SABRE HOLDINGS CORP - 10-K Annual Report

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

Delaware (State or other jurisdiction of incorporation or organization)		75-2662240 (I.R.S. Employer Identification No.)
3150 Sabre Drive Southlake, Texas (Address of principal executive offices)		76092 (Zip Code)

Title of each class		Name of exchange on which registered
Class A common stock, par value $.01 per share		New York Stock Exchange

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

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

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

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

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

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

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.

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

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

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

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

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

The Sabre system provides subscribers a single rich source of travel information, allowing travel agents to search tens of thousands of itinerary and pricing options across multiple travel providers for consumers within seconds. The Sabre system reports transaction data about subscriber-generated reservations to associates, allowing them to better manage inventory and revenues. The Sabre system also allows 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.

Associate Participation. Airlines and other associates can display 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, 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 between the Sabre system and the associates' inventory system, giving subscribers more detailed information and associates improved inventory management. For an associate selecting one of the higher levels of participation, 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 about inventory and confirmed reservations and allowing the associate to optimize revenue for each flight. Car rental companies and hotel operators are provided with similar levels of participation from which to select. We also provide associates, upon request, marketing data (in the form of anonymous, aggregated data from which all personal information has been deleted) derived from the 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.

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

			Low
Quarter Ended:
	December 31, 2003	$	23.00	$	19.58
	September 30, 2003	$	27.50	$	21.14
	June 30, 2003	$	26.68	$	15.68
	March 31, 2003	$	20.78	$	14.00
Quarter Ended:
	December 31, 2002	$	22.25	$	14.85
	September 30, 2002	$	35.80	$	18.42
	June 30, 2002	$	49.35	$	33.26
	March 31, 2002	$	49.98	$	36.85

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

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

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

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

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

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

Period	Total Number of Shares Purchased	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program (1)		Maximum Dollar Value of Shares That May Yet be Purchased Under the Program
October
10/01/03-10/31/03	231,000	$	21.57	231,000		$	95,018,392
November
11/01/03-11/30/03	813,200	$	21.53	813,200		$	77,506,188
December
12/01/03-12/31/03	1,115,397	$	20.65	265,397	(2)	$	71,755,943

Total 4^th Quarter 2003 Repurchases	2,159,597	$	21.08	1,309,597


		Year Ended December 31,
		2003(4)			2002(4)		2001(4)			2000(2)			1999(2)
		(in millions, except per share data and other data where indicated)
Income Statement Data (1) (2) (3) (9):
Revenues		$	2,045.2		$	2,056.5	$	2,145.0		$	1,955.5		$	1,705.4
Operating expenses, excluding amortization of goodwill and intangible assets			1,822.7			1,685.6		1,876.2			1,673.3			1,399.9
Amortization of goodwill and intangible assets			56.3			53.4		277.5			109.4			—

Operating income (loss)			166.2			317.5		(8.7	)		172.8			305.5
Other income (expense), net (10)			(38.4	)		21.4		20.2			(13.9	)		155.4
Minority interests			(.4	)		.2		22.5			30.7			—

Income from continuing operations before income taxes			127.4			339.1		34.0			189.6			460.9
Income taxes			44.1			125.0		81.0			93.5			170.4

Income (loss) from continuing operations			83.3			214.1		(47.0	)		96.1			290.5
Income from discontinued operations, net (1) (5)			—			—		75.1			48.0			41.4
Cumulative effect of accounting change, net (6)			—			—		3.1			—			—

Net earnings		$	83.3		$	214.1	$	31.2		$	144.1		$	331.9

Earnings (loss) per common share—basic:
	Income (loss) from continuing operations (1)	$	.59		$	1.53	$	(.35	)	$	.74		$	2.24
	Income from discontinued operations, net (1)		—			—		.57			.37			.32
	Cumulative effect of accounting change, net (6)		—			—		.02			—			—

Net earnings		$	.59		$	1.53	$	.24		$	1.11		$	2.56

Earnings (loss) per common share—diluted:
	Income (loss) from continuing operations (1)	$	.58		$	1.50	$	(.35	)	$	.74		$	2.22
	Income from discontinued operations, net (1)		—			—		.57			.37			.32
	Cumulative effect of accounting change, net (6)		—			—		.02			—			—

Net earnings		$	.58		$	1.50	$	.24		$	1.11		$	2.54

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