to the plaintiffs and the putative plaintiff class. The settlement was approved by an order of the Delaware Court of Chancery, issued February 28, 2003. The Court, however, has not ruled on the amount of the attorneys' fees and costs to award plaintiffs' counsel, but that amount will not exceed $1.9 million in any event. We completed our tender offer for the publicly-held shares of Travelocity.com on April 8, 2002 and Travelocity.com became a 100% owned indirect subsidiary of Sabre Holdings Corporation on April 11, 2002.

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

        No matters were submitted to a vote of our security holders during the fourth quarter of the fiscal year ended December 31, 2002.

12

PART II

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

        Our Class A common stock is traded on the New York Stock Exchange (symbol TSG). The approximate number of record holders of our Class A common stock at March 6, 2003 was 10,735.

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

        We have paid a dividend only once in our history. A dividend of approximately $675 million, or $5.20 per share, was paid on February 18, 2000 in connection with our separation from AMR Corporation, which was our majority owner until March 2000. No dividends were paid during 2001 or 2002. Although we have traditionally retained our earnings to finance future growth, we may consider paying dividends in the future if we feel it is in the best interest of our shareholders. Any determination as to the future payment of dividends will depend upon the future results of operations, capital requirements and financial condition of Sabre Holdings Corporation and its subsidiaries and such other factors as our Board of Directors may consider, including any contractual or statutory restrictions on our ability to pay dividends. We may consider additional share repurchases, but such repurchases would require approval from our Board of Directors. The timing, volume and price of any repurchases would be made at the discretion of management and would depend on corporate considerations and market conditions.

13

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

        The following table presents selected historical financial data for each of the five years in the period ended December 31, 2002. On April 8, 2002, we completed a $28 per share cash tender offer for all of the approximately 16.7 million outstanding publicly-held common shares of Travelocity.com that we did not own. Prior to the tender offer, we had an approximate 70% ownership stake in Travelocity.com. We consolidated Travelocity.com and accounted for the 30% outside ownership as minority interest. After the tender offer, we effected a short-form merger, on April 11,2002, whereby Travelocity.com became our indirect 100% owned subsidiary. Effective on July 1, 2001 we completed the sale of our information technology infrastructure outsourcing business ("Outsourcing Business") to Electronic Data Systems Corporation ("EDS"). The results of operations of the Outsourcing Business have been presented as a discontinued operation for the years ended December 31, 2001, 2000, 1999 and 1998. See Note 3 to the Consolidated Financial Statements. During 2002, we also completed the purchase of Site59, and during 2001 we completed the acquisition of Sabre Pacific. During 2000, we acquired Preview, Gradient Solutions Limited (now known as Sabre Ireland Online Limited), GetThere and a 51% ownership interest in Dillon Communication Systems GmbH ("Dillon"). These transactions affect the comparability of the data presented. See Management's Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements for further information regarding these transactions and their impact on our financial condition and results of operations. We have paid a dividend only once in our history. On February 7, 2000, we declared a cash dividend on all outstanding shares of our Class A common stock. A dividend of approximately $675 million, or $5.20 per share, was paid on February 18, 2000 in connection with our separation from AMR Corporation, which was our majority owner until March, 2000. In addition, effective January 1, 2002, we adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). Under the new rules, intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests annually or when changes in circumstances indicate that the carrying value may not be recoverable. See Note 2 to the Consolidated Financial Statements for further information regarding the impact of this change in accounting.

14

(1)

Effective on July 1, 2001, we completed the sale of our Outsourcing Business and also entered into agreements with Electronic Data Systems Corporation ("EDS") for (i) EDS to manage our IT systems for 10 years and (ii) to jointly market certain IT services and software solutions to the travel and transportation industries. See Note 3 to the Consolidated Financial Statements. The results of operations of the Outsourcing Business have been reclassified and presented as income from discontinued operations, net, for 2001, 2000, 1999 and 1998. Balance sheet and cash flow data for periods prior to the sale have not been revised for the effects of our sale of the Outsourcing Business.

(2)

Prior to AMR's divestiture of its entire ownership interest in us in the first quarter of 2000, we had significant related party transactions with AMR and American Airlines. The terms of many of the agreements with AMR and its affiliates were revised in connection with the divestiture. See Note 8 to the Consolidated Financial Statements.

(3)

The results of operations in 2002, 2001 and 2000 were impacted by our merger and acquisition activities and the amortization expense related to the goodwill and intangible assets recorded in those transactions. Amortization of goodwill and certain indefinite lived intangible assets ceased on January 1, 2002 upon our adoption of SFAS No.142, resulting in approximately $212 million net of tax and minority interest, less amortization expense being recognized in 2002 compared with 2001. See Notes 2 and 5 to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding mergers and acquisitions, the change in accounting for goodwill and certain intangible assets and their impacts on our financial condition and results of operations.

(4)

On September 11, 2001, the United States was the target of terrorist attacks of unprecedented scope involving the hijacking and destruction of multiple passenger aircraft operated by commercial air carriers. Since the September 11, 2001 attacks, our revenue continues to be adversely affected by the state of the United States economy, by the possibility of terrorist attacks, government hostilities and military action, by the financial instability of many air carriers and by delays resulting from added security measures at airports. Bookings have also decreased since September 11, 2001 due to some or all of these conditions. Bookings were down approximately 65% immediately after the September 11, 2001 attacks and were down approximately 15% at the end of 2001. Our results of operations for the year ended December 31, 2002 were negatively affected by this continued reduction in travel. Our total global bookings for 2002 were down 7.8% and total bookings for 2002 in the U.S. were down approximately 11.9% from the year ago period.

(5)

Income from discontinued operations for the year ended December 31, 2001 includes a gain of approximately $39 million, net of related income taxes of approximately $25 million, recognized upon completion of the sale of our Outsourcing Business to EDS effective July 1, 2001.

(6)

On January 1, 2001 we adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. See Note 7 to the Consolidated Financial Statements.

(7)

CRS reservations for which we collect a booking fee.

(8)

Includes direct reservations plus reservations processed by joint venture partners using the Sabre system.

15

(9)

EBITDA (as used herein) is defined as net income (loss) from continuing operations before interest income and expense, income taxes, depreciation and amortization and other income (expense), net. We use both EBITDA, and EBITDA as a percentage of revenue (EBITDA margin), as a supplemental financial measurement in the evaluation of our business and interpret trends in EBITDA in a similar manner as trends in cash flows and liquidity. We believe that EBITDA and EBITDA margin may provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements. EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with accounting principles generally accepted in the United States. When evaluating EBITDA, investors should consider, among other factors, (i) increasing or decreasing trends in EBITDA, (ii) whether EBITDA has remained at positive levels historically and (iii) how EBITDA compares to levels of interest expense. Because EBITDA excludes some, but not all, items that affect net income and may vary among companies, the EBITDA presented above may not be comparable to similarly titled measures of other companies. While we believe that EBITDA may provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements, functional or legal requirements of our business may require us to utilize our available funds for other purposes. EBITDA is comprised of the following components for each respective period presented:

(10)

For purposes of computing the ratio of earnings to fixed charges, earnings consist of the sum of income from continuing operations before income taxes and the cumulative effect of change in accounting method, interest expense and the portion of rent expense deemed to represent interest. Fixed charges consist of interest incurred, whether expensed or capitalized, including amortization of debt issuance costs, if applicable and the portion of rent expense deemed to represent interest. Earnings for the year ended December 31, 2001 were inadequate to cover fixed charges by $1.3 million.

16

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

Summary

        During 2002, we generated revenues by providing travel marketing and distribution services to travel agencies, corporate travel departments and travel suppliers using the Sabre system through our Sabre Travel Network business segment (formally Travel Marketing and Distribution); to consumers using the Travelocity Websites, to businesses using GetThere products and from the development and marketing of Sabre Airline Solutions products. Approximately 76.5% of our revenue was generated from Sabre Travel Network, approximately 11.1% from Travelocity, 2.4% from GetThere and 10.0% from Sabre Airline Solutions. Total revenues from continuing operations have grown at a compound annual growth rate of 6.4% for the three years ended December 31, 2002.

        Air travel in 2001 was trending lower than in 2000, initially because of the declining economic conditions in the United States, then due to the September 11, 2001 terrorist attacks. As further discussed in the Reduced Volume of Air Travel Section of Business Trends below, we have experienced significant decreases in bookings volumes due to reduced travel in the United States and, to a lesser degree, internationally following these attacks.

        For the three years ended Dec