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

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-50515

ORBITZ, INC.
(Exact Name of Registrant as Specified in its Charter)

Securities Registered Pursuant to Section 12(g) of the Act: None

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. ý

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

        The aggregate market value of our voting common stock on December 31, 2003 (based on the December 31, 2003 closing price of $23.33) held by non-affiliates of Orbitz, Inc. was $293,226,208.

        The number of shares outstanding of Orbitz, Inc.'s Class A Common Stock, par value $0.001 per share (the "Class A Common Stock"), as of February 29, 2004 was 12,820,719 and the number of shares outstanding of Orbitz, Inc.'s Class B Common Stock, par value $0.001 per share (the "Class B Common Stock"), as of February 29, 2004 was 27,269,809.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the definitive Proxy Statement of Orbitz, Inc. (the "2004 Proxy Statement") with respect to the 2004 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 concerning our current expectations, assumptions, estimates and projections about the future. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to risks and uncertainties that could cause our actual results to differ materially from those indicated in the forward-looking statements. These risks and other factors include those listed under "Risks Related To Our Business" and elsewhere in this report. You can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

PART I

Item 1.    Business.

Formation

        On February 24, 2000, Orbitz, LLC was formed as a Delaware limited liability company under the name of "DUNC, LLC." Its initial members consisted of Continental Airlines, Delta Air Lines, Northwest Airlines and United Air Lines. On May 9, 2000, American Airlines acquired membership interests in DUNC, LLC. Orbitz, Inc. was originally formed under the name of "DUNC, Inc." and was incorporated in the State of Delaware on May 4, 2000. Pursuant to a series of subscription letters dated May 9, 2000, its initial shareholders consisted of American Airlines, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Northwest Airlines, Inc. and United Air Lines, Inc. Collectively, we refer to these five airlines as our "Founding Airlines." In July 2000, DUNC, LLC and DUNC, Inc. changed their names to "Orbitz, LLC" and "Orbitz, Inc.," respectively.

        From February 24, 2000 through February 19, 2001, we developed our business, which included technology development and the establishment of our operations. On February 20, 2001, we had a limited launch of our website. On June 4, 2001, we launched Orbitz.com to the general public.

Restructuring

        On April 10, 2002, we entered into a restructuring transaction to, among other things: (1) restructure the capitalization of Orbitz, Inc. and Orbitz, LLC to facilitate ownership by our Founding Airlines or their affiliates and future investors in Orbitz, Inc., (2) designate Orbitz, Inc. as the sole manager of Orbitz, LLC and (3) adopt our 2002 Stock Plan. To accomplish this restructuring, a new wholly owned entity, CANDU, Inc., was formed by our Founding Airlines or their affiliates and issued to such Founding Airlines or their affiliates an aggregate of 6,829 shares of its Class B common stock. CANDU, Inc. was then merged with and into Orbitz, Inc. As a result of this restructuring transaction: (1) Orbitz, Inc. adopted the form of certificate of incorporation of CANDU, Inc. as its certificate of incorporation and (2) the capitalization of Orbitz, Inc. was restructured to give effect to the current capitalization of CANDU, Inc. by converting all outstanding shares of Class B common stock of CANDU, Inc. into shares of Class B common stock of Orbitz, Inc., converting all outstanding shares of common stock of Orbitz, Inc. into Class C common stock of Orbitz, Inc. and canceling all outstanding shares of Series A preferred stock of Orbitz, Inc. Also in connection with the restructuring, Orbitz, Inc. amended and restated its bylaws and adopted the CANDU 2002 Stock Plan as its 2002 Stock Plan, and the limited liability company agreement of Orbitz, LLC was amended to designate Orbitz, Inc. as the sole manager. Pursuant to the certificate of incorporation of Orbitz, Inc., as amended, each share of Class C common stock converted into one share of Class A common stock, $0.001 par value, of Orbitz, Inc. upon the consummation of the IPO Exchange discussed below.

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IPO Exchange

        In connection with the restructuring done to facilitate our initial public offering, our "IPO," on December 18, 2003, we formed a wholly owned subsidiary, O Holdings Inc., a Delaware corporation, and contributed 3,700,000 Class C Units in Orbitz, LLC to O Holdings Inc. In addition, on December 19, 2003, immediately prior to the closing of our IPO pursuant to an agreement among us and each of the holders of Class B common stock, our Founding Airlines or their affiliates contributed all their membership interests in Orbitz, LLC to us in exchange for an aggregate of 8,180,000 shares of Class A common stock, an aggregate of 27,262,980 shares of Class B common stock and an aggregate of 434,782 shares of redeemable Series A non-voting convertible preferred stock. As a result of the foregoing transactions, Orbitz, LLC is 99% owned by us and 1% owned by our wholly owned subsidiary, O Holdings Inc. We act as the sole manager of Orbitz, LLC. This transaction is referred to as the "IPO Exchange." Additionally, concurrent with the IPO Exchange, all shares of Class C common stock were converted to shares of Class A common stock.

Initial Public Offering

        On December 19, 2003, we consummated the IPO of our Class A common stock. We sold 4,000,000 shares of our Class A common stock at an offering price of $26.00 per share and received net proceeds of $94.6 million. Our Founding Airlines sold an aggregate of 8,180,000 shares in the IPO. We did not receive any proceeds from the sale of our Founding Airlines' shares of Class A common stock.

Overview

        We are a leading online travel company that enables travelers to search for and purchase a broad array of travel products, including airline tickets, lodging, rental cars, cruises and vacation packages. Since launching our website, Orbitz.com, in June 2001, we have become the third largest online travel site based on gross travel bookings. We believe our rapid growth has been driven by our comprehensive display of fares and rates, our innovative technology, our consumer friendly website and our extensive supplier relationships. On our website, consumers can search over two billion fares and flights on more than 455 airlines as well as rates at over 45,000 lodging properties and at 23 car rental companies. Our search results are presented in an easy-to-use matrix display that provides what we believe to be the broadest selection of travel options available to consumers, enabling them to select the price and supplier that best meet their individual travel needs. Our agreements with leading airlines, together with our powerful technology, allow us to offer consumers what we believe to be the largest selection of low fares generally available to the public. We also have commercial agreements with leading suppliers of lodging and rental cars that offer consumers a wide array of competitive rates.

        We were formed by our Founding Airlines to access the rapidly growing online travel industry, to address the need for an unbiased, comprehensive display of fares in a single location for consumers, and to establish a lower cost and unbiased distribution channel for air travel suppliers. Following our formation, numerous U.S. and international airlines, including our Founding Airlines, entered into distribution agreements with us, including charter associate agreements. Many of our suppliers provide us, on a non-exclusive basis, with their lowest fares generally available to the public and guaranteed minimum transaction fees. Our airline suppliers benefit from our low-cost distribution model, access to our large customer base and our unbiased display of fares.

        Our large customer base has also enabled us to establish relationships with leading hotels and car rental agencies that give us access to preferred rates at thousands of hotel properties and numerous car rental companies. In the third quarter of 2002, we launched our OrbitzSaver program, designed to provide consumers with a wide array of low-cost prepaid hotel rooms. Suppliers also benefit from OrbitzSaver rates due to fewer cancellations and the ability to sell under-utilized inventory. The OrbitzSaver program accounted for approximately 33% of the hotel rooms we sold in the quarter

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ended December 31, 2003, and it includes hotel rooms sold through our merchant hotel initiative and under our agreement with Travelweb. We launched our Merchant Hotel initiative in March 2003, and hotels that participate in this program provide us room inventory directly at negotiated rates. Rooms sold under the Orbitz Merchant Hotel program, on average, generate over three times the amount of revenue per transaction compared to hotel rooms sold through traditional retail methods and under our agreement with Travelweb.

        We have also launched additional features and services designed to complement our core consumer offering. In August 2002, we launched our Supplier Link technology, which enables us to establish direct connections with air travel suppliers and bypass the traditional GDS distributors when booking airline tickets. As a result, Supplier Link allows participating airlines to distribute tickets at a lower cost to them while generating increased profitability to us. Since the initiation of this program, we have implemented Supplier Link with five major domestic airlines, and during 2003 approximately 33% of our air transactions were conducted using Supplier Link. We plan to implement Supplier Link with additional air travel suppliers in the future.

        In September 2002, we established Orbitz for Business, the first corporate product offered by an online travel agency. Orbitz for Business provides companies with the same functionality offered to our leisure customers while adding features to address the needs of both business travelers and corporate travel managers who administer travel policies. In August 2003, we launched our dynamic packaging product, which provides us with the ability to create and consumers with the ability to purchase a customized package involving air, hotel and other products in one transaction at one bundled price.

        Since our launch, over 21 million consumers have registered to use Orbitz.com, and we have conducted over 26 million travel transactions. In the year ended December 31, 2003, we sold $3.4 billion in gross travel bookings.

Industry Background

The Travel Industry

        The travel industry is among the largest industries in the United States, with total annual air, lodging, car, cruise and vacation package bookings of an estimated $193 billion in 2002, according to PhoCusWright. Air transportation, lodging and car rentals account for a majority of these travel expenditures, representing approximately 39%, 35% and 10%, respectively, of total estimated travel bookings.

        Purchasing travel can be a complicated process involving a variety of destinations, dates and price limitations and the purchase of several products from different suppliers, including air, lodging and car rental providers. To facilitate the exchange of travel information, travelers and suppliers have traditionally relied on travel agents as intermediaries. Travel agents typically perform the task of research, fact finding and price comparison on behalf of consumers. However, traditional travel agents may not always present optimal choices for consumers and are generally not available 24 hours a day or seven days a week. Travel agents depend on computer reservation systems, referred to as electronic global distribution systems, or GDSs, to access flight and other travel product availability and pricing, and to book air and other travel products. These GDSs may not be able to provide all the information and options that are available in the marketplace due to technical limitations of their legacy mainframe computer systems and their inherent computational limitations. As such, travel agents may not be able to provide consumers with the broadest array of available travel options. Travel agents who use GDSs can also increase the overall distribution cost to both consumers and suppliers. For consumers, particularly business travelers, travel agencies typically charge a fee. Traditional consumer leisure travel fees are up to $25 and corporate travel fees generally range from $25 to $50 per transaction. The GDS fees that are charged to suppliers as part of a typical travel agency booking also represent a substantial

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distribution expense for suppliers. A portion of these fees is typically shared with travel agents, each time a booking is made using their systems.

The Online Travel Industry

        The sale of travel products online is rapidly gaining consumer acceptance. Leisure and unmanaged business travel is the largest consumer spending category on the Internet with approximately $28 billion in estimated gross travel bookings in 2002, according to PhoCusWright. The Internet empowers consumers and business travelers with a convenient and efficient way to compare and book travel options. In addition, delivery and confirmation of the travel product purchased can be made almost instantaneously through an e-mail sent to the consumer. The Internet also permits suppliers to employ targeted marketing strategies in order to optimize bookings and revenues. While online travel has been widely accepted by consumers, online travel as a percentage of total travel sales is still relatively low. According to PhoCusWright, online travel sales are expected to grow at a compounded annual rate of 32.1% from 2002-2005 versus total travel sales which are expected to grow at an compounded annual rate of 5.4% over the same time period. Key drivers of the projected rapid growth of online travel include increased penetration of consumer sales to total travel and corporate travel sales migrating online.

        Set forth below is a chart that illustrates the rapid historic and projected growth of the online travel industry.

        Historical and Projected Travel Sales (online, total and penetration—$ in billions)

Source: PhoCusWright Inc.

        Although online travel sales have been growing rapidly, we believe that a significant opportunity exists to further increase the number of consumers who purchase travel on the Internet and on Orbitz by using consumer and supplier-focused technologies and processes to improve the way travel is purchased and sold.

Orbitz' Strengths

        The following attributes have enabled Orbitz to become the third largest online travel service provider based on gross travel bookings:

Large Audience and Strong Brand Recognition

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Large audience:  In 2003, Orbitz was one of the three most visited travel sites on the Internet, averaging more than 12 million unique visitors a month, according to comScore Media Metrix. We have over 21 million registered users and have conducted more than 26 million travel transactions since launch.



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Strong brand awareness and positioning:  Orbitz' brand awareness rivals that of our major competitors, despite our more recent entrance in the market and lower marketing expenditures, according to research done by Hall and Partners for Orbitz. We believe consumers associate the Orbitz brand with online travel leadership, ease of use, and low fares and rates on travel transactions.

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Value for Consumers and Travel Suppliers

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Easy-to-use and innovative website:  Our site offers a comprehensive display of travel options, including air, hotel, car, cruises and vacation packages. Our air matrix typically shows more itineraries and airlines per search, and we display the results of our air travel searches in an unbiased manner. We provide our broad array of travel options and price transparency through our innovative and intuitive matrix design, which enables consumers to sort by supplier, location, price and where applicable, hotel quality rating and vehicle type. Our additional consumer-friendly search tools include Flex Search and Deal Detector. Flex Search enables consumers to search up to 30 days of flight and fare combinations with a single click—a search that would require dozens of searches on competitors' sites. Deal Detector is a personalized search tool which regularly checks all flights and fare availability until it finds a match with a traveler's previously specified criteria, then sends an alert to the traveler. We offer a wide array of low fares and rates through our airline charter associates, which are contractually obligated to provide us with their lowest fares generally available to the public, including those marketed on their own websites.



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Proactive, personalized and technology-driven customer care:  We have developed a personalized traveler care system to alert our customers to situations and events that could affect their travel plans. Our dedicated customer care team monitors airline traffic control systems, airline flight information systems, satellite weather data and other information sources and transmits flight delays, gate changes, traffic conditions and other time-sensitive data to a traveler's cell phone, e-mail device or pager. In December 2003, more than 1.9 million travelers received proactive care updates and services from Orbitz, including more than 44% via wireless devices. We believe that our technology-driven care program differentiates Orbitz from our competitors and encourages both customer conversion and customer retention.



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Value for travel suppliers:  We distribute travel products to our more than 21 million registered users. Our air search matrix displays results in an unbiased manner, in accordance with price and other search criteria, regardless of an airline's status as a charter associate. By working with us, many of our airline suppliers have achieved distribution cost savings through a combination of GDS rebates and Orbitz' competitive transaction fees. We also offer our proprietary Supplier Link program, which allows tickets to be booked directly with a supplier rather than through a GDS. We believe suppliers can save up to 70% by using Supplier Link, in comparison to tickets booked through a GDS.

Innovative Technology Platform

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Powerful search capabilities:  Our search technology is capable of quickly searching over two billion fares and flights on more than 455 airlines, as well as rates at over 45,000 lodging properties and at 23 car rental companies. We use many horizontally scalable clusters of computers with high processing power and computation capabilities, and we obtain schedule and fare data directly from the publisher of airline schedule and fares. As a result, our search technology is not subject to the limitations of mainframe technologies or GDS vendor systems.



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Supplier Link technology:  Supplier Link is our proprietary technology platform that connects directly to airline suppliers' internal reservation systems. The technology is able to compute fares, store passenger records, manage information and book tickets without using a GDS, lowering distribution costs by up to 70% for our airline suppliers.

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Low-Cost Operations

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Low-cost technology platform:  Most of our applications do not depend on any particular hardware or operating system platform. Therefore, we are able to run our business on what we believe to be the most cost-efficient platform available. We make extensive use of commodity hardware, such as personal computers, rather than expensive mainframe computers, which allows for flexibility and processing power capable of handling large amounts of traffic and data at relatively low unit costs. We also rely on Linux for most of our applications, rather than more expensive operating systems. Our systems are designed to function with a high degree of automation, resulting in a low person-to-machine support ratio.



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Low customer support and fulfillment costs:  We built our operating infrastructure to minimize the costs associated with each travel purchase. We have been able to reduce customer support and fulfillment costs per transaction by about 80% from the time our site was introduced to the general public in June 2001 through year-end 2003. We keep costs low by maintaining an intuitive, easy-to-use website that minimizes telephone interaction and by negotiating cost-efficient agreements with third- party providers for call center and other fulfillment services. For example, as of December 31, 2003, we routed about 10% of our service calls and all our e-mail queries to a call center in India, where the cost of labor is low and service levels are high. In addition, we focus on maintaining low overhead costs and high employee productivity.



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Efficient marketing:  We have created brand recognition and attracted new users at a low marketing cost through efficient performance-based marketing expenditures, particularly e-marketing techniques targeted to Internet users. For example, we have placed Orbitz advertising on comparative shopping tools, advertised on travel content sites and paid for placement on search engine websites.

Strategy

        Our objective is to grow profitably as a leading online distributor of travel products. The key elements of our strategy include the following:

Increase Sales and Profitability of Non-air Travel Products

        We are a leader in the online sale of air travel. We believe our leadership in air travel is strategically important to driving sales of other products because airline tickets are generally the first product purchased as consumers make their travel plans. While revenues from sales of non-air travel products and services increased to 21% of total revenues from 13% for the years ended December 31, 2003 and 2002, respectively, we intend to continue to increase the mix of non-air travel sold, as we believe that we still have a higher concentration of air travel than our competitors. During the year ended December 31, 2003, approximately 66% of our total revenues were derived from airline ticket sales. A key component of our strategy has been to leverage our leadership in the sale of air travel to sell other travel products and services, many of which offer higher profit margins than air travel products. We have launched several key initiatives to take advantage of this opportunity:

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Improve cross-selling and marketing techniques:    We have increased and intend to continue to increase cross-selling of lodging and car rental products by presenting air customers at the point of sale with an improved matrix display of lodging and car rental choices, based on their selected air travel itinerary. We are also increasing consumer awareness of our non-air travel offerings through targeted direct marketing of these products to our registered user base and other potential customers. A portion of our recent broadcast advertising has focused on our hotel initiatives and we expect to continue this targeted advertising.

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Improve lodging offerings:    We have increased and intend to continue to increase sales of lodging by expanding our offerings to include a large selection of rooms available at low-cost rates to consumers who are willing to pre-pay at the time reservations are made, and by simplifying the lodging booking process. Our hotel matrix display is unique within the industry and enables consumers to search over 45,000 properties, showing the best available rates in a single display for a side-by-side comparison. Below the matrix, we offer travelers the option to sort and display hotels by price, location or OrbitzSaver rate.



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Drive merchant transactions:    We have developed in-house merchant hotel capabilities to establish direct relationships with hotel chains and properties and have entered into a relationship with Travelweb to sell inventory at major hotel chains through Orbitz. We receive significantly higher revenue per transaction for our prepaid hotel properties, particularly those enrolled through the Orbitz Merchant Hotel program. A key component of our ongoing strategy is to continue to drive a greater portion of sales through these higher margin channels. In the quarter ended December 31, 2003, over 33% of our hotel revenue came from our Orbitz Merchant Hotel program.



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Launch of our dynamic packaging product:    In August 2003, we launched our dynamic packaging product in partnership with National Leisure Group, which provides us with the ability to create and consumers with the ability to purchase a customized package involving air, hotel and other products in one transaction at one bundled price. In 2004, we intend to incorporate other products into our dynamic packaging product, including car rentals, resort attractions and services and side trips and to begin offering dynamic packaging independent of National Leisure Group, which we believe will further increase our margins from non-air activities. We expect our packaging product to gain consumer acceptance because it gives them more options for purchasing travel and provides them significant cost savings. Suppliers benefit from incremental revenue opportunities and the flexibility to adjust their pricing while not revealing the magnitude of the discount because the package is bundled as a whole with each component priced in an opaque manner. We believe that dynamic packaging benefits us because it offers the potential to enhance our margins and increase our market share, particularly as we incorporate merchant rates for lodging and car rentals.



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Improve cruise and vacation package offerings:    We plan to continue to increase sales of cruises and vacation packages through further enhancements to our functionality and content and through our partnership with National Leisure Group, our cruise and vacation provider.

Retain Customers by Providing a Superior Experience

        We offer consumers what we believe to be the broadest selection of travel options, the largest selection of low fares generally available to the public and a wide array of competitive rates on other travel products. We believe these factors generate a high degree of customer loyalty and result in high customer retention rates. Key initiatives to promote higher customer retention include:

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Continue to maintain strong supplier relationships to ensure the largest selection of low fares generally available to the public and a wide array of competitive rates on other travel products;



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Continue to leverage our technology to deliver site improvements that ensure ease-of-use and provide consumers with informed choices, such as enhanced international offerings, dynamic packaging, Deal Detector and Flex Search;



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Invest in technologies that will improve our ability to target our customers with relevant e-mail offers and improved personalization across our site; and



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Continue to develop our customer care capabilities to make travel more convenient for our customers.

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Capitalize on Innovative Technology Platform

        We will continue to capitalize on our strength in developing innovative technology to enhance relationships with suppliers:

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Grow Supplier Link: We plan to grow our Supplier Link business, which allows participating airline suppliers to distribute tickets at a lower cost to them while generating increased profitability to us. We currently operate Supplier Link with five airlines and expect to implement Supplier Link with additional airlines in the future; and



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Establish Direct Connections with Hotels: To enhance our merchant hotel program, we will look to establish direct connections between Orbitz and hotel property management systems. This will allow lodging suppliers to reduce costs by eliminating hotel connectivity fees and improving operational efficiencies by eliminating the time-consuming steps of inputting rate and availability information into online travel systems and confirming transactions by fax and e-mail.

Expand our Customer Base

        Our goal is to increase our customer base by acquiring new customers in a cost-effective manner and increasing our market share in the rapidly growing online travel industry. We intend to achieve this objective by:

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Emphasizing performance-based online advertising and other targeted marketing strategies;



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Cost-effectively building our brand through traditional broadcast and print channels;



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Generating increased transactions from frequent Orbitz customers using direct mail recognition programs and encouraging infrequent bookers to purchase more travel from us using supplier incentives; and



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Increasing our presence in corporate travel.

Pursue New Business Opportunities

        We plan to use our innovative technology and our relationships with travel suppliers to expand into new business opportunities that enhance our growth prospects.

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In September 2002, we launched Orbitz for Business, our low-cost online corporate travel product. We intend to increase the size of our corporate program by enhancing our product by adding functionality for frequent corporate travelers and corporate travel managers.



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We are well positioned to allow third-party travel agents and other parties to connect directly to airline systems using our Supplier Link technology, subject to supplier approval. This would allow us to generate additional Supplier Link revenue and would allow suppliers to realize savings for transactions conducted other than through Orbitz.



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Future initiatives may include expanding into international markets, developing a suite of additional tools specifically designed for use by travel agents and introducing additional Orbitz-branded services, such as our existing Orbitz credit card and travel protection.

        In order to pursue these business opportunities and our other growth initiatives, we may make strategic acquisitions of other businesses, products and technologies. The discussion of our strategy in this section reflects our current view of the ways we intend to develop our business in the future. Many of the initiatives we describe above are at an early stage, and we continue to review them in light of changing business conditions. We may change our plans, and future developments could differ from those we intend or expect to occur.

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Orbitz.com-Reservations

        Our website enables consumers and business travelers to research and purchase a wide range of travel products and services, including airline tickets, hotel accommodations, car rentals, cruises, and vacation packages. We have established commercial agreements with numerous travel suppliers and offer air fares and rates from over 455 airlines, over 45,000 hotel properties and 23 car rental providers. Our advanced search technology allows our customers to easily find and compare what we believe to be the widest selection of travel options, the largest selection of low fares generally available to the public and a wide array of competitive rates for other travel products. Finally, we have developed what we believe is an intuitive and easy-to-use booking process for making reservations and purchasing travel services.

        Flights.    Our search engine can quickly analyze over two billion possible flight and fare combinations to provide customers with what we believe to be the largest selection of low fares generally available to the public. Our technology and innovative display matrix allow consumers to quickly and easily evaluate a broad range of potential fare and supplier options through an intuitive design. Our matrix display enables customers to compare data regarding preferred travel dates, destinations, times, trip duration, number of passengers, class of travel and number of stops, and then displays fare and flight offerings matching those specifications according to price and number of stops. Consumers can also prioritize the categories according to their specific preferences. Our matrix display provides comprehensive information to consumers in an unbiased manner to enable them to select their preferred carrier. Once the consumer selects a flight, our three-step booking process makes it easy for consumers to purchase their tickets. By selecting our "anytime" feature, customers with flexible travel schedules can expand the choices available to them. Travel Tips is a dynamic tool which, in real time, identifies to the traveler savings available if they are willing to use nearby airports or alternate times.

        In 2003, we launched two major enhancements to our air product, Flex Search and Deal Detector.

        Flex Search:    Our Flex Search feature offers consumers additional flexibility by showing flight and fare options for travel within several days of the chosen arrival or departure date, indicating the most cost-effective time to take a trip of a specified number of days, or determining the most cost-effective weekend to travel within a specified time period. In a single click, consumers are able to search flight and fare combinations on hundreds of airlines. We believe that competitive sites and traditional travel agent tools would require dozens of searches to retrieve this level of information.

        Deal Detector:    Deal Detector is a new product launched in October 2003 that alerts travelers of a flight they want to take. The traveler specifies the target price and other trip criteria and Deal Detector regularly checks flight and fare availability until it locates a transaction meeting the traveler's specifications. If a flight meeting the specifications has been targeted, Deal Detector alerts the traveler who can then book the flight on Orbitz.

        Other recent enhancements to our air product include enabling the booking of up to nine passengers per transaction (up from four) and adding more international flights and fares into our air matrix. Future enhancements to our air functionality are expected to include the ability to search by fare type (e.g., fully refundable vs. restricted), or search by schedule (sort by outbound schedule then return schedule), the acceptance of promotional codes and the development of online check-in capabilities.

        Lodging:    We enable customers to search, compare and book reservations at over 45,000 lodging properties. In addition to information on destination, dates and number of guests, customers can select a specific lodging or hotel chain, quality rating, location or point of interest. Travelers can also specify amenity preferences such as restaurants, swimming pools, room service, health club facilities, handicapped facilities, business centers and meeting rooms. Our search engine relies on a proprietary

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cache of hotel rates, which enables us to quickly search multiple databases of room rates and availability in an efficient manner. We display the results of a hotel search using an industry-first hotel matrix that follows the same user-friendly design as our original air matrix. Based on the provided travel criteria, the hotel matrix groups hotels by quality rating and location and then reflects the lowest available price. OrbitzSaver rates are displayed before other rates but consumers can elect to sort hotels by price or location.

        We also offer a competitive selection of hotel properties and rates, including retail and prepaid options. Through a distribution agreement with Pegasus Solutions, Inc., a leading hotel GDS, we offer retail rates from over 45,000 hotel properties. Under this agreement, which was entered into in December 2000 and amended in December 2002, Pegasus provides us with access to its database of lodging information and in addition provides the ability to search for availability and rates and make and cancel reservations at hotels. Pegasus pays us an inducement fee for each net reservation that we book through Pegasus, which fee is subject to change based on transactional efficiency levels, and we agree to direct a minimum volume of hotel reservations made through its system through Pegasus, with the express exception of prepaid merchant inventory, such as reservations booked through our Orbitz Merchant Hotel program or our agreement with Travelweb. If we fall below these minimum volume commitments for three consecutive months, Pegasus has the right to terminate the agreement. Pegasus has agreed to specified service level commitments with respect to its system availability and problem resolution procedures, and we have the right to terminate the agreement if these commitments are not met. The agreement is scheduled to expire on December 15, 2004.

        We also offer competitive prepaid rates at over 14,000 properties, through our Orbitz Merchant Hotel program and an agreement with Travelweb, a joint venture formed by Hilton, Marriott International, Hyatt, Starwood, Intercontinental and Pegasus. As of December 31, 2003, our Orbitz Merchant Hotel program, launched in March 2003, has over 7,000 properties under contract and is rapidly adding additional inventory. Under our Orbitz Merchant Hotel program, we derive revenues from hotel transactions where we set the room rate, and have no obligation to pay the hotel suppliers for unsold rooms. Hotels can offer merchant inventory directly through Orbitz using either our web-based Extranet or using Pegasus. We are committed to expanding our offering to provide lodging properties and rates similar in scope to our offerings of air and car rental products. As a result, we continue to invest in the sales effort and account management required to secure net rates for sales on a prepaid basis from a variety of hotel providers. We expect future enhancements to our hotel functionality to include richer hotel content including virtual tours and user reviews.

        In addition, under our agreement with Travelweb, we receive prepaid travel inventory from Travelweb founders and other participating chains and properties for display on our website. We receive transaction fees from Travelweb based on the payments received by Travelweb for completed hotel bookings on our website. As part of the Travelweb agreement, we are entitled to receive lodging inventory from Travelweb's participating chains and properties at rates and in quantities that at least 70% of the time are no less favorable than comparable accommodations offered on Hotels.com, Expedia and other competitors.

        Car rentals:    Our car rental feature allows consumers to search and reserve car rentals online at 23 car rental companies. Our car matrix display shows consumers what we believe to be the most comprehensive selection of car rental companies on the Internet. In addition to specifying date and location preferences, customers can select a specific car company, request specific features and obtain credit for any potential discounts (such as American Automobile Association or corporate discounts) when renting a car. We display our car rental options using our matrix display, which lists car brands and available vehicle types. Potential future enhancements to our car rental offering are expected to include local market rentals (e.g., off-airport rental locations), one way drop-off and merchant car inventory through our dynamic packaging capability. A major strength of our car offering is the total

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pricing display, which lists the total cost of the rental, including local taxes, for a majority of our car bookings.

        Cruises and vacation packages:    Our cruise feature, which is maintained and operated by National Leisure Group, allows customers to search and book cruise vacations on 16 cruise lines according to cruise line, date, length of sail, or destination preferences. In addition, it features special cruise deals offered to online customers. The "cruise tools" feature provides answers to frequently asked questions about cruises.

        Our vacation packages feature allows customers to choose among a variety of suppliers of vacation packages, including air and lodging, escorted tours, last-minute and other packages. Consumers can select their tour based on destination, resort name or interest preferences. It also features online specials and answers to frequently asked questions.

Orbitz.com—Customer Services

        In addition to letting travelers book travel transactions on Orbitz.com, we also provide a broad array of useful information and services designed to optimize the consumer's Orbitz experience.

Travel Watch

        The travel watch feature on our website provides real-time flight, weather, airport and news information. It also creates and continuously updates "travel briefs" that gather all personal trip and customer care information, such as the latest air traffic control delays, into one convenient location. Travel watch is divided into two main travel information areas:

        Travel news and features:    We provide customers with industry and travel headlines from around the world. We also include tips from travel experts and regularly updated weather and air traffic control developments.

        Resources:    Customers can access driving directions, parking information and tips on getting around the terminals at each of the major domestic airports. It also features information about airline policies and frequent-flyer programs. Overseas travelers can access information about foreign entry requirements, passports, medical and health requirements, travel warnings, embassy locations and U.S. customs requirements.

Customer Care

        At Orbitz, customer care refers to a specialized Orbitz program that tracks the travel environment in the United States and, to a lesser degree, abroad and uses this data to proactively assist travelers who may need to be informed or make alternate plans. In addition, customer care provides a formal channel for customer feedback to us for product improvements and problem resolution.

        Our customer care program was designed as a proactive way to keep our customers informed about flight delays, schedule information and relevant news or events that may impact their travel plans. It permits broad customer participation and enables us to forecast events and travel situations, pinpoint impacted customers and notify customers in large numbers through multiple methods, such as e-mail, cell phone and pager. Data synthesized by a team of experts in our headquarters with a background in air traffic control, airport operations management, customer service and travel agency special services can be integrated with data obtained from travel suppliers and other providers' computer systems. This data is used to inform and assist travelers before they leave for the airport and while they are in transit. The information is available to travelers who book their trip on Orbitz. Surveys conducted by us indicate that our care program is an important contributor to customer retention. In December 2003, over 1.9 million travelers received pro-active care alerts with over

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44% wireless penetration. The customer care program is an important element in boosting the trust and confidence of new customers and promoting repeat purchases. We believe our customer care program demonstrates our ability to provide innovative support services and differentiates us from our competitors.

Customer Support

        Customer support refers to our online help tools and the more traditional telephone-based assistance provided to our customers for changes and cancellations, paper ticket processing, website questions and general assistance. Customer support is provided through a central command center at our headquarters that largely serves a monitoring and resource allocation role. Web-based self service support is provided with a comprehensive database of frequently asked questions allowing customers to dynamically interact with the system and evaluate the level of response provided and quickly get answers to more general support questions. Telephone support is primarily provided by Up--Stream (an outsourced service provider) in its call centers located in North Dakota and Kentucky, where productivity and employee retention are at or near national highs for this type of employment. Under our agreement with Up--Stream, we have agreed to pay a per transaction service fee, as well as minor additional fees when Up--Stream exceeds its service benchmarks for handling customer inquiries. Under our customer support program, telephone and e-mail specialists use a proprietary Orbitz desktop application that provides an integrated view of the customer's needs, activities and relationship with us. A state-of-the-art interactive voice response system with speech recognition and speech synthesis is also employed to provide our customers with a broad array of self-service options. Our e-mail support service provided through Up--Stream takes advantage of advanced automation tools as well. In 2003, we began routing our e-mail communications, as well as about 10% of our service calls to a communications center in India to improve response time and quality while reducing overall costs.

        Ticketing and other fulfillment services are performed by E-travelexperts, or ETX, located in Minnesota utilizing a highly automated process. ETX provides these services under a five-year agreement expiring December 31, 2006 and, like Up--Stream, prices their services on a per ticket basis. We believe our customer support functions provide high levels of productivity and customer satisfaction. In addition, based on our pricing structure with our providers, we believe we are able to achieve costs per ticket that are among the lowest in the industry. As we grow our merchant hotel business, we have also contracted with ETX to provide secondary support for more involved service calls relating to hotelier questions and customer issues that involve hotel or billing issues.

Corporate Travel

        In September 2002, we launched Orbitz for Business, the first corporate product offered by an online travel agency, in response to growing demand for corporate travel solutions that provide lower transaction costs, lower average ticket price, high degree of price transparency, access to a wide choice of low fares, and a superior, automation-enhanced service experience. Orbitz for Business offers companies the same functionality and ease of use that we offer for leisure bookings, while adding functionality and service features that address the needs of both business travelers and the corporate travel managers who administer corporate travel policies.

        Orbitz for Business is a full service travel management program that provides three levels of service: a) online bookings, b) 24 hours a day, seven days a week reservation and service support and c) premier travel services. Our online offering includes the corporate booking tool as well as access to data reports and program administration tools. We provide corporate customers with direct access to a team of highly skilled corporate travel agents for reservations and support 24 hours a day, seven days a week. In addition, our care team provides premier services, such as upgrades and preferred seat unblocking services, to senior executives and frequent travelers.

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        Orbitz for Business also includes the following corporate travel features:

•

full integration of corporate negotiated fares and rates in our booking path;



•

travel arranger functionality, which allows personal assistants to manage travel on behalf of corporate employees;



•

functionality designed to control travel policies in more highly managed corporate environments, including the ability to track and report reasons for employees not choosing the lowest available fare and the ability to limit availability displays to only those suppliers with which the corporation has a preferred relationship; and



•

consolidated data reporting, which helps corporations track travel spending and support negotiations with suppliers.

        We derive revenues from Orbitz for Business through various levels of service fees charged for making or changing online or offline reservations as well as from transaction fees paid to us by suppliers.

        Since the introduction of Orbitz for Business, we continue to enroll small and large companies, including Fortune 500 firms. According to industry analysts, corporate online bookings are expected to more than double between 2003 and 2008. We intend to develop new features and enhancements to our product, refine our corporate service offer and make additional investments into sales and marketing to ensure that we compete effectively in this emerging market.

Technology Services

Supplier Link

        We have developed Supplier Link, which uses our technology platform to establish direct links with an airline's internal reservation system. This allows us to book airline tickets directly with the supplier, effectively bypassing the expensive GDSs for this portion of our airline bookings. Approximately 33% of our total paid air transactions for the year ended December 31, 2003 were processed using Supplier Link. Our Supplier Link technology enables airlines to avoid paying GDS booking fees on transactions processed using this technology, which can represent approximately 3-5% of the price of a ticket. Under this program, we believe that suppliers can save up to 70% compared to distribution costs through a GDS. We believe our Supplier Link technology is unique among our competitors.

        We have implemented Supplier Link for five of our charter associate airlines: American Airlines, Continental Airlines, Northwest Airlines, America West Airlines and US Airways. We intend to implement Supplier Link technology with additional airlines in the future.

Booking Engine Services

        In addition to generating revenues from Orbitz.com, we provide hosting services to airlines as a platform for their websites. This line of business is known as Orbitz Booking Engine Services, or BES. BES assists travel suppliers to sell travel products over their own websites and includes such services as flight availability and fares, bookings, seat selection, and management of frequent flyer accounts, including award travel bookings.

        In April 2002, we launched BES for American Airlines and in August 2002, we launched BES for Northwest Airlines. In December 2003, we extended our BES agreement with Northwest Airlines by two years to December 31, 2007. We derive our BES revenue through contractual hosting and support fees and, in some cases, through transaction fees when reservations are made or airline tickets are purchased using our services.

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Technology and Operations

        We believe that the design and quality of our technology differentiate our website and product offerings from those of our competitors. Our goal has been to build an innovative travel management tool for consumers and to build systems that will move traffic and transactions through a low-cost channel. We believe that our system will continue to support rapid growth and differentiate us from our competitors.

        Our hardware and software architecture is designed to maximize scalability, availability, reliability, efficiency, flexibility, manageability and security. By implementing many GDS-like features ourselves including computing fares, checking availability, and booking transactions directly with airline hosts, we have constructed our booking engine using Internet technologies rather than a system based around more traditional mainframe travel systems. In addition to powering our own website, our technology provides the critical booking engine functionality for Northwest Airlines' website, NWA.com, and for American Airlines' website, AA.com. Both of these systems utilize the same Orbitz hardware and software architecture.

Hardware

        Our focus on reducing costs per transaction keeps our technology team focused on the efficiency of our hardware. We make extensive use of commodity hardware, which allows for flexibility and processing power capable of handling large amounts of traffic and data at low unit costs. In addition, we have built monitoring and automation tools to help us monitor, detect and fix problems in our hardware and software, resulting in little downtime for maintenance and upgrades, while helping to keep costs of operating and maintaining the machines low despite increases in the number of machines. Hardware is monitored and managed 24 hours a day, seven days a week by our operations group, but our entire system requires a low person-to-machine support ratio. Our system's hardware and network architecture are designed to avoid single points of failure.

Software

        Our framework separates our application into three main layers: the booking engine layer, business logic layer and presentation layer or user interface. Each layer of our system is responsible for different functions and services and operates independently of all others. Because our system has been designed with few dependencies among internal components or on outside systems, we can be innovative and flexible in the design of new features and functionality, which can be added without requiring any changes or re-work to other layers of the system and with a minimum amount of end-user downtime.

        Our booking engine allows connections to multiple host systems including GDSs and airline host systems to place reservations. Our Supplier Link product uses our booking engine to provide connections to airlines' own systems, dramatically reducing the cost of distribution for tickets sold over those connections. Five such connections exist, and the flexibility afforded by our software allows adding more connections with no downtime in the booking engine. This same architecture and design has been used in the implementation of our hotel search and booking system. The booking engine is capable of dynamically adding new data sources for searching and new host systems for booking hotel transactions without requiring end-user downtime.

        Our booking engine uses ITA's search algorithm technology to search for low fares. We have developed our own proprietary support services and software architecture that enables us to use ITA's technology in connection with our booking engine. ITA's technology has been licensed to us on a non-exclusive basis under an agreement scheduled to terminate in 2007. Under this agreement and a related service level agreement, we pay ITA an annual license fee and in some circumstances additional fees, professional fees and service costs. ITA has agreed to provide us with most favored customer

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status. We have leveraged our advanced software and inexpensive hardware to provide our users several unique features, including Flex Search and Deal Detector.

        Our user interface is designed to support multiple distribution channels, including Web browsers, e-mail, wireless devices and customer service agents.

Security and Fraud Prevention

        Security has been and will continue to be a key consideration in the design and operation of our systems. Security is provided at multiple levels in both our hardware and software and our security systems for customer data are regularly validated by third party security evaluations.

        We bear financial risk from reservations placed with fraudulent credit card data. All claims of unauthorized charges are forwarded by customer support to our revenue protection department for investigation and resolution with the customer. To reduce our financial risk, we have implemented a number of anti-fraud measures and procedures. We rely on encryption and authentication technology for the secure transmission and validation of customer credit card information and other confidential information. Since servers can become vulnerable to viruses or harmful computer code transmitted over the Internet, we proactively check for intrusions into our infrastructure that could compromise the confidentiality of customer credit card data. We additionally use fraud prevention technology to identify potentially fraudulent transactions. In many cases, our verification process will include contacting the cardholder or the credit card issuer to determine whether a charge was authorized. The expansion of our Orbitz Merchant Hotel program heightens our exposure to credit card fraud since consumer credit card payments under that program are made directly to us, not to the hotel.

Consumer Marketing

        We use various forms of cost-effective online marketing, including advertising on content sites and placement on comparative shopping tools as well as on search engine websites such as Google and Overture. We expect to continue to use online advertising as our primary marketing vehicle. A smaller portion of our marketing budget is dedicated to traditional advertising such as TV, primarily cable, and print publications. Finally, our charter associate airlines support our marketing efforts with in-kind marketing support that is primarily directed toward support of our sales promotion and public relations activities. Our marketing initiatives are subject to strict cost performance and measurement processes.

        We attract first-time purchasers and convert them to repeat customers by focusing on highly efficient e-mail and search engine marketing. Our retention efforts are further enhanced by segmentation and database mining techniques that recognize our best customers and seek to motivate our newest ones. Our cross-selling techniques on and off the website seek to expand the range of products purchased by each customer on Orbitz. We believe that our innovative customer support and customer care programs also engender loyalty.

        Our marketing efforts employ a comprehensive array of analytical tools that measure our spending effectiveness. We use these tools to ensure that we stay focused on achieving a high return on our marketing investment. We believe that focusing on performance-based marketing techniques and the financial implications of our marketing efforts is an important factor in pursuing our goal of profitable growth.

Consumer Advisory Board

        We are committed to providing consumers with industry-leading functionality and ease-of-use. We have invited several persons with backgrounds in consumer affairs, e-commerce and travel to serve on our Consumer Advisory Board. The Board meets regularly and makes recommendations to the senior management team on issues related to our products, privacy and security, industry trends, regulatory

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matters and methods of improving our products and services. We believe this is an important aspect of our goal of serving the needs of our customers. There are four people on our Consumer Advisory Board. Cornish Hitchcock is an attorney with more than 20 years of experience who advocated the rights of airline passengers at the Aviation Consumer Action Project (ACAP) and Public Citizen, two national consumer organizations. Esther Dyson is the Chairman of EDventure Holdings, which publishes a monthly computer-industry newsletter and sponsors two of the technology industry's premier annual conferences. John Levine is a consultant in the software industry, author of Internet for Dummies and has served as a board member for a user advocacy group, the Coalition Against Unsolicited Commercial E-Mail. Michael Hall is the corporate travel manager for Johnson Controls, Inc., a founding member of the Wisconsin chapter of the Association for Corporate Travel Executives and a member of the National Business Travel Association.

Customers

        Since launching our website in June 2001, we have experienced significant growth to become the third largest online travel company based on gross travel bookings. Since our launch, we have completed over 26 million travel transactions. Our customer base is highly fragmented with no meaningful customer concentration.

Suppliers

        We have distribution and marketing agreements with numerous airlines, lodging companies, rental car companies and other travel suppliers. These agreements enable us to offer our consumers what we believe to be the most comprehensive selection of low fares generally available to the public and a wide array of competitive rates on other travel products. The airline charter associate agreements in place with numerous carriers ensure that we have access to the lowest fares generally available to the public, including those available on the airlines' own websites. In exchange, our airline charter associates benefit from our low-cost distribution model, access to our broad customer base and our unbiased display of air travel products. Our airline charter associate agreements with our Founding Airlines are terminable by each of them upon 30 days notice to us, subject to the restriction set forth in the stockholders agreement that such agreements or similar commercial agreements not be terminated for a period of two years from the date of our initial public offering, and the terms of our agreements with other suppliers generally expire within one to two years. Our hotel agreements include (1) merchant hotel contracts with certain hotels, hotel management groups and hotel chains that give us access to discounted negotiated rates that we then mark-up and sell to consumers on a prepaid basis; (2) an agreement with Travelweb that provides us with discounted, prepaid rates from thousands of hotels; and (3) agreements with certain hotel chains which provide us with commissions on all retail transactions. Our car rental agreements provide us with access to the lowest rates on any third-party site.

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The table below lists some of the major suppliers with whom we have distribution or marketing agreements:

Competitors

        The travel market is rapidly evolving and intensely competitive, and we expect competition to increase. We compete with a variety of companies with respect to each product or service we offer, including:

•

InterActiveCorp, an interactive commerce company, which owns or controls numerous travel-related enterprises, including Expedia, an online travel agency, Hotels.com, a distributor of online lodging reservations, Hotwire, a wholesaler of airline tickets, lodging and other travel products, and Ticketmaster and Citysearch, both of which offer destination information and tickets to attractions;



•

Sabre Holdings, which owns Travelocity, an online travel agency, GetThere, a provider of online corporate travel technology and services, and the Sabre Travel Network, a GDS;



•

Cendant, a provider of travel and vacation services, which owns or controls the following: Galileo International, a worldwide GDS; Cheap Tickets, an online travel agency; Lodging.com, an online distributor of hotel rooms; Howard Johnson, Ramada Inns, and other hotel franchisors; Avis and Budget car rental companies; Travelport, a provider of online corporate travel services and other travel-related brands;



•

other consolidators and wholesalers of airline tickets, lodging and other travel products, including priceline.com and Travelweb;



•

travel agencies targeting the corporate market, such as American Express, Navigant, TQ3/Maritz, World Travel Partners and Carlson Wagonlit, which compete against our Orbitz for Business service;



•

other local, regional, national and international traditional travel agencies servicing leisure and business travelers; and

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•

operators of other GDSs, which control the computer systems through which travel reservations historically have been booked.

        We compete on the basis of ease of use, customer service and satisfaction, price, availability of product type or rate, service, amount and accessibility of information and breadth of products offered. As the demand for online travel products grows, we believe that the range of companies involved in the online travel products industry, including traditional travel agencies, travel industry information providers, online portals and e-commerce providers, will increase their efforts to develop products that compete with our website. Many travel suppliers, such as airlines, lodging, car rental companies and cruise operators, also offer and distribute travel products, including products from other travel suppliers, directly to the consumer through their own websites. We believe that our comprehensive service offerings, innovative technology and focused customer support will continue to help us compete effectively in the travel products market. However, we cannot assure you that our online operations will continue to compete successfully with any current or future competitors.

Intellectual Property

        We protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws and through the domain name dispute resolution system. In order to limit access to and disclosure of our proprietary information, all of our employees have signed confidential information and invention assignment agreements, and we generally enter into nondisclosure agreements with third parties. We cannot provide assurance, however, that the steps we have taken to protect our intellectual property rights will adequately deter infringement or misappropriation of those rights. Particularly given the international nature of the Internet, the rate of growth of the Internet and the ease of registering new domain names, we may not be able to detect unauthorized use of our intellectual property or take enforcement action.

        From time to time, in the ordinary course of our business, we have been subject to legal proceedings and claims relating to the intellectual property rights of others, and we expect that third parties will continue to assert intellectual property claims against us. These claims and any resultant litigation could subject us to significant liability for damages. In addition, even if we prevail, the litigation could be time consuming and expensive to defend and could affect our business materially and adversely. Any claims or litigation from third parties may also limit our ability to use various patented business and data processes and hardware systems, service marks, trademarks, copyrights, trade secrets and other intellectual property subject to these claims or litigation, unless we enter into license agreements with the third parties. However, these agreements may be unavailable on commercially reasonable terms, or not available at all. Furthermore, the validity of any patents that we may receive in the future may be challenged if such patents are asserted against third parties.

Government Regulation

        We must comply with laws and regulations relating to our sales activities, including those prohibiting unfair and deceptive practices and those requiring us to register as a seller of travel products, comply with disclosure requirements and participate in state restitution funds. In addition, many of our travel suppliers are heavily regulated and we are indirectly affected by such regulation.

Travel Industry Regulation

        As a travel company selling air transportation products, we are subject to regulation by the Department of Transportation, or DOT, which has jurisdiction over economic issues affecting the sale of air travel, including consumer protection issues and competitive practices. The DOT has the authority to enforce economic regulations, and may assess civil penalties or challenge our operating authority. To the extent we sell travel products other than air transportation, we remain subject to

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regulation by the Federal Trade Commission, which has jurisdiction over a wide range of advertising, marketing and other consumer protection areas.

Antitrust Regulation

        Our Founding Airlines or their affiliates, own approximately 68% of our outstanding common stock, compete with each other in the operation of their own businesses. As a result, we may continue to be subject to antitrust scrutiny, both at the federal level by the Department of Justice, or DOJ, and at the state level by Attorneys General of the various states, although there are not currently any pending federal or state reviews of which we are aware. In July 2003, the DOJ concluded its three-year examination of our business and operations. The scope of the investigation included an examination of various provisions contained within the charter associate agreements and a search for evidence of any anti-competitive effect on the marketplace and competition, as well as a search for evidence of coordination among our Founding Airlines. In closing its investigation, the DOJ affirmed that they had found no evidence that either the formation of Orbitz or the terms of the charter associate agreements has harmed consumers or competition.

GDS Regulation

        On December 31, 2003 the DOT completed rulemaking proceedings to revise the regulations governing GDSs. The result of the rulemaking was to completely deregulate the GDS industry after a short transition period which ends July 31, 2004.

Internet Regulation

        We must also comply with laws and regulations applicable to businesses engaged in online commerce. An increasing number of laws and regulations apply directly to the Internet and commercial online services. Moreover, there is currently great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. It is possible that laws and regulations may be adopted to address these and other issues. Further, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws. New laws or different applications of existing laws would likely impose additional burdens on companies conducting business online and may decrease the growth of the Internet or commercial online services. In turn, this could decrease the demand for our products or increase our cost of doing business.

        Federal legislation imposing limitations on the ability of states to impose taxes on Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, which was extended by the Internet Nondiscrimination Act, exempted certain types of sales transactions conducted over the Internet from multiple or discriminatory state and local taxation through November 1, 2003. The majority of products and services we sell are already taxed: hotel rooms and car rentals at the local level, and air transportation at the federal level with state taxation preempted. Nevertheless, failure to renew this legislation could allow state and local governments to impose additional taxes on some aspects of our Internet-based sales, and these taxes could decrease the demand for our products or increase our cost of operations.

International

        We may become subject to the laws and regulations of other countries, including with respect to transportation, privacy and consumer and online regulation. These may impose additional costs or other obligations on us.

Future Regulation

        Congress, the DOT and other governmental agencies have under consideration, and may consider and adopt new laws, regulations and policies regarding a variety of matters that could affect our business or operations. We cannot predict what other matters might be considered in the future by Congress, the DOT or such other agencies, nor what the impact of this regulation might be on our business.

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Employees

        At of December 31, 2003, we employed 308 persons on a full-time basis and 16 individuals as interns. None of our employees is represented by collective bargaining agreements. We have not experienced any work stoppages and believe our relationship with our employees to be good.

Public Filings

        Copies of the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are made available free of charge through the Company's web site at www.orbitz.com as soon as reasonable practicable after we electronically file them with the SEC.

Risks Related To Our Business

        Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange Commission are certain risks and uncertainties that we believe could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report.

        Because we have a limited operating history, it is difficult to evaluate our business and prospects.

        Our business began operations in February 2000 and we launched our online travel service in June 2001. As a result, we have only a limited operating history from which you can evaluate our business and our prospects. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving industries, such as the online travel industry. Some of these risks relate to our ability to:

•

attract and retain customers on a cost-effective basis;



•

expand and enhance our service offerings;



•

operate, support, expand and develop our operations, our website, our software and communications and other systems;



•

diversify our sources of revenue;



•

maintain adequate control of our expenses;



•

raise additional capital;



•

respond to technological changes;



•

respond to litigation;



•

respond to regulatory changes or demands; and



•

respond to competitive market conditions.

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

We have a history of operating losses and may incur losses in the future.

        Since our inception in February 2000, we have reported operating losses each year. Our operating losses were $42.9 million from the period of inception through December 31, 2000, and $105.5 million, $18.9 million and $16.9 million for the years ended December 31, 2001, 2002, and 2003, respectively. We may continue to incur operating losses, and we cannot assure you that we will be profitable in future periods. Historically, most of our financing came through contributions from our Founding

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Airlines and their affiliates. The Founding Airlines and their affiliates have no obligation to make further investments in us, and we do not anticipate that they will do so.

        Under our business plan, we will continue to incur significant sales and marketing expenses to expand our customer base. Accordingly, we will need to increase our revenues at a rate greater than our expenses to maintain profitability. We cannot predict whether we will maintain profitability in future periods. If our business does not expand enough to increase our revenues sufficiently, or even if our business does expand but we are unable to manage our expenses, we may not sustain profitability in future periods.

        Our growth cannot be assured. Even if we do experience growth, we cannot assure you that we will grow profitably.

        Our business strategy is dependent on the growth of our business. For us to achieve significant growth, consumers and travel suppliers must accept our website as a valuable commercial tool. Consumers who have historically purchased travel products through traditional commercial channels, such as using local travel agents and calling suppliers directly, must instead purchase these products on our website. Similarly, travel suppliers will also need to accept or expand their use of our website and to view our website as an efficient and profitable channel of distribution for their travel products.

        Our growth will depend on our ability to broaden the range of travel products we offer. For the years ended December 31, 2003 and 2002, we derived 66% and 76%, respectively, of our revenues from airline ticket sales. Our business strategy is dependent on expanding our revenues from lodging, car rentals, cruises, vacation packages, corporate travel and other travel related products. Key components of this strategy include the growth of our hotel business, particularly our Orbitz Merchant Hotel program, and the dynamic packaging product that we have developed. See "—Our business plans call for the significant growth of our hotel business, and we may be unsuccessful in managing or expanding that business" and "—If we are unable to improve the competitiveness of our hotel inventory from Travelweb, or supplement it with Orbitz Merchant Hotel inventory, our business may suffer." We cannot assure you that our efforts will be successful or result in increased revenues, higher margins or continued profitability.

        Our growth is also dependent on our ability to broaden the appeal of our website to business and other travelers. Although we launched an Orbitz for Business service directed at corporate users in September 2002, we have limited experience with corporate travel, and our ability to offer products and services that will attract a significant number of business travelers to use our services is not certain. If any of these initiatives is not successful, our growth may be limited and we may be unable to maintain profitability.

        Our plans to pursue other opportunities for revenue growth and cost reduction, which we describe in "Business—Strategy," are at an early stage, and we cannot assure you that our plans will be successful or that we will actually proceed with them as described.

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

        We rely on charter associate agreements or other participation or commission agreements with our airline suppliers, and these agreements contain terms that could affect our access to airline inventory and reduce our revenues. In particular, our charter associate agreements with our Founding Airlines, which accounted for approximately 71% of our air supplier transaction fees during the year ended December 31, 2003, are terminable by each of the Founding Airlines upon 30 days notice to us, subject to the restriction set forth in the stockholders agreement that such agreements or similar commercial agreements not be terminated for a period of two years from the date of our IPO. Most of the remaining relationships we have with airline suppliers are freely terminable by the supplier, or will

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become so within the next year. None of these arrangements is exclusive and airline suppliers could enter into, and in some cases may have entered into, similar agreements with our competitors.

        In addition, we are dependent for lodging and car rental inventory on arrangements with our lodging and car rental suppliers under which these suppliers provide us inventory and compensate us on a commission basis. These arrangements are short-term in nature and in some cases unwritten.

        We cannot assure you that our arrangements with travel suppliers will remain in effect or that any of these suppliers will continue to supply us with the same level of access to inventory of travel offerings in the future. If our access to inventory is affected, or our ability to obtain inventory on favorable economic terms is diminished, it could have a material adverse effect on our business, financial condition or results of operations.

        We are controlled by our Founding Airlines or their affiliates, who may have strategic interests that differ from those of our other shareholders.

        Our Founding Airlines or their affiliates hold a majority of our voting power and their designees comprise a majority of our board. Our Founding Airlines may have strategic interests that are different than ours. Our Founding Airlines or their affiliates own, in the aggregate, approximately 68% of our outstanding common stock, and, through the exercise of certain supermajority voting rights accorded to them in our corporate governance documents, control approximately 96% of the voting power of all shares of voting stock.

        In addition, our Founding Airlines have filed a Schedule 13G with the Securities and Exchange Commission to report their Orbitz holdings as a group. As a result, under a "controlled company" exception to Nasdaq's independence requirements, we are exempt from an obligation to maintain a majority of independent directors on our board and instead have a majority of directors affiliated with our Founding Airlines. In addition, directors affiliated with our Founding Airlines continue to oversee the director nomination and executive compensation functions.

        For the foreseeable future, to the extent that some or all of our Founding Airlines or their affiliates vote similarly, they will be able to exercise control over all matters requiring approval by the board of directors or our shareholders, and this power may be expected to continue even if our Founding Airlines or their affiliates own a minority economic interest in Orbitz. As a result, they or their affiliates will be able to:

•

control the composition of our board of directors, including the right to select six of the nine members of our board (one of whom is our chief executive officer) and the ability to nominate the remaining three directors and vote their shares to elect (together with the holders of Class A common stock) them;



•

control our management and policies; and



•

determine the outcome of significant corporate transactions, including changes in control that may be beneficial to shareholders.

        In addition, our corporate governance documents and our stockholders agreement with our Founding Airlines or their affiliates provide them with a greater degree of control and influence in the operation of our business and the management of our affairs than is typically available to shareholders of a publicly-traded company. In particular, our corporate governance documents and the stockholders agreement with our Founding Airlines or their affiliates provide that:

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Orbitz cannot issue common stock or other securities without the vote of two-thirds of its directors and, for issuances of securities with voting rights greater than one vote per share, without the further approval of the holders of three-fourths of the voting power of the Class B common stock then outstanding entitled to supervoting rights;

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•

Orbitz cannot enter into any transaction involving any merger, acquisition, consolidation, reorganization or issuance of securities as a result of which our Founding Airlines or their affiliates would own less than a majority of the voting power of the successor or surviving entity, without the approval of the holders of two-thirds of the voting power of the Class B common stock then outstanding entitled to supervoting rights; and



•

Orbitz cannot sell, or contract for the lease or license of, all or substantially all of its assets or sell, or contract for the lease or license of, all or a substantial portion of the assets or business of any of its controlled affiliates, if the assets sold, leased or licensed generate more than 20% of its consolidated net revenues or consolidated income, without the approval of the holders of two-thirds of the voting power of the Class B common stock then outstanding entitled to supervoting rights.

        These restrictions could keep us from pursuing relationships with strategic partners and from raising additional capital, which could impede our ability to expand our business and strengthen our competitive position. These restrictions could also limit shareholder value by preventing a sale of Orbitz.

        We are controlled by our Founding Airlines and conflicts of interest with and among them could impede our business strategy and hurt our business.

        Our Founding Airlines and their affiliates will be able to act in each of their own interests, which may conflict with, or be different from, the interests of other shareholders who do not maintain a commercial relationship with Orbitz. For the foreseeable future, we expect a majority of our directors will be senior employees of our Founding Airlines. Our Founding Airlines compete with each other in the operation of their respective businesses and can be expected to have individual business interests that may conflict with those of the other Founding Airlines. Their differing interests could make it difficult for us to pursue strategic initiatives that require consensus among our Founding Airlines. In addition, our certificate of incorporation and stockholders agreement expressly provide that holders of our Class B common stock may have other business interests and may engage in any other businesses, including businesses similar to ours, except for restrictions on specified investments that expire two years after our IPO. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects.

        Our relationships with our Founding Airlines have subjected Orbitz to significant litigation and regulatory scrutiny, which may continue.

        As an enterprise founded and controlled by horizontal airline competitors, we may be subject to ongoing regulatory scrutiny of our business to a degree that is not likely to be experienced by our competitors.

        During the last several years, we have been reviewed or investigated by a number of federal and state regulators. In July 2003, the Antitrust Division of the Department of Justice completed an investigation of us and our Founding Airlines that it commenced in 2000 and concluded that our business has not harmed consumers or reduced competition. In late 2002, a commission created by Congress to study the economic status of travel agents and impediments to the flow of travel information concluded its review, which included an examination of our impact on traditional travel agents and consumers, without taking action adverse to us. In December 2002, the Department of Transportation issued the results of a review of our business and operations, and did not find evidence that our operations had an anti-competitive effect on the marketplace for air travel. Our business and operations were under longstanding informal review by a working group of Attorneys General from various states, the last of which ended their inquiry in July 2003 without taking action adverse to us.

        We remain at risk that other or similar regulatory investigations could commence in the future. At any time, the outcome of investigations and other regulatory scrutiny could lead to compulsory changes

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to our business model, industry agreements, conduct or practices or our relationships with our Founding Airlines and governmental or additional private lawsuits against us, any of which could materially harm our revenue, impair our ability to provide access to the broadest range of low fares and impact our ability to grow and compete effectively.

        We expect that our competitors will continue to engage in lobbying and other activities, with the objective of generating negative publicity about us and pressing legislation or regulation that could be harmful to us. These activities may result in private or governmental litigation against us, further investigations of our business by various governmental authorities or the adoption of laws and regulations that make it more difficult for us to compete effectively, particularly as we implement new initiatives designed to enhance our competitive position.

        The continued involvement of our Founding Airlines on our board of directors and as shareholders may result in litigation and regulatory scrutiny of our business. For example, we are a defendant in a lawsuit filed in April 2002 by a group of offline travel agents against Orbitz and several of our Founding Airlines. See "Item 3. Legal Proceedings." The plaintiffs in this case allege anti-competitive conduct and seek treble damages and injunctive relief, including:

•

the dissolution of Orbitz or, in the alternative,



•

that the defendant airlines make all their fares available to offline travel agents, all Founding Airlines or their affiliates sell their stock in Orbitz, and all our airline charter associate agreements be revised.

        Although unsuccessful, offline travel agents also petitioned the Department of Transportation, or DOT, for similar injunctive relief in March 2002 alleging anti-competitive practices. Our co