SABRE GROUP HOLDINGS INC, S-1/A, 1996-10-04

SABRE GROUP HOLDINGS INC
S-1/A, 1996-10-04
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996

REGISTRATION NO. 333-09747
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------------

AMENDMENT NO. 3

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------------

THE SABRE GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7375 75-2662240
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>

4255 AMON CARTER BOULEVARD
FORT WORTH, TEXAS 76155
(817) 931-7300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

MICHAEL J. DURHAM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE SABRE GROUP HOLDINGS, INC.
4255 AMON CARTER BOULEVARD
FORT WORTH, TEXAS 76155
(817) 931-7300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

---------------------

Copies to:

<TABLE>
<S> <C> <C>
Anne H. McNamara, Esq. John B. Brady, Jr., Esq. Andrew D. Soussloff, Esq.
Senior Vice President Debevoise & Plimpton Sullivan & Cromwell
and General Counsel 875 Third Avenue 125 Broad Street
AMR Corporation New York, New York 10022 New York, New York 10004
4333 Amon Carter Blvd. (212) 909-6000 (212) 558-4000
Fort Worth, Texas 76155
(817) 963-1234
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

---------------------

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE> 2
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold and offers to buy may not be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* and there shall not be any sale of these securities in any State in *
* which such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of such *
* State. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996

<TABLE>
<S> <C> <C>
LOGO 20,200,000 SHARES
THE SABRE GROUP HOLDINGS, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
</TABLE>

-------------------

Of the 20,200,000 shares of Class A Common Stock offered, 16,160,000 shares
are being offered hereby in the United States and 4,040,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting."

All of the shares of Class A Common Stock offered hereby are being issued
and sold by the Company. The Company is a wholly-owned subsidiary of AMR
Corporation and, upon completion of the Offerings, AMR will own 100% of the
outstanding Class B Common Stock of the Company, which will represent
approximately 84.2% of the economic interest in the Company (approximately 82.2%
if the Underwriters' over-allotment options are exercised in full). See "Use of
Proceeds" and "Relationship with AMR and Certain Transactions."

Holders of Class A Common Stock generally have rights identical to those of
holders of Class B Common Stock, except that holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to 10 votes per share on all matters submitted to a vote of
stockholders. Holders of Class A Common Stock are generally entitled to vote
with the holders of Class B Common Stock as one class on all matters as to which
the holders of Class B Common Stock are entitled to vote. Following the
Offerings, the shares of Class B Common Stock will represent approximately 98.2%
of the combined voting power of all classes of voting stock of the Company
(approximately 97.9% if the Underwriters' over-allotment options are exercised
in full). See "Description of Capital Stock."

Prior to the Offerings, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
of the Class A Common Stock will be between $20.00 and $23.00 per share. For
factors to be considered in determining the initial public offering price, see
"Underwriting."

Shares of Class A Common Stock are being reserved for sale to directors,
officers and employees of the Company, directors of AMR and certain other
persons at the initial public offering price. See "Underwriting." Such
directors, officers, employees and other persons will purchase, in the
aggregate, less than 10% of the Class A Common Stock offered in the Offerings.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.

The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "TSG," subject to official notice of issuance.

-------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total(3).......................... $ $ $
</TABLE>

- ---------------
(1) The Company and AMR have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."

(2) Before deducting estimated expenses of $1,350,000 payable by the Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 2,424,000 shares of Class A Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company has granted the
International Underwriters a similar option with respect to an additional
606,000 shares as part of the concurrent international offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."

-------------------

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
certificates for the shares will be ready for delivery in New York, New York on
or about , 1996, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
-------------------

The date of this Prospectus is , 1996.
<PAGE> 3

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED THROUGH THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, references
herein to the "Company" include The SABRE Group Holdings, Inc. and its
consolidated subsidiaries and, for any period prior to the July 2, 1996
reorganization (the "Reorganization") of the businesses of AMR Corporation
("AMR"), the businesses of AMR constituting The SABRE Group, an operating unit
of AMR.

THE COMPANY

OVERVIEW

The Company is a world leader in the electronic distribution of travel
through its proprietary travel reservation and information system, SABRE(R), and
is the largest electronic distributor of travel in the United States. In
addition, the Company is a leading provider of solutions to the airline industry
and fulfills substantially all of the data processing, network and distributed
systems needs of American Airlines, Inc. ("American") and AMR's other
subsidiaries.

The Company believes that its competitive strengths give it a leadership
position in its markets and a foundation from which to pursue further growth.
During the last 20 years, the Company has developed core competencies that
include a comprehensive knowledge of the travel industry, the capability to
perform high-volume, high-reliability, real-time transactions processing and
expertise in the application of operations research, information technology and
industrial engineering skills to solve complex operations problems. These core
competencies enable the Company to create an efficient electronic marketplace
for the sale and purchase of travel and to offer a broad and deep array of
technological solutions to the airline industry. In providing its products and
services, the Company operates one of the largest, privately-owned, real-time
transactions processing systems in the world in its underground central computer
facility (the "Data Center"), which is connected to over 120,000 computer access
terminals and operates 24 hours a day, seven days a week. The SABRE system
maintains over 50 million air fares (updated five times per business day),
processes an average of 93 million requests for information per day and has
processed up to 4,969 requests for information per second (in July 1996).

The Company has generated consistent annual revenue growth, from $1,097
million in 1991 to $1,530 million in 1995, and operating earnings growth, from
$220 million in 1991 to $380 million in 1995. A majority of the Company's
revenues, 59.1%, is attributable to bookings made by travel agents using SABRE.
The Company has had long-standing relationships with most of its travel agency
subscribers. For example, approximately 97% of the travel agency locations that
were SABRE subscribers at the beginning of 1995 were SABRE subscribers at the
end of 1995. In addition, a significant portion of the Company's revenues, 24.2%
in 1995, is derived from information technology solutions provided to American
and its affiliates. Such services are currently provided to American and its
affiliates pursuant to an Information Technology Services Agreement, dated as of
July 1, 1996 (the "Technology Services Agreement"), which has a term of 10 years
for most services (three and five years for other services). See "Relationship
with AMR and Certain Transactions -- Contractual Arrangements."

The Company's non-affiliated customer revenues have grown at a 13.5%
compound annual rate during the last five years, to $982 million in 1995, and
have grown from 53.9% of total revenues in 1991 to 64.2% in 1995. The Company
expects that the proportion of its revenues represented by non-affiliated
customer revenues will continue to increase. The Company has identified several
opportunities for future revenue growth, including increasing the use of SABRE
outside of the United States, offering new products in emerging distribution
channels, such as corporate direct distribution and the Internet, expanding
participation of travel providers in SABRE and providing technology solutions
products and services more broadly.

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<PAGE> 5

ELECTRONIC TRAVEL DISTRIBUTION

SABRE and other global distribution systems are the principal means of air
travel distribution in the United States and a growing means of air travel
distribution internationally. Through SABRE, travel agencies, corporate travel
departments and individual consumers ("subscribers") can access information on
and book reservations with airlines and other providers of travel and travel-
related products and services ("associates"). As of June 30, 1996, travel
agencies with more than 29,000 locations in over 70 countries on six continents
subscribed to SABRE, and more than 2.5 million individuals subscribed to
Travelocity(sm) and easySABRE(sm), the Company's consumer-direct products. SABRE
subscribers are able to book reservations with more than 350 airlines and, other
than through Travelocity, to make reservations with more than 55 car rental
companies and more than 190 hotel companies covering approximately 30,000 hotel
properties worldwide.

During 1995, more airline bookings in the United States were made through
SABRE than through any other global distribution system. The Company estimates
that in 1995 over 40% of all airline bookings made through travel agencies in
the United States were made through SABRE. In 1995, 65.8% of the Company's
revenues was generated by the electronic distribution of travel, primarily
through booking fees paid by associates.

INFORMATION TECHNOLOGY SOLUTIONS

The Company is a leading provider of solutions to the airline industry. The
Company also employs its airline expertise to offer solutions to other
industries that face similar complex operations issues, including the airport,
railroad, logistics, hospitality and financial services industries. The
solutions offered by the Company include software development and product sales,
transactions processing and consulting. The Company believes that its suite of
airline-related software solutions is the most comprehensive in the world. In
addition, pursuant to the Technology Services Agreement, the Company provides
data processing, network and distributed systems services to American and AMR's
other subsidiaries, fulfilling substantially all of their information technology
requirements. In 1995, 34.2% of the Company's revenues was generated by the
provision of information technology solutions.

MARKET POSITION AND STRATEGY

The Company intends to maintain its leadership positions and to expand its
product offerings in electronic travel distribution and information technology
solutions. The Company believes that it has many competitive strengths,
including (i) a strong market position as a world leader in, and the largest
provider in the United States of, the electronic distribution of travel, (ii)
established relationships with travel agencies and providers of travel products
and services, (iii) comprehensive product and service offerings in electronic
travel distribution and information technology solutions, (iv) a comprehensive
knowledge of the travel industry and (v) economies of scale and sizable
investments in its technological infrastructure and network. The Company intends
to use these strengths to achieve continued revenue and earnings growth. Key
components of this strategy include:

- INCREASING PENETRATION IN INTERNATIONAL TRAVEL DISTRIBUTION MARKETS. The
Company believes that the international market for travel and
travel-related products and services presents opportunities for the
Company to expand by building on its existing base in Europe and Latin
America and by pursuing additional opportunities in Asia. The Company
will pursue international opportunities directly and through the
formation of international alliances. The Company's revenues from its
travel distribution products outside the United States have grown at a
compound annual rate of 29.8% during the last five years, to $250
million in 1995.

- EXPANDING AND CUSTOMIZING ASSOCIATE PARTICIPATION. The Company plans to
continue to expand participation in SABRE by associates, such as air
charters, car rental companies, hotels, railroads and tour operators,
and has initiated an effort to increase the value provided

4
<PAGE> 6

to associates by tailoring available participation options to the needs of
different travel providers.

- ENHANCING THE VALUE OF THE TRAVEL DISTRIBUTION PRODUCT TO TRAVEL AGENTS.
The Company plans to maximize the value of its products to travel agents
by increasing the depth and breadth of information available through SABRE
and the ease of use and reliability of its products. The Company will also
continue to develop products to enhance the competitiveness of its travel
agent subscribers. For example, the Company has developed two user
interface products, Turbo SABRE(sm) and Planet SABRE(sm), that provide
travel agencies with greater productivity through data integration and
increased ease of use, respectively.

- PARTICIPATING IN EMERGING DISTRIBUTION CHANNELS. With products such as
Business Travel Solutions(sm) ("BTS"), which is scheduled for release in
the fourth quarter of 1996, and Travelocity, the Company intends to
continue to compete in emerging distribution channels, such as corporate
direct distribution, the Internet and computer on-line services.

- ENHANCING TECHNOLOGY AND OPERATING CAPABILITIES. The Company has budgeted
capital expenditures of over $210 million for 1996, which the Company
anticipates funding with operating cash flow. In addition, the Company has
begun a multi-year development effort, for which the Company has budgeted
over $100 million during the next five years, to improve SABRE's core
operating capabilities. The goals of this development effort are to
accelerate new product development, increase flexibility, power and
functionality for subscribers and associates, improve data management
capabilities, raise capacity levels and lower operating costs.

- ENHANCING THE COMPANY'S POSITION IN INFORMATION TECHNOLOGY SOLUTIONS. The
Company intends to expand its information technology solutions in the
airline industry and to employ its airline industry expertise to continue
to expand into other industries with similar complex operations issues.

- PURSUING STRATEGIC ACQUISITIONS AND ALLIANCES. The Company expects to
enhance its competitive position through strategic acquisitions of and
alliances with businesses that augment the Company's product offerings or
provide entry into new markets or access to new technologies. The Company
believes that it will generate sufficient cash flow beyond internal
capital requirements to fund significant acquisitions and alliances in the
future. During 1995, the Company generated approximately $215 million of
net cash flow from operating activities, after its internal capital
requirements were met.

RELATIONSHIP WITH AMR

The Company is a newly-formed Delaware corporation and, prior to the
Offerings, a direct wholly-owned subsidiary of AMR. AMR is also the parent
corporation of American and other subsidiaries. Upon completion of the
Offerings, AMR will own 100% of the outstanding Class B common stock, par value
$.01 per share, of the Company (the "Class B Common Stock"), representing
approximately 98.2% of the combined voting power of all classes of voting stock
of the Company (approximately 97.9% if the Underwriters' over-allotment options
are exercised in full). As long as AMR beneficially owns a majority of the
combined voting power, it will have the ability to elect all of the members of
the Board of Directors of the Company (the "Board of Directors") and thereby
ultimately to control the management and affairs of the Company.

Pursuant to the Reorganization consummated on July 2, 1996, the Company
became the successor to the businesses of The SABRE Group which were formerly
operated as divisions or subsidiaries of American or AMR. In connection with the
Reorganization, the Company issued an $850 million subordinated debenture (the
"Debenture") payable to American, which was transferred to AMR and the amount of
which exceeds the historical book value of the assets contributed by American
and AMR to the Company by $120.9 million. The Company will have $482 million of

5
<PAGE> 7

long-term indebtedness outstanding after approximately $368 million of the net
proceeds of the Offerings is used to repay a portion of such indebtedness. See
"Use of Proceeds" and Pro Forma Condensed Consolidated Financial Information.
The Company in the past has been and will continue to be dependent upon American
and its affiliates for a substantial portion of the Company's business. In
connection with the Reorganization, the Company has entered into certain
agreements with AMR and its affiliates (the "Affiliate Agreements"), the
financial terms of which were generally effective as of January 1, 1996. Those
agreements include the Technology Services Agreement pursuant to which the
Company will provide information technology services to American for a term of
10 years for most services (three and five years for others). On a pro forma
basis, giving effect to the Reorganization and the Affiliate Agreements as
though effective as of January 1, 1995, the Company's revenues for 1995 were
$1,463 million, representing a decrease of $66 million from historical 1995
revenues, and net income was $133 million, representing a decrease of $92
million from historical 1995 net income. See "Risk Factors -- Dependence on
American Airlines," "Risk Factors -- Relationship with AMR," "Relationship with
AMR and Certain Transactions -- Contractual Arrangements" and Pro Forma
Condensed Consolidated Financial Information.

6
<PAGE> 8

THE OFFERINGS

The offering hereby of 16,160,000 shares of Class A common stock, par value
$.01 per share, of the Company (the "Class A Common Stock" and, collectively
with the Class B Common Stock, the "Common Stock") initially being offered in
the United States (the "U.S. Offering") and the offering of 4,040,000 shares of
Class A Common Stock initially being offered in a concurrent international
offering outside of the United States (the "International Offering") are
collectively referred to as the "Offerings." The closing of each Offering is
conditioned upon the closing of the other Offering.

<TABLE>
<S> <C>
Class A Common Stock offered by the
Company(1)
U.S. Offering......................... 16,160,000 shares
International Offering................ 4,040,000 shares
Total......................... 20,200,000 shares
Common Stock to be outstanding after the
Offerings(1)
Class A Common Stock.................. 20,200,000 shares
Class B Common Stock.................. 107,374,000 shares
Total......................... 127,574,000 shares
Use of proceeds(2)...................... Approximately $368 million will be used to
repay a portion of the Debenture to AMR.
The remaining net proceeds will be used for
general corporate purposes.
Proposed NYSE symbol.................... TSG
Voting rights........................... The holders of Class A Common Stock
generally have rights identical to holders
of Class B Common Stock, except that
holders of Class A Common Stock are
entitled to one vote per share and holders
of Class B Common Stock are entitled to 10
votes per share. The Class A Common Stock
and Class B Common Stock generally will
vote together as a single class on all
matters except as otherwise required by
Delaware law. See "Description of Capital
Stock -- Common Stock -- Voting Rights."
Under certain circumstances, Class B Common
Stock will automatically convert to Class A
Common Stock. See "Relationship with AMR
and Certain Transactions" and "Description
of Capital Stock -- Common Stock -- Con-
version."
</TABLE>

- ---------------

(1) Exclusive of up to 3,030,000 shares of Class A Common Stock subject to
over-allotment options granted by the Company to the Underwriters. See
"Underwriting."

(2) After deducting the underwriting discount and estimated expenses of the
Offerings, and assuming no exercise of the Underwriters' over-allotment
options.

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<PAGE> 9

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

Set forth below are the summary historical consolidated financial and other
data of the Company for the periods and dates indicated. This information should
be read in conjunction with the Consolidated Financial Statements, and the
related notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996(4)
-------- -------- --------- -------- --------- --------- -------
(IN MILLIONS, EXCEPT OTHER DATA WHERE INDICATED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues........................... $1,097.1 $1,173.8 $ 1,258.2 $1,406.7 $ 1,529.6 $ 767.5 $838.3
Operating Expenses................. 876.9 929.5 1,004.5 1,056.5 1,149.2 548.0 640.7
-------- -------- --------- -------- --------- --------- ------
Operating Income................... $ 220.2 $ 244.3 $ 253.7 $ 350.2 $ 380.4 $ 219.5 $197.6
Other Income (Expense), net(2)..... (7.6) (173.2) (84.7) (26.1) (10.3) (10.4) (2.4)
-------- -------- --------- -------- --------- --------- ------
Income Before Income Taxes......... $ 212.6 $ 71.1 $ 169.0 $ 324.1 $ 370.1 $ 209.1 $195.2
Income Taxes....................... 77.6 38.8 69.0 126.9 144.2 82.0 76.1
-------- -------- --------- -------- --------- --------- ------
Income Before Cumulative Effect of
Accounting Change................ $ 135.0 $ 32.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
Cumulative Effect of Accounting
Change(3)........................ -- 19.0 -- -- -- -- --
-------- -------- --------- -------- --------- --------- ------
Net Earnings....................... $ 135.0 $ 13.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
======== ======== ========= ======== ========= ========= ======
BALANCE SHEET DATA (AT END OF
PERIOD)(1):
Current Assets..................... $ 55.1 $ 91.1 $ 107.1 $ 404.3 $ 271.2 $ 259.2 $449.6
Total Assets....................... 558.8 550.1 584.3 873.5 729.4 737.8 855.8
Current Liabilities(2)............. 108.5 154.2 346.4 503.2 218.6 176.5 225.8
Stockholders' Equity............... 411.0 244.7 158.0 289.5 432.1 477.8 551.2
OTHER DATA(1):
Operating Income as a Percentage of
Revenue.......................... 20.1% 20.8% 20.2% 24.9% 24.9% 28.6% 23.6%
Percentage of Revenue from
Non-affiliated Customers......... 53.9% 55.0% 56.6% 58.1% 64.2% 64.4% 68.8%
Reservations Booked Using
SABRE............................ 220.2 255.3 275.2 311.1 325.5 170.6 181.2
Net Cash Provided by
Operating Activities............. $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $ 168.3 $143.2
Net Cash Used for Investing
Activities....................... $ (183.0) $ (122.4) $ (171.7) $ (177.3) $ (174.7) $ (105.4) $(41.5)
Net Cash Provided by (Used for)
Financing Activities(5).......... $ (130.9) $ (204.7) $ (160.7) $ 215.3 $ (385.2) $ (246.4) $ (9.4)
Capital Expenditures............... $ 171.0 $ 128.8 $ 176.6 $ 168.9 $ 164.6 $ 104.4 $ 82.0
</TABLE>

- ---------------

(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.

(2) The operating results for the years ended December 31, 1992 and 1993 include
a provision for losses of $165 million and $71 million, respectively,
associated with a reservations system project and resolution of related
litigation. The balance sheets as of December 31, 1992 and 1993 include
current liabilities for the losses of $28 million and $133 million,
respectively. See Note 5 to the Consolidated Financial Statements.

(3) Effective January 1, 1992, the Company adopted FAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," changing the method of
accounting for these benefits. The cumulative effect of adopting FAS 106 as
of January 1, 1992 was a charge of $19 million, net of income taxes of $10
million.

(4) The operating results for the six months ended June 30, 1996 reflect the
impact of the Affiliate Agreements, the financial terms of which were
effective as of January 1, 1996. See Note 11 to the Consolidated Financial
Statements.

(5) Consists of advances to or from affiliates and contributions from or
distributions to affiliates.

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<PAGE> 10

SUMMARY PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

Set forth below are the summary pro forma consolidated financial and other
data of the Company for the periods indicated. This information should be read
in conjunction with the Consolidated Financial Statements, and the related notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Pro Forma Condensed Consolidated Financial
Information, and the related notes thereto, included elsewhere in this
Prospectus. The pro forma financial information below assumes the Reorganization
and Offerings were consummated, and the Affiliate Agreements were effective, on
January 1, 1995 with respect to the income statement data and at June 30, 1996
with respect to the balance sheet data. The pro forma information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if the
transactions had been consummated at the assumed dates, nor is it necessarily
indicative of future results of operations.

<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR THE
REORGANIZATION, THE AFFILIATE
AGREEMENTS AND THE OFFERINGS
----------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1995 1995 1996
------------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.................................................... $1,463.3 $736.7 $832.2
Operating Expenses.......................................... 1,178.7 561.2 635.1
-------- ------ ------
Operating Income............................................ $ 284.6 $175.5 $197.1
Other Income (Expense), net................................. (39.8) (25.1) (17.3)
-------- ------ ------
Income Before Income Taxes.................................. $ 244.8 $150.4 $179.8
Income Taxes................................................ 95.4 59.1 70.2
-------- ------ ------
Net Earnings................................................ $ 149.4 $ 91.3 $109.6
======== ====== ======
Pro Forma Earnings Per Share(2)............................. $ 1.17 $ .72 $ .86
======== ====== ======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
AS ADJUSTED
FOR THE
REORGANIZATION AS FURTHER
AND THE ADJUSTED
AFFILIATE FOR THE
AGREEMENTS OFFERINGS
-------------- ----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA(1):
Current Assets.................................................... $ 449.6 $ 490.5
Total Assets...................................................... 1,049.0 1,090.0
Current Liabilities............................................... 171.7 171.7
Debenture Payable to AMR.......................................... 850.0 481.8
Stockholders' Equity (Deficit).................................... (120.9) 288.2
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR THE
REORGANIZATION, THE AFFILIATE
AGREEMENTS AND THE OFFERINGS
-------------------------------
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ---------------
1995 1995 1996
------------ ----- -----
<S> <C> <C> <C>
OTHER DATA(1):
Operating Income as a Percentage of Revenue.................... 19.4% 23.8% 23.7%
Percentage of Revenue from Non-affiliated Customers............ 67.1% 67.1% 69.3%
</TABLE>

- ---------------

(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.

(2) The Company was formed on June 25, 1996 and became a wholly-owned subsidiary
of AMR on July 2, 1996 in connection with the Reorganization. As part of the
Reorganization, AMR caused to be transferred to the Company the subsidiaries
and divisions through which AMR has historically conducted its electronic
travel distribution and information technology solutions operations. The pro
forma earnings per common share calculation is based upon weighted average
common shares outstanding after the Reorganization and the Offerings. See
Notes 10 and 11 to the Consolidated Financial Statements.

9
<PAGE> 11

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors:

DEPENDENCE ON AMERICAN AIRLINES

The Company's revenues and earnings are highly dependent on its business
with American and its affiliates. In 1995, 35.8% of the Company's revenues was
generated by information technology solutions provided to American and its
affiliates and through booking fees paid by American for bookings on American
through SABRE (32.9% on a pro forma basis after giving effect to the financial
impact of the Affiliate Agreements). Pursuant to certain of the Affiliate
Agreements, the Company provides information technology solutions to American,
gains access to SABRE subscribers such as travel agencies and corporations
through marketing services provided by American and, under certain
circumstances, lends to and borrows from American. See "Relationship with AMR
and Certain Transactions." American is the largest single travel provider in
SABRE, generating booking fees that account for a substantial portion of the
Company's revenues.

The Company derives a substantial portion of its revenues from the
Technology Services Agreement, which has a base term that expires on June 30,
2006 for a majority of the services performed by the Company, with terms
expiring June 30, 1999 and June 30, 2001 for services that represented 5.7% and
0.5%, respectively, of the Company's total revenues for the six months ended
June 30, 1996. American is generally required to continue purchasing from the
Company services currently performed under the Technology Services Agreement for
the term applicable to such service, as specified in the preceding sentence. New
services, however, including most new applications development work, can be
competitively bid by American, with the Company having a right to bid on most of
such services. There can be no assurance that American will purchase new
services from the Company or that it will continue to purchase services from the
Company upon expiration of the Technology Services Agreement.

The Technology Services Agreement also provides for annual price
adjustments. For certain prices, adjustments are made according to formulas
that, commencing in 1998, are reset every two years and that may take into
account the market for similar services provided by other companies.
Consequently, downward market pressures on fees generally charged by computer
outsourcers or increased price competition for provision of services to the
airline industry, both of which the Company believes could occur, would have a
negative impact on the Company's future revenues under the Technology Services
Agreement.

Through subcontracting arrangements with American (the "Canadian
Subcontract"), the Company provides data processing and network and distributed
systems services to Canadian Airlines International ("Canadian"). American has
guaranteed payment to the Company of the fees the Company will be entitled to
receive pursuant to the terms of the Canadian Subcontract from Canadian in
payment for all such services actually performed by the Company. In addition,
American has agreed to reimburse the Company for any capitalized costs incurred
in connection with the implementation of such systems that remain unamortized in
the event of the termination or expiration of such subcontracting arrangement or
for a write down of such costs.

Pursuant to a Marketing Cooperation Agreement (the "Marketing Cooperation
Agreement"), American will provide marketing support for the Company's products
targeted to travel agencies until June 30, 2006 and will support the Company's
promotion of BTS until September 30, 2001 and the Company's promotion of
Travelocity and easySABRE until June 30, 2001. The Company relies on these
services to support its relationship with travel agents who may utilize SABRE
and to promote its products to those corporations and individuals who are
customers of American. With limited exceptions, however, American is not
restricted from distributing its airline products and services directly to
corporate or individual consumers through the Internet or otherwise. For
example, American has recently announced AAccess, an Internet product designed
to allow

10
<PAGE> 12

American to electronically distribute its products directly. American also
participates in other global distribution systems.

Under a credit agreement between the Company and American, dated as of July
1, 1996 (the "Credit Agreement"), designed to permit AMR to manage efficiently
the cash needs of its subsidiaries, the Company is required to lend to American
up to $100 million of excess cash if required by American to meet American's
daily cash needs, and American is required to lend to the Company (either from
its excess cash or from external borrowing facilities) up to $300 million if
required by the Company to meet the Company's daily cash needs. The Company will
be subject to the credit risk of American to the extent American makes
borrowings under the Credit Agreement.

American's collective bargaining agreement with the Allied Pilots
Association, the union that represents all of American's pilots (the "APA"),
became amendable on August 31, 1994. In January 1996, the APA filed a petition
with the National Mediation Board (the "NMB") to appoint a federal mediator. A
mediator was appointed and meetings with the APA, NMB and American were held
commencing in March 1996. On September 2, 1996, American and the APA announced
that they had concluded negotiations on a new labor agreement, subject to
ratification by the Board of Directors of the APA and the APA's members.

If American were to terminate early any of the Affiliate Agreements
discussed above, fail or otherwise become unable to fulfill its principal
obligations thereunder or determine not to renew certain of the Affiliate
Agreements, the Company's financial condition and results of operations would be
materially adversely affected.

COMPETITION

COMPETITION IN ELECTRONIC TRAVEL DISTRIBUTION

The markets in which the Company's electronic travel distribution business
operates are highly competitive. The Company's electronic travel distribution
business competes primarily against other large and well-established global
distribution systems. SABRE's principal competitors include Amadeus/System One,
Galileo/Apollo and Worldspan*, each of which is owned by a separate consortium
of airlines and offers many services similar to the Company's services.
Moreover, although certain barriers exist for any new global distribution
system -- barriers such as the need for significant capital investment to
acquire or develop the hardware, software and network facilities necessary to
operate effectively a global distribution system -- the Company is always faced
with the potential of new competitors, particularly as new channels for travel
distribution develop. Factors affecting competitive success of global
distribution systems include depth and breadth of information, ease of use,
reliability, subscriber and booking fees, service and incentives to travel
agents and range of products available to travel providers, travel agents and
consumers. The Company believes it competes effectively with respect to each of
these factors. Increased competition, however, could require the Company to
reduce prices, to increase spending on marketing or product development or
otherwise to take actions that might adversely affect its operating earnings.

Competitive factors could also lead the Company to change its billing
practices in response to pressure from travel providers who list their products
and services in SABRE. A change in billing practices might adversely affect the
Company's financial condition and results of operations.

Competition to attract and retain travel agent subscribers is particularly
intense. If the Company were unable to compete effectively and a portion of the
Company's travel agency subscribers accounting for a significant percentage of
bookings through SABRE were to cease using SABRE and begin utilizing other
systems, the Company's financial condition and results of operations would be
materially adversely affected.

- ---------------

* Amadeus, System One, Galileo, Apollo and Worldspan are trademarks of their
respective owners and are not trademarks of the Company.

11
<PAGE> 13

The Company believes that the potential for growth in the number of new
travel agent subscribers exists primarily outside the United States, where the
Company's market recognition is not as well developed as in the United States. A
number of trade barriers erected by foreign travel providers -- often
government-owned -- have restricted the ability of the Company to gain market
share abroad. These providers have on occasion precluded SABRE from offering
their products and services, thus making SABRE's product less attractive to
travel agencies in those markets than other global distribution systems that
have such capability. Additionally, some international markets are served by
other global distribution systems that have substantially greater market
presence than the Company or long-standing relationships with travel agency
subscribers or associates.

Although distribution through travel agents continues to be the primary
method of travel distribution, new channels are developing for distribution
directly to businesses and consumers through computer on-line services, the
Internet and private networks. The Company faces competition in these channels
not only from its principal competitors but also from possible new entrants in
the sale of travel products and also from travel providers, including American,
who distribute their products directly. For example, in July 1996, American
Express Co. and Microsoft Corp. announced an on-line travel booking service for
corporations, which they have scheduled for release in the first half of 1997.
The Company expects that this on-line travel booking service, while only in the
developmental stage, will eventually directly compete with BTS. In addition, the
Internet permits consumers to have direct access to travel providers, thereby
by-passing both traditional travel agents and global distribution systems such
as SABRE. Although the Company has positioned its BTS, Travelocity and easySABRE
products to compete in the emerging distribution channels, there can be no
assurance that the Company's products will compete successfully or that the
failure to compete successfully will not have a material adverse effect on the
financial condition and results of operations of the Company.

COMPETITION IN INFORMATION TECHNOLOGY SOLUTIONS

The Company's solutions business competes both against full-service
providers of technology outsourcing services and solutions companies, some of
which have considerably greater financial resources than the Company, and
against smaller companies that offer a limited range of services. Among the
Company's full service competitors are Electronic Data Systems, IBM/ISSC,
Unisys, Andersen Consulting and Lufthansa Systems. Many of these competitors
have formed strategic alliances with large companies in the travel industry, and
the Company's access to such potential customers is thus limited.

DEPENDENCE UPON TRAVEL INDUSTRY; SEASONALITY

The Company's earnings can be significantly affected by events in the
travel industry, from which the Company derives substantially all of its
revenues. Because a significant portion of those revenues are derived from
airline bookings, the Company's earnings are especially sensitive to events that
affect airline travel and the airlines that participate in the SABRE system. Any
event, including political instability, armed hostilities, recession, excessive
inflation, strikes, lockouts or other labor disturbances or other adverse
occurrence, that results in a significant decline in sales of travel products
through SABRE or in an overall downturn in the business and operations of the
Company's customers in the travel industry could have a material adverse effect
on the financial condition and results of operations of the Company.

The travel industry is seasonal in nature. Bookings, and thus fees charged
for bookings through SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to early bookings by customers for travel
during the holiday season and due to a decrease in business travel during the
holiday season.

12
<PAGE> 14

CHANGING TECHNOLOGY

The Company's future results will depend in part upon its ability to make
timely and cost-effective enhancements and additions to its technology and to
introduce new products and services that meet customer demands. The success of
current and new product and service offerings is dependent on several factors,
including proper identification of customer needs, cost, timely completion and
introduction, differentiation from offerings of the Company's competitors and
market acceptance. In addition, maintaining flexibility to respond to
technological and market dynamics may require substantial expenditures and lead
time. There can be no assurance that the Company will successfully identify and
develop new products or services in a timely manner, that products, technologies
or services developed by others will not render the Company's offerings obsolete
or noncompetitive or that the technologies in which the Company focuses its
research and development investments will achieve broad acceptance in the
marketplace.

DEPENDENCE ON FACILITIES AND NETWORK

SABRE and the Company's data processing and transactions processing
services are dependent on the Data Center. Although the Company has taken what
it considers to be sufficient precautions to protect this facility, a natural
disaster or other calamity that causes significant damage to the facility would
have a material adverse effect on the financial condition and results of
operations of the Company. See "Business -- Facilities."

The Company relies on several communications companies, both in the United
States and internationally, to provide network access between the Data Center
and SABRE access terminals. In particular, the Company relies upon Societe
Internationale de Telecommunications Aeronautiques ("SITA"), which is owned by a
consortium of airlines, including American, to maintain and develop its data
communications in the United States and Canada and to provide network services
in almost all locations served by the Company. Any failure or inability of SITA
or other companies to provide and maintain network access could have a material
adverse effect on the financial condition and results of operations of the
Company.

ACQUISITIONS AND INVESTMENTS

One component of the Company's strategy is to make strategic acquisitions
and to form strategic alliances. There can be no assurance that any acquisition
will be made, that any alliance will be formed, and, if any acquisitions or
alliances are so made or formed, that they will be successful. In addition,
acquisitions that the Company may make will involve risks, including the
successful integration and management of acquired technology, operations and
personnel. The integration of acquired businesses may also lead to the loss of
key employees of the acquired companies and diversion of management attention
from ongoing business concerns.

RELATIONSHIP WITH AMR

AMR currently owns all of the outstanding capital stock of the Company. See
"Relationship with AMR and Certain Transactions." Upon completion of the
Offerings, AMR will own 100% of the Company's outstanding Class B Common Stock,
representing approximately 98.2% of the combined voting power of all classes of
voting stock of the Company (approximately 97.9% if the Underwriters'
over-allotment options are exercised in full). As long as AMR beneficially owns
a majority of the combined voting power, it will have the ability to elect all
of the members of the Board of Directors and thereby ultimately to control the
management and affairs of the Company, including any determinations with respect
to acquisitions, dispositions, borrowings, issuances of Common Stock or other
securities of the Company or the declaration and payment of any dividends on the
Common Stock. In addition, AMR will be able to determine the outcome of any
matter submitted to a vote of the Company's stockholders for approval and to
cause or prevent a change in control of the Company.

13
<PAGE> 15

Although, in negotiating the Affiliate Agreements between the Company and
AMR, American and AMR's other subsidiaries, the parties endeavored to implement
market-based agreements, as a result of AMR's control of the Company, none of
such agreements resulted from "arm's-length" negotiations. There can be no
assurance that the Company would not have received more favorable terms from an
unaffiliated party. For a description of the Affiliate Agreements, see
"Relationship with AMR and Certain Transactions."

The Restated Certificate of Incorporation of the Company (the "Certificate
of Incorporation") provides that any amendment or termination of any agreement
or arrangement, or any new agreement or arrangement, between the Company and AMR
or its affiliates effected with the approval of a majority of the Company's
directors who are not officers of either the Company or AMR or directors of AMR
(the "Disinterested Directors"), or consistent with guidelines or standards
approved by the Disinterested Directors, or approved by the holders of a
majority of the Company's outstanding voting stock (not including that owned by
AMR) shall be deemed fair to the Company and its stockholders, provided that, if
such approval is not obtained, no presumption shall arise that such amendment or
termination (or new agreement) is not fair to the Company and its stockholders.
The Certificate of Incorporation also contains provisions allocating corporate
opportunities between AMR and the Company based primarily on the relationship to
the Company and AMR of the individual to whom an opportunity is presented. See
"Description of Capital Stock -- Certificate of Incorporation and Bylaw
Provisions."

Conflicts of interest may arise between the Company and AMR in a number of
areas relating to their past and ongoing relationships, including the nature and
quality of services rendered by the Company to AMR and its affiliates or by AMR
and its affiliates to the Company, potential competitive business activities,
shared marketing functions, tax and employee benefit matters, indemnity
agreements, registration rights, sales or distributions by AMR of all or any
portion of its ownership interest in the Company or AMR's ability to control the
management and affairs of the Company. There can be no assurance that AMR and
the Company will be able to resolve any potential conflict or that, if resolved,
the Company would not receive more favorable resolution if it were dealing with
an unaffiliated party. In addition, certain of the Affiliate Agreements contain
specific procedures for resolving disputes between the Company and AMR with
respect to the subject matter of those agreements. There can be no assurance
that more favorable results to the Company would not be obtained under different
procedures.

For as long as AMR desires to include the Company in its consolidated group
for federal income tax purposes, which requires that AMR own at least 80% of the
total voting power and stock with a value equal to at least 80% of the total
value of the Company, the Company may be constrained in its ability to raise
equity capital or to issue Common Stock in connection with acquisitions. For any
period of time that the Company continues to be part of AMR's consolidated
group, it will be jointly and severally liable for the federal income tax
liability of other members of the consolidated group and for funding and
termination liabilities applicable to the group's tax-qualified employee benefit
plans.

AMR could decide to sell or otherwise dispose of all or a portion of its
Class B Common Stock (or, upon conversion of the Class B Common Stock, the
resulting Class A Common Stock) at some future date, and there can be no
assurance that, in any transfer by AMR of a controlling interest in the Company,
any holders of Class A Common Stock will be allowed to participate in such
transaction or will realize any premium with respect to their shares of Class A
Common Stock. Sales or distribution by AMR of substantial amounts of Class B
Common Stock (or Class A Common Stock) in the public market or to its
stockholders could adversely affect prevailing market prices for the Class A
Common Stock. See "-- Shares Available for Future Sale," "Relationship with AMR
and Certain Transactions" and "Shares Eligible for Future Sale."

14
<PAGE> 16

INTERNATIONAL EXPANSION AND OPERATIONS

Pursuit of international growth opportunities may require significant
investments for an extended period before returns on such investments, if any,
are realized, and may require support of United States or local government
authorities. See "Business -- Electronic Travel Distribution -- Industry
Regulation." There can be no assurance as to the extent, if at all, that the
Company's plans to expand in international markets will be successful. The
Company's current international activities and prospects could be adversely
affected by factors such as reversals or delays in the opening of foreign
markets, exchange controls, currency and political risks and taxation. In
addition, the laws and policies of the United States affecting foreign trade,
investment and taxation could also adversely affect the Company's international
operations and growth.

UNITED STATES REGULATIONS; FUTURE PARTICIPATION OF CERTAIN AIRLINE ASSOCIATES IN
SABRE

Regulations promulgated by the U.S. Department of Transportation (the
"DOT") govern the relationship of SABRE with airlines and travel agencies. These
regulations (the "U.S. Regulations") generally require airlines affiliated with
global distribution systems to participate in the United States in other global
distribution systems that are affiliated with other airlines. More specifically,
the U.S. Regulations require any airline doing business in the United States
that owns five percent or more of a global distribution system (a
"GDS-Affiliated Airline"), to participate in any other global distribution
system doing business in the United States which is offered by an airline or an
airline affiliate (an "Airline-Affiliated System") at the same level as it does
in the system it owns and to provide data on its flights to the other
Airline-Affiliated System that is as complete, accurate and timely as the
information given to its own system, as long as the other Airline-Affiliated
System offers terms for participation that are commercially reasonable. Although
the Company believes the U.S. Regulations will be extended, the U.S. Regulations
are currently scheduled to expire on December 31, 1997. See
"Business -- Electronic Travel Distribution -- Industry Regulation."

If (i) SABRE were no longer offered or marketed to travel agents by any
airline or airline affiliate or (ii) the U.S. Regulations were to expire (or
were to be revised to eliminate the participation requirement described above),
GDS-Affiliated Airlines, such as Delta Air Lines, United Airlines, USAir,
Continental Airlines and British Airways, would no longer be legally required to
participate in SABRE at any level. Although the Company does not anticipate that
any of these airlines would, as a practical matter, discontinue listing their
flights in SABRE under such circumstances, there can be no assurance that any of
the airlines would continue to participate in SABRE, absent any legal
requirement, on the same commercial terms that prevail today. Decisions by
several airlines to discontinue listing their services in SABRE or a significant
reduction in revenues resulting from such decisions or resulting from the
absence of any legal requirement compelling participation could materially
adversely affect the financial condition and results of operations of the
Company.

NEWLY FORMED LEGAL ENTITY; HOLDING COMPANY STRUCTURE

The Company has existed in its present form only since July 2, 1996. Prior
to such time, although the businesses of the Company had been accounted for as a
separate unit of AMR, the Company had not operated as a separate legal entity.
The financial information included herein may not necessarily reflect what the
results of operations, financial position and cash flows would have been had the
Company been a separate entity during the periods presented.

In addition, the Company is a holding company and will thus rely primarily
on dividends and other intercompany transfers of funds from its subsidiaries for
any repayment of debt or, in the event dividends are declared, any payment of
dividends to the Company's stockholders. See "Dividend Policy." Although the
Company intends to retain its earnings to finance future growth and not to
declare any cash dividends in the foreseeable future, and although there are
currently no material contractual restrictions or legal prohibitions on
dividends or other intercompany transfers of funds to the Company by its
subsidiaries, the Company's subsidiaries could become subject to

15
<PAGE> 17

contractual restrictions or legal or regulatory impediments to the making of
dividends or such other transfers to the Company.

INTELLECTUAL PROPERTY RIGHTS

Some of the Company's significant assets are its software and other
proprietary information and intellectual property rights. The Company relies on
a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect these assets. The Company's
software and related documentation, however, are protected principally under
trade secret and copyright laws, which afford only limited protection. In
addition, the laws of some foreign jurisdictions may provide less protection
than the laws of the United States for the Company's proprietary rights.
Unauthorized use of the Company's intellectual property could have a material
adverse effect on the Company, and there can be no assurance that the Company's
legal remedies would adequately compensate it for the damages to its business
caused by such use.

The Company does not believe that any of its products infringe upon the
proprietary rights of third parties in any material respect. There can be no
assurance, however, that third parties will not claim infringement by the
Company with respect to current or future products. Any such claim, with or
without merit, could result in substantial costs and diversion of management
resources, and a successful claim could effectively block the Company's ability
to use or license its products in the United States or abroad or otherwise have
a material adverse effect on the financial condition and results of operations
of the Company.

Licenses for a number of software products have been granted to the
Company. Certain of these licenses, individually and in the aggregate, are
material to the business of the Company. Although management believes that the
risk that the Company will lose any material license is remote, any such loss
could have a material adverse effect on the financial condition and results of
operations of the Company. See "Business -- Intellectual Property."

POTENTIAL ANTI-TAKEOVER CONSIDERATIONS

Under the Company's Certificate of Incorporation, the Board of Directors
has the authority, without action by the Company's stockholders, to fix certain
terms and issue shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and to issue rights to purchase securities or other property
from the Company. Actions of the Board of Directors pursuant to this authority
may have the effect of delaying, deterring or preventing a change in control of
the Company. Other provisions in the Company's Certificate of Incorporation and
in the Restated Bylaws (the "Bylaws") impose procedural and other requirements,
including the requirement that a vote of more than 80% of the voting stock of
the Company is necessary for stockholders to amend the Bylaws and certain
provisions of the Certificate of Incorporation. These requirements could make it
more difficult to effect certain corporate actions, including replacing
incumbent directors. In addition, the Board of Directors is divided into three
classes, each of which is to serve for a staggered three-year term after the
initial classification and election, and, after AMR ceases to be the beneficial
owner of an aggregate of at least a majority of the voting power of the Company,
incumbent directors may not be removed without cause, all of which may make it
more difficult for a third party to gain control of the Board of Directors. With
certain exceptions, Section 203 of the Delaware General Corporation Law (the
"DGCL") imposes certain restrictions on mergers and other business combinations
between the Company and any holder of 15% or more of the voting stock of the
Company. Section 203 does not apply to AMR's interest in the Company. See
"Description of Capital Stock -- Certificate of Incorporation and Bylaw
Provisions."

SHARES AVAILABLE FOR FUTURE SALE

Subject to applicable law, AMR will be free to sell any and all of the
shares of Common Stock it owns after completion of the Offerings. AMR and the
Company have agreed, however, subject to

16
<PAGE> 18

certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock (other than the shares offered hereby or pursuant to employee stock option
plans which exist on, or are described herein to be implemented after, the date
of this Prospectus, or on conversion or exchange of convertible or exchangeable
securities outstanding on the date of this Prospectus) for a period of 180 days
after the date of this Prospectus without the prior written consent of Goldman,
Sachs & Co., on behalf of the Underwriters. In connection with the Offerings,
the Company and AMR have entered into an agreement which provides that AMR will
have certain rights to have shares of Common Stock owned by it after the
Offerings registered by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), in order to permit the public sale of such shares. In
addition, beginning two years after AMR acquired its shares of Common Stock, AMR
will be permitted to sell in the public market specified amounts of such Common
Stock without registration pursuant to Rule 144 under the Securities Act ("Rule
144"). No prediction can be made as to the effect, if any, that future sales of
Common Stock by AMR, or the availability of Common Stock for future sale, will
have on the market price of the Class A Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices for the Class
A Common Stock. See "Shares Eligible for Future Sale."

ABSENCE OF A PRIOR PUBLIC MARKET; VOLATILITY OF PRICE

Prior to the Offerings, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price of the Class A Common
Stock will be determined through negotiation between the Company and the
Underwriters and may not be indicative of the market price for the Class A
Common Stock after the Offerings. See "Underwriting."

The market price for the Class A Common Stock may be highly volatile. The
Company believes that factors such as announcements by it, or by its competitors
or travel providers, of quarterly variances in financial results could cause the
market price of the Class A Common Stock to fluctuate substantially. In
addition, the stock market may experience extreme price and volume fluctuations
which often are unrelated to the operating performance of specific companies.
Market fluctuations or perceptions regarding the Company's industry, as well as
general economic or political conditions, may adversely affect the market price
of the Class A Common Stock.

17
<PAGE> 19

THE COMPANY

The Company is a holding company incorporated in Delaware on June 25, 1996.
The SABRE Group, Inc. is the sole direct subsidiary of the Company and, pursuant
to the Reorganization, is the successor to the businesses of The SABRE Group,
which were previously operated as divisions or subsidiaries of American or AMR.

Upon completion of the Offerings, AMR will own 100% of the outstanding
Class B Common Stock, representing approximately 84.2% of the economic interest
in the Company and approximately 98.2% of the combined voting power of all
classes of voting stock of the Company (approximately 82.2% of the economic
interest and 97.9% of the combined voting power if the Underwriters'
over-allotment options are exercised in full). As long as AMR beneficially owns
a majority of the combined voting power, it will have the ability to elect all
of the members of the Board of Directors of the Company and thereby ultimately
to control the management and affairs of the Company. In connection with the
Reorganization, the Company issued the $850 million Debenture to American, which
was transferred to AMR as a dividend. Approximately $368 million of the net
proceeds of the Offerings will be used to repay a portion of such indebtedness.
See "Use of Proceeds" and Pro Forma Condensed Consolidated Financial
Information. The Company has been and will continue to be dependent upon
American and its affiliates for a substantial portion of the Company's business.
In connection with the Reorganization, the Company entered into the Affiliate
Agreements, including the Technology Services Agreement pursuant to which the
Company will provide information technology services to American for a term of
10 years for most services (three and five years for other services). See "Risk
Factors -- Dependence on American Airlines," "Risk Factors -- Relationship with
AMR" and "Relationship with AMR and Certain Transactions -- Contractual
Arrangements."

The Company's executive offices are located at 4255 Amon Carter Boulevard,
Fort Worth, Texas 76155, and its telephone number is (817) 931-7300.

USE OF PROCEEDS

The Company will receive approximately $409.1 million from the sale of the
20.2 million shares of Class A Common Stock in the Offerings based on an assumed
price to the public of $21.50 per share (after deducting underwriting
commissions and estimated expenses payable by the Company). Approximately $368
million of the net proceeds of the Offerings will be used to repay a portion of
the indebtedness represented by the Debenture payable by the Company to AMR. The
Debenture, which matures on September 30, 2004, bears interest, payable
semiannually, at a rate based on the sum of the six-month London Interbank
Offered Rate plus a margin determined by the Company's senior unsecured
long-term debt rating or, if such debt rating is not available, upon the
Company's ratio of debt to total capital. The Debenture was issued as part of
the Reorganization in connection with the transfer of the businesses of The
SABRE Group to the Company. In the judgment of the Company, the fair market
value of such businesses is at least equal to the Debenture, although the
Debenture exceeds the historical book value of the Company's assets by $120.9
million. See "Relationship with AMR and Certain Transactions." The remaining net
proceeds will be used for general corporate purposes.

18
<PAGE> 20

DIVIDEND POLICY

The Company currently intends to retain its earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Any future determination as to the
payment of dividends will depend upon the future results of operations, capital
requirements and financial condition of the Company and such other factors as
the Board of Directors may consider, including any contractual or statutory
restrictions on the Company's ability to pay dividends.

DILUTION

The pro forma net tangible book value of the Company at June 30, 1996,
giving effect to the Reorganization, was a deficit of approximately $120.9
million, or $1.13 per share of Common Stock. Net tangible book value per share
of Common Stock represents the amount of total tangible assets less total
liabilities, divided by the total number of shares of Common Stock outstanding.

Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Class A Common Stock in the Offerings and the
pro forma net tangible book value per share of Common Stock immediately after
the completion of the Offerings. After giving effect to the assumed sale of
approximately 20.2 million shares of Class A Common Stock at a price of $21.50
per share by the Company in the Offerings and the application of the estimated
net proceeds therefrom, the pro forma net tangible book value of the Company as
of June 30, 1996 would have been approximately $288.2 million, or $2.26 per
share. This represents an immediate dilution in pro forma net tangible book
value per share of $19.24 to investors who purchase shares of Class A Common
Stock in the Offerings. The following table illustrates the dilution in pro
forma net tangible book value per share to such investors:

<TABLE>
<S> <C> <C>
Initial public offering price per share................ $21.50
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Reorganization... $(1.13)
------
Increase per share attributable to new investors....... $ 3.39
------
Pro forma net tangible book value per share as of June
30, 1996 after giving effect to the Offerings........ $ 2.26
------
Dilution per share to new investors.................... $19.24
======
</TABLE>

19
<PAGE> 21

CAPITALIZATION

The following table sets forth information regarding the consolidated
long-term debt and capitalization of the Company (i) at June 30, 1996, (ii) as
adjusted for the pro forma effects of the Reorganization and the financial
impact of the Affiliate Agreements and (iii) as further adjusted to reflect (x)
the reclassification of 1,000 shares of common stock, $.01 par value, of the
Company held by AMR into 107,374,000 shares of Class B Common Stock and (y) the
sale of 20,200,000 shares of Class A Common Stock in the Offerings at an assumed
initial public offering price of $21.50 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------
PRO FORMA AS
ADJUSTED FOR THE PRO FORMA AS
REORGANIZATION AND FURTHER ADJUSTED
AFFILIATE FOR THE
HISTORICAL AGREEMENTS(1) OFFERINGS(2)(3)
---------- ------------------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Note Payable to AMR............................. $ 54,102 $ -- $ --
Long-Term Debenture Payable to AMR.............. -- 850,000 481,843
Stockholders' Equity:
Preferred Stock: $.01 par value, 20,000,000
shares authorized; no shares issued........ -- -- --
Common Stock: $.01 par value; 1,000 shares
authorized; 1,000 shares issued and
outstanding................................ -- -- --
Class A Common Stock: $.01 par value;
250,000,000 shares authorized; 20,200,000
shares issued and outstanding, as
adjusted................................... -- -- 202
Class B Common Stock: $.01 par value;
107,374,000 shares authorized; 107,374,000
shares issued and outstanding, as
adjusted................................... -- -- 1,074
Additional Paid-in Capital.................... -- -- 407,788
Retained Earnings (Deficit)................... (120,876) (120,876)
Stockholder's Net Investment.................. 551,187 -- --
-------- --------- ---------
Total Stockholders' Equity
(Deficit)........................... $ 551,187 $ (120,876) $ 288,188
-------- --------- ---------
Total Capitalization.................. $ 605,289 $ 729,124 $ 770,031
======== ========= =========
</TABLE>

- ---------------

(1) Adjusted to reflect the Reorganization, including the issuance of the
Debenture to American, and the financial impact of the Affiliate
Agreements. American subsequently transferred the Debenture to AMR.

(2) Adjusted to reflect the transactions described in note (1) above, the
reclassification of 1,000 shares of common stock, $.01 par value, of the
Company held by AMR into 107,374,000 shares of Class B Common Stock and the
issuance of 20,200,000 shares of Class A Common Stock, assuming an offering
price of $21.50 per share, pursuant to the Offerings, resulting in net
proceeds of approximately $409 million after deducting underwriting
commissions and estimated expenses of the Offerings and to reflect the use
of approximately $368 million of the proceeds of the Offerings to repay a
portion of the Debenture.

(3) Excludes options to purchase the Company's Class A Common Stock outstanding
under the Company's Long-Term Incentive Plan. See Note 11 to the
Consolidated Financial Statements.

20
<PAGE> 22

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The selected financial information and other data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements,
notes thereto and other financial information included elsewhere in this
Prospectus. The income statement data for the two years ended December 31, 1992,
and the balance sheet data as of December 31, 1991, 1992 and 1993, have been
derived from financial statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. The income statement data for the three
years ended December 31, 1995, and the balance sheet data as of December 31,
1994 and 1995, have been derived from the Consolidated Financial Statements of
the Company included elsewhere in this Prospectus, which also have been audited
by Ernst & Young LLP, independent auditors, whose report thereon appears
elsewhere in this Prospectus. The selected financial data set forth below for
the six months ended June 30, 1995 and 1996 is derived from unaudited
consolidated interim financial statements of the Company. The unaudited interim
consolidated financial statements have been prepared on a basis consistent with
the Consolidated Financial Statements and, in the opinion of management, include
all adjustments, consisting of only normal recurring adjustments, necessary for
a fair presentation of such data. The results for the six month period ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full fiscal year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996(4)
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT OTHER DATA WHERE INDICATED)
INCOME STATEMENT DATA(1):
Revenues............................... $1,097.1 $1,173.8 $1,258.2 $1,406.7 $1,529.6 $ 767.5 $838.3
Operating Expenses..................... 876.9 929.5 1,004.5 1,056.5 1,149.2 548.0 640.7
-------- -------- -------- -------- -------- ------ ------
Operating Income....................... $ 220.2 $ 244.3 $ 253.7 $ 350.2 $ 380.4 $ 219.5 $197.6
Other Income (Expense), net(2)......... (7.6) (173.2) (84.7) (26.1) (10.3) (10.4) (2.4)
-------- -------- -------- -------- -------- ------ ------
Income Before Income Taxes............. $ 212.6 $ 71.1 $ 169.0 $ 324.1 $ 370.1 $ 209.1 $195.2
Income Taxes........................... 77.6 38.8 69.0 126.9 144.2 82.0 76.1
-------- -------- -------- -------- -------- ------ ------
Income Before Cumulative Effect of
Accounting Change.................... $ 135.0 $ 32.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
Cumulative Effect of Accounting
Change(3)............................ -- 19.0 -- -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net Earnings........................... $ 135.0 $ 13.3 $ 100.0 $ 197.2 $ 225.9 $ 127.1 $119.1
======== ======== ======== ======== ======== ====== ======
BALANCE SHEET DATA
(AT END OF PERIOD)(1):
Current Assets......................... $ 55.1 $ 91.1 $ 107.1 $ 404.3 $ 271.2 $ 259.2 $449.6
Total Assets........................... 558.8 550.1 584.3 873.5 729.4 737.8 855.8
Current Liabilities(2)................. 108.5 154.2 346.4 503.2 218.6 176.5 225.8
Stockholder's Net Investment........... 411.0 244.7 158.0 289.5 432.1 477.8 551.2
OTHER DATA(1):
Operating Income as a Percentage of
Revenue.............................. 20.1% 20.8% 20.2% 24.9% 24.9% 28.6% 23.6%
Percentage of Revenue from
Non-affiliated Customers............. 53.9% 55.0% 56.6% 58.1% 64.2% 64.4% 68.8%
Reservations Booked Using SABRE........ 220.2 255.3 275.2 311.1 325.5 170.6 181.2
Net Cash Provided by Operating
Activities........................... $ 315.3 $ 328.1 $ 332.4 $ 224.9 $ 391.8 $ 168.3 $143.2
Net Cash Used for Investing
Activities........................... $ (183.0) $ (122.4) $ (171.7) $ (177.3) $ (174.7) $(105.4) $(41.5)
Net Cash Provided by (Used For)
Financing Activities(5).............. $ (130.9) $ (204.7) $ (160.7) $ 215.3 $ (385.2) $(246.4) $ (9.4)
Capital Expenditures................... $ 171.0 $ 128.8 $ 176.6 $ 168.9 $ 164.6 $ 104.4 $ 82.0
</TABLE>

- ---------------

(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.

(2) The operating results for the years ended December 31, 1992 and 1993 include
a provision for losses of $165 million and $71 million, respectively,
associated with a reservation system project and resolution of related
litigation. The balance sheets as of December 31, 1992 and 1993 include
current liabilities for the losses of $28 million and $133 million,
respectively. See Note 5 to the Consolidated Financial Statements.

(3) Effective January 1, 1992, the Company adopted FAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," changing the method of
accounting for those benefits. The cumulative effect of adopting FAS 106 as
of January 1, 1992 was a charge of $19 million, net of income taxes of $10
million.

(4) The operating results for the six months ended June 30, 1996 reflect the
impact of the Affiliate Agreements, the financial terms of which the parties
agreed to apply as of January 1, 1996. See Note 11 to the Consolidated
Financial Statements.

(5) Consists of advances to or from affiliates and contributions from or
distribution to affiliates.

21
<PAGE> 23

SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION

The pro forma financial information and other data below assume the
Reorganization and Offerings were consummated, and the Affiliate Agreements were
effective, on January 1, 1995. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transactions had
been consummated at the assumed dates, nor is it necessarily indicative of
future results of operations. The unaudited interim and quarterly consolidated
financial statements have been prepared on a basis consistent with the
Consolidated Financial Statements and, in the opinion of management, include all
adjustments, consisting of only normal recurring adjustments, necessary for fair
presentation of such data. The pro forma information should be read in
conjunction with the Pro Forma Condensed Consolidated Financial Information, and
the related notes thereto, and the Consolidated Financial Statements, and the
related notes thereto.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues...................................... $ 1,529.6 $ (66.3)(3) $ 1,463.3
Operating Expenses............................ 1,149.2 29.5(4) 1,178.7
-------- ------- --------
Operating Income.............................. $ 380.4 $ (95.8) $ 284.6
Other Income (Expense), net................... (10.3) (29.5)(5) (39.8)
-------- ------- --------
Income Before Income Taxes.................... $ 370.1 $(125.3) $ 244.8
Income Taxes.................................. 144.2 (48.8) 95.4
-------- ------- --------
Net Earnings.................................. $ 225.9 $ (76.5) $ 149.4
======== ======= =========
Pro Forma Earnings Per Share(2)............... $ 1.17
=========
OTHER DATA(1):
Operating Income as a Percentage of
Revenue..................................... 24.9% 19.4%
Percentage of Revenue from Non-affiliated
Customers................................... 64.2 67.1
</TABLE>

22
<PAGE> 24

SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION -- (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.......................................... $767.5 $ (30.8)(3) $ 736.7
Operating Expenses................................ 548.0 13.2(4) 561.2
------ ------ ------
Operating Income.................................. $219.5 $ (44.0) $ 175.5
Other Income (Expense), net....................... (10.4) (14.7)(5) (25.1)
------ ------ ------
Income Before Income Taxes........................ $209.1 $ (58.7) $ 150.4
Income Taxes...................................... 82.0 (22.9) 59.1
------ ------ ------
Net Earnings...................................... $127.1 $ (35.8) $ 91.3
====== ====== ======
Pro Forma Earnings Per Share(2)................... $ .72
======
OTHER DATA(1):
Operating Income as a Percentage of Revenue....... 28.6% 23.8%
Percentage of Revenue from Non-affiliated
Customers....................................... 64.4 67.1
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE
REORGANIZATION, REORGANIZATION,
THE AFFILIATE THE AFFILIATE
AGREEMENTS AGREEMENTS
AND THE AND THE
HISTORICAL OFFERINGS OFFERINGS
---------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.......................................... $838.3 $ (6.1) $ 832.2
Operating Expenses................................ 640.7 (5.6)(4) 635.1
------ ------ ------
Operating Income.................................. $197.6 $ (0.5) $ 197.1
Other Income (Expense), net....................... (2.4) (14.9)(5) (17.3)
------ ------ ------
Income Before Income Taxes........................ $195.2 $ (15.4) $ 179.8
Income Taxes...................................... 76.1 (5.9) 70.2
------ ------ ------
Net Earnings...................................... $119.1 $ (9.5) $ 109.6
====== ====== ======
Pro Forma Earnings Per Share(2)................... $ .86
======
OTHER DATA(1):
Operating Income as a Percentage of Revenue....... 23.6% 23.7%
Percentage of Revenue from Non-affiliated
Customers....................................... 68.8 69.3
</TABLE>

23
<PAGE> 25

SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION -- (CONCLUDED)

<TABLE>
<CAPTION>
QUARTER ENDED:
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA AND OTHER DATA WHERE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues...................... $ 368.6 $368.1 $ 375.8 $350.8 $ 420.8 $411.4
Operating Expenses............ 272.4 288.8 292.8 324.7 311.2 323.9
------ ------ ------ ------ ------ ------
Operating Income.............. $ 96.2 $ 79.3 $ 83.0 $ 26.1 $ 109.6 $ 87.5
Other Income (Expense),
net......................... (15.7) (9.4) (6.6) (8.1) (8.4) (8.9)
------ ------ ------ ------ ------ ------
Income Before Income Taxes.... $ 80.5 $ 69.9 $ 76.4 $ 18.0 $ 101.2 $ 78.6
Income Taxes.................. 31.3 27.8 29.4 6.9 39.3 30.9
------ ------ ------ ------ ------ ------
Net Earnings.................. $ 49.2 $ 42.1 $ 47.0 $ 11.1 $ 61.9 $ 47.7
====== ====== ====== ====== ====== ======
Pro Forma Earnings Per
Share(2).................... $ .39 $ .33 $ .37 $ .08 $ .48 $ .38
====== ====== ====== ====== ====== ======
OTHER DATA(1):
Operating Income as a
Percentage of Revenue....... 26.1% 21.5% 22.1% 7.4% 26.0% 21.3%
Reservations Booked Using
SABRE....................... 86.5 84.1 82.1 72.8 91.9 89.3
</TABLE>

- ---------------

(1) The Company has significant transactions with AMR and American. See Notes 3
and 11 to the Consolidated Financial Statements.

(2) The Company was formed on June 25, 1996 and became a wholly owned subsidiary
of AMR on July 2, 1996 in connection with the Reorganization. As part of the
Reorganization, AMR caused to be transferred to the Company the subsidiaries
and divisions through which AMR has historically conducted its electronic
travel distribution and information technology solutions operations. The pro
forma earnings per common share calculation is based upon weighted average
common shares outstanding after the Reorganization and the Offerings,
including equivalent shares related to options outstanding under the
Company's Long-Term Incentive Plan. See Notes 10 and 11 to the Consolidated
Financial Statements.

(3) Adjustments include a reduction in marketing support payments from American
and the effect of the Technology Services Agreement with American. See the
notes to the Pro Forma Condensed Consolidated Financial Information.

(4) Adjustments include the following items as applicable: employee travel
costs, marketing support payments, additional general expenses and a
reduction in rent expense. See the notes to the Pro Forma Condensed
Consolidated Financial Information.

(5) Adjustment represents additional interest expense resulting from the
issuance of the Debenture. See the notes to the Pro Forma Condensed
Consolidated Financial Information.

24
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

The Company generated approximately 65.8% of its revenues in 1995 from
providing electronic travel distribution services using SABRE. As compensation
for services provided, fees are collected from associates for reservations
booked through SABRE. The booking fee per transaction that an associate pays to
the Company depends upon several factors, including the associate's level of
participation in SABRE and the types of products or services provided by the
associate. Booking fees in 1995 represented approximately 89.7% of revenues from
electronic travel distribution services. See "Business -- Electronic Travel
Distribution -- Associate Participation." The Company also derives revenues from
service contracts with subscribers, principally travel agencies, pursuant to
which the Company provides access to SABRE, hardware, software, hardware
maintenance and other support services.

Approximately 34.2% of the Company's revenues in 1995 was generated from
information technology solutions. Although solutions services have been provided
to more than 120 airlines or airline associations, approximately 79.5% of the
Company's revenues in 1995 from information technology solutions was from
American, other AMR affiliates and Canadian.

The following table sets forth revenues by affiliation and geographic
location as a percent of total revenues:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1993 1994 1995 1995 1996(1)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Affiliation:
Non-affiliated Customers............. 56.6% 58.1% 64.2% 64.4% 68.8%
Affiliated Customers................. 43.4 41.9 35.8 35.6 31.2
----- ----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Geographical:
United States........................ 85.9% 85.0% 83.6% 83.9% 82.8%
International........................ 14.1 15.0 16.4 16.1 17.2
----- ----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

- ---------------

(1) Revenues for the six months ended June 30, 1996 reflect the financial impact
of the Affiliate Agreements entered into in connection with the
Reorganization, the financial terms of which were effective as of January 1,
1996.

Total revenues have grown at a compound annual growth rate of 10.3% for
1993 through 1995. Revenues from affiliated customers as a percent of total
revenues have declined as the Company's external business has grown. Revenues
from non-affiliated customers have grown at a compound annual growth rate of
17.4% for the three years ended December 31, 1995, to $982 million in 1995.
Revenues from affiliated customers remained relatively unchanged for the same
time period. The Company expects that the proportion of its revenues represented
by non-affiliated customer revenues will continue to increase. International
revenues have increased as a percent of total revenues. International revenues
have grown at a compound annual growth rate of 18.6% for the three-year period
ended December 31, 1995, to $250 million in 1995, while revenues from the United
States have grown at a compound annual growth rate of 8.8% over the same period,
to $1,279 million in 1995.

The Company's primary expenses from providing electronic travel
distribution services and information technology solutions consist of salaries,
benefits and other employee related costs, depreciation and amortization,
communication costs, equipment maintenance costs and subscriber

25
<PAGE> 27

incentives. Salaries, benefits and other employee related costs, depreciation
and amortization and communication costs represented over 70% of 1995 total
operating expenses. While salaries and benefits have grown at a rate similar to
that for revenues in order to support the Company's growth, depreciation and
amortization costs have grown at a rate slower than that for revenues primarily
due to the benefits of price and performance improvements for Data Center
equipment and subscriber equipment. In addition, communication expense decreased
due to rate reductions.

As a result, operating income as a percentage of revenue increased from
20.2% in 1993 to 24.9% in 1995. Operating income as a percentage of revenue for
both electronic travel distribution and information technology solutions was
approximately the same as the combined percentages for 1993, 1994 and 1995.
However, for the six months ended June 30, 1996, operating income as a
percentage of revenue from information technology solutions declined to
approximately 20% of revenues principally as a result of the new Technology
Services Agreement with American discussed below, while operating income as a
percentage of revenue for electronic travel distribution remained at
approximately 25%.

SEASONALITY

The following table sets forth quarterly financial and other data for the
Company:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS, EXCEPT WHERE INDICATED)
<S> <C> <C> <C> <C>
1994
Reservations Booked Using SABRE........... 80.3 80.7 80.4 70.1
Revenues.................................. $ 353.6 $ 349.9 $ 361.4 $ 341.8
Operating Income.......................... 97.9 93.3 108.0 50.9
Net Earnings.............................. 58.4 54.0 59.2 25.5
Operating Income as a Percent of Revenue.. 27.7% 26.7% 29.9% 14.9%
1995
Reservations Booked Using SABRE........... 86.5 84.1 82.1 72.8
Revenues.................................. $ 384.6 $ 383.1 $ 393.3 $ 368.6
Operating Income.......................... 118.1 101.4 108.2 52.8
Net Earnings.............................. 66.9 60.1 66.9 31.9
Operating Income as a Percent of Revenue.. 30.7% 26.5% 27.5% 14.3%
</TABLE>

The travel industry is seasonal in nature. Bookings, and thus fees charged
for bookings through SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to early bookings by customers for travel
during the holiday season and a decline in business travel during the holiday
season. Operating margins also decrease in the fourth quarter as revenues
decrease and expenses remain constant.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

REVENUES. Revenues for the six months ended June 30, 1996 compared to the
six months ended June 30, 1995 increased approximately $71 million, 9.2%, from
$767 million to $838 million.

Electronic travel distribution revenues increased approximately $63
million, 12.4%, from $512 million to $575 million primarily due to growth in
booking fees from associates from $460 million to $536 million. This growth was
driven by an overall increase in the price per booking charged to associates and
an increase in booking volumes worldwide.

Revenue from information technology solutions increased approximately $7
million, 2.9%, from $256 million to $263 million. Revenues from non-affiliated
customers increased approximately $11 million, offset by a decrease in revenues
from AMR of approximately $7 million for these services primarily due to
application of the financial terms of the Technology Services Agreement.

26
<PAGE> 28

OPERATING EXPENSES. Operating expenses increased $93 million, 16.9%, from
$548 million to $641 million during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. This increase was primarily
attributable to an increase in salaries and benefits, the Affiliate Agreements
as discussed above and subscriber incentive expenses. Salaries and benefits
increased primarily due to an overall increase of 8% in the average number of
employees necessary to support the Company's revenue growth and new product
development.

The Company and AMR and American agreed to apply the financial terms of the
Marketing Cooperation Agreement, Travel Privileges Agreement and Corporate
Travel Agreement as of January 1, 1996, which resulted in an increase in
operating expenses of approximately $19 million for the six months ended June
30, 1996. Subscriber incentive expenses increased in order to maintain and
expand the Company's travel agency subscriber base.

OPERATING INCOME. Operating income decreased $22 million, 10.0%, from $219
million to $197 million. Operating margins decreased from 28.6% to 23.6%
primarily due to the impact of the Affiliate Agreements.

OTHER EXPENSES. Other expenses decreased $8 million due to a reduction in
the losses from joint ventures in which the Company owns an interest accounted
for under the equity method.

INCOME TAXES. The provision for income taxes was $76 million and $82
million for the six months ended June 30, 1996 and 1995, respectively. The
decrease in the provision for income taxes corresponds with the decrease in net
income before the provision for income taxes.

NET EARNINGS. Net earnings decreased $8 million, 6.3%, from $127 million to
$119 million, primarily due to the decrease in operating income.

1995 COMPARED TO 1994

REVENUES. Revenues for 1995 as compared to 1994 increased approximately
$123 million, 8.7%, from $1,407 million to $1,530 million.

Electronic travel distribution revenues increased approximately $101
million, 11.1%, from $906 million to $1,007 million. The increase was primarily
attributable to growth in booking fees from associates from $810 million to $904
million. This growth was driven by an overall increase in the price per booking
charged to associates, a migration of associates to higher participation levels
within SABRE and an increase in booking volumes primarily attributable to
international expansion in Europe and Latin America.

Revenues from information technology solutions increased approximately $22
million, 4.4%, from $501 million to $523 million. Revenues from information
technology solutions provided to Canadian under the agreement between AMS
Holdings, Inc., an AMR subsidiary, and Canadian, which began generating revenues
in November 1994, increased $36 million due to the impact of a full year of
services provided under the agreement. These increases were offset by a decrease
in revenues from such services provided to AMR primarily due to a change in the
pricing structure implemented in 1995.

OPERATING EXPENSES. Operating expenses increased $93 million, 8.8%, from
$1,056 million to $1,149 million. The increase was primarily attributable to an
increase in salaries and benefits, travel service costs from American and
subscriber incentive expenses. Salaries and benefits increased due to an overall
increase of 4% in the average number of employees necessary to support the
Company's revenue growth, annual salary increases and an increase in the
provision for incentive compensation. Travel service costs from American
increased due to the increase in the number of employees and an increase in the
negotiated rates with American. See Note 3 to the Consolidated Financial
Statements. Subscriber incentive expenses increased in order to maintain and
expand the Company's travel agency subscriber base.

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INTEREST EXPENSE. Interest income or expense was credited or charged to the
Company by AMR based on the balance at the end of each month in cash equivalents
and note payable to AMR. Cash equivalents represented cash held by American for
the Company or advanced from American to the Company. Interest expense decreased
$10 million primarily due to a capital infusion from AMR during 1995. See Note 3
to the Consolidated Financial Statements.

OPERATING INCOME. Operating income increased $30 million, 8.6%, from $350
million to $380 million. Operating margins were at 24.9% for both 1995 and 1994
due to revenues and expenses increasing at substantially the same rate.

OTHER EXPENSES. Other expenses decreased $6 million due to a reduction in
the losses from joint ventures in which the Company owns an interest accounted
for under the equity method.

INCOME TAXES. The provision for income taxes was $144 million and $127
million in 1995 and 1994, respectively. See Note 4 to the Consolidated Financial
Statements for additional information regarding taxes.

NET EARNINGS. Net earnings increased $29 million, 14.6%, from $197 million
to $226 million, primarily due to the increase in operating income.

1994 COMPARED TO 1993

REVENUES. Revenues for 1994 as compared to 1993 increased approximately
$149 million, 11.8%, from $1,258 million to $1,407 million.

Electronic travel distribution revenues increased approximately $121
million, 15.4%, from $785 million to $906 million. The increase was primarily
attributable to growth in booking fees from associates from $676 million to $810
million. This growth was driven by increases in booking volumes and increases in
the price per booking charged to associates. The increase in booking volumes was
related to fare initiatives by domestic air carriers which increased travel and,
thus, reservations made through SABRE.

Revenues from information technology solutions increased $28 million, 5.9%,
from $473 million to $501 million. Revenues from information technology
solutions provided to AMR increased due to a change in the pricing structure
implemented in 1994. Revenues for information technology solutions provided to
Canadian under the agreement between AMS Holdings, Inc., a subsidiary of AMR,
and Canadian, which began producing revenues in November 1994, were $8 million
in 1994.

OPERATING EXPENSES. Operating expenses increased $52 million, 5.2%, from
$1,004 million to $1,056 million, due to an increase in salaries and benefits,
travel service costs from American, subscriber incentive expenses, legal and
professional fees and management service fees charged to the Company by AMR.
Salaries and benefits increased due to an increase of 6% in the average number
of employees necessary to support the Company's revenue growth, annual salary
increases and an increase in the provision for incentive compensation. Travel
service costs increased due to the increase in the number of employees and an
increase in the negotiated rates with American. See Note 3 to the Consolidated
Financial Statements. Subscriber incentive expenses increased in order to
maintain and expand the Company's travel agency subscriber base. Legal and
professional fees increased due to a nonrecurring restructuring charge recorded
in 1994. Management service fees charged to the Company by AMR increased
primarily due to the increase in the number of employees and growth in legal
services provided to the Company by AMR.

OPERATING INCOME. Operating income increased $96 million, 38.0%, from $254
million to $350 million. Operating margins increased from 20.2% to 24.9% due to
the increase in revenues of 11.8%, while expenses increased only 5.2%.

LOSS ON PARTNERSHIP SETTLEMENT. Loss on the partnership settlement of $71
million in 1993 represented a nonrecurring cost related to the settlement of
litigation regarding a partnership

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formed to design and develop a computer reservation system for the auto rental
and hotel industries. See Note 5 to the Consolidated Financial Statements.

INTEREST EXPENSE. Interest expense increased $8 million primarily due to
cash advances from American for the loss on the partnership settlement mentioned
above.

OTHER EXPENSES. Other expenses increased $5 million due to additional
losses incurred by joint ventures in which the Company owns an interest
accounted for under the equity method.

INCOME TAXES. The provision for income taxes was $127 million and $69
million in 1994 and 1993, respectively. See Note 5 to the Consolidated Financial
Statements for additional information regarding taxes.

NET EARNINGS. Net earnings increased $97 million, 97.2%, from $100 million
to $197 million, primarily due to the increase in operating income.

LIQUIDITY AND CAPITAL RESOURCES

The Company had substantial liquidity at June 30, 1996, with $187 million
and $224 million in cash and cash equivalents and working capital, respectively.
At December 31, 1995, cash and cash equivalents and working capital were $95
million and $53 million, respectively. Prior to July 2, 1996, the Company's cash
and cash equivalents were held for the Company by American. Cash equivalents
were immediately charged or credited to the Company upon recording certain
transactions, including transactions with American for airline booking fees and
purchases of goods and services.

Effective with the Reorganization on July 2, 1996, the Company began
maintaining a cash management system and cash and investment accounts separate
from American. Transactions with American no longer result in the recording of
cash equivalents, but are settled through intercompany billings, with payment
due in 30 days. American performs cash management services for the Company under
the Management Services Agreement. The Company invests the cash in short-term
marketable securities, consisting primarily of certificates of deposit, bankers'
acceptances, commercial paper, corporate notes and government notes. For cash
management purposes, the Company and American have entered into the Credit
Agreement.

The Company has financed its operations through cash generated from
operations. The Company's net cash provided by operating activities of $143
million for the six months ended June 30, 1996 was primarily attributable to net
income partially offset by an increase in accounts receivable partially due to
the seasonality of bookings in the fourth quarter. The Company's net cash
provided by operating activities of $392 million in 1995 was primarily
attributable to net income. Net cash provided by operating activities in 1994
was $225 million, which included expenditures of $158 million relating to the
partnership settlement discussed in "-- Results of Operations -- 1994 Compared
to 1993 -- Loss on Partnership Settlement" and Note 5 to the Consolidated
Financial Statements.

Investing activities have primarily been related to purchases of computer
equipment to be provided to subscribers of SABRE and for use in data processing
services, and investments in joint ventures primarily associated with
international expansion in Mexico and Japan. Capital expenditures for the six
months ended June 30, 1996 were $82 million and for the year ended December 31,
1995 were $165 million.

Net property and equipment as shown on the balance sheet as of June 30,
1996 decreased approximately $34 million from December 31, 1995. This decrease
was primarily due to the sale of certain computer network equipment with a cost
of approximately $100 million and a net book value of approximately $25 million
to a third party at a price approximating net book value. The sale of this
equipment is not expected to have a significant impact on the Company's future
results of operations.

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In 1995, certain of The SABRE Group entities, from which the Company was
formed, distributed $394 million to American, in their capacity as divisions or
subsidiaries of American or AMR. Also during 1995, AMR contributed $245 million
to the Company in order to adequately capitalize certain of The SABRE Group
entities. In addition, a note payable to AMR of $54 million was established
during 1995, which was capitalized in 1996 in connection with the
Reorganization. Proceeds from the contribution and note payable were used to
reduce cash advances from AMR.

The Company expects that the principal use of funds in the foreseeable
future will be for capital expenditures, software product development,
acquisitions and working capital. Capital expenditures will consist of purchases
of equipment for the Data Center, as well as computer equipment, printers,
fileservers and workstations to support (i) updating subscriber equipment
primarily for travel agencies, (ii) expansion of the subscriber base and (iii)
new product capital requirements. The Company has budgeted capital expenditures
of approximately $210 million for 1996. Beyond 1996, the Company expects that
capital expenditures will range from $210 million to $240 million annually. The
Company expects to incur approximately $40 million of nonrecurring capital
expenditures in 1997 for the refurbishment of its facilities and the scheduled
replacement of a major computer processor at the Data Center. The Company
believes available balances of cash and cash equivalents combined with cash
flows from operations are sufficient to meet the Company's capital requirements.

The Company currently intends to retain its earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Any determination as to the payment of
dividends will depend upon the future results of operations, capital
requirements and financial condition of the Company and its subsidiaries and
such other factors as the Board of Directors of the Company may consider,
including any contractual or statutory restrictions on the Company's ability to
pay dividends.

AFFILIATE AGREEMENTS WITH AMR AND AMERICAN

The Company and AMR and American have entered into the Affiliate
Agreements, which include the Technology Services Agreement for the provision of
information technology services to American by the Company, the Marketing
Cooperation Agreement for the provision by American of marketing support for the
Company's products targeted toward travel agencies and American's support of the
Company's promotion of BTS, Travelocity and easySABRE, an agreement for the
provision of management services by American to the Company (the "Management
Services Agreement") and agreements for the provision of travel services by
American to the Company and its employees (the "Travel Privileges Agreement" and
"Corporate Travel Agreement"). See "Relationship With AMR and Certain
Transactions -- Contractual Arrangements" and Note 11 to the Consolidated
Financial Statements for a description of each agreement.

On a pro forma basis giving effect to the financial impact of the
Technology Services Agreement as of January 1, 1995, information technology
solutions represented approximately 32.6% of the Company's revenues in 1995, of
which approximately 77.5% was from American, other AMR affiliates and Canadian.

The base term of the Technology Services Agreement expires June 30, 2006.
The terms of the services to be provided by the Company to American, however,
vary. For the six months ended June 30, 1996, revenues from services provided
under the Technology Services Agreement with a service term of (i) three years
represented approximately 5.7% of total revenues, (ii) five years represented
approximately 0.5% of total revenues and (iii) 10 years represented
approximately 16.8% of total revenues.

The Affiliate Agreements generally establish pricing and service terms and
certain agreements, including the Technology Services Agreement, provide for
periodic price adjustments that may take into account the market for similar
services. Commencing in 1998, the formulas for annually adjusting certain rates
under the Technology Services Agreement will be adjusted every two years

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through negotiations of the parties which are to be guided by benchmarking
procedures set forth in the Technology Services Agreements. The resulting rates
may represent an increase or decrease over the previous rates. The financial
terms of the Affiliate Agreements were applied to the Company's operations
commencing January 1, 1996, and the application thereof resulted in a reduction
in revenues and an increase in expenses for the six months ended June 30, 1996
as compared to the six months ended June 30, 1995.

The Company has also entered into a Tax-Sharing Agreement with AMR, dated
as of July 1, 1996 (the "Tax-Sharing Agreement"), which in most respects
formalizes the Company's previous arrangements with AMR and which the Company
does not expect to have a material impact on future operating results.

The impacts of the Affiliate Agreements, as well as other impacts resulting
from the Reorganization and Offerings, are presented in the Pro Forma Condensed
Consolidated Balance Sheet for June 30, 1996 and the Pro Forma Condensed
Consolidated Statements of Income for the six months ended June 30, 1995 and
1996 and the year ended December 31, 1995. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
transactions had been consummated as presented in the Pro Forma Condensed
Consolidated Financial Information, nor is it necessarily indicative of future
results of operations.

PRO FORMA RESULTS OF OPERATIONS

PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1995

REVENUES. Pro forma revenues for the six months ended June 30, 1996
compared to the six months ended June 30, 1995 increased approximately $95
million, 13.0%, from $737 million to $832 million.

Pro forma electronic travel distribution revenues increased approximately
$74 million, 14.7%, from $501 million to $575 million. The increase was
primarily attributable to growth in booking fees from associates from $460
million to $536 million. This growth was driven by an overall increase in the
price per booking charged to associates and an increase in booking volumes
worldwide.

Pro forma revenues from information technology solutions increased
approximately $22 million, 9.3%, from $235 million to $257 million, primarily
due to growth in solutions services provided to AMR and non-affiliated
customers.

OPERATING EXPENSES. Pro forma operating expenses increased $74 million,
13.2%, from $561 million to $635 million during the six months ended June 30,
1996 as compared to the six months ended June 30, 1995. This increase was
primarily attributable to an increase in salaries and benefits and subscriber
incentive expenses. Salaries and benefits increased primarily due to an overall
increase of 8% in the average number of employees necessary to support the
Company's revenue growth and new product development. Subscriber incentive
expenses increased in order to maintain and expand the Company's travel agency
subscriber base.

OPERATING INCOME. Pro forma operating income from operations increased $22
million, 12.3%, from $175 million to $197 million. Operating margins remained
stable due to the increase in revenues of 13.0%, while expenses increased 13.2%.

OTHER EXPENSES. Pro forma other expenses decreased $8 million primarily due
to a reduction in the losses from joint ventures in which the Company owns an
interest accounted for under the equity method.

INCOME TAXES. The pro forma provision for income taxes was $70 million and
$59 million for the six months ended June 30, 1996 and 1995, respectively. The
increase in the provision for income taxes corresponds with the increase in net
income before the provision for income taxes.

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NET EARNINGS. Pro forma net earnings increased $18 million, 20.2%, from $91
million to $109 million, primarily due to the increase in operating income.

PRO FORMA 1995

The Company's 1995 revenues decreased approximately $66 million, 4.3%, from
$1,530 million on an historical basis to $1,463 million on a pro forma basis.
This decrease is due to the effect of the Marketing Cooperation Agreement
eliminating certain marketing support payments of $21 million made by American
to the Company during 1995 combined with a pro forma $45 million decrease in
revenues for services provided to American to reflect the terms specified in the
Technology Services Agreement.

Operating expenses increased approximately $30 million, 2.6%, from $1,149
million on an historical basis to $1,179 million on a pro forma basis. This
increase is primarily a result of the pro forma effects of the $20 million
marketing fee to be paid to American by the Company under the terms of the
Marketing Cooperation Agreement; an increase in employee travel costs of $26
million under the terms of the Travel Privileges Agreement and Corporate Travel
Agreement, combined with the Company's inability to use American's existing
discounts for flights on other airlines; and an increase of $5 million in
general and administrative costs associated with administration of the various
Affiliate Agreements and the inability of the Company to receive American's
discount on shipping and handling services. The above increases are partially
offset by a $12 million reduction in communication expenses from SITA under the
terms of the Technology Services Agreement and a decrease in rent expense, net
of increased depreciation and property tax expenses, of $9 million, resulting
from the transfer of ownership of certain buildings, including the related
furniture and fixtures, to the Company from American.

As a result of the decreased revenues and the increased operating expenses,
operating income decreased $96 million, 25.2%, from $380 million on an
historical basis to $285 million on a pro forma basis. Operating margins
decreased from 24.8% on an historical basis to 19.4% on a pro forma basis.

Other expenses increased $29 million on a pro forma basis as a result of
the recognition of interest expense on the Debenture held by AMR.

Pro forma net earnings of $149 million represent a decrease of $76 million
from historical net earnings of $226 million. This decrease is attributable to
the decreased revenues and increased operating expenses discussed above,
combined with increased interest expense from the Debenture partially offset by
a $49 million decrease in income tax expense.

EFFECTS OF THE REORGANIZATION, AFFILIATE AGREEMENTS WITH AMR AND AMERICAN AND
THE OFFERINGS ON LIQUIDITY AND CAPITAL RESOURCES

In connection with the Reorganization, the Company issued the Debenture to
American. The Debenture is a floating rate subordinated debenture due September
30, 2004, with a principal amount of $850 million. American subsequently
transferred the Debenture to AMR. Because the assets and liabilities of the
divisions and subsidiaries of American transferred to the Company are included
in the historical financial statements of the Company, this transaction resulted
in the Company recognizing a deficit in stockholder's equity subsequent to the
Reorganization. See Note 1 and Note 11 to the Consolidated Financial Statements.
A portion of the net proceeds from the Offerings will be used to repay a portion
of the Debenture. See "Use of Proceeds."

The interest rate on the Debenture will be 7.2% through September 30, 1996,
and thereafter will be based on the sum of the six-month London Interbank
Offered Rate plus a margin determined by the Company's senior unsecured
long-term debt rating or, if such debt rating is not available, upon the
Company's ratio of net debt to total capital. The interest rate will be
determined at the beginning of each six-month period beginning October 1 and
April 1 and accrued interest will be payable each

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September 30 and March 31. The Company may prepay the principal balance in whole
or in part at any time prior to December 31, 1996 and thereafter on any interest
payment date.

For cash management purposes, the Company, American and AMR entered into
the Credit Agreement which established a line of credit whereby the Company is
required to borrow from American, and American is required to lend to the
Company, any amounts required by the Company to fund its daily cash
requirements. In addition, American may, but is not required to, borrow from the
Company to fund its daily cash requirements and the Company is required to lend
to American if the Company has excess cash available. The maximum available
amount that the Company may borrow under the Credit Agreement at any time is
$300 million and, for American, $100 million, and, in the case of the Company as
lender, is limited to the lender's excess cash available. If the Company's
credit rating is better than "B" on the Standard & Poor's Ratings Service Scale
(or an equivalent thereof) or American has excess cash to lend to the Company,
the interest rate to be charged to the Company will be the sum of (a) the higher
of (i) American's average rate of return on short-term investments for the month
in which borrowings occurred or (ii) the actual rate of interest paid by
American to borrow funds to make the loan to the Company under the Credit
Agreement, plus (b) an additional spread based upon the Company's credit risk.
If the Company's credit rating is "B" or below on the Standard & Poor's Ratings
Service Scale (or an equivalent thereof) and American does not have excess cash
to lend to the Company, the interest rate to be charged to the Company will be
the lower of (a) the sum of (i) the borrowing cost incurred by American to draw
on its revolving credit facility to make the advance plus (ii) an additional
spread based on the Company's credit risk or (b) the sum of(i) the cost at which
the Company could borrow funds from an independent party plus (ii) one half of
the margin American pays to borrow under its revolving credit facility. The
Company believes the interest rate charged under this agreement by American may,
from time to time, be slightly above the rate at which the Company could borrow
externally; however, no standby fees for the line of credit will be required to
be paid by either party.

The net proceeds to the Company from its sale of shares of Class A Common
Stock pursuant to the Offerings will be approximately $409.1 million (after
deducting underwriting commissions and estimated expenses payable by the
Company) based on an assumed price to the public of $21.50 per share . The net
proceeds will be used to repay a portion of the Debenture discussed above and
for general corporate purposes. See "Use Of Proceeds."

INFLATION

The Company believes that inflation has not had a material effect on its
results of operations.

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BUSINESS

The Company is a world leader in the electronic distribution of travel
through its proprietary travel reservation and information system, SABRE, and is
the largest electronic distributor of travel in the United States. In addition,
the Company is a leading provider of solutions to the airline industry and
fulfills substantially all of the data processing, network and distributed
systems needs of American, AMR's other subsidiaries and Canadian.

The Company believes that its competitive strengths give it a leadership
position in its markets and a foundation from which to pursue further growth.
During the last 20 years, the Company has developed core competencies that
include a comprehensive knowledge of the travel industry, the capability to
perform high-volume, high-reliability, real-time transactions processing and
expertise in the application of operations research, information technology and
industrial engineering skills to solve complex operations problems. These core
competencies enable the Company to create an efficient electronic marketplace
for the sale and purchase of travel and to offer a broad and deep array of
technological solutions to the airline industry. In providing its products and
services, the Company operates one of the largest, privately-owned, real-time
transactions processing systems in the world in its underground central computer
facility, which is connected to over 120,000 computer access terminals and
operates 24 hours a day, seven days a week. The SABRE system maintains over 50
million air fares (updated five times per business day), processes an average of
93 million requests for information per day and has processed up to 4,969
requests for information per second (in July 1996).

ELECTRONIC TRAVEL DISTRIBUTION

OVERVIEW

SABRE and other global distribution systems are the principal means of air
travel distribution in the United States and a growing means of air travel
distribution internationally. Through SABRE, travel agencies, corporate travel
departments and individual consumers can access information on and book
reservations with airlines and other providers of travel and travel-related
products and services. As of June 30, 1996, travel agencies with more than
29,000 locations in over 70 countries on six continents subscribed to SABRE, and
more than 2.5 million individuals subscribed to Travelocity and easySABRE, the
Company's consumer-direct products. SABRE subscribers are able to book
reservations with more than 350 airlines and, other than through Travelocity, to
make reservations with more than 55 car rental companies and more than 190 hotel
companies covering approximately 30,000 hotel properties worldwide.

SABRE

SABRE, like other global distribution systems, creates an electronic market
place where travel providers display information about their products and
warehouse and manage inventory. Subscribers -- principally travel agencies but
also business travel departments and individual consumers -- access information
and purchase travel products and services. In 1995, more than 600 travel
providers displayed information about their products and services through SABRE,
and the Company estimates that $40 billion in travel products and services were
reserved through SABRE.

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The following diagram depicts the purchase and sale of travel products and
services through SABRE:

Sabre Travel

SABRE, first developed in the 1960's, was one of the world's first
electronic airline reservation systems. SABRE evolved from American's internal
reservation system into a global distribution system when SABRE's content was
expanded to include additional airlines and other travel providers. Computer
reservation terminals were placed in travel agencies beginning in 1976, and
consumer direct access to SABRE became available through computer on-line
services in 1985 and on the Internet in 1996.

In addition to providing information to subscribers about airlines and
other travel providers and their products and services, SABRE reports
transaction information from subscriber-generated sales back to the provider
from which such products and services were purchased. This allows travel
providers to manage inventory and yields. SABRE also allows travel agency
subscribers to print airline tickets, boarding passes and itineraries.
Additionally, SABRE provides subscribers with travel information on matters such
as currency, health and visa requirements, weather and sightseeing.

By accessing the SABRE system, a subscriber can, from a single source,
obtain schedule, availability and pricing information from multiple travel
providers for complex travel itineraries. A typical SABRE
transaction -- consisting of an information request by a subscriber, a search in
SABRE and a response to the subscriber -- averages less than two seconds in
elapsed time. SABRE's "one-stop shopping" capabilities permit a consumer to
locate, price, compare and purchase the travel products and services that best
satisfy the traveler's requirements.

ASSOCIATE PARTICIPATION

The Company derives its electronic travel distribution revenues primarily
from booking fees paid by associates for reservations for their products and
services made through SABRE (unless the

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reservations are later cancelled). In addition to airlines, associates include
car rental companies, hotel companies, railroads, tour operators, ferry
companies and cruise lines, which participate in SABRE through products designed
for such associates, such as CARS Plus(sm), SHAARP Plus(sm), SABRErail(sm),
SABRE TourGuide(R), SABRE Navigator(sm) and SABRE CruiseDirector(R),
respectively. SABRE subscribers can also purchase travel insurance or book
theater tickets or limousines through SABRE. In 1995, 59.1% of the Company's
revenues was generated through booking fees.

Depending upon the level of participation or "functionality" at which they
participate in SABRE, airlines and other associates display, warehouse, manage
and sell their inventory in SABRE. The booking fee per transaction paid by an
associate to the Company depends upon several factors, including the associate's
level of participation in SABRE and the type of products or services provided by
the associate. Airlines are provided with a wide range of participation levels
from which to choose. The lowest level of functionality for airlines -- Basic
Booking Request(SM) -- is aimed at the low-cost "no-frills" carriers and
provides schedules and electronic booking only. Higher levels of functionality
for airlines, such as Direct Connect Availability(SM), provide greater levels of
communication between SABRE and associates, thus enabling SABRE to provide
subscribers with more detailed information and to provide associates with
improved inventory management. For an associate selecting one of the higher
levels of participation, SABRE provides subscribers with a direct connection to
the associate's internal reservation system, allowing SABRE to provide real-time
information and allowing the associate to optimize revenue for each flight.

Car rental companies and hotel operators are provided with similar levels
of participation from which to select. From 1991 to 1995, the number of bookings
for car rental companies and hotels grew at a compound annual rate of 16.9%. The
Company intends to pursue continued growth in such bookings by, among other
things, emphasizing in its marketing the various levels of functionality that
the Company can provide to car rental companies and hotel companies.

The Company also provides associates, upon request, marketing data derived
from SABRE bookings for fees that vary depending on the amount and type of
information provided.

Although most of the world's airlines are SABRE associates, the Company
believes that the market for associate participation in SABRE has room for
growth, both through the addition of non-airline associates and through
upgrading by associates to higher levels of functionality in SABRE. In marketing
to associates, the Company emphasizes SABRE's global distribution capabilities,
the ability of associates to display information at no charge until a booking is
made and SABRE's extensive subscriber network.

SUBSCRIBER ACCESS

The Company provides subscribers with access to SABRE which enables them to
electronically locate, price, compare and purchase travel products and services
provided by associates. The Company tailors the interface and functionality of
SABRE to the needs of its different types of subscribers. Marketing is targeted
to travel agencies, corporations and individual consumers.

TRAVEL AGENTS. The Company provides travel agents with the hardware,
software, technical support and other services that travel agents need to access
SABRE in return for fees that vary based on the number of bookings generated by
the travel agency. Such fees are payable over the term of the travel agent's
agreement with the Company, which term is generally five years in the United
States and Latin America, three years in Canada and one year in Europe. In 1995,
approximately 4.3% of the Company's revenues was generated by fees from travel
agent subscribers.

Because travel agencies have differing needs, based on, among other things,
volume and location, the Company has modified the SABRE interface to meet the
specific needs of different categories of travel agents. Travel agents can
choose SABRE interfaces that range from simple, text-based systems to
feature-laden graphical interfaces. For instance, using its expertise in its

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solutions services business, the Company developed Turbo SABRE, an advanced
point-of-sale interface that allows for screen customization and reservations
sales process structuring and eliminates SABRE-specific commands, thereby
reducing keystrokes and training requirements for high-volume travel agencies
who may need high levels of functionality. Turbo SABRE also provides data
sources other than SABRE, such as back office hosts or LAN databases.

Planet SABRE, which the Company intends to introduce in the fourth quarter
of 1996, is a graphical interface consisting of a suite of Windows* applications
comprised of a graphical launch pad, which allows the user to move to any
function with one or two clicks of a mouse, a customizer feature, which allows
travel agencies to tailor Planet SABRE to meet their own specific needs, a
tutorial, online help, a place to store notes about clients, destinations or
procedures and a suggestion system. Planet SABRE transforms SABRE from a complex
command-oriented system to an all-graphic interface with continued access to the
SABRE host system and its capabilities.

SABRE interfaces are available in English, Spanish, Portuguese, French,
German, Italian and Japanese, with a Chinese version currently in development.
In addition, the Company offers travel agencies back-office accounting systems
and further supports travel agencies by offering a simplified method to develop
and place their own marketing presence on the World Wide Web.

The Company markets SABRE to travel agencies domestically and
internationally principally using a sales force of approximately 480 employees.
Presently, more than 14,500 travel agency locations in the United States use
SABRE and, in 1995, more airline bookings in North America were made using SABRE
than through any other global distribution system. Based upon internal
estimates, the Company believes that, in 1995, more than 40% of all airline
bookings made through travel agencies in the United States were made using
SABRE. The 10 largest travel agencies in the United States subscribe to SABRE,
although they also subscribe to another global distribution system as well. The
Company estimates that, in 1995, of all bookings made by these 10 travel
agencies, more than 55% were made using SABRE. The Company has had long-standing
relationships with most of its travel agency subscribers. For example,
approximately 97% of the travel agency locations that were SABRE subscribers at
the beginning of 1995 were SABRE subscribers at the end of 1995.

CORPORATIONS. The Company provides Commercial SABRE to travel agencies to
supply to corporations with which they work closely. Using Commercial SABRE, a
traveler inputs booking details on a personal computer, which are then
transmitted to the SABRE travel agent who reviews the travel plans, makes the
reservations and issues the travel documents.

The Company also will provide SABRE to corporations through Business Travel
Solutions. BTS, designed for corporate travel managers, is a fully-integrated
suite of personal computer-based planning modules for travel planning,
pre-travel decision-making and back-end travel expense reporting. BTS's various
modules will provide corporations with tools to manage travel costs, to ensure
compliance with corporate travel policies and to provide expense reporting,
information regarding vendor relationships, ease of access for booking and quick
and flexible distribution of tickets.

BTS is presently being tested by Cap Gemini, Digital Equipment Corp., First
Data Corp. and Cisco Systems, Inc. BTS is scheduled for release in the fourth
quarter of 1996. The Company intends to market BTS initially to Fortune 1,000
companies through a distribution network and its direct sales force and
currently expects to be able to install the full product suite of BTS by the end
of 1996. The Company believes that substantial opportunities exist for the
marketing and implementation of BTS because it provides efficiencies over other
products available today and because only a small percentage of corporations
currently have direct access to a global distribution system.

- ---------------

* Windows is a registered trademark of Microsoft Corp.

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INDIVIDUAL CONSUMERS. In order to enhance its array of electronic travel
distribution products and services, the Company formed its SABRE Interactive
division to develop opportunities for consumer-direct travel distribution via
personal computer, cable television and other media. The Company believes that,
because presently only a small percentage of individual consumers in the United
States and worldwide directly purchase travel and travel-related services
electronically, substantial growth opportunities exist in the individual
consumer market.

For over 10 years, the Company has been a leader in providing consumers the
ability to directly purchase travel electronically. Through the Company's
Travelocity and easySABRE products, individual consumers can, for no fee (other
than any normal on-line fees that may be charged by a computer on-line service),
obtain access to destination information, compare prices and select travel
products from their personal computers at their own pace.

Travelocity is accessible through computer on-line services and the
Internet. It currently offers flight schedules, reservations and purchase
capabilities for all airlines available in SABRE and expects to offer hotel and
car rental reservations and purchase capabilities by the end of the year.
Travelocity also offers information about travel destinations and additional
services, including chat groups, conferences and postings managed by noted
travel writers and correspondents and the ability for consumers to purchase
merchandise, such as luggage, travel guides and travel accessories. From its
launch on March 12, 1996 at the Cyber Cafe in New York City until August 24,
1996, Travelocity had logged more than 2.4 million visits to its web site, and
its users had viewed more than 29 million pages in the site. Currently more than
248,000 members subscribe to Travelocity. The Internet address for Travelocity
is http://www.travelocity.com.

Travelocity was developed and has been marketed jointly by the Company and
Worldview Systems Corporation ("Worldview"), and Worldview provides the
destination information and additional services described above. Worldview
recently notified the Company that it intended to terminate the strategic
alliance agreement related to Travelocity. The Company believes Worldview does
not have the right to terminate the agreement under the circumstances, and the
Company and Worldview are currently discussing areas of disagreement and
possible modifications to their arrangement. It is possible that in the future
some or all of the destination information and additional services provided by
Worldview may not be available on Travelocity or may be provided by other
vendors or that the Company will be required to provide consumer access to SABRE
on the Internet through easySABRE or an alternative Internet product rather than
through Travelocity. The Company believes that modification or termination of
its agreement with Worldview will not be material to the Company.

The Company introduced easySABRE in 1985 as one of the world's first home
booking systems for travel. easySABRE is available through a number of computer
on-line information systems such as Prodigy, CompuServe and AT&T Easy Link
Services.* With easySABRE, consumers can, for no fee (other than any normal
on-line fees that may be charged by the computer on-line service), view travel
reservation information and make bookings directly in SABRE. easySABRE has a
membership of more than 2.5 million, of which more than 120,000 members are
active users each month.

After reservations are made through either Travelocity or easySABRE, if a
ticket is needed, the consumer may have a travel agent issue the ticket, have
the Company's customer service center issue the ticket and deliver it to the
consumer or call the travel provider directly. The Company receives booking fees
from travel providers for purchases of their travel products and services
pursuant to reservations made through Travelocity and easySABRE.

INTERNATIONAL MARKETING. The Company believes that, because almost all
United States travel agencies currently subscribe to one or more global
distribution systems, the primary areas of

- ---------------

* Prodigy, CompuServe and AT&T Easy Link Services are the trademarks of their
respective owners and are not trademarks of the Company.

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growth for SABRE among travel agencies are outside the United States. As a
result, the Company is actively involved in marketing SABRE internationally
either directly or through joint venture or distributorship arrangements,
depending upon the dynamics of the particular international market targeted. The
Company is presently focusing its marketing efforts in Europe and Latin America
and anticipates increasing its marketing efforts in Asia.

The Company has entered into various distribution agreements and joint
venture arrangements with businesses resident in foreign countries to increase
its international presence. The Company's global marketing partners include
principally foreign airlines that may have influence over the choice of a global
distribution system by travel agents in such airlines' primary markets and
entities that operate smaller global distribution systems or other
travel-related network services. Included among the Company's international
distribution and joint venture arrangements are arrangements covering Japan with
Japan Airlines, China with the Civil Aviation Administration of China, Israel
with El Al, India with Air India and Indian Airlines, Australia with Qantas
Airways, Ansett Airlines and Air New Zealand, Mexico with Aeromexico and
Mexicana de Aviacion and the Middle East with Gulf Air. The Company believes
that continued development of marketing, licensing, joint venture and other
arrangements with non-U.S. airlines and distribution systems will aid in the
expansion of SABRE outside of the United States.

Through its marketing efforts, the Company has placed SABRE in
approximately 16,500 travel agency locations in the United States and Canada,
3,900 locations in Europe, 3,000 locations in Latin America, 2,800 locations in
Asia, 1,700 locations in the South Pacific, 800 locations in the Caribbean, 650
locations in the Middle East and 8 locations in Africa. From 1991 to 1995, the
Company's bookings volumes outside the United States grew at a 28.2% compound
annual rate, excluding Mexico and Japan, where SABRE is marketed, and booking
fees are recognized, by separate legal entities in which the Company is part
owner. The map set forth below illustrates SABRE's current international market
presence.

NUMBER OF TRAVEL AGENCY LOCATIONS

LOGO

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STRATEGY

The Company has developed a five-part strategy to maintain and expand its
position in the global travel distribution market and to maintain its operating
margins.

- INCREASING PENETRATION IN INTERNATIONAL TRAVEL DISTRIBUTION MARKETS. The
Company believes that the international market for travel and related
products and services presents opportunities for the Company to expand its
business by building on its existing base in Europe and Latin America and
by pursuing opportunities in Asia. The Company will pursue international
opportunities directly and through the formation of international
alliances. The Company's revenues from its travel distribution business
outside the United States have grown at a compound annual rate of 29.8%
during the last five years, to $250 million in 1995.

- EXPANDING AND CUSTOMIZING ASSOCIATE PARTICIPATION. The Company plans to
continue to expand participation in SABRE by associates, such as air
charters, car rental companies, hotels, railroads and tour operators, and
has initiated an effort to increase the value provided to associates by
tailoring available participation options to the needs of different travel
providers.

- ENHANCING THE VALUE OF THE TRAVEL DISTRIBUTION PRODUCT TO TRAVEL AGENTS.
The Company plans to maximize the value of its products to travel agents
by increasing the depth and breadth of information available through SABRE
and the ease of use and reliability of its products. The Company will also
continue to develop products to enhance the competitiveness of its travel
agent subscribers. For example, the Company has developed two user
interface products, Turbo SABRE and Planet SABRE, that provide travel
agencies with greater productivity through data integration and increased
ease of use, respectively.

- PARTICIPATING IN EMERGING DISTRIBUTION CHANNELS. With products such as
BTS, which is scheduled for release in the fourth quarter of 1996, and
Travelocity, the Company intends to continue to compete in emerging
distribution channels, such as corporate direct distribution, the Internet
and computer on-line services.

- PURSUING ALLIANCES WITH LARGE AGENCIES. The Company intends to form
strategic alliances with large travel agency chains where appropriate to
meet its growth objectives.

COMPETITION

The Company competes in electronic travel distribution primarily against
other large and well-established global distribution systems. SABRE's principal
competitors include Amadeus/System One, Galileo/Apollo and Worldspan.
Amadeus/System One is owned by Air France, Continental Airlines, Iberia and
Lufthansa. Galileo/Apollo is owned by United Airlines, British Airways,
Swissair, KLM Royal Dutch and USAir, among others. The Canadian affiliate of
Galileo/Apollo is owned by Air Canada. Worldspan is owned by Delta, Northwest
and TWA and is affiliated with ABACUS, an Asian global distribution system. Each
of these competitors offers many products and services similar to those of the
Company.

Moreover, although certain barriers exist for any new provider of
electronic commerce -- barriers such as the need for significant capital
investment to acquire or develop the hardware,

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software and network facilities necessary to operate effectively a global
distribution system -- the Company is always faced with the potential of new
competitors, particularly as new channels for travel distribution develop.

Competition to attract and retain travel agent subscribers, which continue
to be the primary method of travel distribution, is very intense. Factors
affecting competitive success of global distribution systems include depth and
breadth of information, ease of use, reliability, service and incentives to
travel agents and range of products available to travel providers, travel agents
and consumers. Because SABRE was named the "World's Leading Computer
Reservations System" for the third year in a row at the 1996 World Travel
Awards, the Company believes it competes effectively as to these factors.

Although distribution through travel agents continues to be the primary
method of travel distribution, new channels of distribution are developing
directly to businesses and consumers through computer on-line services, the
Internet and private networks. The Company faces competition in these channels
not only from its principal competitors but also from possible new entrants in
the sale of travel products and from travel providers that distribute their
products directly. For example, in July 1996, American Express Co. and Microsoft
Corp. announced an on-line travel booking service for corporations, which they
have scheduled for release in the first half of 1997. The Company expects that
this on-line travel booking service, while only in the developmental stage, will
eventually directly compete with BTS. In addition, the Internet permits
consumers to have direct access to travel providers, thereby by-passing both
traditional travel agents and global distribution systems such as SABRE. The
Company has positioned its BTS, Travelocity and easySABRE products to compete in
these emerging distribution channels.

With easySABRE, the Company was one of the first companies to introduce
global distribution system access through a computer on-line service. The
Company believes that it continues to be a market leader in providing access
through computer on-line services and that this leadership in the market, as
well as its 10 years of experience marketing easySABRE, provide the Company an
advantage in marketing Travelocity.

In addition, the Company believes that BTS, Travelocity and easySABRE enjoy
an advantage over products distributed directly by travel suppliers because the
Company's display of travel products is not biased in favor of any particular
provider. Also, the breadth and depth of the content of the Company's products
permit one-stop shopping rather than requiring access to several different sites
to compare prices and then book a single trip.

INDUSTRY REGULATION

More than half of the Company's electronic travel distribution business is
generated by travel agencies located in the United States. Airline-Affiliated
Systems have been subject to regulations promulgated by the DOT since November
1984. The current form of the U.S. Regulations was adopted in 1992. The U.S.
Regulations will expire on December 31, 1997, unless they are extended.

The U.S. Regulations govern the relationships of Airline-Affiliated Systems
with GDS-Affiliated Airlines and travel agencies. Therefore, the U.S.
Regulations would not apply to SABRE if SABRE were not offered or marketed to
travel agencies by American or any other airline or airline affiliate, such as
the Company. Additionally, the U.S. Regulations do not apply with respect to the
use of a global distribution system by consumers and business travel
departments. Accordingly, the U.S. Regulations do not currently apply to BTS,
Travelocity or easySABRE.

One of the principal requirements of the U.S. Regulations is that displays
of airline services by Airline-Affiliated Systems must be nondiscriminatory.
This means that the global distribution system may not use carrier identity in
ordering the display of services or in building connecting flights. Travel
agencies, however, may utilize software to override the neutral displays of an
Airline-Affiliated System.

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Airline-Affiliated Systems are required to charge the same fees to all air
carriers for the same level of service and to update information for all air
carriers with the same degree of care and timeliness and to provide, on request,
information on fee arrangements. Any mechanism for the sale of airline products
offered to one or more air carriers must be offered to all other air carriers on
nondiscriminatory terms.

The U.S. Regulations also govern relationships between Airline-Affiliated
Systems and travel agents. The U.S. Regulations mandate, among other things,
that contracts between travel agency subscribers and an Airline-Affiliated
System be for no longer than five years. The rules also forbid an
Airline-Affiliated System from impeding a travel agent's use of another system
by, for example, making it a breach of contract for an agency to fail to make a
designated minimum number of bookings. The rules do allow, however, systems to
provide a credit against monthly fees to travel agents who achieve certain
booking thresholds, with the agency being obligated to pay the system for any
shortfall. The U.S. Regulations also forbid Airline-Affiliated Systems from
entering into contracts with travel agents containing exclusivity clauses or
that require the agency to maintain a certain percentage of computer terminals
or bookings for a particular system, vis-a-vis other systems.

The rules prohibit GDS-Affiliated Airlines from linking the payment of
commissions to travel agents to the travel agent's use of the system with which
the GDS-Affiliated Airline is affiliated. Further, an Airline-Affiliated System
may not ban travel agents from using software provided by third parties in
connection with the system's equipment, unless that software threatens to impair
the integrity of the system.

The U.S. Regulations require any GDS-Affiliated Airline doing business in
the United States to participate in competing Airline-Affiliated Systems at the
same level as it does in its affiliated system and to provide data on its
flights to competing Airline-Affiliated Systems that is as complete, accurate
and timely as the information given to its affiliated system, as long as the
competing system offers terms for participation that are commercially
reasonable.

Although GDS-Affiliated Airlines are required by the U.S. Regulations to
participate in competing Airline-Affiliated Systems at the same level of
functionality, non GDS-Affiliated Airlines are not subject to the same
requirement. Thus many global distribution systems include in their associate
agreements parity clauses, which generally require an airline participating in a
global distribution system to participate in that system at as high a level of
functionality as in any competitive system. On August 14, 1996, the DOT issued a
notice of proposed rulemaking (an "NPRM") proposing a prohibition on the use of
parity clauses by global distribution systems but suggesting that such clauses
could still be enforced as to airlines that own or market a global distribution
system. The NPRM is a result of a Petition for Rulemaking filed by Alaska
Airlines. See "Business -- Legal Proceedings." The Company has filed comments on
the NPRM, in which the Company states that it is opposed to the prohibition on
parity clauses. See "Risk Factors -- United States Regulations; Future
Participation of Certain Airline Associates in SABRE."

Additionally, the DOT has issued an NPRM that proposes two rules. The first
proposed rule would require each global distribution system to offer a display
that lists flights without giving on-line connections any preference over
interline connections. The second proposed rule would require that any display
offered by a global distribution system be based on criteria rationally related
to consumer preferences. The Company has not yet filed comments with the DOT
with regard to this NPRM.

The Company also has operations in Australia, Canada and the European
Union. The overall approach of the regulations for global distribution systems
in each of these three jurisdictions is similar to that of the United States. In
each of these jurisdictions, rules require nondiscriminatory displays of airline
services and nondiscriminatory booking fees, and forbid airlines affiliated with
global distribution systems from linking travel agency commissions to the use of
a particular system.

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Further, these rules forbid airlines affiliated with global distribution systems
from discriminating against competing systems with respect to the data that they
furnish.

There are, however, unique aspects of each set of rules. The current
Canadian and European Union rules do apply to Travelocity and easySABRE. The
European rules also dictate the precise order in which flights must be displayed
and permit travel agents to cancel their subscription agreements at the end of
the first year of the contract. The Canadian rules forbid contracts with travel
agencies of more than three years in duration and forbid certain uses of
carriers' sales forces for promoting global distribution systems. The European
rules are presently under review and are expected to be revised within the next
year. The Company does not anticipate that any revision will materially affect
its operations in Europe.

The Company also has operations in the Caribbean, Latin America and Asia.
In jurisdictions in those regions, there is no regulation of global distribution
systems for travel products.

The Company currently does business in more than 70 countries outside the
U.S. The DOT, in conjunction with the U.S. Department of State, is charged with
assuring fair and open access for U.S. air carriers, and U.S. global
distribution systems owned by airlines, to overseas markets. In this regard, the
DOT has provided assistance to the Company in entering several overseas markets.
This assistance by the DOT to SABRE could cease if SABRE were not offered to
travel agencies by American or another airline or an airline affiliate.

The regulations in Australia, Canada and the European Union also contain,
in varying degrees, remedies the Company can use to assist in the eradication of
discriminatory practices that may impede the Company's access to the regulated
market.

INFORMATION TECHNOLOGY SOLUTIONS

OVERVIEW

SOLUTIONS

The Company offers a comprehensive set of solutions to the airline
industry. These solutions include: (i) consulting, which includes capabilities
ranging from reengineering to functional consulting; (ii) software development,
sales and licensing, which includes individual sales of specific products as
well as custom development and integration; and (iii) full solutions
outsourcing, which includes a full range of solutions. In providing solutions,
the Company depends mainly upon its technical personnel and senior management.
Recruiting and retaining capable personnel, particularly those with expertise in
operations research, information technology and industrial engineering, is vital
to the provision of solutions by the Company.

The Company combines the expertise of its operations research, information
technology and industrial engineering professionals to offer to the airline
industry a wide array of consulting services, including business planning and
analysis, information technology services, flight technical services and
business process design services.

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The Company's solutions have helped American become one of the most
technologically advanced airlines in the world. The Company has provided
solutions to over 120 additional airlines or airline associations. These
solutions have many applications for airlines. For instance, (i) with Fare
Action Evaluator(sm), airlines can seek to enhance revenue using statistical and
database sources that estimate the economic implications of fare actions before
they are implemented, (ii) with AIRPRICE(sm), airlines can analyze and manage
fares and react to competitors' changes, (iii) with AIRFLITE(sm), airlines can
determine superior flight schedules and (iv) with AIRCREWS(sm), airlines can
improve crew member scheduling thus reducing staffing costs.

The Company also provides real-time transactions processing services
whereby the Company provides access to its hardware and software to airlines for
reservations, flight operations, departure control and other related services.
Local computer terminals at a customer's location are linked to the Company's
mainframes, and the Company maintains and operates the entire system on a secure
and confidential basis. As of June 30, 1996, under such arrangements, the
Company provides to more than 60 airlines -- including Southwest Airlines, Gulf
Air and Alaska Airlines -- versions of one or more of the Company's systems for
reservations, flight operations, passenger handling and cargo booking and
tracking.

Building on its base of experience established in the development of
solutions for the airline industry, the Company has extended its software
solutions and consulting businesses to other industries, particularly those that
face complex operations issues similar to the airline industry, including the
airport, hospitality, logistics, railroad and financial services industries. For
example, the Company worked closely with SNCF, the French national railroad, to
design, develop and install a passenger railway reservations system, which is
now accessed by more than 25,000 ticketing devices throughout Europe. The
Company and SNCF are now jointly marketing this software to other passenger
railroads. Other clients in industries outside of the airline industry include
the United States Navy, Roadway Express, Air Products and Chemicals, Club Med,
NationsBank, John Alden Insurance, Avis Rent A Car, Ryder Truck and, most
recently, Hyatt Hotels. For Hyatt, all of the hotel management company's
software maintenance and development functions have been outsourced to the
Company, in connection with an alliance with Computer Sciences Corporation,
which has undertaken to provide a broad variety of data processing services to
Hyatt for an initial five-year term. The Company will also commercialize Hyatt's
existing systems, including its computer reservation and property management
systems, and market them to third parties in collaboration with Computer
Sciences Corporation.

The Company distributes its solutions and consulting services through a
sales and marketing organization with offices in eight cities on four continents
(Dallas, Tulsa, Vancouver, London, Paris, Kuwait, Hong Kong and Sydney). The
Company also maintains agency relationships to support sales efforts in key
markets, including India, China and the Middle East. To date, the Company has
provided business solutions to more than 250 clients located in more than 50
countries.

TECHNOLOGY SERVICES

The Company, through its SABRE Computer Services division ("SCS"), provides
data processing, network and distributed systems services to American and AMR's
other subsidiaries. The Company fulfills substantially all of American's data
processing requirements and manages all voice and data communication services
for American and AMR's other subsidiaries, including data networks, voice
networks and radio services. The Company also provides American with the
services required to design, install, operate and maintain its range of local
area networks, desktop, mobile computing and peripheral devices. This includes
the design, installation, operation and maintenance of American's airport
operations. In 1995, the Company introduced SABRE Wireless(SM), which provides
American's airport personnel the ability to access SABRE from mobile devices.

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As part of the Reorganization, the Company entered into the Technology
Services Agreement with American to provide these services for a term of 10
years for most services (three and five years for others). See "Relationship
with AMR and Certain Transactions -- Contractual Arrangements." Although the
Company has no current plans to offer data processing or network services to
other customers, the Company has the capacity to explore future opportunities.

STRATEGY

The Company has developed a three-part strategy to maintain its position as
one of the world's leading providers of solutions to the airline industry and to
expand its core competencies to become one of the leading providers of solutions
to other industries.

- ENHANCING LEADERSHIP IN AIR TRAVEL SOLUTIONS. The Company believes that,
although it already provides its airline customers with a complete line of
products, it can enhance its market leadership by improving the depth and
breadth of its airline-related software product line and by expanding its
airline consulting business through internal development, license
agreements and acquisitions.

- EMPLOYING EXPERTISE INTO OTHER INDUSTRIES. The Company has over 20 years'
experience in applying its operations research, information technology and
industrial engineering skills in the airline industry. The Company intends
to build upon this experience and to leverage its expertise into other
industries, such as oil and gas, logistics, insurance and manufacturing,
with similar complex operations issues. As the Company's suite of
solutions expands, the Company believes that it will also be able to
provide non-airline customers with comprehensive services including
software development and product sales, transactions processing and
consulting.

- PURSUING ADDITIONAL STRATEGIC RELATIONSHIPS. The Company intends to
pursue alliances with leading information systems outsourcers to provide
complete information technology outsourcing, with the Company providing
the solutions outsourcing.

COMPETITION

The Company in information technology solutions competes both against
full-service providers of technology outsourcing and solutions companies, some
of which have considerably greater financial resources than the Company, and
against smaller companies that offer a limited range of products. Among the
Company's full-service competitors are Electronic Data Systems, IBM/ISSC,
Unisys, Andersen Consulting and Lufthansa Systems. Many of these competitors
have formed strategic alliances with large companies in the travel industry, and
the Company's access to such potential customers is thus limited. The Company
believes that its competitive position in the travel industry is enhanced by its
experience in developing systems for American, by its ability to offer not only
software applications but also systems development, integration and maintenance
and transactions processing services, and because it can offer to customers what
it believes to be the most comprehensive suite of software solutions for the
airline industry.

INTELLECTUAL PROPERTY

In connection with the Reorganization, American transferred to the Company
the software utilized in the operation of the business of The SABRE Group. This
software, along with other software, proprietary information and intellectual
property rights, are significant assets of the Company. The Company relies on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect these assets. The Company's
software and related documentation, however, are protected principally under
trade secret and copyright laws, which afford only limited protection. In
addition, the laws of some foreign jurisdictions may provide less protection
than the laws of the United States for the Company's proprietary rights.
Unauthorized use of the Company's intellectual property could have a material
adverse effect

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on the Company, and there can be no assurance that the Company's legal remedies
would adequately compensate it for the damages to its business caused by such
use.

Licenses for a number of software products have been granted to the
Company. Certain of these licenses, individually and in the aggregate, are
material to the business of the Company.

FACILITIES

The Company's principal executive offices are located in Fort Worth, Texas,
primarily in two buildings, one of which is owned by the Company and one of
which is leased from the Dallas/Fort Worth International Airport Board pursuant
to a lease that expires in 2023, subject to four renewal options, exercisable by
the Company, of five years duration each. The Company also leases office
facilities in approximately 70 other locations worldwide. The Company's Data
Center is located in an underground facility in Tulsa, Oklahoma. The land on
which the Data Center is located is leased from the Tulsa Airport Improvements
Trust, a public trust organized under the laws of the State of Oklahoma,
pursuant to a lease that expires in 2038.

SABRE and the Company's data processing services and transactions
processing are dependent on the Company's central computer operations and
information processing facility located in the Data Center, which contains over
120,000 square feet of space and houses fifteen mainframes having 12,639
gigabytes of storage and 3,371 MIPS of processing power. The SABRE system, which
is connected to over 120,000 computer access terminals and operates non-stop
throughout the year, maintains over 50 million air fares (updated five times per
business day), averages 93 million requests for information per day and has
processed up to 4,969 requests for information per second (in July 1996). The
Company also utilizes a computer center located in one of its office buildings
in Fort Worth (the "Fort Worth Center"). At the Fort Worth Center, the Company
operates and manages a wide variety of processors and computer systems as well
as server based and client/server distributed systems.

The Company's travel agency and corporate subscribers connect to SABRE
through leased access circuits. These leased access circuits, in turn, connect
to the domestic and international data networks leased by the Company from SITA,
which connect to the Data Center.

The Company believes that its office facilities will be adequate for its
immediate needs and that additional or substitute space is available if needed
to accommodate expansion. The Company also believes that its Data Center, Fort
Worth Center and network access will be adequate for its immediate and
foreseeable needs. The Company, however, continuously invests in research and
development to upgrade these facilities to meet changing technological needs.

LEGAL PROCEEDINGS

In June 1996, American Trans Air, Inc. filed suit against American in the
U.S. District Court for the Southern District of Indiana, Indianapolis Division
seeking a refund of $400,000 in booking fees it claims were charged for
illegitimate bookings. Prior to the filing by American Trans Air of its lawsuit,
America West Airlines Inc. had used a similar claim of illegitimate bookings to
withhold over $1.0 million in booking fees payable to American. American and
SABRE Associates, Inc., an affiliate of the Company, filed suit in the District
Court of Tarrant County, Texas, 153rd Judicial District, to recover the unpaid
booking fees from America West. In connection with the Reorganization, the
Company is the successor in interest to American in both of these cases. The
claims of both American Trans Air, Inc. and America West relate to booking fees
charged by the Company, and commonly charged by other providers in the
electronic travel distribution industry, for "passive bookings," which are
bookings initially made directly with a travel provider (rather than through a
travel agent) and subsequently ticketed through SABRE or another global
distribution system. If both American Trans Air and America West prevail on
their claims of illegitimate booking fees, other associates may also make
similar claims. The Company believes, however, that passive booking fees are
properly charged pursuant to its contracts with associates. The Company intends
to

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vigorously defend its actions in this regard and believes that the claims of
American Trans Air, Inc. and America West can be successfully defended or
resolved without any material adverse effect on the Company's financial
condition or results of operations.

Alaska Airlines has filed a Petition for Rulemaking with the DOT seeking a
rule that would bar a global distribution system from requiring airlines that
are not GDS-Affiliated Airlines to participate in such system at the same level
of functionality as the airline participates in other global distribution
systems. The Company believes that this Petition for Rulemaking is a result of a
breach of contract suit brought by American against Alaska Airlines in 1994 in
the U.S. District Court for the Northern District of Texas. In its complaint,
American alleged that Alaska Airlines breached its participating carrier
agreement by obtaining greater functionality from other global distribution
systems than it obtained from SABRE. American sought declaratory relief. In
connection with the Reorganization, the Company is the successor in interest to
American in this litigation. On September 19, 1996, the U.S. District Court for
the Northern District of Texas dismissed the lawsuit on the grounds that, as the
Company's claims were based on state law, they were preempted by federal law.
The Company currently plans to appeal the dismissal. See "-- Electronic Travel
Distribution -- Industry Regulation."

EMPLOYEES

As of June 30, 1996, the Company had approximately 7,900 full-time
employees. A central part of the Company's philosophy is to attract and maintain
a highly capable staff. The Company considers its current employee relations to
be good. None of the Company's employees are represented by a labor union.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company, their present
positions and their ages with the Company are as follows:

Robert L. Crandall........ Mr. Crandall was elected Chairman of the Board of
Directors of the Company in July 1996. He has been
Chairman of the Board and Chief Executive Officer of
AMR Corporation since 1985, President of AMR since
its formation in 1982 and Chairman of the Board and
Chief Executive Officer of American since 1985. Mr.
Crandall was President of American from 1980 to 1995.
Mr. Crandall is also a director of Halliburton
Company. Age 60.

Michael J. Durham......... Mr. Durham was elected a director, President and
Chief Executive Officer of the Company in July 1996.
Mr. Durham was also elected President and Chief
Executive Officer of The SABRE Group, Inc. in July
1996. Mr. Durham was elected President of The SABRE
Group in 1995. Mr. Durham was Senior Vice President
and Treasurer of AMR and Senior Vice
President -- Finance and Chief Financial Officer of
American from 1989 to 1995. Age 45.

Gerard J. Arpey........... Mr. Arpey was elected a director of the Company in
July 1996. He has been Senior Vice President of AMR
since 1992 and Chief Financial Officer of AMR since
1995. Mr. Arpey was Vice President of American from
1989 to 1995. Age 38.

Anne H. McNamara.......... Mrs. McNamara was elected a director of the Company
in August 1996. Mrs. McNamara has been Senior Vice
President and General Counsel of AMR since 1988. Mrs.
McNamara is a director of Louisville Gas & Electric
Company and of LG&E Energy Corp. and serves on the
compensation and nominating/development committees of
both companies. Age 48.

Bradford J. Boston........ Mr. Boston was elected Senior Vice President -- SABRE
Computer Services of the Company in July 1996. Mr.
Boston was also elected President -- SABRE Computer
Services for The SABRE Group, Inc. in July 1996. Mr.
Boston was President -- SABRE Computer Services, a
division of The SABRE Group, from June 1996 to July
1996. Prior to that time, Mr. Boston was Senior Vice
President for American Express Travel Related
Services from 1994 to 1996, was Senior Vice President
of Visa International's Visanet operations from 1993
to 1994, and was Vice President of Systems
Development for United Airlines/Covia Partnership
from 1991 to 1993. Age 42.

Thomas M. Cook............ Mr. Cook was elected Senior Vice President -- SABRE
Decision Technologies of the Company in July 1996.
Mr. Cook was also elected President -- SABRE Decision
Technologies for The SABRE Group, Inc. in July 1996.
Mr. Cook was President -- SABRE Decision
Technologies, a division of The SABRE Group, from its
formation in 1994 to 1996. For American, Mr. Cook was
President -- Decision Technologies from 1988 to 1994.
Age 56.

Terrell B. Jones.......... Mr. Jones was elected Senior Vice President -- SABRE
Interactive and Chief Information Officer of the
Company in July 1996. Mr. Jones was also elected
President -- SABRE Interactive and Chief Informa-

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tion Officer for The SABRE Group, Inc. in July 1996.
Mr. Jones served as President -- SABRE Computer
Services, a division of The SABRE Group, from 1993 to
1996 and as President -- SABRE Interactive, a
division of The SABRE Group, from 1995 to 1996. For
American, Mr. Jones served as Managing Director and
Division Vice President -- SCS Systems Planning &
Development from 1991 to 1993, and as Managing
Director & Vice President -- STIN Product Development
from 1987 to 1991. Age 48.

Jeffrey G. Katz........... Mr. Katz was elected Senior Vice President -- SABRE
Travel Information Network of the Company in July
1996. Mr. Katz was also elected President -- SABRE
Travel Information Network for The SABRE Group, Inc.
in July 1996. Mr. Katz was President -- SABRE Travel
Information Network, a division of The SABRE Group,
from 1993 to July 1996. For American, Mr. Katz served
as Division Managing Director -- Passenger Sales from
1991 to 1993. Age 41.

T. Patrick Kelly.......... Mr. Kelly was elected Senior Vice President, Chief
Financial Officer and Treasurer of the Company and of
The SABRE Group, Inc. in July 1996. Mr. Kelly was
Senior Vice President -- SABRE Group Planning from
1995 to July 1996. For American, Mr. Kelly served as
Vice President -- Financial Planning & Analysis from
1993 to 1995, Managing Director -- SABRE Development
Services from 1992 to 1993, and Managing
Director -- Financial Planning from 1990 to 1992. Age
39.

Andrew B. Steinberg....... Mr. Steinberg has agreed to serve as Senior Vice
President, General Counsel and Corporate Secretary of
the Company as of the date of the consummation of the
Offerings. Mr. Steinberg has served as an associate
general counsel of American since 1994 and will
resign from that position upon becoming Senior Vice
President, General Counsel and Corporate Secretary of
the Company. From 1991 to 1994, Mr. Steinberg was a
senior attorney with American. Age 37.

Following the consummation of the Offerings, the Company intends to elect
five additional directors, two of whom are directors but not employees or
officers of AMR and three of whom are neither employees or officers of the
Company or AMR nor directors of AMR.

INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors is divided into three classes of directors, with
each class elected to a three-year term every third year and holding office
until their successors are elected and qualified. Mr. Crandall's present term as
Chairman of the Board will expire at the Company's annual meeting of
stockholders to be held in 1999. Mr. Durham's present term as a director will
expire at the Company's annual meeting of stockholders to be held in 1999. Mr.
Arpey's present term as a director will expire at the Company's annual meeting
of stockholders to be held in 1998. Mrs. McNamara's present term as a director
will expire at the Company's annual meeting of stockholders to be held in 1997.

The Bylaws authorize the Board of Directors to designate three committees,
an Executive Committee, an Audit Committee and a Compensation/Nominating
Committee. The Board of Directors has designated an Executive Committee and
will, upon the consummation of the Offerings, designate an Audit Committee and a
Compensation/Nominating Committee. In addition, the Board of Directors may, from
time to time, designate one or more Special Committees, which shall have such
duties and may exercise such powers as are granted to it by the Board of
Directors.

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The Executive Committee will consist of four or more members, including the
Chairman of the Board and the Chief Executive Officer. The Executive Committee
has and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Company, with the exception of
such powers and authority as may be specifically reserved to the Board by law or
by resolution adopted by the Board of Directors.

The Audit Committee, which will be composed entirely of directors who are
not employees or officers of the Company or AMR or directors of AMR, will review
and recommend the selection of independent auditors, the fees to be paid to such
auditors, the adequacy of the audit and accounting procedures of the Company and
such other matters as may be specifically delegated to the Audit Committee by
the Board of Directors. In this connection, the Audit Committee shall, at its
request, meet with representatives of the independent auditors and with the
financial officers of the Company separately or jointly.

The Compensation/Nominating Committee, which will be composed entirely of
directors who are neither employees nor officers of the Company, will review and
make recommendations with respect to the management remuneration policies of the
Company including salary rates and fringe benefits of elected officers, other
remuneration plans such as incentive compensation, deferred compensation and
stock option plans, directors' compensation and benefits and such other matters
as may be specifically delegated to the Compensation/Nominating Committee by the
Board of Directors. In addition, the Compensation/Nominating Committee will make
recommendations to the Board of Directors concerning suitable candidates for
election to the Board of Directors, with respect to assignments to committees of
the Board of Directors, and with respect to promotions, changes and succession
among the senior management of the Company. In making recommendations for
suitable candidates for election to the Board of Directors, the
Compensation/Nominating Committee will consider nominees for election
recommended by stockholders.

COMPENSATION OF DIRECTORS

Directors who are not executive officers of the Company or AMR will receive
an annual retainer of $25,000 for Board of Directors and committee service and a
fee of $1,000 for each meeting of the Board of Directors or any committee
thereof attended.

It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, effective on the consummation of the Offerings, a
Directors' Stock Incentive Plan (the "SIP").

The SIP will provide for an annual award of options to purchase 3,000
shares of the Company's Class A Common Stock to each director who is neither an
officer nor an employee of the Company, AMR or any subsidiary thereof (a
"Non-Employee Director") who is in office on the first business day after each
annual meeting of stockholders occurring during the term of the SIP (an "Annual
Award"). The options, which will have an exercise price equal to the fair market
value of the Class A Common Stock on the date of grant, will vest pro rata over
a five-year period, as long as the Non-Employee Director is in office on the
first business day after each annual meeting of stockholders. Notwithstanding
the vesting provisions of the previous sentence, if a Non-Employee Director
ceases to be a director due to death or disability before all options are
vested, the Non-Employee Director's options shall vest immediately upon death or
disability. Each option will expire on the earlier of (i) the date the
Non-Employee Director ceases to be a director of the Company, if for any reason
other than death, disability or retirement or (ii) three years from the date the
Non-Employee Director ceases to be a director of the Company due to death,
disability or retirement; provided, however, that if the Non-Employee Director
dies within the three-year period following disability or retirement, as
applicable, the option will expire no later than 12 months after the
Non-Employee Director's death.

The SIP will also provide for a one-time award of options to purchase
10,000 shares of the Company's Class A Common Stock to a new Non-Employee
Director upon his or her initial election

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to the Board of Directors (a "New Director"). This grant will be made on the
business day immediately following the annual meeting at or after which such New
Director is elected to the Board (the "Election Award"). Options granted as an
Election Award, which will have an exercise price equal to the fair market value
of the Class A Common Stock on the date of grant, will vest in the same manner
as options granted as an Annual Award. The Election Award will be in addition to
the Annual Award.

A maximum of 350,000 shares may be issued under the SIP, subject to
appropriate adjustments in the event of certain corporate transactions,
including but not limited to reorganizations, stock dividends and splits. The
SIP will be administered, and may be amended, by the Board of Directors.

No income will be realized by the Non-Employee Director at the time options
are granted. Generally, upon exercise of an option, the Non-Employee Director
will realize ordinary income in an amount equal to the difference between the
price paid for the shares and the fair market value of the shares on the date of
exercise. The Company will be entitled to a tax deduction in the same amount.
Any appreciation (or depreciation) after the date of the exercise will be either
short-term or long-term capital gain or loss, depending on the length of time
that the Non-Employee Director has held the shares.

EXECUTIVE COMPENSATION

Prior to the Reorganization, a majority of the employees of the Company,
including the five most highly compensated executive officers of the Company,
who are named below, were compensated by American. Following the Reorganization,
the executive officers and all other employees of the Company will be
compensated solely by the Company, and the executive officers of the Company
will no longer participate in any of American's compensation plans, except with
regard to certain equity awards granted by AMR as described below and with
regard to American's fixed benefit retirement plan, in which the employees of
the Company will participate until December 31, 1996.

The Company's compensation program will be administered by the
Compensation/Nominating Committee. The Company's executive officers will receive
annual cash compensation in the form of a base salary and will participate in a
formula-based incentive compensation plan that is tied to the Company's
financial performance. In addition, the Company's executive officers and other
key employees will be eligible to participate in the Company's Long-Term
Incentive Plan (the "LTIP"). The Company's executive officers will also
participate in one or more retirement plans, the parameters of which are
presently under consideration by the Company.

For the fiscal year ended December 31, 1995, the five most highly
compensated officers of the Company whose aggregate remuneration exceeded
$100,000 were Michael J. Durham, Thomas M. Cook, Terrell B. Jones, Jeffrey G.
Katz and T. Patrick Kelly (the "named executive officers"). See "-- Compensation
of the Named Executive Officers in 1995." Bradford J. Boston was appointed
Senior Vice President -- SABRE Computer Services on June 1, 1996. As base salary
for 1996, Mr. Durham will receive $393,583, Mr. Cook will receive $259,499, Mr.
Jones will receive $243,700, Mr. Katz will receive $187,243 and Mr. Kelly will
receive $186,883. Mr. Boston will receive a base salary of $132,750 for the
seven months commencing June 1, 1996, the date of commencement of his employment
with the Company.

The Company's incentive compensation plan provides that each of the named
executive officers, along with other key employees, will be eligible to receive
cash bonus awards only if specified financial performance goals are met by the
Company. The target bonus payable to a participant under the incentive
compensation plan is based upon that individual's job classification at the
Company, but the actual amount of the award is based on a subjective evaluation
of such individual's performance. No bonus payment may exceed 100% of the
individual's base salary.

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THE COMPANY'S LONG-TERM INCENTIVE PLAN

It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, and AMR, as the Company's sole stockholder, will
approve, effective upon the consummation of the Offerings, the LTIP.

LTIP awards may be made to key employees, including officers of the
Company, its subsidiaries and affiliates but may not be granted to any director
who is not also an employee of the Company, its subsidiaries or affiliates. The
number of employees participating in the LTIP will vary from year to year.

Initially 13.0 million shares of Class A Common Stock will be authorized to
be issued under the LTIP. The Company presently intends, however, that as long
as AMR beneficially owns at least 80% of the economic interest, and 80% of the
voting power, of the Company, the Company will only issue such number of shares
under the LTIP as will permit AMR to retain at least 80% of the economic
interest, and 80% of the voting power, of the Company.

If shares subject to an option under the LTIP cease to be subject to such
option, or if shares awarded under the LTIP are forfeited, or an award otherwise
terminates without a payment being made to the participant in the form of Class
A Common Stock, such shares will again be available for future distribution
under the LTIP. In the event of certain changes in the Company's capital
structure affecting the Class A Common Stock, the LTIP Committee may make
appropriate adjustments in the number of shares that may be awarded and in the
number of shares covered by options and other awards then outstanding under the
LTIP, and, where applicable, the exercise price of awards under the LTIP.

The LTIP will be administered by a committee consisting of no fewer than
two members of the Board of Directors (the "LTIP Committee"). The LTIP Committee
will have the authority to grant the following types of awards under the LTIP:
(1) stock options, (2) stock appreciation rights, (3) restricted stock, (4)
deferred stock, (5) stock purchase rights, (6) other stock-based awards. Each of
these awards may be granted alone or in conjunction with, or in tandem with,
other awards under the LTIP and/or cash awards outside the LTIP.

1. STOCK OPTIONS. Incentive stock options and non-qualified stock options
may be granted for such number of shares as the LTIP Committee shall determine,
except that no participant may be granted stock options in any 12 month period
for more than 400,000 shares. Stock options are exercisable at such times and
subject to such terms and conditions as the LTIP Committee determines and over a
term (not in excess of 10 years) determined by the LTIP Committee. Except as
otherwise determined by the LTIP Committee, the exercise price for any option
may not be less than 100% of the fair market value of the Company's Class A
Common Stock as of the date of grant.

Unless otherwise determined by the LTIP Committee, only options that are
exercisable on a participant's date of termination, death, disability or
retirement may be subsequently exercised. Upon an employee's voluntary
resignation or termination for cause, such employee's stock options generally
will terminate. If the employee is involuntarily terminated without cause, stock
options generally will be exercisable for three months following such
termination. The LTIP provides that stock options generally will be exercisable
for three years following termination of employment due to death, disability or
retirement; provided, however, that if the employee dies within the three-year
period following disability or retirement, as applicable, the option will expire
12 months after the employee's death. In no event, however, will a stock option
remain exercisable past its original term.

2. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") may be
granted in conjunction with all or part of a stock option and will be
exercisable only when the underlying stock option is exercisable. Once an SAR
has been exercised, the portion of the stock option underlying the SAR
terminates. The LTIP Committee may grant SARs that become exercisable only in
the event of a Change in Control or Potential Change in Control of the Company
and may provide that such SARs

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<PAGE> 54

may be cashed out on the basis of the Change in Control Price, as such terms are
defined in the LTIP.

Upon exercise of an SAR, the LTIP Committee, at its discretion, will pay
the employee in cash, Class A Common Stock or a combination thereof, an amount
equal to the excess of the then fair market value of the stock over the exercise
price, multiplied by the number of SARs being exercised.

3. RESTRICTED STOCK. The vesting of restricted stock may be conditioned
upon such factors as the LTIP Committee may determine. The LTIP Committee
determines the period during which restricted stock is subject to forfeiture. At
grant, the LTIP Committee may provide for other awards, payable either in stock
or cash, to ensure payment of a minimum value at the time the restrictions
lapse.

4. DEFERRED STOCK. The LTIP Committee determines the periods during which
the deferred stock is subject to forfeiture. The vesting of deferred stock may
be conditioned upon the attainment of specific performance goals or such other
factors as the LTIP Committee may determine. The LTIP Committee may provide for
other awards, payable either in stock or cash, to ensure payment of a minimum
value at the time the deferral limitations lapse, subject to such performance,
service and/or other terms and conditions as the LTIP Committee may specify.

5. STOCK PURCHASE RIGHTS. The LTIP Committee may grant to eligible
individuals rights to purchase the Company's Class A Common Stock at (a) the
fair market value, (b) 50% of the fair market value, (c) book value or (d) par
value, all such values being determined as of the date of grant. The LTIP
Committee may condition such rights, or their exercise, on such terms and
conditions as it sees fit. Rights to purchase stock will be exercisable for a
period to be determined by the LTIP Committee, except that the period may not be
greater than 30 days.

6. OTHER STOCK-BASED AWARDS. The LTIP Committee may also grant other types
of awards that are valued, in whole or in part, by reference to or otherwise
based on the Company's Class A Common Stock. Such awards will be made upon such
terms and conditions as the LTIP Committee in its discretion may provide.

The LTIP will also permit the LTIP Committee to pay cash amounts to any
executive officer (within the meaning of Section 16(a) of the Securities
Exchange Act of 1934, as amended) upon the achievement, in whole or in part, of
performance goals or objectives established in writing by the LTIP Committee
with respect to such performance periods as the LTIP Committee shall determine.
Any such goals or objectives shall be based on one or more of the Performance
Criteria, as defined in the LTIP. The maximum amount of any such cash payment to
any single officer with respect to any 12 month period shall not exceed the
lesser of (i) $1,000,000 or (ii) twice the officer's annual base salary as in
effect on the last day of the preceding fiscal year.

If there is a Change in Control or a Potential Change in Control, all
awards that are not then vested will become vested and any restrictions or
limitations will lapse. Stock options, SARs, limited SARs, restricted stock,
deferred stock, stock purchase rights and other stock-based awards will, unless
otherwise determined by the LTIP Committee in its sole discretion, be cashed out
on the basis of the Change in Control Price.

The following is a brief summary of the federal income tax consequences of
awards made under the LTIP based upon the federal income tax laws in effect on
the date hereof. This summary is not intended to be exhaustive and does not
describe state or local tax consequences.

Incentive Stock Options. No taxable income is realized by the participant
upon the grant or exercise of an incentive stock option (an "ISO"). If a
participant does not sell the stock received upon the exercise of an ISO ("ISO
Shares") for at least two years from the date of grant and within one year from
the date of exercise, when the shares are sold any gain (loss) realized will be
long-term capital gain (loss). In such circumstances, no deduction will be
allowed to the Company for federal income tax purposes.

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If ISO Shares are disposed of prior to the expiration of the holding
periods described above, the participant generally will realize ordinary income
at that time equal to the excess, if any, of the fair market value of the shares
at exercise (or, if less, the amount realized on the disposition of the shares)
over the price paid for such ISO Shares. The Company will be entitled to deduct
any such recognized amount. Any further gain or loss realized by the participant
will be taxed as short-term or long-term capital gain or loss. Subject to
certain exceptions for disability or death, if an ISO is exercised more than
three months following the termination of the participant's employment, the
option will generally be taxed as a non-qualified stock option.

Non-Qualified Stock Options. No income is realized by the participant at
the time a non-qualified stock option is granted. Generally upon exercise of a
non-qualified stock option, the participant will realize ordinary income in an
amount equal to the difference between the price paid for the shares and the
fair market value of the shares on the date of exercise. The Company will be
entitled to a tax deduction in the same amount. Any appreciation (or
depreciation) after the date of the exercise will be either short-term or
long-term capital gain or loss, depending on the length of time that the
participant has held the shares.

Stock Appreciation Rights. No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, the participant
will generally be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash and the fair market value of any
shares received. The Company will be entitled to a deduction at the time and in
the amount included in the participant's income by reason of the exercise. If
the participant receives Class A Common Stock upon exercise of any SAR, the
post-exercise appreciation or depreciation will be treated in the same manner
discussed above under Non-Qualified Stock Options.

Restricted Stock. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
any consideration paid for the stock. The Company will be entitled to a
deduction at the same time and in the same amount. The holding period to
determine whether the participant has long-term or short-term gain or loss on a
subsequent sale generally begins when the stock is no longer subject to
forfeiture, and the participant's tax basis for such shares will generally equal
the fair market value of such shares on such date.

However, a participant may elect, under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), within 30 days of the grant of
the stock, to recognize taxable ordinary income on the date of grant equal to
the excess of the fair market value of the shares of restricted stock
(determined without regard to the restrictions) over the purchase price of the
restricted stock. By reason of such an election, the participant's holding
period will commence on the date of grant, and the participant's tax basis will
be equal to the fair market value of the shares on that date (determined without
regard to restrictions). Likewise, the Company generally will be entitled to a
deduction at that time in the amount that is taxable as ordinary income to the
participant. If shares are forfeited after making such an election, the
participant will be entitled to a deduction or loss for tax purposes only in an
amount equal to the purchase price, if any, of the forfeited shares.

Deferred Stock. A participant receiving deferred stock generally will be
subject to tax at ordinary income rates on the fair market value of the deferred
stock on the date that the stock is distributed to the participant, and the
capital gain or loss holding period for such stock will also commence on that
date. The Company generally will be entitled to a deduction in the amount that
is taxable as ordinary income to the participant.

ANTICIPATED GRANTS TO THE EXECUTIVE OFFICERS FOR 1996

On the date of the consummation of the Offerings, the Company will make
one-time grants to the named executive officers in connection with the Offerings
and annual grants as part of their annual compensation. The grants will be
comprised of (i) options to purchase Class A Common Stock, (ii) restricted stock
and (iii) performance shares, which are shares of Class A Common

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Stock (and a type of deferred stock) that will be issued in the first quarter of
1999 based upon the Company's attainment of pre-determined financial objectives
over the period from 1996 to 1998 ("Performance Shares"). A portion of each of
the one-time grants of options is an acceleration of grants that would otherwise
be made, and will reduce the number of options to be granted, to the named
executive officers and to Mr. Boston in 1997.

The Company anticipates that upon the consummation of the Offerings: (i)
approximately $1,500,000 in options to purchase shares of Class A Common Stock,
calculated using a modified Black-Scholes model, and $338,500 in Performance
Shares, valued based upon the Offering price of the Class A Common Stock, will
be granted to Mr. Durham; (ii) approximately $662,700 in options to purchase
Class A Common Stock, $175,200 in Performance Shares and $55,800 in restricted
stock will be granted to Mr. Cook; (iii) approximately $475,300 in options to
purchase Class A Common Stock and $175,300 in Performance Shares will be granted
to Mr. Jones; (iv) approximately $450,000 in options to purchase Class A Common
Stock and $169,700 in Performance Shares will be granted to Mr. Katz; (v)
approximately $450,000 in options to purchase Class A Common Stock and $166,400
in Performance Shares will be granted to Mr. Kelly; and (vi) approximately
$280,000 in options to purchase Class A Common Stock will be granted to Mr.
Boston.

CONVERSION OF AMR EQUITY COMPENSATION TO CLASS A COMMON STOCK

Upon consummation of the Offerings, except as noted below, each employee
will have the opportunity to have all unexercised or unvested stock awards from
AMR held by such employee converted into stock awards of the Company and vest
under the original time schedule applicable with respect to such awards. Each of
the officers of the Company has elected to convert his AMR equity awards into
awards payable in Class A Common Stock.

Performance shares of AMR common stock that will be issued in the first
quarter of 1998 based upon the Company's attainment of pre-determined cash flow
objectives over the period from January 1, 1995 to December 31, 1997 will vest
according to their original performance metric and time frame. However, upon
vesting, payment to employees of the Company will be made using shares of Class
A Common Stock. The number of shares of Class A Common Stock to be issued will
equal the number of shares of AMR common stock to be issued multiplied by the
market price of AMR common stock on the date of the pricing of the Offerings and
divided by the Offering price.

Stock options to purchase AMR common stock will be exchanged on the date of
the consummation of the Offerings for options to purchase Class A Common Stock
of equal in-the-money value.

Career equity, awarded by AMR, is an award of deferred common stock that
vests generally at retirement. Most of the shares of career equity held by
employees of the Company will convert, on the date of consummation of the
Offerings, into some combination of options to purchase Class A Common Stock and
restricted shares of Class A Common Stock.

Two forms of AMR stock awards will not be altered in connection with the
Offerings. Performance shares of AMR common stock relating to the period from
January 1, 1994 through December 31, 1996 (issuable in the first quarter of
1997) will be paid in shares of AMR common stock when and if payment is due. In
addition, each share of AMR restricted stock held by each employee of the
Company, other than Mr. Boston, will complete its vesting according to its
original vesting schedule and will be converted to restricted shares of Class A
Common Stock. Pursuant to his terms of employment, Mr. Boston's AMR restricted
stock will convert into shares of restricted stock of the Company of equal
value.

55
<PAGE> 57

EMPLOYMENT AGREEMENTS

The Company has entered into an agreement (the "Durham Agreement") with Mr.
Durham, which provides that Mr. Durham will be employed by the Company for a
term of three years from the date of the Offerings. In the event that the
Company terminates Mr. Durham's employment during the term of the Durham
Agreement without cause, Mr. Durham would receive a severance payment equal to
the greater of (i) one year's salary and incentive compensation or (ii) the
total amount of salary remaining for the term of the Durham Agreement, and all
outstanding stock awards would continue vesting through the greater of one year
or the remainder of the term of the Durham Agreement. Mr. Durham and the Company
have also agreed that Mr. Durham will receive travel privileges from American
until June 30, 2008, and thereafter as a retiree if he retires on or prior to
June 30, 2008, subject to limited exceptions.

The Company has assumed the obligations of American under agreements
originally entered into by American with Mr. Cook and Mr. Jones (the "Officer
Agreements"). Mr. Cook's agreement provides that Mr. Cook will be employed by
the Company as an officer until October 31, 2000. Mr. Jones' agreement provides
that Mr. Jones will be employed by the Company as an officer until April 18,
2000, subject to extension by the Company to no later than April 18, 2004.
Pursuant to the Officer Agreements, the Company reserves the right to remove Mr.
Cook or Mr. Jones as an officer and to retain him as an employee for consulting
services during the remainder of the term of the applicable Officer Agreement.
Such officer's base salary as a consultant would be the rate in effect at the
time of his removal as an officer and such salary would continue for the
remainder of the term of the applicable Officer Agreement. Pursuant to the
Officer Agreements, each of Mr. Cook and Mr. Jones is entitled to receive
specified amounts of incentive compensation under AMR's Long Term Incentive
Plan, along with other specified benefits customarily provided to officers of
the Company. Each of Mr. Cook and Mr. Jones has agreed that the incentive
compensation to be awarded under AMR's Long Term Incentive Plan will instead be
granted in awards of Class A Common Stock pursuant to the LTIP.

RETIREMENT PLANS

Each employee of the Company will continue to participate in American's
fixed benefit retirement plan until December 31, 1996, as described below. After
that time, the Company will implement The SABRE Group Retirement Plan (the
"SGRP") and the Legacy Pension Plan (the "LPP").

Until December 31, 1996, each employee of the Company will participate in
American's fixed benefit retirement plan (the "Fixed Benefit Retirement Plan"),
which complies with the Employee Retirement Income Security Act of 1974
("ERISA") and qualifies for federal exemption under the Internal Revenue Code of
1986 (the "Code"). Until December 31, 1996, the named executive officers of the
Company are eligible for additional retirement benefits under the Supplemental
Executive Retirement Plan (the "SERP"). The SERP provides pension benefits
(calculated upon the basis of final average base salary, incentive compensation
payments and performance returns) to which officers of the Company would be
entitled but for the limit of $120,000 on the maximum annual benefit payable
under ERISA and the Code and the limit on the maximum amount of compensation
that may be taken into account under the Company's basic pension program
($150,000 for 1995).

56
<PAGE> 58

The following table shows typical annual benefits payable under the Fixed
Benefit Retirement Plan and the SERP, based upon retirement in 1995 at age 65,
to persons in specified remuneration and credited years of service
classifications. Annual retirement benefits set forth below are subject to
reduction for Social Security benefits.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
--------------------------------------------------------
FINAL CREDITED YEARS OF SERVICE
AVERAGE --------------------------------------------------------
SALARY 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$250,000............................. $ 75,000 $100,000 $125,000 $150,000 $175,000
300,000............................. 90,000 120,000 150,000 180,000 210,000
400,000............................. 120,000 160,000 200,000 240,000 280,000
500,000............................. 150,000 200,000 250,000 300,000 350,000
600,000............................. 180,000 240,000 300,000 360,000 420,000
700,000............................. 210,000 280,000 350,000 420,000 490,000
800,000............................. 240,000 320,000 400,000 480,000 560,000
</TABLE>

As of December 31, 1995, the named executive officers had the following
credited years of service: Mr. Durham: 15.5; Mr. Cook: 12.5; Mr. Katz: 14.5; Mr.
Jones: 16.0; Mr. Kelly: 10.5.

Commencing January 1, 1997, employees of the Company who were under the age
of 40 as of December 31, 1996 will participate in the SGRP. Employees who were
over the age of 40 as of December 31, 1996 will have the option of participating
in the SGRP or the LPP. The SGRP is a plan qualified under Section 401(k) of the
Code. Pursuant to the SGRP, the Company will contribute 2.75% of each employee's
base pay to the SGRP. In addition, the Company will match 50 cents of each
dollar contributed by an employee, up to 6% of the employee's base pay. The
employee will vest in the Company contributions after three years of service
with the Company, including service for AMR affiliates. The employee is
immediately vested in his or her own contributions and in the matching
contributions of the Company. The amount that any employee will be entitled to
receive upon retirement will be subject to the amount of that employee's
contributions, the investment selections of the employee and the returns
thereon.

The LPP is substantially identical to American's Fixed Benefit Retirement
Plan. All benefits earned by employees of the Company under American's Fixed
Benefit Retirement Plan will be transferred to the LPP effective December 31,
1996. Upon retirement, benefits under the LPP will be calculated based upon base
pay for the five years closest to retirement. For employees who participate in
the SGRP, benefits payable under the LPP will be based upon credited years of
service as of December 31, 1996. However, employees in the SGRP will continue to
earn years of service for purposes of determining vesting and early retirement
benefits under the LLP.

The Company anticipates that, prior to January 1, 1997, it will adopt a
supplemental executive retirement plan for its officers and directors. Although
the form of the supplemental executive retirement plan is under consideration,
the Company anticipates that the benefits payable thereunder will be similar to
those payable under American's SERP. As such, typical annual benefits payable to
officers who participate in the LPP and the SERP will be similar to those
indicated on page 55 for participation in American's plans.

EMPLOYEE STOCK PURCHASE PLAN

It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, and AMR as the sole stockholder will approve, a
Stock Purchase Plan (the "Stock Purchase Plan") for employees of the Company who
are based in the United States and in certain foreign jurisdictions, and who
otherwise meet the requirements specified in Section 423 of the Code. Through
the Stock Purchase Plan, eligible employees will have the opportunity to
purchase shares of Class A Common Stock semi-annually at a 15% discount from the
prevailing market price on the

57
<PAGE> 59

first or last day of the applicable six-month period, whichever is lower.
Pursuant to the Stock Purchase Plan, each employee will be permitted to acquire
annually Class A Common Stock with an aggregate maximum purchase price equal to
2% of that employee's base pay, subject to applicable limitations under the
Code.

EXECUTIVE TERMINATION BENEFITS AGREEMENTS

The Company will have, effective as of the closing of the Offerings,
executive termination benefits agreements (the "termination benefits
agreements") with seven of its officers, including all of the named executive
officers. The benefits provided by the termination benefits agreements are
triggered by the termination of the individual who is a party to a termination
benefits agreement (i) within three years following a change in control of the
Company, if the individual's employment with the Company is terminated other
than for cause or if the individual terminates his or her employment with "good
reason" or (ii) within one year following a change in control of the Company, if
the individual terminates his or her employment with the Company; provided,
however, that if the individual's employment is terminated for cause or as a
consequence of death or disability, the termination benefits agreement is not
triggered. Under the terms of the termination benefits agreements, a change in
control of the Company is deemed to occur (i) if a third party, other than AMR
or an affiliate, acquires 20% or more of the combined voting power of the
Company's then outstanding securities with respect to the election of directors
of the Company, (ii) upon the occurrence of a transaction that requires
stockholder approval and involves the acquisition of the Company (through the
purchase of assets or by merger or otherwise) by an entity other than the
Company, a subsidiary thereof, AMR or an affiliate thereof or (iii) if during
any 24-month period the individuals who, at the beginning of such period,
constitute the Board of Directors of the Company cease for any reason other than
death to constitute at least a majority thereof and the new directors of the
Company were not elected with the approval of the individuals who, at the
beginning of such period, constitute the Board of Directors. A change in control
would not occur in the event that AMR distributes its Class B Common Stock (or
upon conversion of such Class B Common Stock, the resulting Class A Common
Stock) to its stockholders or sells such Common Stock to the public in an
underwritten public offering. The termination benefits agreements provide that
upon such termination, the individual will receive, in a lump sum payment, the
sum of (i) two times the greater of (A) the executive's annual base salary at
the Termination Date or (B) the executive's effective annual base salary
immediately prior to the change in control, plus (ii) two times the greater of
(x) the median annual bonus awarded to the executive under the LTIP or any other
bonus plan or (y) 50% of the highest median target bonus rate applicable to the
executive for any period during such prior three-year period, multiplied by the
annual applicable base salary determined under (i) above, and certain other
miscellaneous benefits. The amount of termination benefits will be adjusted if
the executive is within two years of his 65th birthday as of the date of
termination. In addition, upon a change in control, the vesting and
exercisability of stock awards will be accelerated (for example, deferred and
restricted stock will immediately vest and all stock options will become
immediately exercisable). Finally, the individual will be reimbursed for excise
taxes, if any, paid pursuant to Section 280G of the Code (or its successor
provision) and for federal income tax paid on such excise tax reimbursement.

58
<PAGE> 60

COMPENSATION OF THE NAMED EXECUTIVE OFFICERS IN 1995

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth the compensation for
the fiscal year ended December 31, 1995 paid by American to the individuals who,
as of December 31, 1995, were the five most highly compensated officers of the
Company whose aggregate current remuneration exceeded $100,000.

ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- --------------------------------------
AWARDS PAYOUTS
------------------------ ----------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME SALARY BONUS AWARDS(1) OPTIONS PAYOUTS(2) COMPENSATION(3)
- -------------------- --------- --------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Durham.............. $ 360,417 $ 116,000 0 5,500 $ 60,000 $ 9,443
Cook................ 239,944 90,321 0 13,000 16,200 8,384
Katz................ 166,402 81,426 0 3,000 16,200 3,266
Jones............... 224,583 96,697 0 5,000 16,200 6,078
Kelly............... 167,142 50,000 0 3,000 13,500 2,551
</TABLE>

- ---------------

(1) The following table sets forth certain information concerning outstanding
stock awards:

DEFERRED AND RESTRICTED STOCK -- TOTAL SHARES AND VALUES

<TABLE>
<CAPTION>
TOTAL NUMBER OF AGGREGATE MARKET VALUE OF
DEFERRED AND RESTRICTED DEFERRED AND RESTRICTED
SHARES HELD AT SHARES HELD AT
NAME DECEMBER 31, 1995(A) DECEMBER 31, 1995(B)
-------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Durham................................ 51,000 $ 3,777,213
Cook.................................. 24,900 1,844,169
Katz.................................. 14,000 1,036,882
Jones................................. 21,050 1,559,026
Kelly................................. 14,800 1,096,132
</TABLE>

- ---------------

a) Consists of shares awarded under AMR's restricted stock plan that will
vest in years 1996-1997, shares of deferred common stock issued under
AMR's Long-Term Incentive Plan ("AMR's LTIP") that vest at retirement
and shares of deferred common stock issued under AMR's LTIP that vest
upon AMR's attainment of pre-determined cash flow objectives over a
three year performance period.

b) Based on the average market price of AMR common stock, $74.063, on the
NYSE on December 29, 1995.

(2) Represents performance returns, granted with respect to deferred shares,
that are payable annually in cash, and are based, in part, on AMR's prior
five-year average return on investment.

(3) Represents the full amount of premiums paid under a split-dollar life
insurance arrangement whereby AMR would recover certain premiums paid.

59
<PAGE> 61

STOCK OPTIONS GRANTED

The following table sets forth information concerning stock options granted
during 1995 by AMR to the named executive officers. The hypothetical present
values of stock options granted in 1995 are calculated under a modified
Black-Scholes model, a mathematical formula used to value options. The actual
amount, if any, realized upon the exercise of stock options will depend upon the
amount by which the market price of AMR's common stock on the date of exercise
exceeds the exercise price. There is no assurance that the hypothetical present
value of stock options reflected in this table will actually be realized.

OPTIONS/SARS GRANTED IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
% OF TOTAL
SECURITIES OPTIONS/SARS HYPOTHETICAL
UNDERLYING GRANTED TO EXERCISE OR PRESENT VALUE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION AT DATE
NAME GRANTED FISCAL YEAR PER SHARE DATE(1) OF GRANT(2)
----------- ------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Durham....................... 5,500 1.2% $ 74.6875 7/20/05 $ 221,595
Cook......................... 13,000 2.9 65.0625 4/24/05 456,272
Katz......................... 3,000 0.7 74.6875 7/20/05 120,870
Jones........................ 5,000 1.1 65.0625 4/24/05 175,489
Kelly........................ 3,000 0.7 74.6875 7/20/05 120,870
</TABLE>

- ---------------

(1) Options have a term of ten years, have an exercise price equal to the
average market price of AMR's common stock on the date of grant and become
exercisable at the rate of 20% per year over a five-year period.

(2) The modified Black-Scholes model used to calculate the hypothetical values
at date of grant considers a number of factors to estimate the option's
present value, including the stock's historical volatility calculated using
the average daily market price of AMR's common stock over a one-year period
prior to the grant date, the exercise period of the option, interest rates
and the stock's expected dividend yield. The assumptions used in the
valuation of the options were: stock price volatility -- 25.942%, exercise
period -- 10 years, interest rate -- 6.28%, and dividend yield -- 10%.

60
<PAGE> 62

STOCK OPTION EXERCISES AND
DECEMBER 31, 1995 STOCK OPTION VALUE

The following table sets forth certain information concerning options to
purchase AMR common stock during 1995 exercised by the named executive officers
and the number and value of unexercised in-the-money options at December 31,
1995. The actual amount, if any, realized upon exercise of stock options will
depend upon the amount by which the market price of AMR's common stock on the
date of exercise exceeds the exercise price. There is no assurance that the
values of unexercised in-the-money options (whether exercisable or
unexercisable) reflected in this table will actually be realized.

STOCK OPTION EXERCISES AND
DECEMBER 31, 1995 STOCK OPTION VALUE

<TABLE>
<CAPTION>
NO. OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT IN THE MONEY OPTIONS
NAME EXERCISE REALIZED DECEMBER 31, 1995 AT DECEMBER 31, 1995(1)
----------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Durham................ 3,000 $ 60,000 31,100/16,900 $398,158/$130,080
Cook.................. 5,600 120,988 5,600/18,400 41,052/ 182,459
Katz.................. 1,600 46,500 6,400/ 8,500 73,716/ 64,378
Jones................. 1,300 27,769 6,400/10,400 79,941/ 108,305
Kelly................. 0 0 6,100/ 8,400 92,266/ 63,303
</TABLE>

- ---------------

(1) Based on the average market price of AMR common stock, $74.063, on the NYSE
on December 29, 1995.

LONG TERM INCENTIVE PLAN AWARDS

Set forth below are the awards granted in 1995 under AMR's LTIP.

<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLANS
PERFORMANCE UNTIL ------------------------------
NAME SHARES(1) ----------- PAYOUT THRESHOLD TARGET MAXIMUM
----------- ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Durham........................ 5,600 12/31/97 0 5,600 16,800
Cook.......................... 2,200 12/31/97 0 2,200 6,600
Katz.......................... 2,000 12/31/97 0 2,000 6,000
Jones......................... 1,900 12/31/97 0 1,900 5,700
Kelly......................... 2,900 12/31/97 0 2,900 8,700
</TABLE>

- ---------------

(1) Performance shares awarded to the named executive officers in 1995 were
granted pursuant to AMR's LTIP under the performance share program
applicable to The SABRE Group.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Compensation information with respect to the named executive officers for
1995 reflects compensation earned prior to the Reorganization. During 1995, the
Company had no Compensation/Nominating Committee.

61
<PAGE> 63

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDER

As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding. After completion of the Offerings, the only shares of Class A
Common Stock that will be outstanding are those that will be issued in the
Offerings (including any shares issued if the Underwriters' over-allotment
options are exercised) and those issued under the Company's employee and
director plans. See "Management." The table below sets forth certain information
with respect to the expected beneficial ownership of the Class B Common Stock of
the Company before and after completion of the Offerings by each beneficial
owner of more than 5% of the outstanding shares of Class B Common Stock and by
the Company's directors and executive officers.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BEFORE OFFERINGS BENEFICIAL OWNERSHIP AFTER OFFERINGS
--------------------------------------------- ----------------------------------------------
PERCENT OF PERCENT PERCENT PERCENT OF PERCENT PERCENT
CLASS B OF OF CLASS B OF OF
NUMBER OF COMMON ECONOMIC VOTING NUMBER OF COMMON ECONOMIC VOTING
NAME OF BENEFICIAL OWNER SHARES STOCK INTEREST POWER SHARES STOCK INTEREST POWER
- ------------------------------ ----------- ---------- -------- ------- ----------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMR Corporation(1)............ 107,374,000 100% 100% 100% 107,374,000 100% 84.2%(2) 98.2%(2)
4333 Amon Carter Blvd.,
Fort Worth, Texas 76155
All directors and executive
officers as a group (9
persons).................... -- -- -- -- -- -- (3) (3)
</TABLE>

- ---------------

(1) The Board of Directors of AMR exercises sole voting and dispositive power
over the shares of Class B Common Stock held of record by AMR.

(2) If the Underwriters' over-allotment options are exercised in full, AMR would
beneficially own 82.2% of the economic interest and 97.9% of the voting
power after the Offerings.

(3) Directors participating in the SIP and the executive officers will receive
equity awards payable in shares of Class A Common Stock pursuant to the
Company's director and employee plans. The exact number of shares to be
issued in connection therewith, and the resulting percentage ownership,
cannot be calculated until the Offering price and the price of AMR common
stock on the date of pricing of the Offerings are known. For information on
the grants to be made, see "Management."

The following table sets forth certain information with respect to the
beneficial ownership, as of September 18, 1996, of AMR's equity securities by
each of the Company's named executive officers and directors and by all of the
Company's directors and executive officers as a group. The table includes all
shares of AMR's common stock held of record or in street name, plus options
granted but unexercised under AMR's director and employee stock option plans.
The directors and officers of the Company individually beneficially own less
than 1% of any class of equity securities of AMR.

<TABLE>
<CAPTION>
COMMON SHARES
NAME OWNED
--------------------------------------------------------------------- -------------
<S> <C>
Robert L. Crandall................................................... *
Michael J. Durham.................................................... *
Gerard J. Arpey...................................................... *
Anne H. McNamara..................................................... *
Thomas M. Cook....................................................... *
Terrell B. Jones..................................................... *
Jeffrey G. Katz...................................................... *
T. Patrick Kelly..................................................... *
All directors and executive officers as a group (9 persons).......... *
</TABLE>

- ---------------

* Each director and officer and the directors and officers of the Company
collectively beneficially own less than 1% of the outstanding common stock of
AMR.

62
<PAGE> 64

RELATIONSHIP WITH AMR AND CERTAIN TRANSACTIONS

FORMATION OF THE COMPANY; INDEBTEDNESS TO AMR

The Company was formed on June 25, 1996 and became a subsidiary of American
on July 2, 1996 in connection with the Reorganization by AMR of the businesses
of its operating unit known as The SABRE Group. As part of the Reorganization,
all of the businesses of The SABRE Group, including the businesses operated as
divisions or subsidiaries of American or AMR, were combined in subsidiaries of
the Company, and the Company and its subsidiaries were dividended by American to
AMR. Since the dividend, AMR has owned all of the Company's outstanding capital
stock.

In connection with the Reorganization, the Company issued the $850 million
Debenture to American, the amount of which exceeds the historical book value of
the assets contributed by American and AMR to the Company by $120.9 million.
American transferred the Debenture to AMR in exchange for a portion of a note of
American held by AMR. The Debenture, which matures on September 30, 2004, bears
interest, payable semiannually, at a rate based on the sum of the six-month
London Interbank Offered Rate plus a margin determined by the Company's senior
unsecured long-term debt rating or, if such debt rating is not available, by the
Company's ratio of debt to total capital. The Company has the right to prepay
the principal amount of the Debenture in whole or in part at any time prior to
December 31, 1996 and thereafter on interest payment dates, and will use
approximately 90% of the net proceeds of the Offerings to prepay part of the
Debenture. See "Use of Proceeds."

Also in connection with the Reorganization, the Company and American
entered into an Intercompany Agreement (the "Indemnification Agreement")
pursuant to which each party indemnified the other for certain obligations
relating to the Reorganization. Pursuant to the Indemnification Agreement, the
Company indemnified American for liabilities assumed in the Reorganization,
against third party claims asserted against American as a result of American's
prior ownership of assets or operation of businesses contributed to the Company
and for losses arising from or in connection with the Company's lease of
property from American. In exchange, American indemnified the Company for
specified liabilities retained by it in the Reorganization, against third party
claims against the Company relating to American's businesses and asserted
against the Company as a result of the ownership or possession by American prior
to the Reorganization of any asset contributed to the Company in the
Reorganization and for losses arising from or in connection with American's
lease of property from the Company.

COMMON STOCK OWNERSHIP

AMR currently owns all of the outstanding capital stock of the Company.
Upon completion of the Offerings, AMR will own 100% of the Company's outstanding
Class B Common Stock, which will represent approximately 98.2% of the combined
voting power of the Company's outstanding Common Stock (approximately 97.9% if
the Underwriters' over-allotment options are exercised in full). As long as AMR
beneficially owns a majority of the combined voting power, it will have the
ability to elect all of the members of the Board of Directors and thereby
ultimately to control the management and affairs of the Company, including any
determinations with respect to acquisitions, dispositions, borrowings, issuances
of Common Stock or other securities of the Company or the declaration and
payment of any dividends on the Common Stock. In addition, AMR will be able to
determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval and to cause or prevent a change in control.

Although, in negotiating the Affiliate Agreements between the Company and
AMR, American and AMR's other subsidiaries, the parties endeavored to implement
market-based agreements, as a result of AMR's control of the Company, none of
the Affiliate Agreements resulted from "arm's-length" negotiations. There can be
no assurance that the Company would not have received more favorable terms from
an unaffiliated party.

63
<PAGE> 65

Conflicts of interest may arise from time to time between the Company and
AMR in a number of areas relating to their past and ongoing relationships,
including the nature and quality of services provided by the Company to AMR and
its affiliates or by AMR or its affiliates to the Company, potential competitive
business activities, shared marketing functions, tax and employee benefit
matters, indemnity agreements, registration rights, sales or distributions by
AMR of all or any portion of its ownership interest in the Company or AMR's
ability to control the management and affairs of the Company. There can be no
assurance, however, that AMR and the Company will be able to resolve any
potential conflict or that, if resolved, the Company would not receive more
favorable resolution if it were dealing with an unaffiliated party. In addition,
certain of the Affiliate Agreements contain specific procedures for resolving
disputes between the Company and AMR with respect to the subject matter of those
agreements. There can be no assurance that a more favorable result to the
Company would not be obtained under a different procedure.

AMR could decide to sell or otherwise dispose of all or a portion of its
holdings of the Company's Class B Common Stock (or, upon the conversion of the
Class B Common Stock into Class A Common Stock, the resulting Class A Common
Stock) at some future date. Furthermore, there can be no assurance that, in any
transfer by AMR of a controlling interest in the Company, any holders of Class A
Common Stock will be allowed to participate in such transaction or will realize
any premium with respect to their shares of Class A Common Stock.

CONTRACTUAL ARRANGEMENTS

TECHNOLOGY SERVICES AGREEMENT

The Company is a party to the Technology Services Agreement with American
to provide American with certain information technology services. The base term
of the Technology Services Agreement expires June 30, 2006. The term of the
services to be provided by the Company to American, however, varies. The Company
will provide: (i) Data Center services, data network services, application
development and existing application maintenance and enhancement services until
June 30, 2006; (ii) services relating to existing client server operations until
June 30, 2001; and (iii) distributed systems services, radio services and voice
network services until June 30, 1999. The provision of these services is
anticipated to generate approximately $380 million in revenue in 1996.

In addition, AMS Holdings, Inc., a subsidiary of AMR, and Canadian have
entered into an agreement pursuant to which AMR and American supply to Canadian
various services, including technology services. Under the Canadian Subcontract,
the Company, as subcontractor through American, will be a principal provider of
technology services to Canadian.

The Technology Services Agreement provides for annual price adjustments.
For certain prices, adjustments are made according to formulas which, commencing
in 1998, are reset every two years and which may take into account the market
for similar services provided by other companies.

With limited exceptions, under the Technology Services Agreement, the
Company will continue to be the exclusive provider of all information technology
services provided by the Company to American immediately prior to the execution
of the Technology Services Agreement. Any new information technology services,
including most new application development services, required by American can be
outsourced pursuant to competitive bidding by American or performed by American
on its own behalf. With limited exceptions, the Company has the right to bid on
all new services for which American solicits bids. Additionally, American may
continue to perform development and enhancement work currently performed by it
for itself.

All new software developed by the Company pursuant to the Technology
Services Agreement will be jointly owned by the Company and American (the
"Jointly Owned Software"). Except as set forth below, the Company will have the
perpetual, irrevocable and exclusive right to market, display and otherwise
commercially exploit the Jointly Owned Software. However, during the term of the
Technology Services Agreement the Company will, for Jointly Owned Software
solely funded by American and for certain enhancements to existing software,
offset fees otherwise payable by

64
<PAGE> 66

American to the Company by an amount equal to 20% of the license fees or
equivalent compensation that the Company receives. In addition, after the
expiration or termination of the Technology Services Agreement, the Company is
required to pay American a royalty for all Jointly Owned Software that was
funded solely by American. American shall have the right to use the Jointly
Owned Software for itself and its commuter airline affiliates and shall be
entitled to market its right to use such product in marketing its services as
described in the next paragraph.

American has the right to market to third parties airline services that are
supported by the Company's information technology. Generally, such support by
the Company will be billed to American at the rates set forth in the Technology
Services Agreement plus any extraordinary costs of the Company associated with
the provision of such services. However, if a significant portion of the value
of the marketed services is driven by the Company's support, and the service is
not related to airport operations or airline alliances, then the compensation to
the Company will be negotiated by American and the Company.

After July 1, 2000, American may terminate the Technology Services
Agreement for convenience if American determines the agreement is no longer
advantageous for any reason. If it does so, American will be required to pay a
termination fee equal to the sum of all amounts then due under the Technology
Services Agreement, including wind-down costs, book value of dedicated assets
and a significant percentage of estimated lost profits. American may also
terminate the Technology Services Agreement without penalty, in whole or in part
depending upon circumstances, for egregious breach by the Company of its
obligations or for serious failure to perform critical or significant services.
If the Company is acquired by a company other than AMR or American with more
than $1 billion in annual airline transportation revenue, then American may
terminate the Technology Services Agreement without paying any termination fee.
Additionally, if American were to dispose of any portion of its business or any
affiliate accounting for more than 10% of the Company's fees from American, then
American shall either cause such divested business or affiliate to be obligated
to use the Company's services in accordance with the Technology Services
Agreement or pay a proportionate termination fee.

Under certain circumstances, American can also request that the Company
exclude third parties from using a product and pay the Company's cost of
excluding third party customers.

The parties have agreed to apply the financial terms of the Technology
Services Agreement as of January 1, 1996.

MANAGEMENT SERVICES AGREEMENT

The Company and American are parties to the Management Services Agreement,
dated July 1, 1996 pursuant to which American performs various management
services for the Company, including treasury, risk management and tax, and
similar administrative services, that American has historically provided to the
Company. The Company expects to pay American approximately $21 million for such
services in 1996, subject to adjustment based on service levels and negotiated
prices. Amounts charged to the Company under this agreement approximate
American's cost of providing the services plus a margin. The Management Services
Agreement will expire on June 30, 1999 unless terminated earlier by either party
if American and the Company are no longer under common control or by American if
the Technology Services Agreement is terminated. Except for certain services
relating to consolidated operations or corporate policy of AMR, which the
Company is required to purchase during the term of the Management Services
Agreement, the Company or American may terminate any service with prior notice
of either three or six months, depending on the annual price of the service. The
parties have agreed to apply the financial terms of the Management Services
Agreement as of January 1, 1996.

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TAX SHARING AGREEMENT

The Company and AMR have entered into the Tax Sharing Agreement which
provides for the allocation of tax liabilities during the tax periods the
Company is part of consolidated federal, state and local income tax returns
filed by AMR. In addition, the Tax Sharing Agreement sets out certain benefits
and obligations of the Company and AMR for tax matters relating to periods
before the Reorganization and for certain benefits and obligations that would
affect the Company or AMR in the future if the Company ceased to be a member of
AMR's consolidated group for federal income tax purposes. The Tax Sharing
Agreement generally requires the Company to pay to AMR the amount of federal,
state and local income taxes that the Company would have paid had it ceased to
be a member of the AMR consolidated tax group for periods after the
Reorganization. The Company is jointly and severally liable for the federal
income tax of AMR and the other companies included in the consolidated return
for all periods in which the Company is included in the AMR consolidated group.
AMR has agreed, however, to indemnify the Company for any liability for taxes
reported or required to be reported on a consolidated return.

Except for certain items specified in the Tax Sharing Agreement, AMR
generally retains any potential tax benefit carryforwards, and remains obligated
to pay all taxes, attributable to periods before the Reorganization. The Tax
Sharing Agreement also grants the Company certain limited participation rights
in any dispute with tax authorities.

MARKETING COOPERATION AGREEMENT

The Company and American are parties to the Marketing Cooperation
Agreement, dated as of July 1, 1996, pursuant to which American will provide
marketing support for 10 years for the Company's Professional SABRE product
targeted to travel agencies and for five years for BTS, Travelocity and
easySABRE. The Marketing Cooperation Agreement may be terminated by either party
prior to June 30, 2006 if the other party fails to perform its obligations
thereunder.

Under the Marketing Cooperation Agreement, American's marketing efforts
will include ongoing promotional programs to assist in the sale of those SABRE
products, development with the Company of an annual sales plan, sponsorship of
sales/promotional events and the targeting of potential customers. The Company
will pay American for its marketing support for Professional SABRE a fee, the
amount of which may increase or decrease, depending on total SABRE booking
volumes generated by certain Professional SABRE subscribers in the U.S., the
Caribbean and elsewhere and on SABRE's market share of travel agency bookings in
those areas. That fee will range between $20 million and $30 million for 1996
and between $10 million and $30 million thereafter. As payment for American's
support of the Company's promotion of BTS, Travelocity and easySABRE, the
Company will pay American a marketing fee based upon booking volumes through
those products. The amounts payable under the preceding sentence are expected to
range from approximately $1 million in the first year of the Marketing
Cooperation Agreement to approximately $12 million in the fifth year.
Additionally, the Company has guaranteed to American certain cost savings in the
fifth year of the Marketing Cooperation Agreement. If American does not achieve
those savings, the Company will pay American any shortfall, up to a maximum of
$50 million. The parties have agreed to apply the financial terms of the
Marketing Cooperation Agreement as of January 1, 1996.

NON-COMPETITION AGREEMENT

The Company, AMR and American have entered into a Non-Competition
Agreement, dated July 1, 1996 (the "Non-Competition Agreement"), pursuant to
which AMR and American, on behalf of themselves and certain, but not all, of
their subsidiaries, have agreed to limit their competition with the Company's
businesses of (i) electronic travel distribution, (ii) development, maintenance,
marketing and licensing of software for travel agency, travel, transportation
and logistics management, (iii) computer system integration, (iv) development,
maintenance and operation of a data

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processing center providing data processing services to third parties and (v)
travel industry, transportation and logistics consulting services relating
primarily to computer technology and automation. Under the Non-Competition
Agreement, American and AMR may develop, operate, market and provide in
compliance with all applicable laws an American Airlines branded electronic
travel distribution that gives a display preference to American's flights. The
Non-Competition Agreement prohibits American or AMR, however, from providing
such system to any travel agency that generated 25% or more of its bookings
through SABRE during the preceding six calendar months. Additionally, in the
event any airline competing with American engages in an activity in connection
with such airline's transportation business, and if the restrictions imposed by
the Non-Competition Agreement would prevent American from engaging in the same
activity and place American at a disadvantage, then American may engage in such
activity, subject to American and the Company consulting about means to mitigate
the effect on the Company of American's engaging in such activity. American and
AMR may also license to third parties any software that is owned by AMR,
American or other AMR affiliates in response to a request or offer from such
third parties. The Non-Competition Agreement expires on December 31, 2001.
American may terminate the Non-Competition Agreement, however, as to the
activities described in clauses (ii) through (v) of this paragraph upon 90 days
notice to the Company if the Technology Services Agreement is terminated by
American as a result of an egregious breach thereof by the Company.

TRAVEL AGREEMENTS

The Company and American are parties to the Travel Privileges Agreement,
dated July 1, 1996, pursuant to which the Company is entitled to purchase
personal travel for its employees and retirees at reduced fares. The Company
estimates that its cost for such services during 1996 will be approximately $15
million. The Travel Privileges Agreement will expire on June 30, 2008. The
Company and American are also parties to the Corporate Travel Agreement, dated
July 1, 1996, pursuant to which the Company receives discounts for certain
flights purchased on American. In exchange, the Company must use American for a
certain percentage of its air travel as compared to all other air carriers
combined. If the Company fails to meet the applicable percentage on an average
basis over any calendar quarter, American may terminate the agreement upon 60
days' notice. The Company estimates that its costs for such services during 1996
will be approximately $32 million. The Corporate Travel Agreement will expire on
June 30, 1998. The parties have agreed to apply the financial terms of the
Travel Privileges Agreement and the Corporate Travel Agreement as of January 1,
1996.

CREDIT AGREEMENT

In order to allow AMR to manage efficiently the cash needs of its
subsidiaries, the Company, AMR and American are parties to the Credit Agreement
pursuant to which the Company is required to borrow from American, and American
is required to lend to the Company, any amount required by the Company to fund
its daily cash requirements. In addition, American may, but is not required to,
borrow from the Company to fund its daily cash requirements, and the Company is
required, with minor exceptions, to lend to American if the Company has excess
cash available. The maximum amount that the Company may borrow at any time from
American under the Credit Agreement is $300 million. The maximum amount that
American may borrow at any time from the Company under the Credit Agreement is
$100 million. If the Company's credit rating is better than "B" on the Standard
& Poor's Ratings Service scale (or an equivalent thereof) or American has excess
cash to lend to the Company, the interest rate to be charged to the Company will
be the sum of (a) the higher of (i) American's average rate of return on
short-term investments for the month in which borrowings occurred or (ii) the
actual rate of interest paid by American to borrow funds to make a loan to the
Company under the Credit Agreement, plus (b) an additional spread based upon the
Company's credit risk. If the Company's credit rating is "B" or below on the
Standard & Poor's Ratings Service scale (or an equivalent thereof) and American
does not have excess cash to lend to the Company, the interest rate to be
charged to the Company will be the lower of (a) the sum of

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(i) the borrowing cost incurred by American to draw on its revolving credit
facility to make the advance plus (ii) an additional spread based on the
Company's credit risk or (b) the sum of (i) the cost at which the Company could
borrow funds from an independent party plus (ii) one half of the margin American
pays to borrow under its revolving credit facility. The Company believes that
the interest rate it will be charged by American could, at times, be slightly
above the rate at which the Company could borrow externally; however, no standby
fees for the Credit Agreement will be required to be paid by either party. The
interest rate to be charged to American will be the Company's average investment
rate for the months in which borrowing occurred plus an additional spread based
upon American's credit risk. On any business day that either party has excess
cash available, it must use that cash to repay any outstanding loans it has
under the Credit Agreement. Loans under the Credit Agreement are not intended as
long-term financing. At the end of each quarter, regardless of whether it has
excess cash available, American must pay all amounts owing under the Credit
Agreement to the Company. The Credit Agreement will terminate on June 30, 1999,
unless earlier terminated at the election of one of the parties upon the
occurrence of certain events, including the termination of the Management
Services Agreement or the cessation of AMR's beneficial ownership of 50% or more
of the capital stock of either the Company or American. The Company has certain
rights of offset against the $850,000,000 Debenture and other debt owed by the
Company to American and AMR if American fails to make quarterly and final
payments when due under the Credit Agreement.

OTHER AGREEMENTS

In addition to the agreements set forth above, the Company and AMR are
parties to a Registration Rights Agreement described under "Shares Eligible for
Future Sale." Additionally, the Company and American are parties to a
Participating Carrier Agreement pursuant to which American participates as an
associate in SABRE. This Participating Carrier Agreement with American is in
substantially the same form as each other Participating Carrier Agreement to
which the Company is a party. The Company and American are also parties to a
Software Marketing Agreement pursuant to which the Company may not sell or
license specified applications to certain competitors of American. The Company
also has, or expects to enter into, other agreements with American or other AMR
affiliates, pursuant to which the Company does not expect to receive or pay
material amounts.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 250,000,000 shares
of Class A Common Stock, 107,374,000 shares of Class B Common Stock and
20,000,000 shares of Preferred Stock. None of the Class A Common Stock or
Preferred Stock is outstanding as of the date hereof. Of the 250,000,000 shares
of Class A Common Stock authorized, 20,200,000 are being offered in the
Offerings (23,230,000 shares if the Underwriters' over-allotment options are
exercised in full), 107,374,000 shares will be reserved for issuance upon
conversion of Class B Common Stock into Class A Common Stock and 13,000,000
shares have been reserved for issuance pursuant to certain employee benefits
plans. See "Management -- Compensation of Directors" and "Management --
Executive Compensation -- The Company's Long-Term Incentive Plan." Of the
107,374,000 shares of Class B Common Stock authorized, 107,374,000 will be
outstanding and held by AMR upon consummation of the Offerings. The following
summary description of the capital stock of the Company is qualified by
reference to the Certificate of Incorporation and Bylaws of the Company, copies
of which are filed as exhibits to the Registration Statement.

COMMON STOCK

VOTING RIGHTS

The holders of Class A Common Stock and Class B Common Stock generally have
identical rights except that holders of Class A Common Stock are entitled to one
vote per share while holders of Class B Common Stock are entitled to 10 votes
per share on all matters to be voted on by

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stockholders. Holders of shares of Class A Common Stock and Class B Common Stock
are not entitled to cumulate their votes in the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all shares of Class A Common Stock and Class B Common
Stock present in person or represented by proxy, voting together as a single
class, subject to any voting rights granted to holders of any Preferred Stock.
Except as otherwise provided by law, and subject to any voting rights granted to
holders of any outstanding Preferred Stock, amendments to the Company's
Certificate of Incorporation generally must be approved by a majority of the
combined voting power of all Class A Common Stock and Class B Common Stock
voting together as a single class. However, amendments to the Company's
Certificate of Incorporation that would alter or change the powers, preferences
or special rights of the Class A Common Stock or the Class B Common Stock so as
to affect them adversely also must be approved by a majority of the votes
entitled to be cast by the holders of the shares affected by the amendment,
voting as a separate class. Notwithstanding the foregoing, any amendment to the
Company's Certificate of Incorporation to increase the authorized shares of any
class or authorize the creation, authorization or issuance of any securities
convertible into, or warrants or options to acquire, shares of any such class or
classes of stock shall be approved by the affirmative vote of the holders of a
majority of the Common Stock, voting together as a single class.

Effective as of the first time at which AMR shall cease to be the
beneficial owner of an aggregate of at least a majority of the voting power of
the Voting Stock (as defined herein) of the Company then outstanding (the
"Trigger Date"), amendments to certain provisions of the Certificate of
Incorporation will require the approval of 80% of the combined voting power of
all Class A Common Stock and Class B Common Stock, voting together as a single
class.

DIVIDENDS

Holders of Class A Common Stock and Class B Common Stock will share in an
equal amount per share in any dividend declared by the Board of Directors,
subject to any preferential rights of any outstanding Preferred Stock. Dividends
consisting of shares of Class A Common Stock and Class B Common Stock may be
paid only as follows: (i) shares of Class A Common Stock may be paid only to
holders of Class A Common Stock and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock and (ii) shares shall be paid
proportionally with respect to each outstanding share of Class A Common Stock
and Class B Common Stock.

CONVERSION

Each share of Class B Common Stock is convertible while held by AMR or any
of its subsidiaries at such holder's option into one share of Class A Common
Stock. Following the occurrence of a Tax-Free Spin-Off (as hereinafter defined),
if any, shares of Class B Common Stock shall not be convertible into shares of
Class A Common Stock at the option of the holder thereof.

Except as provided below, any shares of Class B Common Stock transferred to
a person other than AMR or any of its subsidiaries or the Class B Transferee (as
defined below) shall automatically convert to shares of Class A Common Stock
upon such disposition. Shares of Class B Common Stock representing more than a
50% economic interest in the Company transferred by AMR or any of its
subsidiaries in a single transaction to one unrelated person (the "Class B
Transferee") or any subsidiary of the Class B Transferee shall not automatically
convert to shares of Class A Common Stock upon such disposition. Any shares of
Class B Common Stock retained by AMR or its subsidiaries following any such
transfer of shares of Class B Common Stock to the Class B Transferee shall
automatically convert into shares of Class A Common Stock upon such transfer.
Shares of Class B Common Stock transferred to stockholders of AMR or
stockholders of the Class B Transferee in a transaction intended to be on a
tax-free basis (a "Tax-Free Spin-Off") under the Code shall not convert to
shares of Class A Common Stock upon the occurrence of such Tax-Free Spin-Off.

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Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock, subject to applicable laws; provided,
however, that shares of Class B Common Stock shall automatically convert into
shares of Class A Common Stock on the fifth anniversary of the Tax-Free
Spin-Off, unless prior to such Tax-Free Spin-Off, AMR, or the Class B
Transferee, as the case may be, delivers to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that such conversion could
adversely affect the ability of AMR, or the Class B Transferee, as the case may
be, to obtain a favorable ruling from the Internal Revenue Service that the
transfer would be a Tax-Free Spin-Off. If such an opinion is received, approval
of such conversion shall be submitted to a vote of the holders of the Common
Stock as soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off, unless AMR or the Class B Transferee, as the case may be, delivers to
the Company an opinion of counsel reasonably satisfactory to the Company prior
to such anniversary that such vote could adversely affect the status of the
Tax-Free Spin-Off, including the ability to obtain a favorable ruling from the
Internal Revenue Service; if such opinion is so delivered, such vote shall not
be held. Approval of such conversion will require the affirmative vote of the
holders of a majority of the shares of both Class A Common Stock and Class B
Common Stock present and voting, voting together as a single class, with each
share entitled to one vote for such purpose. No assurance can be given that such
conversion would be consummated. The requirement to submit such conversion to a
vote of the holders of the Common Stock is intended to ensure that tax-free
treatment of the Tax-Free Spin-Off is preserved should the Internal Revenue
Service challenge such automatic conversion as violating the 80% vote
requirement currently required by the Code for a tax-free spin-off.

OTHER RIGHTS

On liquidation, dissolution or winding up of the Company, after payment in
full of the amounts required to be paid to holders of Preferred Stock, if any,
all holders of Common Stock, regardless of class, are entitled to share ratably
in any assets available for distribution to holders of shares of Common Stock.

No shares of either class of Common Stock are subject to redemption or have
preemptive rights to purchase additional shares of Common Stock.

Upon consummation of the Offerings, all the outstanding shares of Class A
Common Stock and Class B Common Stock will be legally issued, fully paid and
nonassessable.

PREFERRED STOCK

As of the date of this Prospectus, no shares of Preferred Stock are
outstanding. The Board of Directors may authorize the issuance of Preferred
Stock in one or more series and may determine, with respect to any such series,
the designations, powers, preferences and rights of such series, and the
qualifications, limitations and restrictions thereof, including (i) the
designation of the series; (ii) the number of shares of the series, which number
the Board of Directors may thereafter (except where otherwise provided in the
designations for such series) increase or decrease (but not below the number of
shares of such series then outstanding); (iii) whether dividends, if any, will
be cumulative or noncumulative and the dividend rate of the series; (iv) the
conditions upon which and the dates at which dividends, if any, will be payable,
and the relation which such dividends, if any, shall bear to the dividends
payable on any other class or classes of stock; (v) the redemption rights and
price or prices, if any, for shares of the series; (vi) the terms and amounts of
any sinking fund provided for the purchase or redemption of shares of the
series; (vii) the amounts payable on and the preferences, if any, of shares of
the series, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company; (viii) whether the
shares of the series will be convertible into shares of any other class or
series, or any other security, of the Company or any other corporation, and, if
so, the specification of such other class or series or such other security, the
conversion price or prices or rate or rates, any adjustments thereof, the date
or dates as of which such shares shall be convertible and all other terms and
conditions upon which

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such conversion may be made; (ix) restrictions on the issuance of shares of the
same series or of any other class or series; and (x) the voting rights, if any,
of the holders of shares of such series.

The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financings and acquisitions and in meeting other
corporate needs that might arise. The authorized shares of Preferred Stock will
be available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. The NYSE currently requires stockholder approval as a
prerequisite to listing shares in several instances, including where the present
or potential issuance of shares could result in an increase in the number of
shares of common stock outstanding, or in the amount of voting securities
outstanding, of at least 20%.

Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage a potential acquiror from
making, without first negotiating with the Board of Directors, an acquisition
attempt through which such acquiror may be able to change the composition of the
Board of Directors, including a tender offer or other transaction that some, or
a majority, of the Company's stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then current market price of such stock.

BUSINESS COMBINATION STATUTE

As a corporation organized under the laws of the State of Delaware, the
Company will be subject to Section 203 of the DGCL, which restricts certain
business combinations between the Company and an "interested stockholder" (in
general, a stockholder owning 15% or more of the Company's outstanding voting
stock) or its affiliates or associates for a period of three years following the
time that the stockholder becomes an "interested stockholder." The restrictions
do not apply if (i) prior to an interested stockholder becoming such, the Board
of Directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in any person becoming an
interested stockholder, such interested stockholder owns at least 85% of the
voting stock of the Company outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock ownership plans and persons
who are both directors and officers of the Company) or (iii) at or subsequent to
the time an interested stockholder becomes such, the business combination is
both approved by the Board of Directors and authorized at an annual or special
meeting of the Company's stockholders, not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested stockholder. Because AMR became an interested stockholder at a
time when the restrictions did not apply, the restrictions will not apply to any
business combination with AMR.

Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation of the Company
does not exclude the Company from the restrictions imposed under Section 203 of
the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may
encourage companies interested in acquiring the Company to negotiate in advance
with the Board of Directors, since the stockholder approval requirement would be
avoided if a majority of the directors then in office approves, prior to the
date on which a stockholder becomes an interested stockholder, either the
business combination or the transaction which results in the stockholder
becoming an interested stockholder.

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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

The summary set forth below describes certain provisions of the Certificate
of Incorporation and Bylaws. The summary is qualified in its entirety by
reference to the provisions of the Certificate of Incorporation and Bylaws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part.

Certain of the provisions of the Certificate of Incorporation and Bylaws
discussed below may have the effect, either alone or in combination with the
provisions of Section 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest or other takeover attempt that is
opposed by the Board of Directors but that a stockholder might consider to be in
such stockholder's best interest. Those provisions include (i) restrictions on
the rights of stockholders to remove directors, (ii) prohibitions against
stockholders calling a special meeting of stockholders or acting by unanimous
written consent in lieu of a meeting and (iii) requirements for advance notice
of actions proposed by stockholders for consideration at meetings of the
stockholders. In addition, the Certificate of Incorporation contains provisions
relating to the allocation of certain corporate opportunities and resolution of
certain potential conflicts of interest. See "-- Corporate Opportunity and
Conflict of Interest Policies."

CLASSIFIED BOARD OF DIRECTORS; REMOVAL; NUMBER OF DIRECTORS; FILLING
VACANCIES

The Certificate of Incorporation and Bylaws of the Company provide that the
Board of Directors -- except for directors who may be elected by the holders of
Preferred Stock or any other series or class of stock -- will be divided into
three classes of directors, with the classes to be as nearly equal in number as
possible. One class is to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1997, another class is to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1998 and another class is to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1999. Each director
is to hold office until his or her successor is duly elected and qualified.
Commencing with the 1997 annual meeting of stockholders, directors elected to
succeed directors whose terms then expire will be elected for a term of office
to expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until such person's successor is
duly elected and qualified.

The Bylaws provide that, subject to any rights of holders of Preferred
Stock or any other series or class of stock to elect directors under specified
circumstances, the number of directors will be fixed from time to time
exclusively pursuant to a resolution adopted by directors constituting a
majority of the total number of directors that the Company would have if there
were no vacancies on the Board of Directors (the "Whole Board"), with the Whole
Board consisting of not more than twelve nor less than three directors. The
Bylaws also provide that, subject to any rights of holders of Preferred Stock or
any other series or class of stock, and unless the Board of Directors otherwise
determines, any vacancies will be filled only by the affirmative vote of a
majority of the remaining directors, even if less than a quorum. Accordingly,
absent an amendment to the Bylaws, the Board of Directors could prevent any
stockholder from enlarging the Board of Directors and filling the new
directorships with such stockholder's own nominees.

The Certificate of Incorporation and Bylaws of the Company provide that,
subject to the rights of holders of Preferred Stock or any other series or class
of stock to elect directors under specified circumstances, effective as of the
Trigger Date, directors may be removed only for cause and only upon the
affirmative vote of holders of at least 80% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class; provided however,
that prior to the Trigger Date, directors may be removed, without cause, with
the affirmative vote of the holders of at least a majority of the voting power
of the then outstanding Voting Stock, voting together as a class.

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The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Board of Directors.
At least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Board of Directors. Such a
delay may help ensure that the Company's directors, if confronted by a holder
attempting to force a proxy contest, a tender or exchange offer, or an
extraordinary corporate transaction, would have sufficient time to review the
proposal as well as any available alternatives to the proposal and to act in
what they believe to be the best interest of the stockholders. The
classification provisions will apply to every election of directors, however,
regardless of whether a change in the composition of the Board of Directors
would be beneficial to the Company and its stockholders and whether or not a
majority of the Company's stockholders believe that such a change would be
desirable.

The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. The classification of the
Board of Directors could thus increase the likelihood that incumbent directors
will retain their positions. In addition, because the classification provisions
may discourage accumulations of large blocks of the Company's stock by
purchasers whose objective is to take control of the Company and remove a
majority of the Board of Directors, the classification of the Board of Directors
could tend to reduce the likelihood of fluctuations in the market price of the
Common Stock that might result from accumulations of large blocks. Accordingly,
stockholders could be deprived of certain opportunities to sell their shares of
Common Stock at a higher market price than might otherwise be the case.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

The Certificate of Incorporation and Bylaws of the Company provide that,
effective as of the Trigger Date, and subject to the rights of any holders of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, stockholder action can be taken only at
an annual or special meeting of stockholders and stockholder action may not be
taken by written consent in lieu of a meeting. The Bylaws provide that, subject
to the rights of holders of any series of Preferred Stock to elect additional
directors under specified circumstances, special meetings of stockholders can be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board or the Chairman of the Board; provided that, prior
to the Trigger Date, special meetings can also be called at the request of the
holders of a majority of the voting power of the then outstanding Voting Stock.
Effective as of the Trigger Date, stockholders are not permitted to call a
special meeting or to require that the Board of Directors call a special meeting
of stockholders. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
pursuant to the notice of meeting given by the Company.

The provisions of the Certificate of Incorporation and Bylaws of the
Company prohibiting stockholder action by written consent and permitting special
meetings to be called only by the Chairman or at the request of a majority of
the Whole Board may have the effect, as of the Trigger Date, of delaying
consideration of a stockholder proposal until the next annual meeting. The
provisions would also prevent the holders of a majority of the voting power of
the Voting Stock from unilaterally using the written consent procedure to take
stockholder action. Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the Chairman or a majority of
the Whole Board by calling a special meeting of stockholders prior to the time
such parties believe such consideration to be appropriate.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS

The Company's Bylaws establish an advance notice procedure for stockholders
to make nominations of candidates for election as directors or bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").

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The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Board of Directors, or by a
stockholder who has given timely written notice containing specified information
to the Secretary of the Company prior to the meeting at which directors are to
be elected, will be eligible for election as directors of the Company. The
Stockholder Notice Procedure also provides that at an annual meeting only such
business may be conducted as has been brought before the meeting by, or at the
direction of, the Chairman or the Board of Directors or by a stockholder who has
given timely written notice containing specified information to the Secretary of
the Company of such stockholder's intention to bring such business before such
meeting. Under the Stockholder Notice Procedure, for notice of stockholder
nominations or proposals to be made at an annual meeting to be timely, such
notice must be received by the Company not less than 90 days nor more than 120
days prior to the first anniversary of the previous year's annual meeting (or,
in the event that the date of the annual meeting is advanced by more than 20
days or delayed by more than 70 days from such anniversary date, not earlier
than the 120th day prior to such meeting and not later than the later of (x) the
90th day prior to such meeting and (y) the 10th day after public announcement of
the date of such meeting is first made). Notwithstanding the foregoing, in the
event that the number of directors to be elected is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Company at least 100 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice will be timely, but only with respect to nominees for any
new positions created by such increase, if it is received by the Company not
later than the 10th day after such public announcement is first made by the
Company. Under the Stockholder Notice Procedure, for notice of a stockholder
nomination to be made at a special meeting at which directors are to be elected
to be timely, such notice must be received by the Company not earlier than the
120th day before such meeting and not later than the later of (x) the 90th day
prior to such meeting and (y) the 10th day after public announcement of the date
of such meeting is first made. If the Chairman of the Board or other officer
presiding at a meeting determines at or prior to the meeting that a person was
not nominated or other business was not brought before the meeting in accordance
with the Stockholder Notice Procedure, such person will not be eligible for
election as a director, or such business will not be conducted at such meeting,
as the case may be.

By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Board of Directors an opportunity to consider
the qualifications of the proposed nominees and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will also provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Board of Directors, will provide the Board of Directors with
an opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations as
to the Board of Directors' position regarding action to be taken with respect to
such business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.

Although the Bylaws do not give the Board of Directors any power to approve
or disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.

The Stockholder Notice Procedure does not apply to AMR and its affiliates
prior to the Trigger Date.

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AMENDMENTS

The Certificate of Incorporation and Bylaws require that, effective as of
the Trigger Date, any amendment to the provisions of the Bylaws or to certain
provisions of the Certificate of Incorporation, including those provisions
discussed above, must be approved by the holders of at least 80% of the Voting
Stock. This requirement, as of the Trigger Date, will prevent a stockholder with
only a majority of the Common Stock from avoiding the requirements of the
provisions discussed above by amending or repealing such provisions. The
Certificate of Incorporation further provides that the Bylaws may be amended by
the Company's Board of Directors.

LIABILITY OF DIRECTORS; INDEMNIFICATION

The Certificate of Incorporation provides that a director will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit. Any amendment or
repeal of such provision shall not adversely affect any right or protection of a
director existing under such provision for any act or omission occurring prior
to such amendment or repeal.

The Bylaws provide that the Company will indemnify any person who was or is
a party to any threatened, pending or completed action, suit or proceeding
because he or she is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership or other enterprise. The Bylaws provide that this
indemnification will be from and against expenses, judgments, fines and amounts
paid in settlement by the indemnitee. However, this indemnification will only be
provided if the indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company.

CORPORATE OPPORTUNITY AND CONFLICT OF INTEREST POLICIES

In order to address certain potential conflicts of interest between the
Company and AMR, the Certificate of Incorporation contains provisions concerning
the conduct of certain affairs of the Company as they may involve AMR and its
subsidiaries (other than the Company and its subsidiaries) and their respective
officers and directors, and the powers, rights, duties and liabilities of the
Company and its subsidiaries and their respective officers, directors and
stockholders in connection therewith. In general, these provisions recognize
that the Company and AMR and their respective subsidiaries may engage in the
same or similar business activities and lines of business and have an interest
in the same areas of corporate opportunities and that the Company and AMR and
their subsidiaries will continue to have contractual and business relations with
each other (including service of officers and directors of AMR as directors of
the Company). See "Management -- Directors and Executive Officers."

For purposes of these provisions, the terms "Company" and "AMR" include
their subsidiaries and other entities in which they respectively beneficially
own, directly or indirectly, 50 percent or more of the outstanding voting
securities or interests (except that "AMR" does not include the Company and its
subsidiaries and such other entities), and, in the case of AMR, all successors
to AMR by way of merger, consolidation or sale of all or substantially all its
assets.

The Certificate of Incorporation provides that any person purchasing or
otherwise acquiring any interest in any shares of capital stock of the Company
shall be deemed to have notice of and to have consented to these provisions.

CORPORATE OPPORTUNITY POLICY. The Certificate of Incorporation provides
that, except as AMR may otherwise agree in writing, AMR will have the right (i)
to engage in the same or similar business

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<PAGE> 77

activities or lines of business as the Company, (ii) to do business with any
potential or actual client, customer or supplier of the Company and (iii) to
employ or engage any officer or employee of the Company. Neither AMR nor any
officer or director thereof will be liable to the Company or its stockholders
for breach of any fiduciary duty by reason of these activities.

If AMR acquires knowledge of a potential transaction or matter that may be
a corporate opportunity for both AMR and the Company, AMR will have no duty to
communicate that opportunity to the Company. Furthermore, AMR will not be liable
to the Company or its stockholders because AMR pursues or acquires that
corporate opportunity for itself, directs that corporate opportunity to another
person or entity or does not present that corporate opportunity to the Company.

If a director or officer of the Company who is also a director or officer
of AMR acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for both the Company and AMR, the Certificate of
Incorporation requires that the director or officer of the Company act in good
faith in accordance with the following three-part policy, and a director or
officer so acting is deemed to have acted reasonably and in good faith and fully
to have satisfied his or her duties of loyalty and fiduciary duties to the
Company and its stockholders with respect to such opportunity.

First, a corporate opportunity offered to any person who is a director but
not an officer of the Company and who is also an officer (whether or not a
director) of AMR will belong to AMR, unless the opportunity is expressly offered
to that person primarily in his or her capacity as a director of the Company, in
which case the opportunity will belong to the Company.

Second, a corporate opportunity offered to any person who is an officer
(whether or not a director) of the Company and who is also a director but not an
officer of AMR will belong to the Company, unless the opportunity is expressly
offered to that person primarily in his or her capacity as a director of AMR, in
which case the opportunity will belong to AMR.

Third, a corporate opportunity offered to any other person who is either an
officer of both the Company and AMR or a director of both the Company and AMR
will belong to AMR or to the Company, as the case may be, if the opportunity is
expressly offered to the person primarily in his or her capacity as an officer
or director of AMR or of the Company, respectively. Otherwise, the opportunity
will belong to AMR.

Under the Certificate of Incorporation, any corporate opportunity that
belongs to AMR or to the Company pursuant to the foregoing policy will not be
pursued by the other (or directed by the other to another person or entity)
unless and until AMR or the Company, as the case may be, determines not to
pursue the opportunity. If the party to whom the corporate opportunity belongs
does not, however, within a reasonable period of time, begin to pursue, or
thereafter continue to pursue, such opportunity diligently and in good faith,
the other party may pursue such opportunity (or direct it to another person or
entity).

A director or officer of the Company who acts in accordance with the
foregoing three-part policy: (i) will be deemed fully to have satisfied his or
her fiduciary duties to the Company and its stockholders with respect to such
corporate opportunity; (ii) will not be liable to the Company or its
stockholders for any breach of fiduciary duty by reason of the fact that AMR
pursues or acquires such opportunity for itself or directs such corporate
opportunity to another person or does not communicate information regarding such
opportunity to the Company; (iii) will be deemed to have acted in good faith and
in a manner he or she reasonably believes to be in the best interests of the
Company; and (iv) will be deemed not to have breached his or her duty of loyalty
to the Company or its stockholders and not to have derived an improper benefit
therefrom.

Under the Certificate of Incorporation, "corporate opportunities"
potentially allocable to the Company consist of business opportunities which (i)
the Company is financially able to undertake; (ii) are, from their nature, in
the Company's line or lines of business and are of practical advantage to the
Company; and (iii) are ones in which the Company has an interest or reasonable
expectancy.

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<PAGE> 78

In addition, "corporate opportunities" do not include transactions in which the
Company or AMR is permitted to participate pursuant to any agreement between the
Corporation and AMR that is in effect as of the time any equity security of the
Company is held of record by any person other than AMR or subsequently entered
into with the approval of the Disinterested Directors.

For purposes of these corporate opportunity provisions, a director of the
Company who is chairman of the Board of Directors (or a committee thereof) or
chief executive officer will not be deemed to be an officer of the Company by
reason of holding such position, unless such person is a full-time employee of
the Company.

CONFLICT OF INTERESTS POLICY. The Certificate of Incorporation provides
that no contract, agreement, arrangement or transaction between the Company and
AMR or any customer or supplier or any entity in which a director of the Company
has a financial interest (a "Related Entity"), or between the Company and one or
more of the directors or officers of the Company, AMR or any Related Entity, or
any amendment, modification or termination thereof, will be voidable solely
because AMR or such customer or supplier, any Related Entity, or any one or more
of the officers or directors of the Company, AMR or any Related Entity are
parties thereto, or solely because any such directors or officers are present at
or participate in the meeting of the Board of Directors or committee thereof
which authorizes the contract, agreement, arrangement, transaction, amendment,
modification or termination (each, a "Transaction") or solely because their
votes are counted for such purpose, if a specified standard is satisfied. That
standard will be satisfied, and AMR, the Related Entity and the directors and
officers of the Company, AMR or the Related Entity (as applicable) will be
deemed to have acted reasonably and in good faith (to the extent such standard
is applicable to such person's conduct) and fully to have satisfied any duties
of loyalty and fiduciary duties they may have to the Company and its
stockholders with respect to such transaction if any of the following four
requirements are met:

(i) the material facts as to the Transaction are disclosed or known to
the Board of Directors or the committee thereof that authorizes the
Transaction, and the Board of Directors or such committee in good faith
approves the Transaction by a majority of the Disinterested Directors on
the Board of Directors or such committee, even if the Disinterested
Directors are less than a quorum;

(ii) the material facts as to the Transaction are disclosed or known
to the holders of Voting Stock entitled to vote thereon, and the
Transaction is specifically approved by vote of the holders of a majority
of the then outstanding Voting Stock not owned by AMR or such Related
Entity, voting together as a single class;

(iii) the Transaction is effected pursuant to guidelines which are in
good faith approved by a majority of the Disinterested Directors on the
Board of Directors or the applicable committee thereof or by vote of the
holders of a majority of the then outstanding Voting Stock not owned by AMR
or such Related Entity, voting together as a single class; or

(iv) the Transaction is fair to the Company as of the time it is
approved by the Board of Directors, a committee thereof or the stockholders
of the Company.

The Certificate of Incorporation also provides that any such Transaction
authorized, approved or effected, and each of such guidelines so authorized or
approved, as described in (i), (ii) or (iii) above, shall be deemed to be
entirely fair to the Company and its stockholders; provided that, if such
authorization or approval is not obtained, or such Transaction is not so
effected, no presumption shall arise that such Transaction or guideline is not
fair to the Company and its stockholders. In addition, the Certificate of
Incorporation provides that AMR shall not be liable to the Company or its
stockholders for breach of any fiduciary duty that AMR may have by reason of the
fact that AMR takes any action in connection with any transaction between AMR
and the Company.

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<PAGE> 79

Effective as of the Trigger Date, the affirmative vote of the holders of
more than 80 percent of the outstanding Voting Stock, voting together as a
single class, will be required to alter, amend or repeal any of these conflict
of interest or corporate opportunity provisions in a manner adverse to the
interests of AMR.

RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY

The Certificate of Incorporation authorizes the Board of Directors to
create and issue rights entitling the holders thereof to purchase from the
Company shares of capital stock or other securities or property. The times at
which and terms upon which such rights are to be issued would be determined by
the Board of Directors and set forth in the contracts or instruments that
evidence such rights. The authority of the Board of Directors with respect to
such rights includes, but is not limited to, determination of (i) the purchase
price of the capital stock to be purchased upon exercise of such rights; (ii)
provisions relating to the times at which and the circumstances under which such
rights may be exercised or sold or otherwise transferred, either together with
or separately from, any other stock or other securities of the Company; (iii)
provisions which adjust the number or exercise price of such rights or amount or
nature of the stock receivable upon exercise of such rights in the event of a
combination, split or recapitalization of any stock of the Company, a change in
ownership of the Company's stock or other securities or a reorganization,
merger, consolidation, sale of assets or other occurrence relating to the
Company or any stock of the Company, and provisions restricting the ability of
the Company to enter into any such transaction absent an assumption by the other
party or parties thereto of the obligations of the Company under such rights;
(iv) provisions which deny the holder of a specified percentage of the
outstanding securities of the Company the right to exercise such rights and
cause such rights held by such holder to become void; (v) provisions which
permit the Company to redeem or exchange such rights; and (vi) the appointment
of the rights agent with respect to such rights. This provision is intended to
confirm the authority of the Board of Directors to issue such share purchase
rights or other rights to purchase stock or securities of the Company or any
other corporation.

LISTING

The Class A Common Stock has been approved for listing on the New York
Stock Exchange under the symbol "TSG," subject to official notice of issuance.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is First Chicago
Trust Company of New York.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices.

Upon completion of the Offerings, the Company will have 20,200,000 shares
of Class A Common Stock issued and outstanding (23,230,000 if the Underwriters'
over-allotment options are exercised in full) and 107,374,000 shares of Class B
Common Stock issued and outstanding. All of the shares of Class A Common Stock
to be sold in the Offerings will be freely tradable without restrictions or
further registration under the Securities Act, except that shares purchased by
an "affiliate" of the Company (as that term is defined in Rule 144) will be
subject to the resale limitations of Rule 144. All of the outstanding shares of
Class B Common Stock are owned by AMR and have not been registered under the
Securities Act and may not be sold in the absence of an effective registration
statement under the Securities Act other than in accordance with Rule 144 or

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<PAGE> 80

another exemption from registration ("Restricted Shares"). Restricted Shares
will become eligible for resale in the public market at various dates in the
future.

The Restricted Shares will constitute "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act and will be eligible
for sale in the open market after the Offerings subject to the contractual
lockup provisions and applicable requirements of Rule 144 described below. In
addition, for as long as AMR is able to cause a majority of the Company's Board
of Directors to be elected, it will be able to cause the Company at any time to
register under the Securities Act all or a portion of the Common Stock owned by
it, in which event such shares could be sold publicly upon the effectiveness of
any such registration without restriction. AMR may also, at any time following
the contractual lockup provisions described below, sell any or all of the Class
B Common Stock in a private placement without regard to the Rule 144
restrictions described below.

In general, under Rule 144 as currently in effect, if a period of at least
two years has elapsed between the later of the date on which "restricted shares"
(as that phrase is defined in Rule 144) were acquired from the Company and the
date on which they were acquired from an "affiliate" of the Company (an
"Affiliate", as that term is defined in Rule 144), then the holder of such
restricted shares (including an Affiliate) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of the Common Stock or (ii) the average
weekly reported volume of trading of the Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
requirements pertaining to the manner of such sales, notices of such sales and
the availability of current public information concerning the Company.
Affiliates may sell shares not constituting restricted shares in accordance with
the foregoing volume limitations and other requirements but without regard to
the two-year period. Under Rule 144(k), if a period of at least three years has
elapsed between the later of the date on which restricted shares were acquired
from the Company and the date on which they were acquired from an Affiliate, a
holder of such restricted shares who is not an Affiliate at the time of the sale
and has not been an Affiliate for at least three months prior to the sale would
be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above. The foregoing description of
Rule 144 is not intended to be a complete description thereof.

Sales of significant amounts of the Common Stock, or the perception that
such sales could occur, could have an adverse impact on the market price of the
Class A Common Stock. The Company has agreed that during the period beginning on
the date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, it will not offer, sell, contract to sell or
otherwise dispose of any shares of Class A Common Stock, any securities of the
Company that are substantially similar to the shares of the Class A Common Stock
or that are convertible or exchangeable into Class A Common Stock or securities
that are substantially similar to the shares of the Class A Common Stock (other
than pursuant to employee stock option plans existing, or on conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) without the prior written consent of Goldman, Sachs & Co., on
behalf of the U.S. Underwriters, except for the shares of Class A Common Stock
offered in connection with the Offerings. AMR has agreed that during the period
beginning on the date of this Prospectus and continuing to and including the
date 180 days after the date of this Prospectus, it will not offer, sell,
contract to sell or otherwise dispose of any shares of Class A Common Stock, any
securities of the Company that are substantially similar to the shares of Class
A Common Stock, or that are convertible or exchangeable into Class A Common
Stock or securities that are substantially similar to the shares of Class A
Common Stock without the prior written consent of Goldman, Sachs & Co., on
behalf of the U.S. Underwriters. See "Underwriting."

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<PAGE> 81

The Company and AMR are also parties to the Registration Rights Agreement
pursuant to which AMR may demand registration under the Securities Act of shares
of the Company's capital stock held by it at any time subject to its agreement
not to sell any shares prior to the expiration of 180 days from the date of this
Prospectus. The Company may postpone such a demand under certain circumstances.
In addition, AMR may request the Company to include shares of the Company's
capital stock held by it in any registration proposed by the Company of such
capital stock under the Securities Act.

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<PAGE> 82

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., J.P. Morgan
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon
Brothers Inc are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Class A Common Stock set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF CLASS A
UNDERWRITER COMMON STOCK
------------------------------------------------------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
J.P. Morgan Securities Inc. ................................
Salomon Brothers Inc .......................................
----------
Total............................................. 16,160,000
==========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Class A Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.

At the request of the Company, the Underwriters have reserved shares of the
Class A Common Stock offered hereby for sale at the public offering price to the
directors, officers and employees of the Company, directors of AMR and certain
other persons. Such directors, officers, employees and other persons will
purchase, in the aggregate, less than 10% of the Class A Common Stock offered in
the Offerings. The number of shares available to the general public will be
reduced to the extent persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the Underwriters to the general public on
the same terms as other shares offered by this Prospectus. In order to comply
with local securities laws in certain jurisdictions outside the United States,
sales to employees of the Company of up to an aggregate of 56,250 shares will be
made directly by the Company, rather than through the Underwriters, and the
total underwriting discount set forth on the cover page of this Prospectus will
be reduced accordingly.

The Company and AMR have entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
international offering (the "International Underwriters") providing for the
concurrent offer and sale of 4,040,000 shares of Class A Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The representatives
acting on behalf of the International Underwriters are Goldman Sachs
International, Merrill Lynch International, J.P. Morgan Securities Ltd. and
Salomon Brothers International Limited.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain

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<PAGE> 83

exceptions, it will offer, sell or deliver the shares of Class A Common Stock,
directly or indirectly, only in the United States of America (including the
States and District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (the "United States") and to U.S. persons,
which term shall mean, for purposes of this paragraph: (a) any individual who is
a resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as a part of the international offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Class A Common Stock (a) in the United States or to any U.S. persons
or (b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (ii) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.

The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
2,424,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 16,160,000 shares of Class A Common Stock offered hereby.
The Company has granted the International Underwriters a similar option to
purchase up to an aggregate of 606,000 additional shares of Class A Common
Stock.

The Company has agreed, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities of the Company that are substantially
similar to the shares of Common Stock or that are convertible or exchangeable
into Common Stock or securities that are substantially similar to the shares of
Common Stock (other than pursuant to employee stock option plans which exist on,
or are described herein to be implemented after, the date of this Prospectus, or
on conversion or exchange of convertible or exchangeable securities outstanding
on the date of this Prospectus) without the prior written consent of Goldman,
Sachs & Co., on behalf of the Underwriters, except for the shares of Class A
Common Stock offered in connection with the Offerings. AMR has agreed, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock, any
securities of the Company that are substantially similar to the shares of Common
Stock or that are convertible or exchangeable into Common Stock or securities
that are substantially similar to the shares of Common Stock without the prior
written consent of Goldman, Sachs & Co., on behalf of the Underwriters.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class A Common Stock offered by them.

Prior to this Offering, there has been no public market for the shares of
Class A Common Stock. The initial public offering price was negotiated among the
Company and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Class A Common Stock, in addition to prevailing market
conditions, were the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the

82
<PAGE> 84

consideration of the above factors in relation to market valuations of companies
in related businesses.

The Class A Common Stock has been approved for listing on the New York
Stock Exchange under the symbol "TSG," subject to official notice of issuance.
In order to meet one of the requirements for listing the Class A Common Stock on
the New York Stock Exchange, the Underwriters have undertaken to sell lots of
100 or more shares to a minimum of 2,000 beneficial holders.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold in
the International Offering, to persons located in the United States.

The Underwriters perform investment banking and financial advisory and
other financial services for the Company, AMR and their affiliates from time to
time.

The Company and AMR have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.

83
<PAGE> 85

CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

The following is a discussion of certain of the anticipated United States
federal income and estate tax consequences of the ownership and disposition of
Class A Common Stock applicable to Non-U.S. Holders. A "Non-U.S. Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a foreign estate or trust. This discussion does not deal with all
aspects of United States federal income and estate taxation that may be relevant
to Non-U.S. Holders in light of their particular circumstances and does not deal
with state, local and non-U.S. tax consequences. Prospective non-U.S. investors
should consult their own tax advisors regarding the United States and other tax
consequences of owning and disposing of Class A Common Stock.

DIVIDENDS

Generally, any dividend paid to a Non-U.S. Holder with respect to Class A
Common Stock will be subject to United States withholding tax at a rate of 30%
of the amount of the dividend, or at a lesser applicable treaty rate. However,
if the dividend is effectively connected with a United States trade or business
of a Non-U.S. Holder, it will be subject to the regular United States federal
income tax, rather than the 30% withholding tax, except as otherwise provided in
an applicable treaty. Under certain circumstances, any such effectively
connected dividends received by a foreign corporation may also be subject to an
additional branch profits tax.

Under current Treasury regulations, dividends paid to an address in a
foreign country are generally presumed to be paid to a resident of such country
for purposes of determining the applicability of a treaty rate. However,
Treasury Regulations proposed to be effective for payments made after December
31, 1997 (the "Proposed Regulations"), which have not finally been adopted,
would require a Non-U.S. Holder to file a form to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends. Such form would contain the holder's name and address and certain
other information.

SALES OF CLASS A COMMON STOCK

Generally, a Non-U.S. Holder will not be subject to United States federal
income or withholding tax on any gain realized upon the sale of Class A Common
Stock unless (i) the gain is effectively connected with a United States trade or
business of the Non-U.S. Holder, or (ii) in the case of a Non-U.S. Holder who is
an individual and holds the Class A Common Stock as a capital asset, such
Non-U.S. Holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the sale and certain
other conditions are satisfied, or (iii) the Company is or has been a "United
States real property holding corporation" for federal income tax purposes (which
the Company does not believe it is or has been) and certain other conditions are
satisfied, and no treaty exception is applicable.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Generally, dividends paid to Non-U.S. Holders with respect to Class A
Common Stock outside the United States that are subject to the 30% withholding
tax or the reduced treaty rate of withholding tax will be exempt from any backup
withholding tax. Otherwise, backup withholding of United States federal income
tax at a rate of 31% may apply to dividends paid with respect to the Class A
Common Stock to holders that are not "exempt recipients" and that fail to
provide certain information (including the holder's taxpayer identification
number) in the manner required by United States law and applicable regulations.

The payment of the proceeds of the disposition of Class A Common Stock by a
Non-U.S. Holder to or through a United States office of a broker will be subject
to information reporting and backup withholding at a rate of 31% unless the
owner certifies, in a suitable form, as to its non-U.S. tax

84
<PAGE> 86

status or otherwise establishes an exemption. The payment of the proceeds of the
disposition to or through a non-U.S. office of a broker will not be subject to
backup withholding, but may be subject to information reporting if the broker is
(i) a U.S. person, (ii) a foreign person that is a controlled foreign
corporation for United States tax purposes, or (iii) a foreign person 50% or
more of whose gross income for a specified 3-year period is effectively
connected with the conduct of a trade or business within the United States.

The Proposed Regulations will, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations provide certain
presumptions under which a Non-U.S. Holder may be subject to backup withholding
in the absence of required certifications.

ESTATE TAX

Class A Common Stock that is beneficially owned by an individual who is
neither a citizen nor a resident of the United States at the time of death will
be included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable treaty provides otherwise.

VALIDITY OF CLASS A COMMON STOCK

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Debevoise & Plimpton, New York, New York, and for
the Underwriters by Sullivan & Cromwell, New York, New York.

EXPERTS

The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1994 and December 31, 1995 and for each of the
three years in the period ended December 31, 1995 appearing in this Prospectus
and the Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Class A Common Stock offered hereby. For the purposes hereof, the term
"Registration Statement" means the original registration statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and such Common Stock,
reference is hereby made to such Registration Statement, including exhibits
thereto, which can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.

Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.

85
<PAGE> 87

The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Class A Common Stock, the Company will
become subject to the reporting requirements of the Exchange Act. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by independent accountants and with quarterly reports
containing interim financial information for each of the first three quarters of
each year.

TRADEMARKS

The following registered and unregistered trademarks used herein are owned
by the Company or one of its subsidiaries: SABRE, Travelocity, easySABRE, Turbo
SABRE, Planet SABRE, SABRE Business Travel Solutions, SABRE BTS, CARS Plus,
SHAARP Plus, SABRErail, SABRE TourGuide, SABRE Navigator, SABRE CruiseDirector,
Basic Booking Request, Direct Connect Availability, Fare Action Evaluator,
AIRPRICE, AIRCREWS, AIRFLITE and SABRE Wireless.

86
<PAGE> 88

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Condensed Consolidated Financial Information............................... F-2
Pro Forma Condensed Consolidated Balance Sheet for June 30, 1996................... F-3
Pro Forma Condensed Consolidated Statement of Income for the year ended December
31, 1995........................................................................ F-4
Pro Forma Condensed Consolidated Statement of Income for the six months ended June
30, 1995........................................................................ F-5
Pro Forma Condensed Consolidated Statement of Income for the six months ended June
30, 1996........................................................................ F-6
Notes to Pro Forma Condensed Consolidated Financial Statements..................... F-7
Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors.................................. F-9
Consolidated Balance Sheets for December 31, 1995 and 1994 and June 30, 1996....... F-10
Consolidated Statements of Income and Stockholder's Net Investment for the years
ended December 31, 1995, 1994 and 1993 and the six months ended June 30, 1996
and 1995........................................................................ F-11
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993 and the six months ended June 30, 1996 and 1995........................ F-12
Notes to Consolidated Financial Statements......................................... F-13
</TABLE>

F-1
<PAGE> 89

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The accompanying pro forma condensed consolidated financial statements are
based upon the historical financial statements of the Company and assume the
Reorganization and the Affiliate Agreements and the Offerings were consummated
at June 30, 1996, with respect to the unaudited pro forma condensed consolidated
balance sheet and on January 1, 1995 with respect to the unaudited pro forma
condensed consolidated statements of income.

The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the transactions had been consummated as presented
in the accompanying pro forma condensed consolidated financial statements, nor
is it necessarily indicative of future results of operations.

The pro forma condensed consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
of the Company included elsewhere herein.

F-2
<PAGE> 90

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA AS PRO FORMA
FOR THE ADJUSTED FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................... $ 187,089 $ 187,089 $ 409,064(h) $ 227,996
(368,157)(i)
Accounts receivable, net............................ 209,697 209,697 209,697
Prepaid expenses.................................... 12,075 12,075 12,075
Deferred income taxes............................... 40,717 40,717 40,717
--------- ---------- --------- ----------
TOTAL CURRENT ASSETS.......................... 449,578 449,578 40,907 490,485
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements................ 11,243 $ 281,399(c) 292,642 292,642
Furniture, fixtures and equipment................... 4,460 16,430(c) 20,890 20,890
Service contract equipment.......................... 545,355 545,355 545,355
Computer equipment.................................. 318,928 318,928 318,928
--------- --------- ---------- --------- ----------
879,986 297,829 1,177,815 0 1,177,815
Less accumulated depreciation and amortization...... (533,740) (104,621)(c) (638,361) (638,361)
--------- --------- ---------- --------- ----------
TOTAL PROPERTY AND EQUIPMENT.................. 346,246 193,208 539,454 0 539,454
OTHER ASSETS.......................................... 59,997 59,997 59,997
--------- --------- ---------- --------- ----------
TOTAL ASSETS.................................. $ 855,821 $ 193,208 $1,049,029 $ 40,907 $1,089,936
========= ========= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................... $ 44,853 $ 44,853 $ 44,853
Accrued compensation and related benefits........... 41,972 41,972 41,972
Other accrued liabilities........................... 84,829 84,829 84,829
Note payable to AMR................................. 54,102 $ (54,102)(d) -- --
--------- --------- ---------- ----------
TOTAL CURRENT LIABILITIES..................... 225,756 (54,102) 171,654 171,654
DEFERRED INCOME TAXES................................. 24,876 34,115(c) 36,449 36,449
(19,500)(g)
(3,042)(f)
PENSION BENEFITS...................................... -- 50,000(g) 50,000 50,000
OTHER POSTRETIREMENT BENEFITS......................... 40,627 7,800(f) 48,427 48,427
OTHER LIABILITIES..................................... 13,375 13,375 13,375
DEBENTURE PAYABLE to AMR.............................. -- 850,000(e) 850,000 $(368,157)(i) 481,843
STOCKHOLDERS' EQUITY
Preferred Stock: $0.01 par value; 20,000,000 shares
authorized; no shares issued...................... -- -- --
Common Stock
$0.01 par value; 1,000 shares authorized and
issued and outstanding.......................... -- --(a) -- --(h) --
Class A: $0.01 par value; 250,000,000 shares
authorized; 20,200,000 shares issued and
outstanding..................................... -- -- 202(h) 202
Class B: $0.01 par value; 107,374,000 shares
authorized; 107,374,000 shares issued and
outstanding..................................... -- -- 1,074(h) 1,074
Additional paid-in-capital.......................... -- -- 407,788(h) 407,788
Formation of Company.............................. --(a)
Reclassify AMR's net investment................... 551,187(b)
Contribution of assets by American................ 159,093(c)
Note payable capitalized.......................... 54,102(d)
Issuance of Debenture to AMR...................... (764,382)(e)
Retained earnings (deficit)......................... -- (120,876) (120,876)
Issuance of Debenture to AMR...................... (85,618)(e)
Postretirement flight benefits.................... (4,758)(f)
Net pension liability............................. (30,500)(g)
Stockholder's net investment...................... 551,187 (551,187)(b) -- --
--------- --------- ---------- --------- ----------
TOTAL STOCKHOLDERS' EQUITY.................... 551,187 (672,063) (120,876) 409,064 288,188
--------- --------- ---------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $ 855,821 $ 193,208 $1,049,029 $ 40,907 $1,089,936
========= ========= ========== ========= ==========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-3
<PAGE> 91

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1995
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR THE FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............. $1,006,926 $ 986,057 $ 986,057
Marketing support payments............... $ (20,869)(j)
Information technology solutions........... 522,690 477,290 477,290
Technology Services Agreement............ (45,400)(k)
---------- --------- ---------- ----------
Total revenues....................... 1,529,616 (66,269) 1,463,347 1,463,347
Operating expenses
Cost of revenues........................... 1,041,475 1,067,283 1,067,283
Technology Services Agreement............ (11,750)(k)
Employee travel costs -- American........ 13,159(l)
Employee travel costs -- other
airlines............................... 6,480(m)
Additional marketing support............. 20,000(j)
Additional general expenses.............. 4,230(n)
Reduction in rent expense................ (7,295)(o)
Additional postretirement expense........ 984(p)
Selling, general and administrative........ 107,717 111,466 111,466
Employee travel costs -- American........ 3,492(l)
Employee travel costs -- other
airlines............................... 1,620(m)
Additional general expenses.............. 410(n)
Reduction in rent expense................ (2,019)(o)
Additional postretirement expense........ 246(p)
---------- --------- ---------- ----------
Total operating expenses............. 1,149,192 29,557 1,178,749 1,178,749
---------- --------- ---------- ----------
Operating income............................. 380,424 (95,826) 284,598 284,598
Other income (expense), net.................. (10,349) (56,011)(q) (66,360) $26,599(s) (39,761)(t)
---------- --------- ---------- -------- ----------
Income before provision for income taxes..... 370,075 (151,837) 218,238 26,599 244,837
Provision for income taxes................... 144,224 (59,216)(r) 85,008 10,374(r) 95,382
---------- --------- ---------- -------- ----------
Net earnings................................. $ 225,851 $ (92,621) $ 133,230 $16,225 $ 149,455
========== ========= ========== ======== ==========
Pro forma earnings per common share data:
Earnings per common share.................. $ 1.18(u) $ 1.17(v)
========== ==========
Average common and common equivalent shares
outstanding.............................. 112,996(u) 127,574(v)
========== ==========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-4
<PAGE> 92

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1995
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR THE FOR THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............... $511,739 $501,475 $501,475
Marketing support payments................. $(10,264)(j)
Information technology solutions............. 255,792 235,261 235,261
Technology Services Agreement.............. (20,531)(k)
-------- -------- -------- --------
Total revenues......................... 767,531 (30,795) 736,736 736,736
Operating expenses
Cost of revenues............................. 499,758 511,388 511,388
Technology Services Agreement.............. (5,867)(k)
Employee travel costs -- American.......... 5,297(l)
Employee travel costs -- other airlines.... 3,240(m)
Additional marketing support............... 10,000(j)
Additional general expenses................ 2,115(n)
Reduction in rent expense.................. (3,647)(o)
Additional postretirement expense.......... 492(p)
Selling, general and administrative.......... 48,323 49,856 49,856
Employee travel costs -- American.......... 1,404(l)
Employee travel costs -- other airlines.... 810(m)
Additional general expenses................ 205(n)
Reduction in rent expense.................. (1,009)(o)
Additional postretirement expense.......... 123(p)
-------- -------- -------- --------
Total operating expenses............... 548,081 13,163 561,244 561,244
-------- -------- -------- --------
Operating income............................... 219,450 (43,958) 175,492 175,492
Other income (expense), net.................... (10,415) (27,977)(q) (38,392) $13,300(s) (25,092)(t)
-------- -------- -------- -------- --------
Income before provision for income taxes....... 209,035 (71,935) 137,100 13,300 150,400
Provision for income taxes..................... 81,978 (28,055)(r) 53,923 5,187(r) 59,110
-------- -------- -------- -------- --------
Net earnings................................... $127,057 $(43,880) $ 83,177 $ 8,113 $ 91,290
======== ======== ======== ======== ========
Pro forma earnings per common share data:
Earnings per common share.................... $ .74(u) $ .72(v)
======== ========
Average common and common equivalent shares
outstanding................................ 112,996(u) 127,574(v)
======== ========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-5
<PAGE> 93

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA AS
ADJUSTMENTS ADJUSTED FOR PRO FORMA
FOR THE THE PRO FORMA AS FURTHER
REORGANIZATION REORGANIZATION ADJUSTMENTS ADJUSTED
AND AFFILIATE AND AFFILIATE FOR THE FOR THE
HISTORICAL AGREEMENTS AGREEMENTS OFFERINGS OFFERINGS
---------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............... $574,982 $574,982 $574,982
Information technology solutions............. 263,307 257,209 257,209
Technology Services Agreement.............. $ (6,098)(k)
-------- -------- -------- --------
Total revenues............................... 838,289 (6,098) 832,191 832,191
Operating expenses
Cost of revenues............................. 576,599 570,909 570,909
Technology Services Agreement.............. $ (6,098)(k)
Employee travel costs -- other airlines.... 3,240(m)
Additional general expenses................ 615(n)
Reduction in rent expense.................. (3,939)(o)
Additional postretirement expense.......... 492(p)
Selling, general and administrative.......... 64,101 64,146 64,146
Employee travel costs -- other airlines.... 810(m)
Additional general expenses................ 205(n)
Reduction in rent expense.................. (1,093)(o)
Additional postretirement
expense.................................. 123(p)
-------- -------- -------- --------
Total operating expenses..................... 640,700 (5,645) 635,055 635,055
-------- -------- -------- --------
Operating income............................... 197,589 (453) 197,136 197,136
Other income (expense), net.................... (2,399) (28,170)(q) (30,569) $13,300(s) (17,269)(t)
-------- -------- -------- -------- --------
Income before provision for income taxes....... 195,190 (28,623) 166,567 13,300 179,867
Provision for income taxes..................... 76,140 (11,163)(r) 64,977 5,187(r) 70,164
-------- -------- -------- -------- --------
Net earnings................................... $119,050 $(17,460) $101,590 $ 8,113 $109,703
======== ======== ======== ======== ========
Pro forma earnings per common share data:
Earnings per common share.................... $ .90(u) $ .86(v)
======== ========
Average common and common equivalent shares
outstanding................................ 112,996(u) 127,574(v)
======== ========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-6
<PAGE> 94

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The accompanying pro forma condensed consolidated balance sheet reflects
the following pro forma adjustments for the Reorganization and the Affiliate
Agreements and the Offerings as if such transactions had been consummated on
June 30, 1996.

(a) To record the formation of the Company pursuant to which the Company
issued 1,000 shares of Common Stock to American, which dividended them to AMR.
Prior to the issuance of Class A Common Stock pursuant to the terms of the
Offerings, AMR owned 100% of the outstanding shares of Common Stock. Immediately
prior to the Offerings, Common Stock held by AMR will be converted to Class B
Common Stock.

(b) To reclassify AMR's net investment to additional paid-in-capital in
connection with the legal formation of the Company.

(c) To record the contribution by American to the Company of buildings and
furniture and fixtures with a historical cost to American of approximately $298
million and accumulated depreciation of approximately $104 million and the
related deferred income taxes.

(d) To record the capitalization of a note payable to AMR of approximately
$54 million.

(e) To record the issuance to American of the $850 million floating rate
subordinated Debenture due September 30, 2004. The Debenture was subsequently
distributed to AMR.

(f) To record the estimated liability to be assumed and the related
deferred income taxes for the Company's obligation to provide post-retirement
flight benefits to certain employees of the Company pursuant to the Travel
Privileges Agreement with American effective July 1, 1996.

(g) To record the estimated net pension liability to be assumed, and the
related deferred income taxes, as a result of the spin-off of the portion of the
American sponsored pension plan attributable to the Company's employees from the
American pension plan to a new pension plan to be sponsored by the Company. The
pro forma net pension liability to be assumed is based on a preliminary
estimate, prepared by the Company's actuaries, of the amounts of pension
obligations and plan assets attributable to employees of the Company. The actual
obligation assumed will depend upon the amounts of pension obligations and plan
assets, as determined by the Company's actuaries, at the date that the spin-off
occurs. Such spin-off is expected to occur effective January 1, 1997.

(h) To record the issuance of 20,250,000 shares of Class A Common Stock of
the Company at an assumed offering price of $21.50 per share pursuant to the
Offerings, resulting in net proceeds of approximately $410 million after
deducting underwriting commissions and estimated expenses of the Offerings and
to record the conversion of Common Stock held by AMR to Class B Common Stock.

(i) To record the use of 90% of the proceeds of the Offerings to repay a
portion of the Debenture.

The accompanying pro forma condensed consolidated statements of income for
the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996
reflect the following pro forma adjustments assuming the Reorganization and the
Affiliate Agreements and the Offerings had been consummated on January 1, 1995.

(j) To record the estimated increase in marketing costs paid to American
and decrease in marketing support payments from American as a result of the
Marketing Cooperation Agreement with American, the financial terms of which the
parties have agreed to apply as of January 1, 1996, regarding marketing support
for the Company's products targeted to travel agencies, and support for the
Company's promotion of Business Travel Solutions, and Travelocity and easySABRE.
The increase in marketing costs is recorded at the minimum of $20 million
required in the agreement.

F-7
<PAGE> 95

However, this amount may increase to $30 million in the first year and could
range from $10 million to $30 million in the second year and thereafter
depending on whether certain booking thresholds are reached by American.

(k) To record the estimated reduction in revenues as a result of the
Technology Services Agreement with American, the financial terms of which the
parties have agreed to apply as of January 1, 1996 and to record the estimated
reduction in revenues from American and associated reduction in communication
expenses due to SITA billing American directly effective July 1, 1996, as
provided for in the Technology Services Agreement. The agreement established
pricing and service terms associated with the Company's information technology
services provided to American. Additional periodic price adjustments are also
defined in the agreement based on the market for similar services provided by
other companies.

(l) To record the estimated increase in travel costs as a result of the
Travel Privileges Agreement and Corporate Travel Agreement with American, the
financial terms of which the parties have agreed to apply as of January 1, 1996.
These agreements allow the Company to purchase personal and business travel for
its employees at reduced fares. The agreements provide pricing and service terms
at a smaller discount than was in effect in 1995.

(m) To record the estimated increase in travel costs on airlines other than
American. The Company is no longer eligible to participate in discounts provided
to American by other airlines effective with the Reorganization. The Company is
attempting to negotiate an agreement with other airlines for discounts similar
to American's.

(n) To record the estimated increase in employee related costs and other
general and administrative costs associated with the Affiliate Agreements with
AMR and American and their administration. Amount includes an increase in
shipping and handling expenses resulting from the Company's inability, effective
with the Reorganization, to receive American's discount rate for these services.

(o) To record the estimated decrease in rent expense paid to American due
to the transfer of ownership of buildings and furniture and fixtures to the
Company. This decrease is partially offset by depreciation expense and property
taxes which will be incurred by the Company as a result of ownership of these
facilities.

(p) To record the estimated increase in post-retirement benefit costs
associated with the Travel Privileges Agreement with American which provides
certain retired employees of the Company flight privileges in exchange for a
fixed fee per retiree.

(q) To record the estimated interest expense associated with the $850
million Debenture, partially offset by a reduction in interest expense from the
forgiveness of a note payable of $54 million by AMR in connection with the
Reorganization, calculated based on the average interest rate the Company would
have incurred during the year.

(r) To record the estimated tax impact of pre-tax income statement
adjustments at the Company's effective tax rate of 39%.

(s) To record the estimated decrease in interest expense resulting from the
partial repayment of the Debenture with the proceeds of the Offerings.

(t) For each 1/8 of 1% increase in interest rates, the impact would be an
annual change in interest expense of approximately $600,000.

(u) The pro forma earnings per common share data is calculated using the
shares of common stock outstanding after the Reorganization, assuming the
conversion of shares of Common Stock held by AMR into approximately 107.4
million shares of Class B Common Stock, adjusted for the number of shares of
Class A Common Stock that would have to be issued to generate sufficient funds
to repay the portion of the Debenture that i) exceeds the book value of assets
contributed to the Company in the Reorganization (approximately $120.9 million)
and ii) will be repaid out of the proceeds from the Offering.

F-8
<PAGE> 96

(v) The pro forma earnings per common share data is calculated using the
weighted average shares of common stock outstanding after the Offerings. The
dilutive impact of common equivalent shares related to stock awards and options
outstanding under the Company's 1996 Long-Term Incentive Plan is not significant
for the periods presented.

F-9
<PAGE> 97

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholder
The SABRE Group Holdings, Inc.

We have audited the accompanying consolidated balance sheets of The SABRE
Group Holdings, Inc. (a wholly-owned subsidiary of AMR Corporation) and
subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of income and stockholder's net investment and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The SABRE Group Holdings, Inc. and subsidiaries at December 31, 1994 and 1995,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Dallas, Texas
January 15, 1996,
except as to Note 1, for which
the date is July 22, 1996

F-10
<PAGE> 98

THE SABRE GROUP HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS

DECEMBER 31,
----------------------- JUNE 30, 1996
1994 1995 -------------
--------- --------- (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................... $ 262,956 $ 94,861 $ 187,089
Accounts receivable, less allowance for
uncollectible accounts of $3,042, $4,822 and
$4,307 at December 31, 1994 and 1995 and June
30, 1996, respectively......................... 114,026 138,972 209,697
Prepaid expenses.................................. 2,604 5,851 12,075
Deferred income taxes............................. 24,705 31,539 40,717
--------- --------- -----------
TOTAL CURRENT ASSETS...................... 404,291 271,223 449,578
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements.............. 18,107 12,250 11,243
Furniture, fixtures and equipment................. 6,044 6,049 4,460
Service contract equipment........................ 490,113 529,918 545,355
Computer equipment................................ 453,295 422,050 318,928
--------- --------- -----------
967,559 970,267 879,986
Less accumulated depreciation and amortization.... (566,155) (589,549) (533,740)
--------- --------- -----------
TOTAL PROPERTY AND EQUIPMENT........................ 401,404 380,718 346,246
OTHER ASSETS........................................ 67,810 77,465 59,997
--------- --------- -----------
TOTAL ASSETS.............................. $ 873,505 $ 729,406 $ 855,821
========== ========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 40,365 $ 53,716 $ 44,853
Accrued compensation and related benefits......... 33,514 33,696 41,972
Other accrued liabilities......................... 60,760 77,071 84,829
Payable to AMR.................................... 302,895 -- --
Note payable to AMR............................... 65,663 54,102 54,102
--------- --------- -----------
TOTAL CURRENT LIABILITIES................. 503,197 218,585 225,756
DEFERRED INCOME TAXES............................... 36,494 30,943 24,876
OTHER POSTRETIREMENT BENEFITS....................... 33,180 37,960 40,627
OTHER LIABILITIES................................... 11,170 9,781 13,375
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Stockholder's net investment...................... 289,464 432,137 551,187
--------- --------- -----------
TOTAL STOCKHOLDER'S EQUITY................ 289,464 432,137 551,187
--------- --------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY.................................. $ 873,505 $ 729,406 $ 855,821
========== ========== ===========
</TABLE>

See notes to the consolidated financial statements.

F-11
<PAGE> 99

THE SABRE GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND STOCKHOLDER'S NET INVESTMENT
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Electronic travel distribution............ $ 785,074 $ 905,908 $1,006,926 $ 511,739 $574,982
Information technology solutions.......... 473,074 500,771 522,690 255,792 263,307
---------- ---------- ---------- --------- --------
Total revenues..................... 1,258,148 1,406,679 1,529,616 767,531 838,289
Operating expenses
Cost of revenues.......................... 919,873 955,120 1,041,475 499,758 576,599
Selling, general and administrative....... 84,600 101,406 107,717 48,323 64,101
---------- ---------- ---------- --------- --------
Total operating expenses........... 1,004,473 1,056,526 1,149,192 548,081 640,700
---------- ---------- ---------- --------- --------
Operating income............................ 253,675 350,153 380,424 219,450 197,589
Other income (expense)
Loss on partnership settlement............ (71,242) -- -- -- --
Interest income (expense), net............ (1,390) (8,913) 1,265 1,114 939
Other, net................................ (12,112) (17,180) (11,614) (11,529) (3,338)
---------- ---------- ---------- --------- --------
Income before provision for income taxes.... 168,931 324,060 370,075 209,035 195,190
Provision for income taxes.................. 68,969 126,899 144,224 81,978 76,140
---------- ---------- ---------- --------- --------
Net earnings................................ 99,962 197,161 225,851 127,057 119,050
Stockholder's net investment at beginning of
the year.................................. 244,704 157,966 289,464 289,464 432,137
Contributions from affiliates............... -- -- 310,329 310,329 --
Distributions to affiliates................. (186,700) (65,663) (393,507) (249,049) --
---------- ---------- ---------- --------- --------
Stockholder's net investment at end of the
year...................................... $ 157,966 $ 289,464 $ 432,137 $ 477,801 $551,187
========== ========== ========== ========= ========
</TABLE>

See notes to the consolidated financial statements.

F-12
<PAGE> 100

THE SABRE GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings............................... $ 99,962 $ 197,161 $ 225,851 $ 127,057 $119,050
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization............ 170,698 174,953 171,471 88,155 87,782
Deferred income taxes.................... (12,287) 50,232 (12,385) -- (15,245)
Loss on partnership settlement........... 71,242 -- -- -- --
Other.................................... 12,090 7,534 7,865 6,503 3,474
Changes in operating assets and
liabilities:
Accounts receivable.................... (14,112) (28,685) (24,946) (33,821) (70,725)
Prepaid expenses....................... 2,599 (1,401) (3,247) (5,037) (6,222)
Other assets........................... (8,445) (41,420) (6,002) (5,368) 11,617
Accrued compensation and related
benefits............................. 6,395 14,618 182 (11,872) 8,276
Accounts payable and other accrued
liabilities.......................... 52,668 8,449 29,662 (335) (1,105)
Partnership settlement................. (45,122) (158,400) -- -- --
Postretirement benefits................ 5,654 4,790 4,780 2,810 2,666
Other liabilities...................... (8,911) (2,884) (1,389) 188 3,595
--------- --------- --------- --------- --------
Net cash provided by operating
activities............................... 332,431 224,947 391,842 168,280 143,163
INVESTING ACTIVITIES
Additions to property and equipment........ (176,557) (168,875) (164,580) (104,411) (82,001)
Acquisition of other investments........... (5,020) (21,087) (16,318) (4,631) (513)
Proceeds from sales of equipment........... 9,874 12,663 6,169 3,609 41,010
--------- --------- --------- --------- --------
Net cash used for investing activities..... (171,703) (177,299) (174,729) (105,433) (41,504)
FINANCING ACTIVITIES
Net cash advances from (to) affiliates..... 25,972 215,308 (236,367) (241,985) (9,431)
Contributions from affiliates.............. -- -- 244,666 244,666 --
Distributions to affiliates................ (186,700) -- (393,507) (249,049) --
--------- --------- --------- --------- --------
Net cash provided by (used for) financing
activities............................... (160,728) 215,308 (385,208) (246,368) (9,431)
--------- --------- --------- --------- --------
Net increase (decrease) in cash
equivalents.............................. -- 262,956 (168,095) (183,521) 92,228
Cash and cash equivalents at beginning of
the period............................... -- -- 262,956 262,956 94,861
--------- --------- --------- --------- --------
Cash and cash equivalents at end of the
period................................... $ -- $ 262,956 $ 94,861 $ 79,435 $187,089
========= ========= ========= ========= ========
Supplemental cash flow information:
Cash payments to affiliates for income
taxes................................ $ 94,336 $ 138,886 $ 148,322 $ 81,978 $ 90,396
========= ========= ========= ========= ========
Interest payments to affiliates........ $ 1,390 $ 8,913 $ -- $ -- $ --
========= ========= ========= ========= ========
</TABLE>

See notes to the consolidated financial statements.

F-13
<PAGE> 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

1. GENERAL INFORMATION

The SABRE Group Holdings, Inc. (the "Company") is a holding company. Its
sole direct subsidiary is The SABRE Group, Inc., which, pursuant to the
Reorganization (defined below), is the successor to the businesses of The SABRE
Group which were previously operated as subsidiaries or divisions of American or
AMR. The SABRE Group was formed by AMR to capitalize on synergies of combining
AMR's information technology businesses under common management.

On July 2, 1996, AMR reorganized the businesses of The SABRE Group (the
"Reorganization"). As part of the Reorganization, the Company was formed as a
subsidiary of American Airlines, Inc. ("American"), the businesses of The SABRE
Group formerly operated as divisions and subsidiaries of American or AMR were
combined under the Company and the Company and its subsidiaries were dividended
by American to AMR. See Note 11 regarding the transactions related to the
implementation of the Reorganization.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -- The Consolidated Financial Statements have been
prepared using AMR's historical basis in the assets and liabilities of the
Company. The Consolidated Financial Statements reflect the results of
operations, financial condition and cash flows of the Company as a component of
AMR and may not be indicative of actual results of operations and financial
position of the Company under other ownership. Management believes the
consolidated income statements include a reasonable allocation of administrative
costs, which are described in Note 3, incurred by AMR on behalf of the Company.

CONSOLIDATION -- All significant accounts and transactions among the
consolidated entities have been eliminated. For financial reporting purposes,
the equity accounts of the previous divisions of American and subsidiaries of
AMR have been accumulated into a single disclosure caption entitled
Stockholder's Net Investment.

INTERIM FINANCIAL DATA -- The Consolidated Financial Statements for the six
months ended June 30, 1995 and 1996 have been prepared without audit. In the
opinion of management, all adjustments, which include only normal recurring
adjustments, necessary to present fairly the consolidated balance sheet as of
June 30, 1996 and the consolidated statements of income and stockholder's net
investment and cash flows for the six months ended June 30, 1995 and 1996 have
been made. Interim period results are not necessarily indicative of the results
to be achieved for the full year.

CASH AND CASH EQUIVALENTS -- Prior to July 2, 1996, the Company's cash and
cash equivalents were held for the Company by American. Cash equivalents are
immediately charged or credited to the Company upon recording certain
transactions, including airline booking fees and other transactions with
American, and purchases of goods and services. Cash equivalents are carried at
cost plus accrued interest, which approximates fair value. See Note 11 regarding
the Company's cash balances subsequent to June 30, 1996.

F-14
<PAGE> 102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

DEPRECIATION AND AMORTIZATION -- The Company's depreciation and
amortization policies are as follows:

<TABLE>
<S> <C>
Property and Equipment:
Buildings....................................... 30 years
Service contract equipment...................... 3 to 5 years
Computer equipment.............................. 3 to 5 years
Furniture and fixtures.......................... 5 to 15 years
Leasehold improvements.......................... Lesser of lease term or useful life
Purchased software.............................. 3 to 5 years
Other Assets:
Internally developed software................... 3 to 5 years
</TABLE>

Property and equipment are stated at cost less accumulated depreciation and
amortization, which is calculated on the straight-line basis. Service contract
equipment consists of hardware provided primarily to subscribers of SABRE.
Depreciation of property and equipment totaled approximately $169 million, $168
million and $163 million in 1993, 1994 and 1995, respectively. Other assets are
amortized on the straight-line basis over the periods indicated.

DEFERRED CONTRACT COSTS -- Included in other assets are costs incurred in
connection with an agreement between AMS Holdings, Inc., a subsidiary of AMR
("AMS"), and Canadian Airlines International ("Canadian") to provide a variety
of management, technical and administrative services. The Company incurred and
deferred approximately $41 million and $9 million in costs associated with the
installation and implementation of SABRE and other systems for Canadian during
1994 and 1995, respectively, under the terms of this twenty year service
contract. Pursuant to the terms of the contract, the Company is allowed to
recover these costs plus a margin over the first ten years of the contract. As a
result, these costs are included in cost of revenues over such recovery period.
Approximately $0.7 million and $5 million of these deferred costs were charged
to operations in 1994 and 1995, respectively. American has agreed to reimburse
the Company for any unrecovered costs incurred in connection with the
implementation of such systems in the event of the termination of the provision
of services to Canadian.

REVENUE RECOGNITION -- The Company provides electronic travel distribution
services using SABRE, one of the largest privately owned real-time computer
systems in the world. As compensation for electronic travel distribution
services provided, fees are collected from airline, car rental and hotel vendors
("associates") for reservations booked through SABRE. The fee per booking
charged to an associate is dependent upon the level of functionality within
SABRE at which the associate participates. Revenue for travel reservations is
recognized at the time of the booking of the reservation, net of estimated
future cancellations. At December 31, 1994 and 1995 the Company had recorded
booking fee cancellation reserves of approximately $9 million and $15 million,
respectively. Revenue for car rental and hotel bookings is recognized at the
time the reservation is used by the customer. The Company also enters into
service contracts with subscribers (primarily travel agencies) to provide access
to SABRE, hardware, software, hardware maintenance and other support services.
Fees billed on service contracts are recognized as revenue in the month earned.

The Company provides information technology solutions to AMR and companies
in the travel industry and other industries worldwide. Revenue from data
processing services is recognized in the month earned. Revenue from software
license fees for standard software products is recognized when the software is
delivered, provided no significant future vendor obligations exist and
collection is probable. The Company recognizes revenue on long-term software
development and consulting contracts under the percentage of completion method
of accounting. Losses, if any, on long-term contracts are recognized when the
current estimate of total contract costs indicates a loss

F-15
<PAGE> 103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

on a contract is probable. Fixed fees for software maintenance are recognized
ratably over the life of the contract.

INCOME TAXES -- The entities comprising the Company are included in the
consolidated federal income tax return of AMR. Prior to July 1, 1996, under the
terms of AMR's tax sharing policy, the Company paid AMR an amount equal to the
income tax payments that it would have been obligated to pay if it had filed
separate income tax returns. See Note 11 regarding the Company's tax sharing
agreement subsequent to June 30, 1996.

The Company computes its provision for deferred income taxes using the
liability method as if it were a separate taxpayer. Under the liability method,
deferred income tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and laws. The measurement of deferred
tax assets is adjusted by a valuation allowance, if necessary, to recognize the
future tax benefits to the extent, based on available evidence, it is more
likely than not they will be recognized.

RESEARCH AND DEVELOPMENT COSTS -- All costs in the software development
process which are classified as research and development costs, which have not
been material, are expensed as incurred until technological feasibility has been
established. Once technological feasibility has been established, such costs are
capitalized until the product is ready for service.

CONCENTRATION OF CREDIT RISK -- The Company's customers are worldwide,
primarily in the United States, Europe and Canada, and are concentrated in the
travel industry. Approximately 43%, 42% and 36% of revenues in 1993, 1994 and
1995, respectively, are related to American and other subsidiaries of AMR. The
Company generally does not require security or collateral from its customers as
a condition of sale. The Company maintains an allowance for losses based upon
the expected collectibility of all accounts receivable. See Note 8.

USE OF ESTIMATES -- The preparation of these financial statements in
conformity with generally accepted accounting principles requires that certain
amounts be recorded based on estimates and assumptions made by management.
Actual results could differ from these estimates and assumptions.

STOCK AWARDS AND OPTIONS -- The Company accounts for stock awards and
options (including awards of AMR stock and stock options) in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." No compensation expense is recognized for stock option grants if the
exercise price of the stock option grants is at or above the fair market value
of the underlying stock on the date of grant. Compensation expense relating to
other stock awards is recognized over the period during which the employee
renders service to the Company necessary to earn the award.

3. RELATED PARTY TRANSACTIONS

Certain of The SABRE Group entities from which the Company was formed
distributed, in their capacity as divisions of American, $394 million in 1995 to
American. Also during 1995, AMR contributed $245 million to the Company and a
note payable to AMR of $66 million was capitalized in order to adequately
capitalize certain of The SABRE Group entities from which the Company was
formed. Proceeds from the contribution were used to reduce cash advances from
AMR.

In conjunction with the capital infusion discussed above, amounts payable
to AMR of approximately $54 million were converted to intercompany notes payable
in 1995, upon which the Company was charged interest expense at an average rate
of 9.9%. The payable to AMR of approximately

F-16
<PAGE> 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

$303 million at December 31, 1994 represents an amount due to AMR upon demand.
The carrying amount of the notes payable to AMR is equivalent to the fair market
value.

American allocates interest income or expense monthly to the Company based
on the net balance of cash equivalents and the payable to AMR at the average
rate earned by American's portfolio of short-term marketable securities. The
allocation may not be representative of what the Company would earn or pay if
its cash were held externally. Cash payments for interest are equivalent to net
interest expense.

Revenues from American and other subsidiaries of AMR were $546 million,
$590 million and $548 million in 1993, 1994 and 1995, respectively, and $273
million and $261 million for the six months ended June 30, 1995 and 1996,
respectively.

Operating expenses are charged to the Company by American and other
subsidiaries of AMR to cover certain employee benefits, facilities rental,
marketing services, management services, legal fees and certain other
administrative costs based on employee headcount or actual usage of facilities
and services. Amounts charged to the Company for these expenses approximate the
cost of such services provided by third parties. Travel service costs for travel
by the Company's employees for personal and business travel are charged to the
Company based on rates negotiated with American. Personal travel costs are
incurred by the Company only because it is affiliated with American. If the
Company were not affiliated with American, this flight privilege would most
likely not be available to employees. It is estimated that travel costs, had the
Company not been affiliated with American, for 1993, 1994 and 1995 would have
been approximately $26 million, $32 million, and $34 million, respectively, and
for the six months ended June 30, 1995 and June 30, 1996 would have been
approximately $14 million in each period. Expenses charged to the Company by
affiliates are as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Employee benefits........ $ 64,268 $ 64,240 $ 68,743 $34,583 $ 43,492
Facilities rental........ 27,294 30,117 29,385 14,631 16,343
Marketing cooperation.... -- -- -- -- 10,802
Management services...... 10,302 16,431 16,508 7,660 9,698
Other administrative
costs.................. 7,625 10,660 11,377 5,957 4,521
Travel services.......... 9,920 18,056 28,761 11,584 20,653
-------- -------- -------- -------- --------
$119,409 $139,504 $154,774 $74,415 $105,509
======== ======== ======== ======== ========
</TABLE>

See Note 11 regarding contractual agreements entered into with AMR and
American subsequent to December 31, 1995.

Substantially all employees of the Company are eligible to participate in a
tax-qualified pension plan sponsored by American. The defined benefit plan
provides benefits for participating employees based on years of service and
average compensation for a specified period of time before retirement. Costs
associated with employee participation in this plan are determined based upon
employee headcount and are allocated to the Company by American. American's
annual allocation of costs to the Company for such benefits was approximately $9
million, $11 million and $9 million in 1993, 1994 and 1995, respectively. The
Company is jointly and severally liable with AMR and other members of AMR's
consolidated group for applicable funding and termination liabilities of the
plan.

F-17
<PAGE> 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

The historical financial statements of the Company do not reflect the portion of
the net obligation of the defined benefit plan sponsored by American
attributable to employees of the Company.

In addition to providing pension benefits, American provides certain health
care and life insurance benefits to retired employees. The amount of health care
benefits is limited to lifetime maximums as outlined in the plan. Substantially
all employees of the Company may become eligible for these benefits if they
satisfy eligibility requirements during their working lives. Certain employee
groups make contributions toward funding a portion of their retiree health care
benefits during their working lives. American funds benefits as incurred and
began, effective January 1993, to match employee prefunding. American's annual
allocation of costs to the Company for such benefits was approximately $6
million, $9 million and $5 million in 1993, 1994 and 1995, respectively. The
Company is jointly and severally liable with AMR and other members of AMR's
consolidated group for funding postretirement benefit liabilities.

Net other postretirement benefit costs allocated to the Company by AMR for
the year ended December 31, 1995 consisted of the following (in thousands):

<TABLE>
<S> <C>
Service cost -- benefits earned during the period................. $2,620
Interest cost on accumulated other postretirement benefit
obligation...................................................... 2,420
Return on assets.................................................. (160)
Net amortization and deferral..................................... (100)
------
Net other postretirement benefit cost............................. $4,780
======
</TABLE>

The following table summarizes the funded status of the plan, as allocated
to the Company by AMR, reconciled to the accrued other postretirement benefit
liabilities recognized in the Company's balance sheet at December 31, 1995 (in
thousands):

<TABLE>
<S> <C>
Fully eligible active participants............................ $ (7,210)
Other active participants..................................... (34,350)
--------
Accumulated other postretirement benefit obligation........... (41,560)
Plan assets at fair value..................................... 3,650
--------
Accumulated other postretirement benefit obligation in excess
of plan assets.............................................. (37,910)
Unrecognized net loss......................................... 1,680
Unrecognized prior service benefit............................ (1,730)
--------
Accrued other postretirement benefit cost..................... $(37,960)
========
</TABLE>

Plan assets consist primarily of shares of a mutual fund managed by AMR.

Future benefit costs were estimated assuming per capita cost of covered
medical benefits would increase at an eight percent annual rate decreasing
gradually to a four percent annual growth rate in 2000 and thereafter. A one
percent increase in this annual trend rate would have increased the accumulated
other postretirement benefit obligation at December 31, 1995, by approximately
$5 million and 1995 other postretirement benefit cost by approximately $1
million. The weighted average discount rate used in estimating the accumulated
other postretirement benefit obligation was 7.25%.

The Company will provide personal flight privileges to retired employees
through an agreement with American. Because flight privileges do not result in
any significant incremental costs for

F-18
<PAGE> 106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

American, the cost of providing this privilege to the Company's employees is not
included in the liability for postretirement benefits at December 31, 1995. See
Note 11.

See Note 11 regarding the Company's benefits and the agreements for
benefits provided by AMR and American subsequent to the Reorganization.

4. INCOME TAXES

The provision for income taxes is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Federal, current.................................. $ 63,202 $ 52,655 $133,575
Federal, deferred................................. (11,121) 50,856 (11,792)
State and local, current.......................... 16,066 20,348 21,936
State and local, deferred......................... (1,166) (624) (593)
Foreign, current.................................. 1,988 3,664 1,098
-------- -------- --------
$ 68,969 $126,899 $144,224
======== ======== ========
</TABLE>

The provision for income taxes differs from amounts computed at the
statutory federal income tax rate as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Statutory income tax provision...................... $59,126 $113,420 $129,526
State income taxes, net of federal benefit.......... 7,845 12,275 13,581
Foreign tax credit.................................. -- (719) --
Valuation allowance................................. 2,831 1,559 449
Other, net.......................................... (833) 364 668
------- -------- --------
$68,969 $126,899 $144,224
======== ========= =========
</TABLE>

F-19
<PAGE> 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

The components of the Company's deferred tax assets and liabilities as of
December 31, 1994 and 1995 were as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions................. $ 14,092 $ 16,100
Net operating loss carryforwards............................ 10,202 9,979
Equipment obsolescence reserve.............................. 5,380 8,976
Booking fee cancellation reserve............................ 3,763 5,754
Reserve for partnership settlement.......................... 9,517 2,745
Other....................................................... 13,447 15,425
-------- --------
Total deferred tax assets........................... 56,401 58,979
Deferred tax liabilities:
Depreciation and amortization............................... (29,879) (25,254)
Software development costs.................................. (18,525) (21,017)
Other....................................................... (8,863) (740)
-------- --------
Total deferred tax liabilities...................... (57,267) (47,011)
Valuation allowance........................................... (10,923) (11,372)
-------- --------
Net deferred tax asset (liability)............................ $(11,789) $ 596
======== ========
Current deferred income tax asset............................. $ 24,705 $ 31,539
Noncurrent deferred income tax liability...................... (36,494) (30,943)
-------- --------
Net deferred tax asset (liability)............................ $(11,789) $ 596
======== ========
</TABLE>

At December 31, 1995, the Company has net operating loss carryforwards of
approximately $95 million for state income tax purposes, primarily arising from
the settlement of litigation regarding certain partnership agreements, as more
fully described in Note 5. The litigation and resulting net operating loss
carryforwards occurred in an entity that was formerly a subsidiary of AMR. If
not utilized, these carryforwards will expire beginning in 1996.

For financial reporting purposes, a valuation allowance of approximately
$11 million has been recognized which principally relates to the state income
tax net operating loss carryforwards and certain other deferred tax assets which
are subject to limitations as to utilization due to the legal structure of the
entity in which the losses originated.

5. PARTNERSHIP SETTLEMENT

Other expense in 1993 includes a provision of approximately $71 million for
losses associated with a reservation system project and resolution of related
litigation. Settlement agreements entered into included $42 million in travel
credits.

In December 1994, the Company paid American approximately $26 million which
represented the present value of the remaining travel credits. In return,
American agreed to assume the liability of providing the partners all travel
services as set forth by the settlement agreements.

6. COMMITMENTS AND CONTINGENCIES

Certain service contracts with significant subscribers contain booking fee
productivity clauses and other provisions which allow subscribers to receive
various amounts of additional equipment and other services from the Company at
no cost to the subscribers. The Company establishes

F-20
<PAGE> 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

liabilities for these commitments as the subscribers satisfy the applicable
contractual terms. The service contracts are priced so that the additional
airline and other booking fees generated over the life of the contract will
exceed the cost of the equipment and other services. Accrued subscriber
incentives at December 31, 1994 and 1995 were approximately $15 million and $17
million, respectively.

The Company leases certain facilities and equipment under various operating
leases with third parties. At December 31, 1995, future minimum lease payments
required under these operating leases with terms in excess of one year are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------
<S> <C>
1996.......................................................... $21,131,000
1997.......................................................... 2,527,000
1998.......................................................... 563,000
1999.......................................................... 209,000
</TABLE>

Rental expense, excluding facilities rented from affiliates, was
approximately $22 million, $27 million and $25 million for the years ended
December 31, 1993, 1994 and 1995, respectively.

The Company is involved in certain disputes arising in the ordinary course
of business. Although the ultimate resolution of these matters cannot be
reasonably estimated at this time, management does not believe that they will
have a material adverse effect on the financial condition or results of
operations of the Company.

7. STOCK AWARDS

Under AMR's 1988 Long-Term Incentive Plan (the "AMR LTIP"), officers and
key employees of the Company may be granted stock options, stock appreciation
rights, restricted stock, deferred stock, stock purchase rights and/or other
stock based awards in common stock, par value $1 per share, of AMR ("AMR Common
Stock").

Options to purchase shares of AMR Common Stock ("AMR Options") have been
granted to officers and key employees of the Company. Options granted are
exercisable at the market value upon grant, generally becoming exercisable over
one to five years following the date of grant, and expiring ten years from the
date of grant. At December 31, 1995, there were approximately 309,000 AMR
Options outstanding held by officers and key employees of the Company, of which
approximately 209,000 were exercisable. The AMR Options have exercise prices
ranging from $40.9375 to $78.0625 per share of AMR Common Stock, with a total
exercise value of approximately $19 million.

Certain officers and key employees of the Company have been awarded
approximately 217,000 shares of deferred AMR Common Stock ("AMR Career Equity
Shares") at no cost, to be issued upon the individual's retirement from AMR.

In conjunction with AMR's 1988 Long-Term Incentive Plan, certain officers
and key employees of the Company have also been awarded, at no cost,
approximately 140,000 shares of deferred $1 par value AMR Common Stock ("AMR
Performance Shares"). The AMR Performance Shares vest over a three-year
performance period based on performance metrics of AMR and the Company, as
defined in the plan. Awards of AMR Performance Shares will terminate on December
31, 1997.

See Note 11 regarding stock awards and options subsequent to the Offering.

F-21
<PAGE> 109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

8. GEOGRAPHICAL ANALYSIS

The Company is a global company, deriving revenues from worldwide
operations. Data relating to the Company's operations by geographic area is set
forth below (in thousands).

<TABLE>
<CAPTION>
UNITED
STATES FOREIGN TOTAL
---------- -------- ----------
<S> <C> <C> <C>
1993
Revenues................................... $1,080,190 $177,958 $1,258,148
Operating income........................... 232,870 20,805 253,675
Identifiable assets........................ 498,137 43,055 541,192
1994
Revenues................................... $1,196,291 $210,388 $1,406,679
Operating income........................... 313,636 36,517 350,153
Identifiable assets........................ 533,163 52,923 586,086
1995
Revenues................................... $1,279,471 $250,145 $1,529,616
Operating income........................... 345,262 35,162 380,424
Identifiable assets........................ 534,626 61,080 595,706
</TABLE>

Operating income from operations consists of revenues less operating
expenses, including an allocation for corporate expenses. Operating income
excludes loss on partnership settlement, interest income (expense) net, and
other income (expense) net. Cash equivalents and deferred tax assets are
excluded from identifiable assets.

9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1994 and 1995 (in thousands).

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Revenues.......................... $353,567 $349,943 $361,382 $341,787
Operating income.................. 97,941 93,316 108,011 50,885
Net earnings...................... 58,422 54,018 59,179 25,542
1995
Revenues.......................... $384,466 $383,065 $393,148 $368,937
Operating income.................. 118,091 101,359 108,192 52,782
Net earnings...................... 66,927 60,130 66,855 31,939
</TABLE>

The travel industry is seasonal in nature. Bookings, and thus booking fees
charged for the use of SABRE, decrease significantly each year in the fourth
quarter, primarily in December, due to customers booking earlier in the year for
travel during the holiday season and a decline in business travel during the
holiday season.

10. PROPOSED PUBLIC OFFERING OF COMMON STOCK (UNAUDITED)

On August 7, 1996, the Company's Board of Directors authorized management
of the Company to file a Registration Statement with the Securities and Exchange
Commission for an initial public offering of the Company's Class A Common Stock.
On October 3, 1996 the Company's Board of

F-22
<PAGE> 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Directors authorized management to sell up to 23,230,000 shares of the Company's
Class A Common Stock through an initial public offering. In conjunction
therewith, the Company's Common Stock held by AMR was converted to Class B
Common Stock. The Company contemplates using approximately 90% of the proceeds
from such offering to retire a portion of the Debenture discussed in Note 11.

11. THE REORGANIZATION AND AFFILIATE AGREEMENTS (UNAUDITED)

The following transactions were consummated in connection with the
Reorganization:

CAPITALIZATION -- The Company was incorporated as a Delaware Corporation
and a direct wholly-owned subsidiary of American, which subsequently dividended
capital stock of the Company to AMR. The Company has 1,000 authorized shares of
Common Stock with a par value of $.01 per share, of which 1,000 shares of Common
Stock were issued to American and dividended to AMR. In conjunction with the
Offerings, the shares of Common Stock held by AMR will be converted to shares of
Class B Common Stock. Common Stock sold under the Offerings will be Class A
Common Stock. The Company also has 20,000,000 authorized shares of preferred
stock with a par value of $.01 per share. No preferred shares have been issued.

LONG-TERM DEBT -- On July 2, 1996, in connection with the Reorganization,
American transferred to the Company certain divisions and subsidiaries of
American through which AMR previously conducted its information technology
businesses, and in return the Company issued to American a floating rate
subordinated debenture due September 30, 2004 with a principal amount of $850
million (the "Debenture") and common stock representing 100% of the equity
ownership interest in the Company. American subsequently exchanged the Debenture
for a portion of a note payable by American to AMR. Because the assets and
liabilities of the divisions and subsidiaries of American transferred to the
Company are included in the historical financial statements of the Company, this
transaction resulted in a reduction of Stockholders' Equity.

The interest rate on the Debenture will be 7.2% through September 30, 1996
and thereafter will be based on the sum of the six-month London Interbank
Offered Rate (LIBOR rate) plus a margin determined based upon the Company's
senior unsecured long-term debt rating or, if such debt rating is not available,
upon the Company's ratio of net debt to total capital. The interest rate will be
determined at the beginning of each six-month period beginning October 1 and
April 1 and accrued interest will be payable each September 30 and March 31. The
Company may prepay the principal balance in whole or in part at any time prior
to December 31, 1996 and thereafter at any interest payment date.

CASH AND CASH EQUIVALENTS -- Effective with the Reorganization, the Company
began maintaining a separate cash management system and separate cash and
investment accounts from American. Transactions with American no longer result
in immediate charges and credits to the Company's cash equivalents, but are
settled through intercompany billings with payment due in 30 days. American
manages the Company's cash management system under the Management Services
Agreement discussed below. The Company invests excess cash in short-term
marketable securities, consisting primarily of certificates of deposit, bankers'
acceptances, commercial paper, corporate notes and government notes.

NOTE PAYABLE TO AMR -- On July 1, 1996, a note payable to AMR at June 30,
1996 of approximately $54 million was capitalized.

PROPERTY AND EQUIPMENT -- On July 1, 1996, American contributed buildings,
furniture and fixtures in addition to those discussed above to the Company with
a cost value of approximately $298 million and a net book value of $193 million.

F-23
<PAGE> 111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

TECHNOLOGY SERVICES AGREEMENT -- The Company is a party to the Technology
Services Agreement with American, dated July 1, 1996, to provide American with
certain information technology services. The base term of the Technology
Services Agreement expires June 30, 2006. The terms of the services to be
provided by the Company to American, however, vary. The Company will provide:
(i) Data Center services, data network services, application development and
existing application maintenance and enhancement services until June 30, 2006;
(ii) services relating to existing client server operations until June 30, 2001;
and (iii) device support, distributed systems services, radio services and
reservations and flight information network services until June 30, 1999.

In addition, AMS and Canadian have entered into an agreement pursuant to
which AMR and American supply to Canadian various services, including technology
services. Under the Canadian Subcontract, the Company, as subcontractor through
American, will be a principal provider of technology services to Canadian.

With limited exceptions, under the Technology Services Agreement, the
Company will continue to be the exclusive provider of all information technology
services provided by the Company to American immediately prior to the execution
of the Technology Services Agreement. Any new information technology services,
including most new application development services, requested by American can
be outsourced pursuant to competitive bidding by American or performed by
American on its own behalf. With limited exceptions, the Company has the right
to bid on all new services for which American solicits bids. Additionally,
American may continue to perform development and enhancement work that it is
currently performing on its own behalf.

The parties have agreed to apply the financial terms of the Technology
Services Agreement as of January 1, 1996. Absent the agreement, revenues for the
six months ended June 30, 1996 would have been $16 million greater than stated
in the Consolidated Statement of Income.

MANAGEMENT SERVICES AGREEMENT -- The Company and American are parties to a
Management Services Agreement, dated July 1, 1996 (the "Management Services
Agreement"), pursuant to which American performs various management services for
the Company, including treasury, risk management and tax, and similar
administrative services, that American has historically provided to the Company.
The Management Services Agreement will expire on June 30, 1999 unless terminated
earlier if American and the Company are no longer under common control or if the
Technology

F-24
<PAGE> 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Services Agreement is terminated early. Amounts charged to the Company under
this agreement approximate American's cost of providing the services plus a
margin. The parties have agreed to apply the financial terms of the Management
Services Agreement as of January 1, 1996. The application of these terms did not
materially impact expenses for the six months ended June 30, 1996.

MARKETING COOPERATION AGREEMENT -- The Company and American are parties to
the Marketing Cooperation Agreement, dated as of July 1, 1996, pursuant to which
American will provide marketing support for 10 years for the Company's
Professional SABRE products targeted to travel agencies and for five years for
BTS, Travelocity and easySABRE. The Marketing Cooperation Agreement may be
terminated by either party prior to June 30, 2006 only if the other party fails
to perform its obligations thereunder.

Under the Marketing Cooperation Agreement, American's marketing efforts
will include ongoing promotional programs to assist in the sale of those SABRE
products, development with the Company of an annual sales plan, sponsorship of
sales/promotional events and the targeting of potential customers. For calendar
year 1996, the Company will pay American for its marketing support for
Professional SABRE a fee, the amount of which may increase or decrease,
depending on total SABRE booking volumes generated by certain Professional SABRE
subscribers in the U.S., the Caribbean and elsewhere and on SABRE's market share
of travel agency bookings in those areas. That fee will range between $20
million and $30 million for 1996 and between $10 million and $30 million
thereafter. As payment for American's support of the Company's promotion of BTS,
Travelocity and easySABRE, the Company will pay American a marketing fee based
upon booking volume. Additionally, the Company has guaranteed to American
certain cost savings in the fifth year of the Marketing Cooperation Agreement.
If American does not achieve those savings, the Company will pay American any
shortfall, up to a maximum of $50 million.

The parties have agreed to apply the financial terms of the Marketing
Cooperation Agreement as of January 1, 1996. The application of these terms
resulted in an increase in expenses of approximately $11 million for the six
months ended June 30, 1996. Absent the cancellation of the marketing support
payments from American for passenger support, revenues would have been
approximately $10 million greater for the six months ended June 30, 1996.

NON-COMPETITION AGREEMENT -- The Company, AMR and American have entered
into a Non-Competition Agreement, dated July 1, 1996 (the "Non-Competition
Agreement"), pursuant to which AMR and American, on behalf of themselves and
certain of their subsidiaries, have agreed to limit their competition with the
Company's businesses of (i) electronic travel distribution, (ii) development,
maintenance, marketing and licensing of software for travel agency, travel,
transportation and logistics management, (iii) computer system integration, (iv)
development, maintenance and operation of a data processing center providing
data processing services to third parties and (v) travel industry,
transportation and logistics consulting services relating primarily to computer
technology and automation. Under the Non-Competition Agreement, American and AMR
may develop, operate, market and provide in compliance with all applicable laws
an American Airlines branded electronic travel distribution system that gives a
display preference to American's flights. The Non-Competition Agreement
prohibits American or AMR, however, from providing such system to any travel
agency that generated 25% or more of its bookings through SABRE during the
preceding six calendar months. Additionally, in the event any airline competing
with American engages in an activity in connection with such airline's
transportation business, and if the restrictions imposed by the Non-Competition
Agreement would prevent American from engaging in the same activity and place
American at a disadvantage, then American may engage in such activity, subject
to American and the Company consulting about means to mitigate the effect on the

F-25
<PAGE> 113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Company of American's engaging in such activity. American and AMR may also
license to third parties any software that is owned by AMR, American or other
AMR affiliates in response to a request or offer from such third parties. The
Non-Competition Agreement expires on December 31, 2001. American may terminate
the Non-Competition Agreement, however, as to the activities described in
clauses (ii) through (v) of this paragraph upon 90 days notice to the Company if
the Technology Services Agreement is terminated by American as a result of an
egregious breach thereof by the Company.

TRAVEL AGREEMENTS -- The Company and American are parties to a Travel
Privileges Agreement, dated July 1, 1996, pursuant to which the Company is
entitled to purchase personal travel for its employees and retirees at reduced
fares. The Travel Privileges Agreement will expire on June 30, 2008. To pay for
the provision of flight privileges to certain of its future retired employees,
the Company will make a lump sum payment to American beginning in 1997 for each
employee retiring in that year. The payment per retiree will be based on the
number of years of service with the Company and AMR over the prior ten years of
service. Service years accrue for the Company beginning on January 1, 1993. AMR
will retain the obligation for the portion of benefits attributable to service
years prior to January 1, 1993. The accumulated benefit obligation for
postretirement travel privileges at July 1, 1996 of approximately $8 million,
net of deferred taxes of approximately $3 million, will be recorded as a
reduction to Stockholders' Equity. The remaining cost of providing this
privilege will be accrued over the estimated service lives of the employees
eligible for the privilege.

The Company and American are also parties to a Corporate Travel Agreement,
dated July 1, 1996 and ending June 30, 1998, pursuant to which the Company
receives discounts for certain flights purchased on American. In exchange, the
Company must fly a certain percentage of its travel on American as compared to
all other air carriers combined. If the Company fails to meet the applicable
percentage on an average basis over any calendar quarter, American may terminate
the agreement upon 60 days' notice.

The parties have agreed to apply the financial terms of the Travel
Privileges Agreement and the Corporate Travel Agreement as of January 1, 1996.
The application of the terms of these agreements resulted in an increase in
expenses of approximately $8 million for the six months ended June 30, 1996.

CREDIT AGREEMENT -- On July 1, 1996, the Company and American entered into
a Credit Agreement pursuant to which the Company is required to borrow from
American, and American is required to lend to the Company, amounts required by
the Company to fund its daily cash requirements. In addition, American may, but
is not required to, borrow from the Company to fund its daily cash requirements.
The maximum amount that the Company may borrow at any time from American under
the Credit Agreement is $300 million. The maximum amount that American may
borrow at any time from the Company under the Credit Agreement is $100 million.
Loans under the Credit Agreement are not intended as long-term financing. If the
Company's credit rating is better than "B" on the Standard & Poor's Ratings
Services scale (or an equivalent thereof) or American has excess cash to lend to
the Company, the interest rate to be charged to the Company will be the sum of
(a) the higher of (i) American's average rate of return on short-term
investments for the month in which borrowings occurred or (ii) the actual rate
of interest paid by American to borrow funds to make a loan to the Company under
the Credit Agreement, plus (b) an additional spread based upon the Company's
credit risk. If the Company's credit rating is "B" or below on the Standard &
Poor's Ratings Service Scale (or an equivalent thereof) and American does not
have excess cash to lend to the Company, the interest rate to be charged to the
Company will be the lower of (a) the sum of (i) the borrowing cost incurred by
American to draw on its revolving credit

F-26
<PAGE> 114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

facility to make the advance plus (ii) an additional spread based on the
Company's credit risk or (b) the sum of (i) the cost at which the Company could
borrow Funds from an independent party plus (ii) one half of the margin American
pays to borrow under its revolving credit facility. The Company believes that
the interest rate it will be charged by American could, at times, be slightly
above the rate at which the Company could borrow externally; however, no standby
fees for the line of credit will be required to be paid by either party. The
interest rate to be charged to American will be the Company's average portfolio
rate for the months in which borrowing occurred plus an additional spread based
upon American's credit risk. At the end of each quarter, American must pay all
amounts owing under the Credit Agreement to the Company.

COMMITMENTS -- On July 1, 1996, the Company entered into an operating lease
agreement with AMR for certain facilities and AMR assigned its rights and
obligations under certain leases to the Company. Also on July 1, 1996 the
Company entered into an operating lease agreement with a third party for the
lease of other facilities. At July 1, 1996, the future minimum lease payments
required under these operating lease agreements along with various other
operating lease agreements with terms in excess of one year for facilities and
equipment were as follows:

<TABLE>
<CAPTION>
AFFILIATES THIRD PARTIES
---------- -------------
<S> <C> <C>
Six months ending
December 31, 1996............................. $ 976,000 $ 17,086,000
Year ending December 31,
1997..................................... 1,540,000 17,493,000
1998..................................... 1,370,000 14,829,000
1999..................................... 1,416,000 13,064,000
2000..................................... 1,173,000 11,489,000
2001..................................... 647,000 12,045,000
Thereafter............................... 7,368,000 63,065,000
</TABLE>

PENSION BENEFITS -- The Company and AMR have entered into an agreement
which permits the employees of the Company to continue to participate in the
benefit plans and programs sponsored by AMR until the Company establishes
separate plans and programs for employees. The current intent of the Company is
to spin off the portion of the AMR sponsored defined benefit pension plan
applicable to the Company's employees from the AMR pension plan to a new pension
plan to be sponsored by the Company on January 1, 1997. At the date of the
spin-off, the unrecognized net obligation attributable to the Company's
employees participating in the plan, estimated to be a liability of
approximately $50 million at December 31, 1995, will be charged to Stockholders'
Equity, net of deferred income taxes of approximately $19 million.

INCOME TAXES -- The Company and AMR have entered into a tax sharing
agreement (the "Tax Sharing Agreement") which provides for the allocation of tax
liabilities during the tax periods the Company is part of consolidated federal,
state and local income tax returns filed by AMR. In addition, the Tax Sharing
Agreement sets out certain benefits and obligations of the Company and AMR for
tax matters relating to periods before the Reorganization and for certain
benefits and obligations that would affect the Company or AMR in the future if
the Company ceased to be a member of AMR's consolidated group for federal income
tax purposes. The Tax Sharing Agreement generally requires the Company to pay to
AMR the amount of federal, state and local income taxes that the Company would
have paid had it ceased to be a member of the AMR consolidated tax group for
periods after the Reorganization. The Company is jointly and severally liable
for the federal income tax of AMR and the other companies included in the
consolidated return for all periods in which the Company is included in the AMR
consolidated group. AMR has agreed, however, to

F-27
<PAGE> 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

indemnify the Company for any liability for taxes reported or required to be
reported on a consolidated return.

The Tax Sharing Agreement replaces AMR's policy discussed in Note 2.

STOCK AWARDS AND OPTIONS -- Effective with the Offerings, the Company will
establish the 1996 Long-Term Incentive Plan (the "LTIP"), whereby officers and
other key employees of the Company may be granted stock options, stock
appreciation rights, restricted stock, deferred stock, stock purchase rights
and/or other stock-based awards. Initially 13,000,000 shares of Class A Common
Stock are authorized to be issued under the LTIP. The LTIP will terminate no
later than ten years from the date of its establishment.

Options granted under the LTIP will be exercisable at a price which is not
less than the market value of Class A Common Stock upon grant, except as
otherwise determined by a committee appointed by the Board of Directors, and no
such options will be exercisable more than 10 years after the date of grant.

Stock appreciation rights may be granted in conjunction with all or part of
any stock option granted under the LTIP. All appreciation rights will terminate
upon termination or exercise of the related option and will be exercisable only
during the time that the related option is exercisable. If an appreciation right
is exercised, the related stock option will be deemed to have been exercised.

For other stock-based awards, a committee established by the Board of
Directors will determine the eligible persons to whom awards will be made, the
times at which awards will be made, the number of shares to be awarded, the
price, if any, to be paid by the recipient and all other terms and conditions of
the award under the terms of the LTIP at the time of grant.

In connection with the Offerings, the AMR Options (Note 7) may be exchanged
for options to purchase shares of Class A Common Stock of the Company. The
exercise prices of the options to purchase Class A Common Stock will be computed
as the initial offering price of Class A Common Stock multiplied by the ratio of
the exercise prices of the AMR Options to the previous day's closing price of
AMR Common Stock at the date of the Offerings. The number of options will be
increased to maintain the option holders' aggregate spread value between the
exercise price of the option and the previous day's closing price of AMR common
stock. These options will continue to vest in equal annual installments over
five years following the original date of grant of the AMR options and expire 10
years from the original date of grant. Based on the closing price of AMR Common
Stock on July 31, 1996 and assuming an initial offering price of $21.50 per
share for the shares of Class A Common Stock, a maximum of approximately 930,000
options for the purchase of Class A Common Stock would be issued with a weighted
average price of approximately $17 per share in exchange for the AMR Options.

In connection with the Offerings, certain AMR Performance Shares (Note 7)
may be converted into deferred Class A Common Stock performance shares ("Company
Performance Shares") based on the initial offering price of shares of Class A
Common Stock and the previous day's closing price of the AMR Common Stock on the
date of the Offerings. The Company Performance Shares will continue to vest over
a three-year period ending December 31, 1997 based on the Company's average
change in business value and free cash flow generated. Based on the closing
price of AMR common stock on July 31, 1996 and assuming an initial offering
price of $21.50 per share for

F-28
<PAGE> 116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Class A Common Stock, a maximum of approximately 341,000 Company Performance
Shares would be issued pursuant to the conversion of the outstanding AMR
Performance Shares.

In connection with the Offerings, the AMR Career Equity Shares (Note 7) may
be exchanged for a combination of restricted shares of Class A Common Stock and
options to purchase shares of Class A Common Stock. The restricted shares will
vest over a three-year period. The stock options, which will have an exercise
price equal to the initial offering price of the Class A Common Stock, will vest
over the five years following the date of grant and will expire ten years from
the date of grant. The actual number of restricted shares and stock options to
be issued is dependent on, among other things, elections by the individuals as
to the mix of restricted shares and stock options to be received, the previous
day's closing price of AMR Common Stock at the date of the Offerings and the
initial offering price of Class A Common Stock. Based on the closing price of
AMR Common Stock on July 31, 1996 and assuming an initial offering price of
$21.50 for Class A Common Stock, the number of shares and options issued
pursuant to the exchange of the AMR Career Equity Shares will range from a
minimum of 182,000 shares to a maximum of 363,000 shares and a minimum of
873,000 options to a maximum of 1,456,000 options.

It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt a Director's Stock Incentive Plan which provides
for an annual award of options to purchase 3,000 shares of the Company's Class A
Common Stock to each non-employee director. The plan will provide for a one time
award of options to purchase 10,000 shares of the Company's Class A Common Stock
to a new Non-Employee Director upon his or her initial election to the Board of
Directors. The options, which will have an exercise price equal to the Class A
Common Stock on the date of grant, will vest pro rata over a five-year period.
Each option will expire on the earlier of (i) the date the Non-Employee Director
ceases to be a director of the Company, if for any reason other than due to
death, disability or retirement or (ii) three years from the date the
Non-Employee Director ceases to be a director of the Company due to death,
disability or retirement.

F-29
<PAGE> 117
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 10
The Company................................... 18
Use of Proceeds............................... 18
Dividend Policy............................... 19
Dilution...................................... 19
Capitalization................................ 20
Selected Historical Consolidated Financial
Information................................. 21
Selected Pro Forma Condensed Consolidated
Financial Information....................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 25
Business...................................... 34
Management.................................... 48
Security Ownership of Management and Principal
Stockholder................................. 62
Relationship with AMR and Certain
Transactions................................ 63
Description of Capital Stock.................. 68
Shares Eligible for Future Sale............... 78
Underwriting.................................. 81
Certain United States Tax Considerations for
Non-United States Holders................... 84
Validity of Class A Common Stock.............. 85
Experts....................................... 85
Additional Information........................ 85
Trademarks.................................... 86
Index to Financial Statements................. F-1
</TABLE>

THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

20,200,000 SHARES

THE SABRE GROUP
HOLDINGS, INC.

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

---------------------

LOGO

---------------------

GOLDMAN, SACHS & CO.

MERRILL LYNCH & CO.

J.P. MORGAN & CO.

SALOMON BROTHERS INC

REPRESENTATIVES OF THE UNDERWRITERS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 118

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
SEC registration fee............................................................. $189,656
NASD filing fee.................................................................. 30,500
NYSE listing fee................................................................. 175,600
Blue Sky fees and expenses....................................................... 26,000
Attorneys' fees and expenses..................................................... 375,000
Accountants' fees and expenses................................................... 250,000
Transfer Agent's and Registrar's fees and expenses............................... 10,000
Printing and engraving expenses.................................................. 270,000
Miscellaneous.................................................................... 23,244
--------
Total.................................................................. 1,350,000
</TABLE>

The amounts set forth above are estimates except for the SEC registration
fee, the NASD filing fee and the NYSE listing fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify directors and
officers and certain other individuals against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by any such person in connection with any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right of
the corporation) in which such person is involved because such person is a
director or officer of the corporation, if such person acted in good faith and
in a manner that such person reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. No indemnification shall be made to an officer or director or other
qualified individual if such person shall have been adjudged to be liable to the
corporation unless such person acted in good faith and in a manner that such
person reasonably believed to be in or not opposed to the best interest of the
corporation and only to the extent the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought, determines that
despite the adjudication of liability such person is fairly and reasonably
entitled to such indemnification. If such person is successful on the merits or
otherwise in defense of any action, then Section 145 provides that such person
shall be indemnified against expenses including attorneys' fees actually and
reasonably incurred by that person in connection therewith. Section 102(b)(7) of
the DGCL provides that the liability of a director may not be limited or
eliminated for the breach of such director's duty of loyalty to the corporation
or its stockholders, for such director's intentional acts or omissions not in
good faith, for such director's concurrence in or vote for an unlawful payment
of a dividend or unlawful stock purchase or redemption or for any improper
personal benefit derived by the director from any transaction.

The Company's Bylaws provide that the Company will indemnify any person who
was or is a party (or is threatened to be made a party) to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
or has agreed to serve at the request of the Company as a director or officer of
the Company, or is or was serving or has agreed to serve at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity. The Company's Bylaws further

II-1
<PAGE> 119

provide that the Company may indemnify any person who was or is a party (or is
threatened to be made a party) to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was or has agreed to become an employee
or agent of the Company, or is or was serving or has agreed to serve at the
request of the Company as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity.

The indemnification referred to in the preceding paragraph will be from and
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the indemnitee or on his or
her behalf in connection with such action, suit or proceeding and any appeal
therefrom. However, such indemnification will only be provided if the indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action, suit or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Notwithstanding the preceding two sentences, in the
case of an action or suit by or in the right of the Company to procure a
judgment in its favor (a) the indemnification referred to in this paragraph will
be limited to expenses (including attorneys' fees) actually and reasonably
incurred by such person in the defense or settlement of such action or suit, and
(b) no indemnification will be made in respect of any claim, issue or matter as
to which such person will have been adjudged to be liable to the Company unless,
and only to the extent that, the Delaware Court of Chancery (or the court in
which such action or suit was brought) determines upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery (or such other court) deems proper. To the
extent that a director, officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above or in defense of any claim, issue or matter
therein, he or she will be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
Expenses incurred by a director or officer in defending a civil or criminal
action, suit or proceeding will be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it will
ultimately be determined that he or she is not entitled to be indemnified by the
Company. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.

The indemnification described in the preceding two paragraphs will not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, will continue as to a person who has
ceased to be a director, officer, employee or agent and will inure to the
benefit of the heirs, executors and administrators of such a person.

The Company will purchase and maintain insurance on behalf of any person
who is or was or has agreed to serve at the request of the Company as a director
or officer of the Company, or is or was serving at the request of the Company as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against, and incurred by, him
or her or on his or her behalf in any such capacity, or arising out of his or
her status as such, whether or not the Company would have the power to indemnify
him or her against such liability under the provisions of the Bylaws; provided,
however, such insurance must be available on acceptable terms, which
determination shall be made by a vote of a majority of the Board of Directors.

II-2
<PAGE> 120

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In connection with its formation on June 25, 1996, and the July 1996
reorganization of The SABRE Group businesses, the Company issued 1,000 shares of
Common Stock and an $850 million Debenture to American in exchange for certain
operating divisions and the capital stock of subsidiaries of American. American
immediately transferred the Debenture to AMR in exchange for a portion of a
debenture of American held by AMR and distributed its shares of the Company's
Common Stock to AMR as a tax-free dividend. Those shares were subsequently
reclassified into 110,563,953 shares of Class B Common Stock. Based on the
relationship between the Company and AMR Corporation and other factors, the
Company believes that these issuances and distributions were exempt from
registration under the Securities Act of 1933, as amended.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Schedule II, Valuation and Qualifying
Account Page S-1

All other financial statement schedules are omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of U.S. Underwriting Agreement.(1)
1.2 -- Form of International Underwriting Agreement.(1)
3.1 -- Form of Restated Certificate of Incorporation of Registrant.(1)
3.2 -- Form of Restated Bylaws of Registrant.(1)
4.1 -- Form of Registration Rights Agreement between Registrant and AMR
Corporation.(1)
4.2 -- Specimen Certificate representing Class A Common Stock.(1)
5.1 -- Opinion of Debevoise & Plimpton as to the legality of the Class A Common
Stock.(2)
10.1 -- Form of Registration Rights Agreement between Registrant and AMR Corporation
(See Exhibit 4.1).(1)
10.2 -- Intercompany Agreement, dated as of July 2, 1996, among Registrant, The SABRE
Group, Inc. TSGL Holding, Inc., TSGL-SCS, Inc., TSGL, Inc., SABRE
International, Inc., SABRE Services Columbia, LTDA and American Airlines,
Inc.(1)
10.3 -- Management Services Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)(3)
10.4 -- Credit Agreement, dated as of July 1, 1996, between Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.(1)
10.5 -- $850,000,000 Subordinated Debenture, dated July 2, 1996, executed by Registrant
and payable to AMR Corporation.(1)
10.6 -- Information Technology Services Agreement, dated July 1, 1996, between The
SABRE Group, Inc. and American Airlines, Inc.(1)(3)
10.7 -- Non-competition Agreement, dated July 1, 1996, among Registrant, The SABRE
Group, Inc., AMR Corporation and American Airlines, Inc.(1)
10.8 -- Marketing Cooperation Agreement, dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc.(1)(3)
10.9 -- Tax Sharing Agreement, dated July 1, 1996, between The SABRE Group, Inc. and
American Airlines, Inc.(1)
10.10 -- Travel Privileges Agreement, dated as of July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc.(1)(3)
10.11 -- Corporate Travel Agreement, dated July 25, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)(3)
10.12 -- Software Marketing Agreement, dated September 10, 1996, among Registrant, The
SABRE Group, Inc. and AMR Corporation.(1)(3)
</TABLE>

II-3
<PAGE> 121

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
10.13 -- Canadian Technical Services Subcontract, dated as of July 1, 1996, between The
SABRE Group Inc. and American Airlines, Inc.(1)(3)
10.14 -- Form of Participating Carrier Agreement between The SABRE Group, Inc. and
American Airlines, Inc.(1)
10.15 -- Investment Agreement, dated September 11, 1996, between The SABRE Group, Inc.
and AMR Investment Services, Inc.(1)(3)
10.16 -- Assignment and Amendment Agreement, dated as of July 1, 1996, among The SABRE
Group, Inc., American Airlines, Inc. and the Dallas-Fort Worth International
Airport Board.(1)
10.17 -- American Airlines Special Facilities Lease Agreement, dated October 1, 1972,
between American Airlines, Inc. and the Dallas-Fort Worth Regional Airport
Board, as amended by Supplemental Agreements Nos. 1-5.(1)
10.18 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.19 -- Sublease, dated June 1, 1958, between American Airlines, Inc. and the Trustees
of the Tulsa Municipal Airport Trust, as amended by Amendments Nos. 1-12.(1)
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between American
Airlines, Inc. and the Tulsa Airports Improvement Trust.(1)
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.23 -- Office Lease Agreement, dated January 19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners -- Westlake/Southlake Partnership.(1)
10.24 -- American Airlines, Inc. Supplemental Executive Retirement Plan dated November
16, 1994, incorporated by reference to Exhibit 10(mmm) to AMR Corporation's
report on Form 10-K for the year ended December 31, 1994, file number 1-8400.
10.25 -- Form of Long-Term Incentive Plan.(1)
10.26 -- Form of Directors' Stock Incentive Plan.(1)
10.27 -- Form of Executive Termination Benefits Agreement.(1)
10.28 -- Employment Agreement, dated August 30, 1996, between The SABRE Group, Inc. and
Michael J. Durham.(1)
10.29 -- Employment Agreement, dated September 7, 1995, between American Airlines, Inc.
and Thomas M. Cook.(1)
10.30 -- Employment Agreement, dated May 7, 1996, between American Airlines, Inc. and
Terrell B. Jones.(1)
10.31 -- Letter Agreement, dated July 15, 1996, between Registrant and Thomas M.
Cook.(1)
10.32 -- Letter Agreement, dated July 15, 1996, between Registrant and Terrell B.
Jones.(1)
21.1 -- Subsidiaries of Registrant.(1)
23.1 -- Consent of Debevoise & Plimpton (included in the opinion set forth in Exhibit
5.1).(2)
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.(1)
27.1 -- Financial Data Schedule.(1)
</TABLE>

- ---------------

(1) Previously filed.
(2) To be filed by amendment.
(3) Item for which confidential treatment is requested.

II-4
<PAGE> 122

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the U.S. Underwriting Agreement and the
International Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

II-5
<PAGE> 123

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Amendment No. 3 to the Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Fort Worth, Texas on October 4, 1996.

The SABRE Group Holdings, Inc.

By: /s/ MICHAEL J. DURHAM
-----------------------------------
Name: Michael J. Durham
Title: President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 has been signed by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE (CAPACITY) DATE
- --------------------------------------------- ---------------------------- ----------------
<C> <S> <C>
* Chairman of the Board of October 4, 1996
- --------------------------------------------- Directors
Robert L. Crandall

/s/ MICHAEL J. DURHAM President and Chief October 4, 1996
- --------------------------------------------- Executive Officer and
Michael J. Durham Director (Principal
Executive Officer and
Director)

* Senior Vice President, October 4, 1996
- --------------------------------------------- Chief Financial Officer
T. Patrick Kelly and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)

* Director October 4, 1996
- ---------------------------------------------
Gerard J. Arpey

* Director October 4, 1996
- ---------------------------------------------
Anne H. McNamara

*By: /s/ MICHAEL J. DURHAM
- ---------------------------------------------
Michael J. Durham
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 124

THE SABRE GROUP HOLDINGS, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------- ------------ -------- -------- ---------- -----------
ADDITIONS
-------------------
CHARGED
TO CHARGED
BALANCE AT COSTS TO
BEGINNING OF AND OTHER BALANCE AT
CLASSIFICATION YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
- ------------------------------------- ------------ -------- -------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Allowance for uncollectible
accounts........................ $3,042 $5,909 $ -- $ (4,129) $ 4,822
Reserve for booking fee
cancellations................... 9,479 4,609 1,228 (502) 14,814
YEAR ENDED DECEMBER 31, 1994
Allowance for uncollectible
accounts........................ 4,819 4,306 -- (6,083) 3,042
Reserve for booking fee
cancellations................... 6,213 3,535 300 (569) 9,479
YEAR ENDED DECEMBER 31, 1993
Allowance for uncollectible
accounts........................ 6,097 2,732 -- (4,010) 4,819
Reserve for booking fee
cancellations................... 5,875 1,044 -- (706) 6,213
</TABLE>

S-1
<PAGE> 125

EXHIBIT LIST

<PAGE> 126

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
10.19 -- Sublease, dated June 1, 1958, between American Airlines, Inc. and the Trustees
of the Tulsa Municipal Airport Trust, as amended by Amendments Nos. 1-12.(1)
10.20 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.21 -- Amended and Restated Sublease Agreement, dated May, 1996, between American
Airlines, Inc. and the Tulsa Airports Improvement Trust.(1)
10.22 -- Assignment Agreement, dated as of July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc.(1)
10.23 -- Office Lease Agreement, dated January 19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners -- Westlake/Southlake Partnership.(1)
10.24 -- American Airlines, Inc. Supplemental Executive Retirement Plan dated November
16, 1994, incorporated by reference to Exhibit 10(mmm) to AMR Corporation's
report on Form 10-K for the year ended December 31, 1994, file number 1-8400.
10.25 -- Form of Long-Term Incentive Plan.(1)
10.26 -- Form of Directors' Stock Incentive Plan.(1)
10.27 -- Form of Executive Termination Benefits Agreement.(1)
10.28 -- Employment Agreement, dated August 30, 1996, between The SABRE Group, Inc. and
Michael J. Durham.(1)
10.29 -- Employment Agreement, dated September 7, 1995, between American Airlines, Inc.
and Thomas M. Cook.(1)
10.30 -- Employment Agreement, dated May 7, 1996, between American Airlines, Inc. and
Terrell B. Jones.(1)
10.31 -- Letter Agreement, dated July 15, 1996, between Registrant and Thomas M.
Cook.(1)
10.32 -- Letter Agreement, dated July 15, 1996, between Registrant and Terrell B.
Jones.(1)
21.1 -- Subsidiaries of Registrant.(1)
23.1 -- Consent of Debevoise & Plimpton (included in the opinion set forth in Exhibit
5.1).(2)
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.(1)
27.1 -- Financial Data Schedule.(1)
</TABLE>

- ---------------

(1) Previously filed.
(2) To be filed by amendment.
(3) Item for which confidential treatment is requested.

<PAGE> 1

EXHIBIT 23.2

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 15, 1996, (except as to Note 1, for which
the date is July 22, 1996) in the Amendment No. 3 to the Registration Statement
on Form S-1 (No. 333-09747) and related Prospectus of The SABRE Group Holdings,
Inc. for the registration of shares of its common stock.

Our audits also included the financial statement schedule of The SABRE
Group Holdings, Inc. listed in Item 16(b). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

/s/ ERNST & YOUNG LLP

Dallas, Texas

October 3, 1996