Travelocity.com Inc.

founded: 1996

Contact Information:

headquarters: 15100 trinity blvd.
fort worth, tx 76155 phone: (817)785-8000 url: http://www.travelocity.com

OVERVIEW

Travelocity.com Inc. is the Internet's leading travel service provider and the sixth-largest travel agency in North America, offering bargains, one-stop shopping, and reservations on plane travel through more than 700 airlines, some 55,000 hotels, more than 50 rental car companies, 8 major cruise lines, and more than 6,500 vacation packages. Other travel features include MapQuest, Frommers, Lonely Planet, World Travel Guide, Meterologix, and an online video library on many vacation destinations.

The Travelocity.com site is offered in English, German, and French and, in addition to serving the United States, the company also offers Web sites tailored to customers in Canada, the United Kingdom, Asia, and Europe. Although competitor Orbitz, a consortium of airlines joined to provide online airfare deals, is gaining fast on Travelocity's lead, the online travel service still boasts an industry-leading 32 million members who have registered free of charge on the Web site and had gross travel bookings of $3.1 billion in 2001. Travelocity.com Inc.'s goal is to increase the power and efficiency of its online shopping service and continue to promote customer satisfaction and loyalty through its customer service centers. Travelocity.com Inc.'s parent company, Sabre Inc. with a 70 percent share in the company, bought the remaining 30 percent ownership of Travelocity in early 2002.

COMPANY FINANCES

Travelocity.com Inc. enjoys a diversified revenue mix, with 2001 revenues consisting of approximately 48.8 percent in air transactions; 19.5 percent in non-air transactions, such as hotels, car rentals, cruises, and vacation packages; 20.8 percent in advertising; and 10.9 percent in other revenues. Travelocity has enjoyed financial growth even through the tough economic climate, particularly suffered by the travel industry, in late 2001. Sales for 2001 totaled $301.8 million, up 56.6 percent from sales of $192.7 million in 2000 and a big jump from the company's 1999 sales of $90.9 million.

Travelocity stock has varied from a low of $11.69 to a high of $37.90 over a 52-week period. No cash dividends were declared or paid during 2000 or 2001, and the company does not intend to pay cash dividends in the foreseeable future but will use any future earnings to finance business growth.

ANALYSTS' OPINIONS

Since Travelocity.com Inc. has established itself as a leader in the online travel agency field, many analysts consider it an attractive stock. Thomas Weisel Partners reported in late 2001 that the stock was an attractive buy due to its 35 percent share of the online agency market, $2.5 billion of travel sold in 2000, and its surprisingly positive outlook for 2002. Weisel also noted in early 2002 that acquiring the remaining 30 percent share of Travelocity was critical for Sabre. Some analysts had a slightly different view, with Robertson Stephens noting in late August of 2001 that although the company reported better-than-expected results, the increasingly competitive market, including Orbitz and Expedia, may negatively affect Travelocity's market share. Nonetheless, they remained positive about the company's long-term outlook. Now fully owned by Sabre, Travelocity's position as a leader in the travel segment seems further cemented.

HISTORY

Travelocity's innovation and leadership in the travel industry began with its parent company, Sabre, who launched the online travel agency with 70 percent ownership and went on to fully acquire it in 2002. Sabre has a long history in revolutionizing the travel business, beginning with their first computer reservation system developed and implemented in 1960, when the first state-of-the-art Sabre system was installed on two IBM computers and was able to process some 84,000 telephone calls each day. In 1964 the final Sabre system was complete: the biggest, private, real-time data processing system with a telecommunications network stretching across the entire United States and providing huge savings for American Airlines, giving it a competitive boost for the next five to seven years.

The next decade saw Sabre upgrading its system and consolidating its computer facilities in Tulsa, Oklahoma, where all of American Airlines' data processing was now handled. The Sabre system was eventually utilized by 86 percent of the top 100 agencies who used automated systems in the most competitive markets. By 1978 the Sabre system had stored 1 million fares.

Sabre expanded internationally when Canadian travel agents began using the Sabre computer reservation systems in 1983. The following year, the company introduced the ground-breaking Bargain Finder pricing, a low-fare search feature enabling travel agents to advise which class of service was the cheapest for the flight booked. EasySabre was launched in 1985, enabling consumers with personal computers to access the Sabre system online to book air travel, hotel, and automobile rental services. The next year, Sabre installed the first automated yield management system for use by the airline industry. The system was designed to generate prices of airline seats for the optimum revenue per flight. Sabre also extended service into the United Kingdom around that time, a move that would herald Sabre's international growth in the next decade.

The company expanded its products and services to the airlines in the late 1980s, with consulting, systems management services, and software designed to aid yield management, crew scheduling, and revenue accounting. The Sabre system had, by then, grown to store 36 million fares. In 1992 the company introduced its Sabre AirFlite scheduling system and, in 1994, developed a systems for railroad reservations in France and later, the United Kingdom.

Sabre launched Travelocity.com in March 1996. The revolutionary Web site was the first to provide travel reservations and extensive destination and event details online. Travelocity was incorporated in September 1999. In 2000 the company merged with Preview Travel and began trading on the NASDAQ Stock Exchange under the symbol TVLY. Along with partner and leading direct marketer Otto Freizeit und Touristik GmbH, the company launched its Travelocity Europe in 2001, a multi-channel travel company that is one of the top European online Agencies. Travelocity.ca, a French and English language site, was also developed FOR Canadian customers.

In March 2002 Sabre Holdings Corporation purchased all the outstanding shares of common stock of Travelocity and became sole owner of the company. Travelocity's symbol, TLVY, was delisted from NASDAQ in April of that year and is now traded under the umbrella of parent company Sabre's symbol, TSG. In early 2002, Travelocity agreed to form a one-stop online travel site in Japan, Tabini. Some of the site's suppliers include Nippon Airways, Japan Airlines, United Airlines, Japan Air Systems, and a consortium of 13 other large international airlines.

STRATEGY

Travelocity.com Inc. seeks to leverage its existing strengths to become a world leader in travel products and services. The company's ultimate goal is to make shopping online for travel a better experience than in the physical world. With more consumers shopping online for travel, the company seeks to enhance their products, services, and features to take advantage of the growing market. With a highly recognizable brand name and 32 million members, the company is able to target customers via e-mail regarding private sales, special fares, and promotions. The company also made significant gains from its member base by the ability to supply key merchandising and advertising opportunities for their travel suppliers. Travelocity also plans to continue its global reach by utilizing Web sites tailored for specific international markets. They balance the risk in these markets by sharing investments with partners. The company stresses that its customer service efforts are key for maintaining customer loyalty.

In an effort to promote travel products and service and increase brand awareness, part of Travelocity's aims include entering into strategic relationships. With that in mind, Travelocity acquired Site59.com, a private online travel service with merchant hotel and vacation packages, as a subsidiary in 2002. The company also has exclusive agreements with online giants America Online (AOL) and Yahoo!. Travelocity also has agreements with a number of their travel suppliers, which include major airlines. With its Web sites now available to about 50 percent of the U.S. wireless market, the company has entered into agreements with AT&T Wireless, Sprint PCS, Palm, and Nextel Communications to keep their brand in people's hands everywhere they go.

FAST FACTS: About Travelocity.com Inc.

Ownership: Travelocity.com Inc. is a wholly-owned subsidiary of Sabre Inc., a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: TSG

Officers: William J. Hannigan, Chmn., 42; Sam Gilliland, Pres. and CEO; Eric J. Speck, EVP and Chief Mktg. Officer; Ramesh K. Punwani, CFO and EVP, 59, 2001 base salary $216,000; James D. Marsicano, EVP, Sales and Services, 59, 2001 base salary $243,230; Andrew B. Steinberg, EVP, Admin., Gen. Counsel, and Corp. Sec., 43, 2001 base salary $233,200; Christopher McAndrews, SVP, Leisure Travel and Media, 38, 2001 base salary $235,224; Peter Cardell, SVP, Transportation and Hospitality, 51; Susan Carmichael, SVP of HR, 49

Employees: 1,554

Principal Subsidiary Companies: Travelocity.com Inc. is wholly owned by parent Sabre Inc., a travel reservations and information technology services company. In addition to Travelocity, Sabre also owns GetThere, Inc. with the corresponding travel Web site GetThere.com.

Chief Competitors: Travelocity.com rivals other companies in the extremely competitive online travel services market, including Expedia, and agencies formed by travel suppliers such as Orbitz, Hotwire, and Hotel Distribution Systems. The company also faces additional competition from wholesalers and consolidators of airline tickets and related travel services; traditional local, regional, national, and international travel agencies; and airlines, hotels, and auto rental companies, some of whom are suppliers to Travelocity.com, via their own Web sites.

INFLUENCES

Travelocity has benefited from efforts to broaden its product offerings, including engaging in partnerships and strategic relationships with travel partners, online vendors, and a variety of organizations. The success of international, market-based sites has spurred the company to continue to seek growth in these areas, with the intended goal of becoming a leader worldwide.

One of Travelocity's biggest challenges is the rapid growth and increasing competition in the online travel services market from rival online companies and even travel partners. Some of Travelocity's competitors have recently made use of advanced "off-host" technology, which has spurred the company to meet or exceed those technological advancements. As a result, Travelocity launched the Intelli-Deck technology, designed to enhance the purchase of cruise vacations through viewable deck plans and interactive tours of the ships. By constantly improving products and services and continuing to focus on brand awareness, the company hopes to keep its leadership status in the field.

In late May 2002, the company launched a new $40 million television, radio, print, and online advertising campaign called "Travelocity Can." The ads focus on the travel possibilities available through the Web site that they suggest is unparalleled in the industry: more like a "travel dream factory" servicing all travel needs at a highly individual level. The ads feature real people describing how Travelocity has helped them plan their dream trips.

CURRENT TRENDS

The company intends to continue to utilize technology to enhance their online services and user friendliness. Travelocity gets its booking capability from utilizing Sabre's technology, with its long history of innovation. Along these lines, the company implemented a new fare search technology that will aid customers in finding even lower fares and increase the range and scope of fare searches by looking for combinations of "local" fares that outmatch traditional, published, nonstop or connecting fares between the user's requested cities. The new search is able to check millions of fare combinations, ensuring the best options for the customer.

With existing partnerships in place with such organizations such as HRN, AOL, Yahoo!, AT&T Wireless, Sprint PCS, Palm, Nextel Communications, and companies in international markets, Travelocity continues to pursue such beneficial alliances and diversifying in new markets worldwide. The company is also seeking growth through recent acquisitions and mergers.

PRODUCTS

The company offers a variety of travel products and services, including airfare, hotel, car rental, cruises, and vacation packages. The services may be accessed via the company's Web site or via online providers, including AOL. Additionally, Travelocity is also able to target customers with its newsletters, including INSIDER, which has a bi-weekly circulation of about nine million, and REAL DEALS with a monthly circulation of about nine million.

CHRONOLOGY: Key Dates for Travelocity.com Inc.

1960:

The first Sabre computer reservations system is installed

1972:

The upgraded Sabre system handles all of American Airlines' data processing

1976:

The first Sabre system is installed in 130 travel agencies

1978:

The Sabre system stores 1 million fares

1984:

Bargain Finder, the first low-fare search system is introduced

1985:

EasySabre, the first online consumer reservations system, is implemented

1996:

Travelocity.com is launched

1999:

Travelocity is incorporated

2000:

Travelocity merges with Preview Travel to become the number one online travel destination; Travelocity goes public on NASDAQ under the symbol TVLY

2001:

Travelocity Europe and Travelocity.ca are launched

2002:

Sabre acquires the remaining 30 percent of Travelocity that it did not previously own; Travelocity acquires Site59.com

Among its new developments, a deal was struck with Walt Disney Parks and Resorts in early 2002 that allows Travelocity to market Disney theme-park tickets and hotel rooms directly from Disney, bypassing third-party wholesalers. Users can buy Disney vacation products and bundle them with other Travelocity products, including airline tickets, under the company's Travelocity Vacations. This may allow the company to offer better prices and access to Disney resorts, parks, and hotels and is the first such agreement made by an online travel vendor with Disney. In a related move, Travelocity entered into a marketing agreement with the Orlando/Orange County Convention & Visitors Bureau, Inc. to create a one-stop shopping service dubbed the "Orlando Super Site" within the Travelocity.com Web site, also accessible through www.orlandoinfo.com, for travelers to the popular vacation destination.

CORPORATE CITIZENSHIP

After the September 11 disasters, Travelocity and Sabre worked to help stranded travelers and local travel agencies. Sabre and its network suppliers worked overtime in New York and throughout the Northeast to reroute network traffic and offer alternative connections to the reservation system. The company also provided equipment, including software and office space in Manhattan to help displaced agencies get up and running again. Along with a major travel agency, Sabre participated in setting up and staffing the agency's government call center that would book flights for U.S. military troops for deployment. Within days after the attacks, Sabre designed and launched the Travel Bulletin Central (TBC) as an information source for stranded travelers that included travel alerts, restrictions, changes in security procedures, contact information, and answers to a variety of most-asked questions. Sabre also gave airlines booking fee credits for canceled flights in the following days, waived normal fees for accessing premium Sabre services through the end of 2001, and aided airlines in calling for U.S. government support of the travel industry.

GLOBAL PRESENCE

Travelocity has created Web sites specific to certain internationals markets, keeping in mind the distinctive cultures, travel purchasing, and supplier inventory in various regions of the world. The creation of a Canadian site, www.travelocity.ca, also brought arrangements with the Canadian Internet brands Yahoo! Canada and AOL Canada. The company also has agreements with various local customer service partners and agencies, enabling international customers to make reservations on the Travelocity Web site to pick up their tickets at participating Sabre travel agencies. With such a variety of channels, Travelocity has been able to make sales in more than 90 countries.

The company's joint ventures, Travelocity Europe, serving the growing European market, and Tabini, in Japan, has allowed Travelocity to extend its global reach, while spreading risk. Tabini, powered by the company's technology, offers booking on nearly all airlines serving Japan, more than 55,000 hotels, and more than 50 car rental companies in the region and worldwide. Additionally, Travelocity intends to join in another venture along with several airlines to create Zuji, offering a wide range of travel services serving the Asian-Pacific region beginning in 2002.

I DREAM OF VACATIONING

Travelocity.com ads launched in 2002 featured the theme of ordinary people doing the things that they only dreamed about, of course using the variety of products and services available on Travelocity's one-stop shopping site. For example, one of the ads, "Elephant," showed a customer riding on one of the African beasts rented through Travelocity.com. Travel tools like Dream Maps, are also featured, which offer a variety of destinations and flight fares for whatever budget is specified by the consumer. Intellideck is yet another innovative tool shown in the ads that allows customers to virtually "tour" a cruise ship so that they can book the perfect cabin on the perfect ship of their dreams. Maybe one day the virtual tour will replace the actual tour?

EMPLOYMENT

Travelocity.com Inc. employs some 1,554 people. None of the company's employees are represented by a labor union, and Travelocity considers relations with their employees to be good. In such a competitive field, the company places a priority on attracting qualified personnel and preserve good working relationships with them. Travelocity seeks a variety of resourceful professionals, including Internet application programmers, marketing and promotion specialists, travel industry relations leaders, database specialists, system integrators, designers, and project managers.

SOURCES OF INFORMATION

Bibliography

sabre home page, 2002. available at http://www.sabre.com.

travelocity.com home page, 2002. available at http://www.travelocity.com.

"travelocity.com inc." hoover's online, june 2002. available at http://www.hoovers.com.

"travelocity.com inc." gale group, june 2002. available at http://galenet.galegroup.com.

"travelocity.com to buy site59.com for $43 million." the wall street journal, 26 march 2002.

"travelocity.com to announce marketing pact with disney, cutting out third parties." the wall street journal, 11 february 2002.

"travelocity.com to create orlando super site; exclusive marketing agreement with orlando/orange county convention & visitors bureau, inc. means better deals and expanded orlando content on travelocity.com." pr newswire, 20 may 2002.

"travelocity and the richards group break new branding campaign: 'travelocity can'." pr newswire, 28 may 2002.

For an annual report:

on the internet at: http://www.sabre.comor write: sabre inc., 3150 sabre drive, southlake, texas 76092

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. travelocity.com inc.'s primary sics are:

4724 travel agencies

7375 information retrieval services

7812 motion picture, video tape production

also investigate companies by their north american industry classification system codes, also known as naics codes. travelocity.com inc.'s primary naics codes are:

512110 motion picture and video production

514191 online information services

561510 travel agencies