GALILEO INTERNATIONAL INC, 424B4, 1999-06-01

GALILEO INTERNATIONAL INC
424B4, 1999-06-01
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No.: 333-77773
PROSPECTUS

31,937,100 Shares
[GALILEO LOGO]
COMMON STOCK
------------------------

THE SELLING STOCKHOLDERS ARE OFFERING 31,937,100 SHARES OF COMMON STOCK OF
GALILEO INTERNATIONAL, INC. WE WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE
SALE OF SHARES OF COMMON STOCK IN THIS OFFERING.
------------------------

OUR COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE AND ON THE
CHICAGO STOCK EXCHANGE UNDER THE SYMBOL "GLC." ON MAY 27, 1999, THE LAST
REPORTED SALE PRICE OF OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS $45
PER SHARE.
------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
------------------------

PRICE $45 A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS STOCKHOLDERS
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Per share.................... $45.00 $1.2105 $43.7895
Total........................ $1,437,169,500 $38,659,860 $1,398,509,640
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

Certain of the selling stockholders have granted the U.S. underwriters the
right to purchase up to an additional 4,790,500 shares to cover over-allotments.
We have agreed to purchase from these selling stockholders the shares included
in the over-allotment option that are not purchased by the U.S. underwriters.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on June 3, 1999.

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

MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
ABN AMRO ROTHSCHILD
a division of ABN AMRO Incorporated
LEHMAN BROTHERS
SALOMON SMITH BARNEY

May 27, 1999
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............ 4
Prospectus Summary.................... 5
Risk Factors.......................... 9
Use of Proceeds....................... 11
Price Range of Common Stock and
Dividend Policy..................... 11
Share Repurchase Program.............. 11
Capitalization........................ 12
Selected Consolidated Financial and
Operating Data...................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 26
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................ 34
Relationship with Airline Stockholders
and Certain Transactions............ 36
Principal and Selling Stockholders.... 39
Description of Capital Stock.......... 40
Material United States Federal Tax
Consequences to Non-U.S. Holders of
Common Stock........................ 43
Shares Eligible for Future Sale....... 46
Underwriters.......................... 47
Legal Matters......................... 51
Experts............................... 51
Where You Can Find More Information... 51
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

In this prospectus, "Galileo," the "company," "we," "us" and "our" refer to
Galileo International, Inc. You should rely only on the information contained or
incorporated by reference in this prospectus. We and the selling stockholders
have not authorized anyone to provide you with information different from that
contained in this prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it. The selling stockholders
are offering to sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. You should assume that the
information appearing in this prospectus, as well as information previously
filed by us with the SEC and incorporated by reference, is accurate as of the
date on the front cover page of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that date.

Our principal executive office is located at 9700 West Higgins Road, Suite
400, Rosemont, Illinois 60018 and our telephone number is (847) 518-4000. Our
World Wide Web address is www.galileo.com. The information on our website is not
incorporated by reference into this prospectus.

3
<PAGE> 3

FORWARD-LOOKING STATEMENTS

This prospectus and the information incorporated by reference include
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

We have based these forward-looking statements on our current expectations
and projections about future events. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These forward-looking statements are
subject to risks and uncertainties that could cause actual events or results to
differ materially from the events or results expressed or implied by the
forward-looking statements.

Risks and uncertainties associated with our forward-looking statements
include, but are not limited to:

- the loss and inability to replace bookings generated by one or more of
our five largest travel agency customers,

- our sensitivity to general economic conditions and events that affect
airline travel and the airlines that participate in our Apollo(R) and
Galileo(R) systems,

- circumstances relating to our investment in technology, including our
ability to timely develop and achieve market acceptance of new products,
or our failure or the failure of our customers and other third parties to
achieve Year 2000 compliance in a timely and cost-effective manner,

- the results of our international operations and expansion into developing
and new CRS markets, governmental approvals, trade and tariff barriers
and political risks,

- new or different legal or regulatory requirements governing the CRS
industry and

- natural disasters or other calamities that may cause significant damage
to our Data Centre facility.

For further discussion of factors that could cause actual results to
differ, please see the discussion under "Risk Factors" contained in this
prospectus and in other information contained in our publicly available SEC
filings.

4
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary with the more detailed information
about us and our financial statements, including the notes to those financial
statements, included in this prospectus and in the documents incorporated by
reference in this prospectus.

GALILEO INTERNATIONAL, INC.

We are one of the world's leading providers of electronic global
distribution services for the travel industry utilizing a computerized
reservation system, or CRS. We provide our subscriber customers with information
and booking capability for:

- more than 500 airlines,

- 41 car rental companies and

- more than 200 hotel companies representing approximately 41,000
properties throughout the world.

In 1998, we completed approximately 350 million bookings, representing an
estimated $60 billion in travel services. Our CRS is operated through our Data
Centre, which is one of the world's largest commercial data processing
complexes. Our Data Centre has a system uptime performance record of better than
99.9%.

Our subscriber customers include travel agencies and corporations and
consumers who use our self-booking products. Our travel agency subscriber
customers operate more than 160,000 computer terminals at approximately 40,000
locations in 106 countries.

We believe that, based on revenues, we are the most internationally
diversified provider of electronic global distribution services for the travel
industry. More than 56% of our 1998 global distribution revenues were derived
from bookings made by our subscriber customers outside the United States. We
believe that we have significant market share in many of the most important and
competitive markets for travel services.

COMPETITIVE STRENGTHS

We intend to reinforce our position as a leading provider of electronic
global distribution services and to continue to capitalize on our competitive
strengths, which include:

- a leading market share,

- a well-balanced and global presence,

- established relationships with a diverse group of travel vendors,

- a technologically advanced information system,

- a comprehensive offering of innovative products and

- our team of highly skilled and incentivized personnel.

STRATEGY

From this base of competitive strengths, we are pursuing a strategy that
includes the following initiatives:

- expanding our global distribution by increasing our subscriber customer
base,

- strengthening customer loyalty through valued customer service,

- leveraging our technology to meet changing customer needs,

- capitalizing on opportunities created by increasing Internet use,

- investing in businesses that complement our technology or core product
offerings, thereby increasing the value offered to our customers and

- continuing to improve productivity and reduce costs.
5
<PAGE> 5

THE OFFERING

Common stock offered by the selling stockholders:

<TABLE>
<S> <C>
United States offering................... 25,549,680 shares
International offering................... 6,387,420 shares
------------
Total............................ 31,937,100 shares
-----------
-----------
Over-allotment option...................... Certain of the selling stockholders have
granted the U.S. underwriters the right to
purchase up to an additional 4,790,500
shares to cover over-allotments. We have
agreed to purchase from these selling
stockholders all of the shares subject to
the over-allotment option that are not
purchased by the U.S. underwriters. We
would pay the price per share, net of
underwriting discounts and commissions,
shown on the cover page of this prospectus
for any shares we purchase. These purchases
would occur no later than the second
business day following the expiration of
the over-allotment option.
Common stock outstanding after this offering:
If the over-allotment option is exercised
in full............................... 104,806,681 shares
If the over-allotment option is not
exercised and we purchase all
4,790,500 shares...................... 100,016,181 shares
Use of proceeds............................ We will not receive any of the net proceeds
from this offering.
New York Stock Exchange and Chicago Stock
Exchange trading symbol.................. GLC
</TABLE>

The common stock outstanding after this offering is based on 104,806,681
shares outstanding on May 3, 1999. This number does not include 13,500,000
shares reserved for issuance under our employee and director benefit plans. As
of March 31, 1999, we had granted options to purchase a total of 2,758,817
shares, including currently exercisable options to purchase 181,643 shares.
6
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table presents summary consolidated financial and operating
data for our company. The data presented in this table are derived from
"Selected Consolidated Financial Data" and the consolidated financial statements
and the notes to the consolidated financial statements that are included
elsewhere in this prospectus. You should read those sections for a further
explanation of the financial data summarized here. You should also read the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section which describes a number of factors that affect our
financial results. The quarterly data include all adjustments, consisting of
normal recurring adjustments, which are, in the opinion of our management,
necessary for a fair presentation of the results for the quarters presented. The
results for any interim period are not necessarily indicative of the results for
a full fiscal year.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1999 1998 1998(1) 1997(2) 1996
---- ---- ------- ------- ----
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $ 404.0 $ 377.0 $1,480.8 $1,256.1 $1,088.3
Operating income....................... 120.8 106.3 331.6 211.5 175.4
Income before income taxes............. 129.8 103.7 325.5 205.6 167.1
Income taxes........................... 51.8 41.4 129.9 44.0 1.9
Net income............................. 78.0 62.3 195.6 161.6 165.2
Pro forma net income(3)................ -- -- -- 123.4 100.3
Basic earnings per common share........ 0.75 0.59 1.87 -- --
Diluted earnings per common share...... 0.74 0.59 1.86 -- --
Pro forma basic and diluted earnings
per common share(3).................. -- -- -- 1.30 1.14
Dividends per common share............. 0.075 0.06 0.285 0.06 --
BALANCE SHEET DATA:
Current assets......................... $ 329.6 $ 315.6 $ 243.5 $ 224.3 $ 240.8
Total assets........................... 1,355.9 1,336.6 1,291.1 1,268.5 599.9
Current liabilities.................... 278.1 241.8 231.8 201.4 199.6
Long-term debt......................... 34.4 220.0 69.5 250.0 70.0
Other long-term obligations............ 130.0 136.0 147.1 133.4 74.9
Partners' capital...................... -- -- -- -- 255.4
Stockholders' equity................... 913.4 738.8 842.6 683.7 --
OTHER DATA:
Operating income as a percentage of
revenue.............................. 29.9% 28.2% 22.4% 16.8% 16.1%
Reservations booked using our CRS
systems(4)........................... 96.9 92.1 345.7 336.1 316.1
Net cash provided by operating
activities........................... $ 92.1 $ 94.6 $ 379.1 $ 324.7 $ 214.1
Capital expenditures(5)................ $ 12.9 $ 19.1 $ 98.7 $ 65.9 $ 40.0
</TABLE>

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

(1) For the year ended December 31, 1998, operating expenses include $26.4
million ($15.9 million after tax) of special charges related to the
realignment of our operations in the United Kingdom and $13.4 million ($8.1
million after tax) in gains related to settlements of contractual disputes
from prior years.

(footnotes continue on following page)
7
<PAGE> 7

(2) Effective July 30, 1997, Galileo International Partnership merged into a
wholly owned limited liability company subsidiary of Galileo International,
Inc., we effected an initial public offering of our common stock and we
incurred debt related to the purchase of three national distribution
companies, or NDCs.

For the year ended December 31, 1997, the results of the acquired NDCs have
been consolidated with our results from the date of each acquisition. 1997
operating expenses include $20.1 million ($12.1 million after tax) of
special charges related to the integration of the acquired NDCs and a $15.3
million nonrecurring charge to reflect the establishment of initial deferred
tax assets and liabilities. No provision for U.S. federal and state income
taxes was recorded prior to July 31, 1997 as such liability was the
responsibility of the partners of Galileo International Partnership.

(3) As a result of the merger of Galileo International Partnership into our
subsidiary and our initial public offering of common stock, pro forma net
income and pro forma basic and diluted earnings per share data are
calculated as though: (i) partners' capital was converted into 88,000,000
shares of common stock for all periods presented and the 16,799,700 shares
issued by us to the public were outstanding from July 30, 1997, and (ii) we
operated in a corporate form for all periods presented and accordingly were
subject to federal and state income taxes.

(4) Transactions in respect of bookings made in the United States, Canada,
Mexico and Japan have been converted to a net segment basis. Bookings made
in the rest of the world are reported on a net segment basis.

(5) Capital expenditures include purchases of property and equipment and
purchases of computer software. Capitalization of internally developed
computer software was $2.8 million and $3.6 million for the three months
ended March 31, 1999 and 1998, respectively. In addition, capitalization of
internally developed computer software was $14.2 million, $21.2 million and
$21.6 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
8
<PAGE> 8

RISK FACTORS

You should carefully consider the following risks as well as the other
information contained or incorporated by reference in this prospectus before
making a decision to invest in our common stock.

A DECLINE IN AIR TRAVEL MAY HURT OUR BUSINESS

Because most of our revenues come from the travel industry, events
affecting the travel industry can significantly affect our earnings. In
particular, because much of our revenue consists of fees generated by airline
bookings, our earnings are especially sensitive to events that affect airline
travel and the airlines that participate in our systems. Political instability,
armed hostilities, terrorism, recession, inflation, strikes, lockouts or other
labor disturbances may, if they cause a significant decline in the volume of air
travel or an overall downturn in the business and operations of our travel
vendor customers, adversely affect our business.

COMPETITION TO ATTRACT AND RETAIN TRAVEL AGENCY SUBSCRIBERS COULD HAVE A
NEGATIVE EFFECT ON OUR BUSINESS

Competition to attract and retain travel agency subscribers is intense. In
highly competitive markets, we and our competitors offer incentive payments to
travel agency subscribers if certain productivity or booking volume growth
targets are achieved. Although continued expansion of the use of incentive
payments could adversely affect our profitability, our failure to continue to
make these payments could result in the loss of some travel agency subscribers.
If we were to lose a significant portion of our current base of travel agencies
to a competitor or if we were forced to increase the amounts of incentive
payments significantly, our business, financial condition or results of
operations could be materially adversely affected. In addition, our five largest
travel agency subscriber customers, measured by 1998 bookings, accounted for
approximately 21.9% of our bookings. The loss of bookings generated by one or
more of these travel agencies, without replacement, could negatively impact our
business.

FAILURE TO MAINTAIN TECHNOLOGICAL COMPETITIVENESS AND TO MAKE TECHNOLOGICAL
INNOVATIONS MAY HAVE A NEGATIVE EFFECT ON OUR BUSINESS

It is important that we make timely and cost-effective enhancements and
additions to our technology and introduce new products that meet the business
demands of our travel vendor and subscriber customers. The success of new
products depends on several factors, including:

- identifying the needs of travel vendors and subscribers,

- developing and introducing new products in a timely manner,

- managing the cost of new product development,

- differentiating new products from those of our competitors and

- achieving market acceptance of new products.

Our business will suffer if we fail to identify and develop new products in
a timely manner, if products developed by others render our offerings obsolete
or noncompetitive or if we make substantial investments in technologies that do
not achieve broad acceptance in the marketplace.

OUR TECHNOLOGY COSTS ARE SUBSTANTIAL AND CANNOT BE QUICKLY REDUCED IN RESPONSE
TO A REDUCTION IN REVENUE

We have made a significant investment in our technology infrastructure. As
a result, our operating expenses are largely fixed and our technology costs
would remain relatively constant even if our booking

9
<PAGE> 9

volumes were to decline. A prolonged reduction in booking volumes could
adversely affect our financial condition.

DAMAGE TO KEY DATA FACILITIES COULD ADVERSELY AFFECT OUR BUSINESS

Our data and transaction processing services are dependent on our Data
Centre, located near Denver, Colorado. Although we believe we have taken
sufficient precautions to protect this facility, a natural or manmade disaster
or other calamity that causes significant damage to the facility or our systems
would adversely affect our business. We also rely on several communications
companies in the United States and internationally to provide network
connections between our Data Centre and our travel vendor and subscriber
customers. If any of the communications companies are unable to provide the
network connections and our contingency plans fail, our business would suffer.

THE YEAR 2000 ISSUE COULD DISRUPT OUR BUSINESS

The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. Any of our travel
vendors' or suppliers' computer programs or systems that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than 2000.
Beginning in September 1995, we implemented a program designed to mitigate the
impact of the Year 2000 issue on our operations.

Our products are dependent upon the electronic exchange of information with
the computer systems of our travel vendor and subscriber customers. We are also
dependent on critical service providers, such as telecommunications firms, for
worldwide product distribution. While many of these third parties have reported
that they are not finding significant problems in their own systems, there can
be no guarantee that the systems of these third parties will be made Year 2000
compliant in a timely manner. Travel vendor and subscriber customers, service
providers and NDCs continue to participate with us in Year 2000 testing.

If we, or third parties with whom we have significant business
relationships, fail to achieve Year 2000 readiness with respect to critical
systems, there could be a material adverse effect on our business, financial
condition or results of operations.

AN INCREASE IN DIRECT ACCESS TO TRAVEL VENDORS COULD HURT OUR BUSINESS

Travel vendors have increasingly been providing direct access to their
reservation systems through their web sites, which potentially bypass CRSs. An
increase in direct access to travel vendors may divert bookings away from our
CRS, which could have a material adverse effect on our results of operations.

OUR EXPANSION INTO DEVELOPING AND NEW CRS MARKETS COULD ENCOUNTER UNFORESEEN
DIFFICULTIES

We intend to expand our global distribution by penetrating and developing
new CRS markets. These markets generally exhibit lower levels of technology and
less developed communications infrastructures than mature CRS markets. We may
face different cost structures in these markets from those that exist elsewhere.
In particular, communications costs in developing and new CRS markets may be
higher than in mature markets. Furthermore, in attempting to penetrate these
markets, we may encounter other challenges inherent in international expansion,
including hiring and training qualified employees, consumer acceptance of our
technology, governmental approvals, trade and tariff barriers and political
risk. If we are unable to respond to these risks, we may not be able to
effectively pursue our strategy of penetrating these markets or may not be able
to derive sufficient benefit from expansion into these markets.

10
<PAGE> 10

USE OF PROCEEDS

The selling stockholders are selling all of the shares of common stock in
this offering and we will not receive any proceeds from the sale of the shares
offered by this prospectus.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock began trading on the New York Stock Exchange under the
symbol "GLC" in July 1997 and on the Chicago Stock Exchange in March 1999. The
following table sets forth, for the quarters indicated, the range of high and
low closing sale prices for our common stock on the New York Stock Exchange and
the dividends declared.

<TABLE>
<CAPTION>
COMMON CASH
STOCK PRICE DIVIDENDS
------------------ DECLARED PER
HIGH LOW SHARE
------- ------- ------------
<S> <C> <C> <C>
Year ended December 31, 1997
Third quarter........................................... $27 15/16 $25 1/16 $ --
Fourth quarter.......................................... 29 1/4 23 3/8 0.060
Year ended December 31, 1998
First quarter........................................... 39 1/2 26 3/16 0.060
Second quarter.......................................... 45 1/16 35 1/2 0.075
Third quarter........................................... 45 7/16 31 3/4 0.075
Fourth quarter.......................................... 43 1/2 28 3/4 0.075
Year ended December 31, 1999
First quarter........................................... 51 9/16 41 5/8 0.075
Second quarter (through May 27, 1999)................... 59 45 0.090
</TABLE>

A recent reported last sale price for our common stock as reported on the
New York Stock Exchange is set forth on the cover page of this prospectus.

Although we expect to reinvest a substantial portion of our earnings in our
business, we currently intend to continue to pay regular quarterly cash
dividends. However, the declaration and payment of dividends, and the amount of
any dividends, are subject to the discretion of our board of directors. The
declaration, payment and amount of dividends will depend upon our results of
operations, financial condition, cash requirements, future prospects and other
factors that our board of directors considers relevant. We cannot assure you
that we will continue to declare and pay dividends in the future.

SHARE REPURCHASE PROGRAM

We commenced a share repurchase program in the fall of 1998. We have
repurchased a total of 169,100 shares under this program. We recently announced
an increase in the authorized size of our share repurchase program from $100.0
million to $500.0 million. We may make purchases in the open market or through
privately negotiated transactions, including from our airline stockholders, in
each case subject to applicable laws and regulations. Our decisions regarding
when and if to make these repurchases, and the amount of these repurchases, will
be made at our discretion and subject to a number of considerations, including
market conditions.

Any shares we may purchase from the selling stockholders, if the U.S.
underwriters' over-allotment option is not exercised in full, will be purchased
under our share repurchase program. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

11
<PAGE> 11

CAPITALIZATION

The following table sets forth our capitalization at March 31, 1999. You
should read this table in conjunction with the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section and the
consolidated financial statements and other financial information appearing
elsewhere in this prospectus.

If the U.S. underwriters do not exercise their over-allotment option and we
purchase all 4,790,500 shares from the selling stockholders, we expect to use
primarily long-term debt, net of any available cash, to pay the purchase price
for these shares. If we purchase these shares, common stock outstanding would
decrease by 4,790,500 shares and common stock held in treasury would increase by
the same number of shares. Stockholders' equity would decrease by the purchase
price paid for the shares and, assuming we were to use long-term debt to fund
the full amount of the purchase price, long-term debt would increase by the same
amount.

<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Long-term debt, less current portion........................ 34.4
Stockholders' Equity:
Special voting preferred stock: $.01 par value; 7 shares
authorized; 7 shares issued and outstanding............ *
Preferred stock: $.01 par value; 25,000,000 shares
authorized; no shares issued........................... --
Common stock: $.01 par value; 250,000,000 shares
authorized; 104,963,525 shares issued; 104,794,425
shares outstanding..................................... 1.1
Additional paid-in capital................................ 669.3
Retained earnings......................................... 254.7
Unamortized restricted stock grants....................... (3.4)
Accumulated other comprehensive income.................... (1.5)
Common stock held in treasury, at cost; 169,100 shares.... (6.8)
------
Total stockholders' equity............................. 913.4
------
Total capitalization........................................ $947.8
======
</TABLE>

- ---------------
* Less than $100,000.

12
<PAGE> 12

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table presents consolidated financial and operating data for
our company. The data presented in this table as of and for each of the years
ended December 31, 1996, 1995 and 1994 are derived from the audited consolidated
financial statements of Galileo International Partnership. The data presented in
this table as of and for each of the years ended December 31, 1998 and 1997 are
derived from the audited consolidated financial statements of Galileo
International, Inc. The data as of and for the quarters ended March 31, 1999 and
1998 are derived from the unaudited condensed consolidated financial statements
of Galileo International, Inc. The quarterly data include all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of our
management, necessary for a fair presentation of the results for the quarters
presented. The results for any interim period are not necessarily indicative of
the results for a full fiscal year. You should read this table in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section and the consolidated financial statements and
other financial information appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------
1999 1998 1998(1) 1997(2) 1996 1995 1994
--------- --------- ---------- --------- --------- --------- ---------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................. $ 404.0 $ 377.0 $ 1,480.8 $ 1,256.1 $ 1,088.3 $ 966.4 $ 813.8
Operating income.......... 120.8 106.3 331.6 211.5 175.4 140.3 69.3
Income before income
taxes................... 129.8 103.7 325.5 205.6 167.1 123.7 53.2
Income taxes.............. 51.8 41.4 129.9 44.0 1.9 2.6 4.4
Net income................ 78.0 62.3 195.6 161.6 165.2 121.1 48.8
Pro forma net income(3)... -- -- -- 123.4 100.3 74.2 31.9
Basic earnings per common
share................... 0.75 0.59 1.87 -- -- -- --
Diluted earnings per
common share............ 0.74 0.59 1.86 -- -- -- --
Pro forma basic and
diluted earnings per
common share(3)......... -- -- -- 1.30 1.14 0.84 0.36
Dividends per common
share................... 0.075 0.06 0.285 0.06 -- -- --

BALANCE SHEET DATA:
Current assets............ $ 329.6 $ 315.6 $ 243.5 $ 224.3 $ 240.8 $ 187.3 $ 133.8
Total assets.............. 1,355.9 1,336.6 1,291.1 1,268.5 599.9 569.0 555.5
Current liabilities....... 278.1 241.8 231.8 201.4 199.6 227.6 191.5
Long-term debt............ 34.4 220.0 69.5 250.0 70.0 134.2 239.8
Other long-term
obligations............. 130.0 136.0 147.1 133.4 74.9 77.6 84.7
Partners' capital......... -- -- -- -- 255.4 129.6 39.5
Stockholders' equity...... 913.4 738.8 842.6 683.7 -- -- --

OTHER DATA:
Operating income as a
percentage of revenue... 29.9% 28.2% 22.4% 16.8% 16.1% 14.5% 8.5%
Reservations booked using
our CRS systems(4)...... 96.9 92.1 345.7 336.1 316.1 285.4 255.0
Net cash provided by
operating activities.... $ 92.1 $ 94.6 $ 379.1 $ 324.7 $ 214.1 $ 172.6 $ 135.8
Capital expenditures(5)... $ 12.9 $ 19.1 $ 98.7 $ 65.9 $ 40.0 $ 64.5 $ 33.2
</TABLE>

(footnotes on following page)

13
<PAGE> 13

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

(5) Capital expenditures include purchases of property and equipment and
purchases of computer software. Capitalization of internally developed
computer software was $2.8 million and $3.6 million for the three months
ended March 31, 1999 and 1998, respectively. In addition, capitalization of
internally developed computer software was $14.2 million, $21.2 million,
$21.6 million, $24.5 million and $25.7 million for the years ended December
31, 1998, 1997, 1996, 1995 and 1994, respectively.

14
<PAGE> 14

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

You should read the following discussion and analysis of our financial
condition and the results of our operations together with our financial
statements and the notes to those financial statements included in this
prospectus.

OVERVIEW

FORMATION OF THE COMPANY. Effective July 30, 1997, Galileo International
Partnership merged into a wholly owned limited liability company subsidiary of
Galileo International, Inc. and we effected an initial public offering of our
common stock. References in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" to "Galileo," the "company,"
"we," "us" and "our" mean, prior to the time of the merger, Galileo
International Partnership and its consolidated subsidiaries and, after the
merger, Galileo International, Inc. and its consolidated subsidiaries. As a
result of this merger:

- we became subject to U.S. federal and state income taxes that were
previously borne by the partners of Galileo International Partnership and

- we recorded a $15.3 million nonrecurring charge to income tax expense to
reflect the establishment of deferred tax assets and liabilities arising
at the time of the merger.

Upon the merger, the airline stockholders' partnership interests were
exchanged for our common stock in the same proportion as their respective
partnership interests in Galileo International Partnership.

REVENUES. We generate most of our revenues from the provision of
electronic global distribution services. Booking fees are the primary source of
this revenue and are charged to travel vendors for reservations made through our
systems. The fees we receive for bookings depend on several factors, including:

- the type of reservation booked (primarily air, car rental or hotel),

- the location of the booking and

- the level of travel vendor participation in our systems.

The booking fee structure for airlines varies based upon the location of
the subscriber generating the booking. For bookings made in North America and
Japan, we charge airlines a fee per transaction and, thereby, earn a separate
fee for each booking and for each cancellation. In the rest of the world, we
charge airlines a booking fee per "net segment." In that case, we earn a fee for
net bookings, equal to gross bookings less cancellations. Globally, car, hotel
and leisure travel vendors are generally charged a fee per net booking. We
charge premiums for higher levels of functionality selected by the travel
vendors. All of our booking fees are denominated in U.S. dollars, which limits
our market risk exposure to fluctuations in other currencies against the U.S.
dollar.

In addition to booking fees and related premiums paid by travel vendors,
subscribers generally pay fees for hardware, software and certain services.
These fees are often discounted or waived for travel agency subscribers,
depending upon the number of bookings generated by the travel agency. In highly
competitive markets, we often make incentive payments to travel agency
subscribers that achieve defined productivity or booking volume growth
objectives.

We also provide information services to airlines, including certain of our
airline stockholders. We currently provide fares quotation services, internal
reservation services, other internal management services and software
development services to these airlines.

15
<PAGE> 15

During the first quarter of 1999, we generated 95.4% of our revenues from
electronic global distribution services and 4.6% of our revenues from
information services. During 1998, we generated approximately 90.7% of our
revenues from electronic global distribution services and approximately 9.3% of
our revenues from information services. The following table summarizes
electronic global distribution services revenues by geographic location as a
percentage of total revenues for the periods indicated. The table also
summarizes total booking volumes for the periods indicated. The 1997 pro forma
revenues assume the 1997 NDC acquisitions occurred on January 1, 1997. The
location of the travel agent making the booking determines the geographic region
credited with the related revenues and bookings.

<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
---------------- --------------------
1997
1999 1998 1998 (PRO FORMA)
------ ------ ----- -----------
<S> <C> <C> <C> <C>
PERCENTAGE OF REVENUES
U.S. Market............................................ 42.3% 44.3% 43.8% 46.2%
All Other Markets...................................... 57.7 55.7 56.2 53.8
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
WORLDWIDE BOOKINGS (IN MILLIONS)
U.S. Market:
Air.................................................. 36.0 36.1 131.4 135.8
Car/Hotel/Leisure.................................... 5.7 5.5 22.6 21.4
----- ----- ----- -----
41.7 41.6 154.0 157.2
All Other Markets:
Air.................................................. 53.7 49.1 186.0 173.8
Car/Hotel/Leisure.................................... 1.5 1.4 5.7 5.1
----- ----- ----- -----
55.2 50.5 191.7 178.9
----- ----- ----- -----
Total Worldwide Bookings............................... 96.9 92.1 345.7 336.1
===== ===== ===== =====
</TABLE>

EXPENSES. Our expenses consist primarily of:

- local sales, marketing and customer service costs,

- commissions paid to NDCs,

- costs associated with the operation of our Data Centre and

- wages and benefits payable to our employees.

Substantially all of our expenses are denominated in U.S. dollars.

Costs of operations shown on our statements of income consist primarily of
the costs of operating our Data Centre. These costs include wages and benefits
of Data Centre and other technical services personnel, and hardware, software
and communications costs. Commissions, selling and administrative expenses shown
on our statements of income consist primarily of commissions payable to NDCs and
other costs of our selling and administrative functions.

FACTORS AFFECTING EARNINGS. Events that affect the travel industry can
significantly affect our earnings. This impact is typically caused by economic
and other conditions that decrease the number of bookings made through our
systems due to decreased demand for airline seats and other travel services.
Other events, such as increased airline competition from low cost carriers,
excess capacity or deterioration of an airline's financial condition, can often
cause fare promotions within the airline industry. This may result in an
increased number of transactions and bookings, thereby stimulating our
revenue-earning capability.

16
<PAGE> 16

RECENT ACQUISITIONS AND SPECIAL CHARGES. During 1998, we acquired an
airline information systems company, S. D. Shepherd Systems, Inc. and two NDCs:
Galileo Nordiska AB and Galileo Canada Distributions Systems, Inc. We also
recorded a nonrecurring charge to operating expenses of $26.4 million, or $15.9
million after tax, related to a strategic realignment of our operations in the
United Kingdom. This special charge consisted of $15.0 million in
severance-related costs and $11.4 million in costs related to disposition of the
current United Kingdom facilities.

During 1997, we acquired three NDCs: Apollo Travel Services Partnership,
Traviswiss AG and Galileo Nederland BV. In connection with these NDC
acquisitions, we recorded a nonrecurring charge to operating expenses of $20.1
million, or $12.1 million after tax, related to our integration of the acquired
NDCs. This special charge consisted of $12.3 million in severance-related costs
and $7.8 million of other integration costs, principally related to duplicate
facilities.

FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998

REVENUES. Revenues increased $27.0 million, or 7.2%, to $404.0 million for
the quarter ended March 31, 1999 from $377.0 million for the quarter ended March
31, 1998. Our electronic global distribution services revenues grew $43.0
million, or 12.6%, primarily due to an increase in airline booking revenues of
11.9% over the quarter ended March 31, 1998. The increase in airline booking
revenues was primarily due to a 5.3% increase in airline booking volumes and
booking fee price increases that went into effect in March 1999 and March 1998.
Total international booking volumes increased 9.3% for the quarter, while U.S.
booking volumes increased 0.2% over the same period last year. This modest
growth in U.S. bookings was due to a new fee structure we introduced in North
America in March 1998 under which we no longer charge airline vendors for
passive bookings that are not ticketed. A passive booking is a booking in our
CRS for which there is no communication between our system and the travel
vendor's system and, therefore, no corresponding booking is created in the
travel vendor's system. An example of a passive booking is a booking made solely
to create an itinerary document. We report only those bookings for which we
receive a fee. Excluding passive airline bookings, growth in active bookings for
the quarter was 2.0% in the United States. The increase in international booking
volumes for the quarter was driven by strong growth in Europe, Africa, the
Middle East, and Southeast Asia. Also contributing to the growth in electronic
global distribution revenues were increases in subscriber fees and revenues from
the sale of information products and services.

The growth in electronic global distribution services revenues was
partially offset by a $16.0 million decline in information services revenues due
principally to the impact of providing fewer network services to one of our
airline vendors. This revenue loss was largely offset by a reduction in
operating expenses related to the provision of these services.

COST OF OPERATIONS. Cost of operations expenses decreased $3.0 million, or
2.2%, to $132.1 million for the quarter ended March 31, 1999 from $135.1 million
for the quarter ended March 31, 1998. The decline in cost of operations expenses
was due primarily to a $13.8 million decrease in voice communication charges,
due to the discontinuation of certain airline vendor network services. Partially
offsetting this decrease was $6.7 million in additional cost of operations
expenses incurred during the first quarter of 1999 due to the Galileo Canada and
Shepherd Systems acquisitions in 1998. These additional operating expenses,
principally wages, maintenance and installation expenses, communication costs
and depreciation expense, were largely offset by lower commissions as we no
longer pay commissions to Galileo Canada but instead incur the direct costs of
distributing our products in this market.

17
<PAGE> 17

Additionally, we record the amortization of the excess of the cost of these
acquisitions over the fair value of net assets acquired and also record
amortization of other intangibles acquired.

The remaining increase in cost of operations expenses was primarily
attributable to higher wages and increased maintenance costs on subscriber
equipment at agency locations. Cost of operations expense growth was lower than
revenue growth due to management's continued focus on operating efficiency and
our continuing ability to take advantage of decreasing technology costs on Data
Centre equipment and to negotiate favorable supplier contracts for subscriber
equipment.

COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses increased $15.4 million, or 11.4%, to $151.0 million for
the quarter ended March 31, 1999 from $135.6 million for the quarter ended March
31, 1998. NDC commissions and subscriber incentive payments increased $14.8
million, or 16.4%, to $105.0 million for the quarter ended March 31, 1999 from
$90.2 million for the quarter ended March 31, 1998. The increase in electronic
global distribution services revenues resulted in increased commissions to NDCs,
which were offset by the elimination of commissions to Galileo Canada as,
subsequent to this acquisition, we no longer pay commissions but instead incur
the direct costs of operating in this market. NDC commissions are generally
based on a percentage of booking revenues and have, therefore, grown at a rate
consistent with the growth in booking revenues by country. Incentive payments,
which are provided to subscribers in order to maintain and expand our travel
agency customer base, increased significantly in this quarter principally due to
the initiation of new contracts with multinational and key U.S. regional
accounts in late 1998 and the first quarter of 1999, as well as the impact of
payments to subscribers previously borne by Galileo Canada. The remaining
increase in commissions, selling and administrative expenses was primarily
attributable to the accrual of estimated payments required under services
agreements with the sellers of certain NDCs acquired in 1997 and 1998.

OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, foreign exchange gains or losses and other
non-operating items. Other income (expense), net increased $11.6 million, to
$9.0 million in income for the quarter ended March 31, 1999 from $2.6 million in
expense for the quarter ended March 31, 1998. This increase was primarily the
result of a $9.4 million gain recognized from the sale of 12% of the shares we
owned in Equant N.V., a telecommunications company. Lower interest expense
arising from lower debt levels in 1999 accounted for the remainder of the
increase in other income (expense), net during the first quarter of 1999.

INCOME TAXES. Income taxes increased $10.4 million, or 25.2%, to $51.8
million for the quarter ended March 31, 1999 from $41.4 million for the quarter
ended March 31, 1998. The increase was a result of higher income before income
taxes for the quarter ended March 31, 1999 compared to the quarter ended March
31, 1998. Our effective tax rate was approximately 40% in both periods.

NET INCOME. Net income increased $15.7 million, or 25.2%, to $78.0 million
for the quarter ended March 31, 1999 from $62.3 million for the quarter ended
March 31, 1998. Net income as a percentage of revenues increased to 19.3% from
16.5% over the same period.

1998 COMPARED TO 1997

REVENUES. Revenues increased $224.7 million, or 17.9%, to $1,480.8 million
for the year ended December 31, 1998 from $1,256.1 million for the year ended
December 31, 1997. The 1998 revenues include the impact of the acquired NDCs
whereas 1997 revenues, prior to the 1997 NDC acquisitions, represent Galileo
International Partnership revenues. Assuming the 1997 NDC acquisitions occurred
on January 1, 1997, revenues for the year ended December 31, 1997, on a pro
forma basis, would have increased $95.4 million, consisting of a $40.7 million
increase in electronic global distribution services and a $54.7 million increase
in information services. Increased pro forma revenues represent primarily
revenues from subscribers for hardware, software and other services and revenue
from airlines for

18
<PAGE> 18

information services performed. Comparing 1998 to pro forma 1997, revenues
increased $129.3 million, or 9.6%, to $1,480.8 million for the year ended
December 31, 1998 from $1,351.5 million in pro forma revenues for the year ended
December 31, 1997.

Growth in 1998 versus 1997 pro forma electronic global distribution
services revenues resulted primarily from an increase in airline booking volumes
of 2.5% and an increase in car, hotel and leisure booking volumes of 6.6% during
1998. Total international booking volumes increased 7.2% for the year, while
U.S. booking volumes declined 2.1% over the same period in the prior year.
Reported U.S. bookings declined due to a new fee structure we introduced in
North America in March 1998 under which we no longer charge airline vendors for
passive bookings that are not ticketed. We report only those bookings for which
we receive a fee. Excluding passive airline bookings, growth in active bookings
for the year was 1.3% in the United States. The increase in international
booking volumes for the year was driven by strong growth in Europe, the Middle
East, Southeast Asia and Africa. An air booking fee price increase that went
into effect March 1, 1998 and other yield improvements also contributed to the
revenue growth during the year.

COST OF OPERATIONS. Cost of operations expenses increased $183.0 million,
or 47.5%, to $568.3 million for the year ended December 31, 1998 from $385.3
million for the year ended December 31, 1997. 1998 expenses include the impact
of the 1997 NDC acquisitions as well as the impact of the 1998 Galileo Canada
acquisition and the Galileo Nordiska acquisition from the date of each
acquisition. 1997 expenses, prior to the 1997 NDC acquisitions, represent
Galileo International Partnership expenses. Additionally, in conjunction with
our acquisitions, we record the amortization of the excess of the cost of these
acquisitions over the fair value of the net assets acquired and the amortization
of other intangibles acquired. Assuming the 1997 NDC acquisitions occurred on
January 1, 1997, pro forma cost of operations for the year ended December 31,
1997 would have increased $156.6 million to $541.9 million. This increase is
caused by additional operating expenses that were partially offset by lower
commissions, as we no longer pay commissions but instead incur the direct costs
of distributing our products in these markets. The additional operating expenses
represent principally the wages, maintenance, communication costs and
depreciation of the acquired NDCs.

Comparing 1998 to pro forma 1997, cost of operations expenses increased
$26.4 million, or 4.9% to $568.3 million for the year ended December 31, 1998
from $541.9 million in pro forma expenses for the year ended December 31, 1997.
As a result of the Galileo Canada and the Galileo Nordiska acquisitions, cost of
operations expenses increased $14.3 million as we incurred the direct costs of
operating in these markets since the date of each acquisition. The remaining
increase was primarily attributable to higher wages for technical personnel,
increased communication costs due to market expansion and increased maintenance
costs for subscriber equipment at agency locations. The increase was partially
offset by a reduction in network services provided to an airline vendor.
Subsequent to the NDC acquisitions, cost of operations expense growth was lower
than revenue growth due to management's continued focus on operating efficiency
and savings realized from the integration of the acquired NDCs. We continue to
take advantage of decreasing technology costs on Data Centre equipment and have
negotiated favorable supplier contracts for subscriber equipment.

COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses decreased $84.7 million, or 13.2%, to $554.5 million for
the year ended December 31, 1998 from $639.2 million for the year ended December
31, 1997. NDC commissions and subscriber incentive payments decreased $128.2
million, or 26.1%, to $363.6 million for the year ended December 31, 1998 from
$491.8 million for the year ended December 31, 1997. The increase in electronic
global distribution services revenues resulted in increased commissions to NDCs.
These increased commissions were more than offset by the elimination of
commissions paid to the acquired NDCs as, subsequent to these acquisitions, we
no longer pay commissions to the acquired NDCs but instead incur the direct cost
of operating in these markets. NDC commissions are generally based on a
percentage of booking revenues

19
<PAGE> 19

and have, therefore, grown at a rate consistent with the growth in booking fees
by country. Incentive payments, which we provide to travel agency subscribers in
order to maintain and expand our travel agency customer base, increased
significantly in 1998 due to the initiation of new contracts with multi-
national accounts as well as the impact of payments to subscribers previously
borne by the acquired NDCs.

Remaining commissions, selling and administrative expenses increased
primarily because 1998 expenses include the impact of the NDC acquisitions
whereas 1997 expenses, prior to these acquisitions, represent Galileo
International Partnership expenses. In addition, the Galileo Canada acquisition,
the Galileo Nordiska acquisition, accruals for estimated payments under our
services agreements and a new employee profit sharing program resulted in
increased expenses, which were partially offset by $13.4 million in favorable
settlements of contractual disputes from prior years.

SPECIAL CHARGES. We recorded special charges of $26.4 million during the
year ended December 31, 1998 related primarily to a strategic realignment of our
operations in the United Kingdom. Special charges include severance provisions
of $15.0 million and $11.4 million in costs related to disposition of the
current United Kingdom facilities.

We recorded special charges of $20.1 million during the year ended December
31, 1997 related to the integration of the acquired NDCs into our operations.
Special charges were comprised primarily of $12.3 million in severance costs
related to termination of employees and $7.8 million of other integration costs,
principally related to duplicate facilities.

OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, and foreign exchange gains or losses. Other
income (expense), net increased $0.2 million, to $6.1 million expense, net for
the year ended December 31, 1998 from $5.9 million expense, net for the year
ended December 31, 1997. This increase was primarily the result of lower
interest income arising from lower average cash and cash equivalents.

INCOME TAXES. We recorded no provision for U.S. federal and state income
taxes prior to July 31, 1997 as such liability was the responsibility of the
partners of Galileo International Partnership. As a result of the July 30, 1997
merger of Galileo International Partnership into a wholly owned limited
liability company subsidiary of Galileo International, Inc., we recorded initial
deferred income taxes of $15.3 million to reflect the establishment of deferred
tax assets and liabilities in 1997. Remaining income taxes for 1997 represent
U.S. federal and state income taxes subsequent to July 30, 1997 and income taxes
for certain of our non-U.S. subsidiaries. Subsequent to the merger, our
effective tax rate is approximately 40%.

NET INCOME. Net income was $195.6 million for the year ended December 31,
1998. Net income was $161.6 million for the year ended December 31, 1997. Net
income in 1998 reflects the recognition of U.S. federal and state income taxes
for the entire year.

1997 COMPARED TO 1996

REVENUES. Revenues increased $167.8 million, or 15.4%, to $1,256.1 million
for the year ended December 31, 1997 from $1,088.3 million for the year ended
December 31, 1996. 1997 revenues include the impact of the 1997 NDC acquisitions
whereas 1996 revenues represent Galileo International Partnership revenues. The
1997 NDC acquisitions resulted in $72.6 million of additional revenues or 43.3%
of the revenue growth during this period. The remaining revenue growth resulted
principally from increased booking volumes worldwide and, to a lesser extent,
from an increase in the price per booking charged to airline travel vendors.
This price increase became effective on March 1, 1997.

OPERATING EXPENSES. Operating expenses increased $131.7 million, or 14.4%,
to $1,044.6 million for the year ended December 31, 1997 from $912.9 million for
the year ended December 31, 1996. Excluding $20.1 million in special charges
related to the integration of the acquired NDCs into our

20
<PAGE> 20

operations, operating expenses increased $111.6 million, or 12.2%, to $1,024.5
million for the year ended December 31, 1997 from $912.9 million for the year
ended December 31, 1996. The NDC acquisitions resulted in additional operating
expenses which were partially offset by lower commissions as we no longer pay
commissions, but instead incur the direct costs of distributing our products in
these markets.

OTHER EXPENSES, NET. Other expenses, net include interest expense, net of
interest income, and foreign exchange gains or losses. Other expenses, net
decreased $2.4 million, to $5.9 million for the year ended December 31, 1997
from $8.3 million for the year ended December 31, 1996. This decrease was
primarily the result of currency fluctuation gains and higher interest income
arising from higher average levels of cash and cash equivalents over the
periods.

INCOME TAXES. We recorded no provision for U.S. federal and state income
taxes prior to July 31, 1997, as such liability was the responsibility of the
partners of Galileo International Partnership. Certain of our non-U.S.
subsidiaries are subject to income taxes. As a result of the merger of Galileo
International Partnership into a wholly owned limited liability company
subsidiary of Galileo International, Inc., we recorded initial deferred income
taxes of $15.3 million to reflect the establishment of deferred tax assets and
liabilities. The remaining provisions for income taxes relate to the period
subsequent to July 30, 1997. Our effective tax rate is approximately 40%.

NET INCOME. Net income was $161.6 million for the year ended December 31,
1997. Net income was $165.2 million for the year ended December 31, 1996. Net
income in 1997 was impacted by the $15.3 million of initial deferred income
taxes, the $12.1 million after tax effect of the special charges recorded as a
result of the integration of the acquired NDCs into our operations and the
on-going recognition of U.S. federal and state income taxes since July 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $43.7 million and working capital totaled
$51.5 million at March 31, 1999. At December 31, 1998, cash and cash equivalents
totaled $9.8 million and working capital totaled $11.7 million. Due principally
to strong operating results and proceeds from the sale of shares in Equant N.V.,
cash and cash equivalents increased by $33.9 million despite the net repayment
of $35.1 million of indebtedness under our credit agreements and $7.9 million in
dividends we paid to our stockholders.

Cash flow used in investing activities, other than NDC acquisitions,
principally relates to purchases of mainframe data processing and network
equipment and purchases of computer equipment provided to our travel agency
subscribers. Capital expenditures, excluding the capitalization of internally
developed software, were $12.9 million for the quarter ended March 31, 1999
compared to $19.1 for the quarter ended March 31, 1998 and $98.7 million for the
year ended December 31, 1998 compared to $65.9 million for the year ended
December 31, 1997. In the first quarter of 1999, we used $7.3 million to acquire
minority ownership equity positions in three technology-related companies.
Proceeds from sale of assets were $9.5 million for the quarter ended March 31,
1999, primarily from the sale of shares we owned in Equant N.V. In 1998, we
invested in three companies that offer innovative technical solutions that
support our business needs. These investments, totaling $21.8 million, included
the Shepherd Systems acquisition and minority interests in two other technology
companies.

Cash flow used in financing activities in the first quarter of 1999
includes net repayments of $35.1 million under our credit agreements and $7.9
million in dividends we paid to our stockholders. We paid a $0.075 per share
cash dividend on February 19, 1999 to stockholders of record as of February 5,
1999. On April 1, 1999, we paid $25.5 million to terminate two equipment leases
related to Swindon data center assets pursuant to early termination provisions
allowed within the leases. As of March 31, 1999, there was no debt outstanding
under our revolving credit facilities and we had $600.0 million available under
these facilities.

21
<PAGE> 21

Cash flow used in financing activities in 1998 includes net repayments of
$180.6 million under credit agreements, $29.9 million in dividends paid to
stockholders and $6.8 million in repurchases of our common stock. On June 5,
1998, we borrowed $34.4 million under a five-year term loan agreement to fund
the acquisition of Galileo Canada.

We expect that future cash requirements will principally be for capital
expenditures, repayments of indebtedness, strategic acquisitions and
investments, and share repurchases. We believe that cash generated by operating
activities will be sufficient to fund our future cash requirements, except that
significant acquisitions, investments or share repurchases, including from the
selling stockholders in connection with this offering, may require additional
borrowings or other financing alternatives. See "Capitalization" and "Principal
and Selling Stockholders."

In connection with the 1997 NDC acquisitions and the Galileo Canada
acquisition, we have entered into services agreements for the provision of
certain marketing services with the sellers, or affiliates of the sellers, of
Apollo Travel Services, Traviswiss, Galileo Nederland and Galileo Canada. Under
these services agreements the sellers or affiliates will provide services to us
related to growing the respective business operations of the acquired NDCs.
Pursuant to these services agreements, we will be required to pay the sellers,
or affiliates of the sellers, of Apollo Travel Services, Traviswiss, Galileo
Nederland and Galileo Canada fees of up to $200.0 million, $6.8 million, $4.7
million and $20.5 million, respectively, each on a present value basis as of the
date of the agreements in the sixth year (eighth year for a portion of Galileo
Canada) following the acquisitions. These fees are contingent upon improvements
in our airline booking fee revenue in the sellers' respective territories over
the five-year period following each acquisition, as measured by the annual price
increase rate and over the five-year period (seven-year period in the case of
Galileo Canada) following each acquisition, as measured by the annual air
segment growth rate. We have reviewed and, to the extent deemed appropriate,
established accruals for these payments based on an evaluation of the likelihood
that the revenue goals required under the terms of these agreements will be met.
As of December 31, 1998, accruals totaling $9.3 million have been recorded and
are reflected in our consolidated balance sheet.

In addition to reinvesting a substantial portion of earnings in our
business, we currently intend to pay regular quarterly dividends and to
repurchase additional shares of our common stock. The declaration and payment of
dividends, the amount of any dividends, and the amount of future repurchases of
our common stock are subject to the discretion of our board of directors and
will depend upon our results of operations, financial condition, cash
requirements, future prospects and other factors deemed relevant by our board of
directors. We cannot provide any assurance that we will continue to declare and
pay dividends or repurchase shares of our common stock in the future.

QUARTERLY COMPARISONS

The following tables set forth an unaudited summary of our quarterly
financial data (in thousands, except share data). This quarterly information has
been prepared on the same basis as the annual consolidated financial statements
and, in management's opinion, reflects all adjustments necessary for a fair
presentation of the information for the periods presented. The operating results
for any quarter are not necessarily indicative of results for a full fiscal
year.

We experience a seasonal pattern in our operating results. The fourth
quarter typically has the lowest total revenues and operating income due to
early bookings by customers for holiday travel and due to a decrease in business
travel during the holiday season. In addition, 1998 fourth quarter operating
expenses include special charges of $26.4 million, $15.9 million after tax,
related to a strategic realignment of our operations in the United Kingdom. 1997
third quarter operating expenses include

22
<PAGE> 22

special charges of $20.1 million, $12.1 million after tax, related to our
integration with our acquired NDCs.

<TABLE>
<CAPTION>
1999 1998
-------- -----------------------------------------
FIRST FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total revenues............................... $403,991 $377,010 $380,637 $377,461 $345,710
Operating expenses........................... 283,175 270,731 288,695 291,130 298,684
Operating income............................. 120,816 106,279 91,942 86,331 47,026
Net income................................... 78,006 62,303 53,951 51,131 28,229
Basic earnings per share..................... 0.75 0.59 0.51 0.49 0.27
Diluted earnings per share................... 0.74 0.59 0.51 0.49 0.27
Operating income as a percentage of
revenue.................................... 29.9% 28.2% 24.2% 22.9% 13.6%
</TABLE>

<TABLE>
<CAPTION>
1997(1)
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total revenues.................................. $307,646 $307,200 $327,655 $313,602
Operating expenses.............................. 241,335 253,634 276,490 273,114
Operating income................................ 66,311 53,566 51,165 40,488
Net income(2)................................... 39,397 32,386 29,263 22,322
Basic and diluted earnings per share(2)......... 0.44 0.36 0.29 0.21
Operating income as a percentage of revenue..... 21.6% 17.4% 15.6% 12.9%
</TABLE>

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

(1) Represents Galileo International Partnership through July 30, 1997 and
Galileo International, Inc. subsequent to July 30, 1997.

(2) Pro forma net income and basic and diluted earnings per share data for 1997
are calculated as though: (i) the partners' capital was converted in the
merger into 88,000,000 shares of our common stock as of January 1, 1997 and
the 16,799,700 shares issued to the public were outstanding from July 30,
1997, and (ii) we had operated in a corporate form effective January 1, 1997
and accordingly were subject to federal and state income taxes.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

We will implement the provisions of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which is required to be adopted for financial statements issued for
the fiscal year ending December 31, 2000. Statement 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. Management believes that adoption of Statement 133 will not have
a material impact on our financial statements.

YEAR 2000

The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or systems or those of our vendors and

23
<PAGE> 23

suppliers that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than 2000.

Beginning in September 1995, we implemented a program designed to help
ensure that all hardware and software used in connection with our business,
including our software products, will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality and
without producing inaccurate results related to such dates. An internal analysis
of our hardware and software has led us to conclude that the majority of our
systems have been engineered to be Year 2000 compliant and should provide a
seamless transition to the Year 2000. In addition, we have consulted outside
experts, including attorneys and independent auditors, regarding our Year 2000
plans.

We electronically exchange information with the computer systems of our
travel vendor customers and suppliers, including air, car, hotel, cruise, rail
and other vendors. We use standardized travel industry interchange formats to
electronically exchange information with many of these vendor customers and
suppliers. Many of these formats did not require modification in order to be
Year 2000 compliant. Where required, modifications to these formats have been
completed. Our GlobalFares(TM) system began successfully processing airline
fares with Year 2000 dates in July 1998. In addition, the investigation and
assessment of our network systems is complete and remediation for such systems
is in progress and on-track for completion during the third quarter of 1999. We
completed remediation planning for most of our travel agency-based software and
began distribution of Year 2000 upgrades for operating systems and package
installation systems used in connection with our travel agency-based software
during the third quarter of 1998. The Year 2000 remediation for most of our
travel agency-based software addresses aesthetic modifications and is not
essential for the reservation booking and ticketing capability of these
products. Remediation planning for country-specific software solutions
facilitating travel agency access to certain third party vendors is ongoing. We
continue to develop, distribute and install, where necessary, upgrades to PC
hardware and software either on a normal maintenance cycle where it exists, or a
separate implementation plan where it does not exist.

Remediation activities related to our mainframe computer systems, which
include our Galileo and Apollo CRSs, were completed on schedule in 1998. Our
Galileo and Apollo systems successfully processed the first Year 2000 airline
reservation bookings on January 3, 1999 and February 4, 1999, respectively, with
airlines which support Year 2000 in their systems. Non-mainframe activities are
on track for completion before the third quarter of 1999.

Embedded systems are not an integral component in our primary business or
operations. Nevertheless, we have identified and validated as compliant or,
where necessary, are in the process of remediating embedded systems in certain
of our facilities and environmental systems. We do not anticipate any material
adverse impact to our business or operations related to Year 2000 performance of
embedded systems.

As an electronic global distribution services company, our products are
dependent upon data provided by our air, car, hotel and tour vendor customers
and other suppliers of data. We are also dependent on critical service
providers, such as telecommunications firms for worldwide product distribution.
We are continuing to assess Year 2000 issues arising from our relationships with
third parties, including our NDCs, to determine the extent to which our
interface systems are vulnerable to failure by these parties to remediate their
own Year 2000-sensitive systems. We have requested Year 2000 compliance status
information from all of our vendor customers, critical other suppliers of data
and our NDCs. We continue to work closely with our NDCs to provide assistance to
meet their Year 2000 challenges. While many of these third parties have reported
that they are not finding significant problems in their own systems, we cannot
guarantee that the systems of these third parties will be made Year 2000
compliant in a timely manner. Vendor customers, service providers and NDCs
continue to participate with us in Year 2000 testing.

24
<PAGE> 24

We completed contingency plans for our mainframe systems on schedule in
1998 and anticipate that the contingency plans for non-mainframe systems will be
complete prior to the third quarter of 1999. We will continue to review and
revise contingency plans to address possible Year 2000 failures of our internal
systems and business processes or those of vendor customers, critical service
suppliers, other suppliers of data and our NDCs, on whose systems we are
dependent. Our contingency plans identify the interruption of local services
provided by third parties, such as telecommunication firms and power supply
companies, as the events which would be most likely to occur. However, should a
problem occur, it would generally be localized and we do not anticipate that it
would have a material adverse effect on our business, financial condition or
results of operations. Our contingency planning involved risk assessment for all
of our business functions and operating and staff departments, including the
identification of assumptions and dependencies. The contingency plans for each
business function and operating and staff department provide for proactive
preparation for Year 2000 challenges, checklists of activities to perform for
validation of possible failures and reactive planning to address any actual Year
2000 failures. The contingency plans also address on-site staff coverage on
January 1, 2000 for all operating and staff departments, and include support
personnel from our critical hardware and software suppliers.

The interruption of services provided by critical service providers, such
as telecommunications firms and power supply companies, due to their own Year
2000 difficulties, could have a material adverse effect on our business and
operations. With respect to bookings for travel after January 1, 2000, any
failure on our part or on the part of our vendor customers, other suppliers of
data or NDCs to ensure that systems are Year 2000 compliant, regardless of when
such bookings occur, could have a material adverse effect on our business,
financial condition or results of operations.

Testing is a critical component in our Year 2000 preparedness program. Our
system for Year 2000 hardware and software validation -- called the "Time
Machine"-- is essentially a copy of our production environment which performs
date-sensitive tests and supports connectivity to the systems of our vendor
customers, suppliers of data, NDCs and certain other third parties without
interrupting existing systems and without risk of contaminating "live"
production data.

We incurred $1.7 million of expenses in the first quarter of 1999, $8.0
million of expenses in 1998 and $4.4 million of expenses in 1997 related to Year
2000 remediation. We expect future expenditures to total approximately $7.3
million. All of these costs are expected to be expensed as incurred. Further, we
expect to incur additional costs after 1999 to remediate and replace less
critical software applications and embedded systems; however, we do not expect
these expenses to have a material adverse effect on our business, financial
condition or results of operations.

The cost of our Year 2000 project and the dates on which we plan to
complete our Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, third
parties' Year 2000 readiness and other factors.

Based on our current schedule for completion of our Year 2000 project, we
believe that our planning is adequate to secure Year 2000 readiness of our
critical systems. Nevertheless, achieving Year 2000 readiness is subject to
various risks and uncertainties, many of which are described above. We are not
able to predict all of the factors that could cause actual results to differ
materially from our current expectations about our Year 2000 readiness. At this
time, we believe the major risks associated with Year 2000 processing are a
system failure or miscalculation causing an inability to process bookings or
engage in other normal business activities. Our failure, or the failure of third
parties with whom we have significant business relationships, to achieve Year
2000 readiness with respect to critical systems could have a material adverse
effect on our business, financial condition or results of operations.

25
<PAGE> 25

BUSINESS

OVERVIEW

We are one of the world's leading providers of electronic global
distribution services for the travel industry using a computerized reservation
system, or CRS. We provide travel agencies, as well as corporations and
consumers who use self-booking products that access our system, with the ability
to view schedules, availability and fare information, book reservations and
issue tickets for more than 500 airlines. We also provide subscribers with
information and booking capability for car rental and hotel companies throughout
the world. We completed approximately 350 million bookings in 1998, representing
an estimated $60 billion in travel services. Our travel agency subscribers
operate more than 160,000 computer terminals in 106 countries, all of which are
linked to our Data Centre, one of the world's largest commercial data processing
complexes, with a system uptime performance record of better than 99.9%.

We believe that, based on revenues, we are currently the most
internationally diversified provider of electronic global distribution services
for the travel industry. Over 56% of our 1998 global distribution revenues were
derived from business generated by our subscriber customers outside of the
United States. We believe that we have significant market share in many of the
most important and competitive markets for travel services, including the United
States and Canada and markets in Europe, Asia/Pacific, the Middle East, Africa
and Latin America. We compete in these markets through our own local sales and
marketing offices and through a network of national distribution companies or
NDCs, a distribution structure that has enabled us to work closely with
associates that possess detailed knowledge of local travel markets. We believe
that our extensive international business experience provides a firm base for
expansion into new overseas markets, many of which offer strong growth
potential.

In addition to our core electronic global distribution services business,
we offer travel industry-related information services that draw upon our
in-depth knowledge of the industry and our expertise in developing and operating
complex, mission-critical transaction processing systems. We operate
GlobalFares, a fares quotation system used by over 100 airlines worldwide.

COMPETITIVE STRENGTHS

We believe that we have the following competitive strengths:

LEADING MARKET SHARE. According to industry sources, we have a worldwide
market share of approximately one-third of the electronic global distribution
services market based on the number of air bookings.

WELL-BALANCED AND GLOBAL PRESENCE. Our subscriber customer base of
approximately 40,000 travel agency locations in 106 countries is linked to our
CRS through more than 160,000 agency terminals. We operate globally and believe
that in-depth knowledge of the local travel markets in which we distribute our
products is essential to developing and strengthening our ties to travel vendors
and the local travel agencies which generate significant booking volumes.

ESTABLISHED RELATIONSHIPS WITH A DIVERSE GROUP OF TRAVEL VENDORS. We
currently have relationships with more than 500 airlines, 41 car rental
companies and more than 200 hotel companies representing approximately 41,000
properties.

TECHNOLOGICALLY ADVANCED INFORMATION SYSTEM. We have made significant
investments in technology and related equipment. We believe that we will benefit
from operating economies of scale as our technology is easily expandable and can
support additional incremental volume with minimal additional investment. Our
computer systems are operational 24 hours a day, every day of the year and
process, on average, 227 million requests for information each day.

26
<PAGE> 26

COMPREHENSIVE OFFERING OF INNOVATIVE PRODUCTS. Our knowledge and
experience of both the travel business and information technology business has
created a basis from which we have been able to provide a broad range of
products and services to our customers. These products and services provide
access to our systems and, therefore, generate booking fees for us.

TEAM OF HIGHLY SKILLED AND INCENTIVIZED PERSONNEL. We conduct
comprehensive in-house sales and information technology training programs for
our sales and software development staff. Our employees are incentivized through
a variety of programs, including stock option plans, profit sharing plans and
performance-based bonus plans.

STRATEGY

From this base of competitive strengths, we plan to pursue a strategy that
includes the initiatives described below.

EXPAND OUR GLOBAL DISTRIBUTION BY INCREASING OUR SUBSCRIBER CUSTOMER
BASE. We operate globally and believe that in-depth knowledge of the local
travel markets in which we distribute our products is essential to developing
and strengthening our ties to travel vendors and the local travel agencies which
generate significant booking volumes. Consistent with this belief, we intend to
increase our subscriber customer base by expanding our influence in local
markets through further alliances with influential associates that understand
the local travel market, including, where appropriate, the establishment of NDCs
in new and emerging markets. We believe that this structure provides us with a
competitive advantage for the distribution of our products as it ensures us a
thorough understanding of local market needs. In appropriate markets, we will
seek opportunities to vertically integrate our operations through the
acquisition of NDCs. In 1998, we acquired two NDCs that market our products in
Canada, Sweden, Finland and Norway.

STRENGTHEN CUSTOMER LOYALTY THROUGH VALUED CUSTOMER SERVICE. We strive to
provide valued customer service in order to strengthen relationships with our
established base of travel vendor and subscriber customers and to attract new
travel vendor and subscriber customers to our core electronic global
distribution services business. During 1998, we created a new customer service
delivery organization, a team charged with ensuring that our products are backed
by high quality service offerings valued by our customers. As a part of their
work, this team is setting new customer service standards and developing
processes to ensure that service around the world is delivered consistently.

LEVERAGE OUR TECHNOLOGY TO MEET CHANGING CUSTOMER NEEDS. We refine our
information technology on a regular basis in order to maintain a cost-effective
system that is fully integrated from travel vendor to subscriber and is tailored
to individual customer needs. We utilize an architecture with standard open
interfaces and protocols to help ensure the efficient distribution of
information among users. In 1998, we introduced Viewpoint(TM), the CRS
industry's first point-and-click graphical user interface booking system for
air, hotel and car rental. Viewpoint provides easy access to travel information
which speeds the booking process and allows travel agents to focus on selling
and servicing customers.

CAPITALIZE ON OPPORTUNITIES CREATED BY INCREASING INTERNET USE. We are
committed to maintaining our technological competitiveness as the use of the
Internet expands. We do not act as an Internet travel agency so as not to
compete with our subscriber customers. Instead, we serve as the booking engine
for multiple leading web-based travel agencies including Internet Travel
Network, Preview Travel and Uniglobe.com.

We also help agencies compete for business requiring Internet access by
providing them with self-service booking products, such as Travelpoint.com(TM),
to meet the demands of their customers. We believe that we can effectively
participate in the growth of Internet-related travel bookings by offering our
subscriber customers an array of web-based services, including web-design,
web-hosting and website management.

27
<PAGE> 27

In 1998, we introduced FocalpointNet(TM), a cost-effective means of
connecting to our Apollo or Galileo system via the Internet versus the standard
dedicated circuit or dial-up telephone line. Corporate travel departments and
individual consumers are demonstrating an increased interest in using the
Internet to directly access the information and services provided by a CRS. In
response, we have increased our emphasis on self-booking products and services,
and reorganized internally to better support our corporate clients. Among our
1998 initiatives was Galileo Passport(TM), a new web-based booking product
sponsored by travel vendors and designed to provide travelers with a fast and
easy method to make business and leisure travel arrangements. Also during 1998,
we introduced Corporate Travelpoint(TM), a fully integrated web-based system
designed to meet the travel management requirements of the largest
organizations. This new product gives corporate travel managers the ability to
rank preferred vendors by market, administer contracts to ensure travelers are
using preferred vendors, and enforce policy compliance through exception
reporting and approval.

INVEST IN BUSINESSES THAT COMPLEMENT OUR TECHNOLOGY OR CORE PRODUCT
OFFERINGS, THEREBY INCREASING THE VALUE OFFERED TO OUR CUSTOMERS. During 1998,
we also began investing in companies that offer innovative technical solutions
that support our customers' business needs. In late 1998, we acquired S. D.
Shepherd Systems, Inc., a leader in marketing information data transfer, or
MIDT, processing, which currently services 15 of the top 25 airlines in the
world. Traditionally, many small- and medium-sized airlines have purchased raw
MIDT data and hired companies to analyze and interpret the data for them. With
our acquisition of Shepherd Systems, carriers can receive data directly from us,
have it processed by Shepherd Systems, and use the resulting information to
enhance their marketing activities and profitability. We have also recently
acquired interests in Destinations.com, ObjectSpace, Inc., Stamps.com, TRIP.com,
Uniglobe Travel On-line and Value Integrated Network, each of which complements
our technology or our core product offerings. We expect to continue our strategy
of investing in technology companies that help to increase the value delivered
to our customers.

CONTINUE TO IMPROVE PRODUCTIVITY AND REDUCE COSTS. We are committed to
improving the efficiency of existing operations and reducing costs. We are
focused on increased employee productivity, strictly controlling our general and
administrative expenses, and continuing to realize telecommunications and
mainframe processing unit cost improvements. For example, in late 1998 we
announced the closure of our software development facility in the United Kingdom
and the consolidation of development functions into our Colorado office in order
to improve productivity and bring products to market more quickly.

ELECTRONIC GLOBAL DISTRIBUTION SERVICES -- MARKETS

As of March 31, 1999, we provided electronic global distribution services
for the travel industry in 106 countries via a network of on-line terminals
operated at approximately 40,000 travel agency locations worldwide.

28
<PAGE> 28

The table below, which shows the approximate number of travel agency
locations and terminals by region, demonstrates our geographic breadth.

<TABLE>
<CAPTION>
TRAVEL AGENCY
LOCATIONS AT TERMINALS AT
MARCH 31, 1999 MARCH 31, 1999
--------------- ----------------
REGION NUMBER % NUMBER %
- ------ ------ ----- ------- -----
<S> <C> <C> <C> <C>
United States....................................... 12,500 31.2% 59,600 36.6%
Europe.............................................. 13,600 33.9 55,800 34.3
Asia/Pacific........................................ 5,700 14.2 22,400 13.8
Canada.............................................. 3,100 7.7 11,100 6.8
Middle East/Africa.................................. 3,400 8.5 9,600 5.9
Latin America....................................... 1,800 4.5 4,300 2.6
------ ----- ------- -----
40,100 100.0% 162,800 100.0%
====== ===== ======= =====
</TABLE>

ELECTRONIC GLOBAL DISTRIBUTION SERVICES -- CUSTOMER BASE: TRAVEL VENDORS AND
SUBSCRIBERS

We derive substantially all of our electronic global distribution services
revenues from booking fees paid by travel vendors. Travel vendors store,
display, manage and sell their services through our systems. We offer airlines
and other travel vendors varying levels of functionality at which they can
participate in our systems, Apollo in North America and Japan and Galileo in the
rest of the world. In 1998, approximately 92% of our booking fee revenues were
generated from airlines.

In order to stimulate booking activity, we offer products to travel
agencies and other subscribers that enable them to electronically locate, price,
compare and purchase travel vendors' services through our systems. By accessing
the electronic marketplace created by our systems, our subscriber customers are
able to obtain schedule, availability and pricing information, and purchase
travel services from multiple travel vendors for complex travel itineraries. Our
product and service offerings to travel agencies also facilitate internal
business processes such as quality control, operations management and financial
information management. Increasingly, this includes the integration of products
and services from independent parties that complement our core product and
service offerings.

Travel agencies access our systems using hardware and software typically
provided by us or an NDC. We and the NDCs also provide technical support and
other assistance to the travel agencies. Through the NDCs and our internal sales
and marketing organization, we have relationships with travel agencies of all
sizes throughout the world. Multinational travel agencies constitute an
important category of subscribers because of the high volume of business that
can be generated through a single relationship. Bookings generated by our five
multinational travel agencies constituted 19.0% of the bookings made through our
systems in 1998.

With the rise in popularity of personal computers, commercial on-line
services and other means of Internet access, individual consumers increasingly
have the ability to purchase services directly from travel vendors that have
electronic distribution capability. We have therefore developed or facilitated
the use of direct access products for travel vendors and travel agencies to
target individual consumers. Among our travel agency customers are a number of
firms whose businesses specialize in attracting and servicing customers through
the Internet. We also provide software products to travel vendors and travel
agencies which enable them to directly distribute travel services to their
customers.

29
<PAGE> 29

ELECTRONIC GLOBAL DISTRIBUTION SERVICES -- PRODUCT DISTRIBUTION

We distribute our products to our subscriber customers primarily through
our internal sales and marketing organization and our NDCs. In markets not
supported directly by our sales and marketing organization, we use the NDC
structure in order to take advantage of the NDC's local market knowledge, as
well as its travel vendor and subscriber relationships. The NDC is responsible
for cultivating the relationship with subscriber customers in its territory,
installing their computer equipment, maintaining the hardware and software
supplied to them and providing ongoing customer support. The NDC earns a share
of the booking fees generated from the NDC's territory, as well as all
subscriber fees billed in that marketplace.

Our local sales and marketing groups distribute our products in the United
States, Mexico, Canada, Belgium, France, Germany, Spain, Portugal, The
Netherlands, Switzerland, Sweden, Finland, Norway, Hong Kong, Singapore, The
Philippines, Brazil and Venezuela, which collectively accounted for
approximately 62% of our 1998 bookings.

Affiliates of certain airline stockholders own the NDCs whose distribution
territories cover Austria, Greece, Ireland, Italy, Japan and the United Kingdom.
Collectively, these NDCs manage subscriber accounts that generated approximately
21% of our booking volume in 1998.

Associate NDCs, which are not affiliated with our airline stockholders but
are typically owned or operated by the national airline of the relevant country
or a local travel-related business, own or operate NDCs that accounted for
approximately 17% of our booking volume in 1998.

We and our NDCs distribute direct access products such as Corporate
Travelpoint and Travelpoint.com to travel agencies for use by their corporate
and individual customers. We and our NDCs also distribute our products to
certain Internet-based travel service providers. The World Wide Web sites of
those travel service providers allow individual consumers direct access to our
systems and provide us with an additional means of generating booking fees.

We have also developed or facilitated the development of branded direct
access products for certain airlines, such as United Connection for United
Airlines and Air Manager for Austrian Airlines. We have adopted this approach in
marketing and distributing direct access products that are branded by the
sponsoring airline and marketed directly by the airline to its corporate and
individual customers. These products provide access to our systems and,
therefore, generate booking fees for our company.

INFORMATION SERVICES

As a result of developing and operating one of the world's largest CRSs, we
have acquired significant knowledge of, and experience in, both the travel
business and the information technology business. This knowledge and experience
has created a basis from which we have been able to provide a range of
specialized information technology solutions to airlines throughout the world.
For example, we currently provide fares quotation services through our
GlobalFares system to over 100 airlines throughout the world. GlobalFares is
used in conjunction with each airline's internal reservation system, and
provides pricing information to these airlines which meets the challenges and
complexities of real-time fares quotation processing. We plan to continue to
market GlobalFares to other airlines.

TECHNOLOGY

We have made significant investments in technology and related equipment.
We believe that we will benefit from operating economies of scale, as our
technology is easily expandable and can support incremental volume with minimal
additional investment.

Our computer systems provide real-time, high-volume transaction processing
and are supported by 21 mainframes with a combined processing capacity of 5,096
MIPS, or millions of instructions per

30
<PAGE> 30

second. Additional peripheral hardware provides approximately 16.9 terabytes of
disk information storage. Our computer systems are operational 24 hours a day,
every day of the year. They process, on average, over 227 million requests for
information per day. At peak times, we process more than 6,700 messages per
second.

Our global communications network provides a fast, resilient and reliable
method for our travel vendor and subscriber customers to access our systems. Our
sites near Denver and London use a meshed backbone network to provide direct
connections from our facilities to certain locations in North America and
Europe. This backbone network provides automatic rerouting of information in the
event of a circuit failure. In addition to the meshed backbone network, we make
extensive use of independent international network service providers to
facilitate our reach into the global market.

Our data and transaction processing services are dependent on our Data
Centre. We maintain comprehensive security and backup systems in order to
deliver consistent, reliable service to customers. Although we believe we have
taken sufficient precautions to protect this facility and to achieve network
security, a natural or manmade disaster or other calamity that causes
significant damage to the facility or our systems would have a material adverse
effect on our business, financial condition or results of operations.

COMPETITION

We primarily compete against other well-established CRSs to provide
electronic global distribution services to the travel industry. Our principal
competitors are Sabre in the United States, Amadeus in Europe and Abacus in
Asia. To a lesser extent, we also compete, on a regional basis, against Axess,
Infini, Topas and Worldspan. Many of these competitors offer products which are
similar to our products.

Competition to attract and retain travel agency subscribers is intense. In
highly competitive markets, we and other CRSs offer financial incentives to
travel agency subscribers if certain productivity or booking volume growth
targets are achieved. Although expanded use of these incentive payments could
adversely affect our profitability, our failure to continue to make such
incentive payments could result in the loss of some travel agency subscribers.
If we were to lose a significant portion of our current base of travel agency
customers to a competing CRS or if we were forced to further increase the
amounts of these incentive payments significantly, our business, financial
condition or results of operations could be materially adversely affected.

In addition to the traditional competitors described above, the emergence
of direct access has created new competition from both technology firms and from
travel vendors themselves. Technology firms provide an on-line link between the
end user and a CRS. We believe we compete effectively with other CRSs for
business from these technology firms. Travel vendors provide consumers with
direct access to their internal reservation systems, either through telephone
reservations facilities or, increasingly, through their websites which may
bypass a CRS. We believe that the features of CRS products that allow
subscribers to comparison shop and to obtain greater functionality and more
information for the end user reduce the potential that the direct access
products sponsored by travel vendors will divert bookings away from CRSs.
However, any significant diversion could have a material adverse effect on our
business, financial condition or results of operations.

RELATIONSHIP WITH AIRLINE STOCKHOLDERS

Following this offering, the airline stockholders will own 29.8% of our
outstanding common stock, assuming full exercise of the U.S. underwriters'
over-allotment option. We believe an airline's decision to participate in a CRS
is dependent upon the distribution capabilities of the CRS rather than the
airline's ownership of the CRS. Therefore, we do not anticipate that there will
be any adverse effect on our business as a result of this decrease in ownership.

31
<PAGE> 31

RESEARCH AND DEVELOPMENT

Our research and development costs consist of expenses incurred during the
course of planned research and investigation aimed at the discovery of knowledge
useful in developing new products or processes, or significantly enhancing
existing products or production processes. Research and development costs,
excluding amortization of computer software, are expensed as incurred and were
approximately $4.8 million, $8.6 million and $8.2 million for the years ended
December 31, 1998, 1997 and 1996, respectively. In addition, we invest in
companies that offer innovative technical solutions to meet our business needs.

EMPLOYEES

We believe that our success is due in large part to our employees. We
strive to hire and retain highly skilled and motivated personnel. As of December
31, 1998, we employed approximately 3,000 people. Approximately 72% of our
employees are located in the United States and Canada, 24% in Europe and 4% in
Latin America and countries throughout the Asia/Pacific region. Our employees in
Brazil, representing less than 1% of our workforce, are unionized in accordance
with local regulations. None of our other employees are unionized. We believe
that our relationship with our employees is good.

PROPERTIES

Our principal executive offices are located in Rosemont, Illinois, a suburb
of Chicago, where we lease approximately 120,000 square feet of office space.
The lease was recently renewed and expires in 2010. Our Data Centre is located
in Englewood, Colorado, a suburb of Denver, in two adjacent buildings that we
own. The Data Centre contains approximately 236,000 square feet of space,
including approximately 130,000 square feet of raised floor computer room space.
We also lease and own office space in various other worldwide locations,
including development and marketing offices located in or near Denver, London
and Hong Kong. See note 7 to our consolidated financial statements, regarding
closure of the development and marketing offices located near London. We believe
that our offices and Data Centre are adequate for our immediate needs and that
additional or substitute space is available if needed to accommodate growth and
expansion.

LEGAL AND REGULATORY MATTERS

LEGAL PROCEEDINGS

We are involved in various matters of litigation as both plaintiff and
defendant. In the opinion of our management, none of these matters, individually
or in the aggregate, if determined adversely to us, would have a material
adverse effect on our business, financial condition or results of operations.

REGULATION

Our business is subject to regulation in the United States, the European
Union and Canada. Each jurisdiction's rules are largely based on the same set of
core premises:

- a CRS must treat all participating airlines equally, whether or not they
are owners of the system,

- airlines owning CRSs must not discriminate against the CRSs they do not
own and

- CRS relationships with travel agencies should not be an impediment to
competition from other CRSs or to the provision of service to the
traveler.

While each jurisdiction has focused on the CRS industry's role in the
airline industry, the U.S. and EU regulations have the greatest impact on us
because of the volume of business we transact in the United States and the
European Union. The United States does not currently regulate CRS relationships

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<PAGE> 32

with non-airline participants such as hotel and car rental companies. Changes to
the EU regulations effective March 15, 1999 allow CRSs to incorporate rail
services into CRS displays. As a result, rail services are now subject to
certain sections of the EU regulations.

The U.S. regulations, among other things, prohibit a CRS that is owned by
an airline or an airline affiliate from entering into contracts with travel
agencies that contain exclusivity clauses or that require the agency to maintain
a certain percentage of computer terminals or bookings for a particular CRS.

In several respects, the U.S. and EU regulators have reached similar
conclusions regarding the appropriate means of ensuring the achievement of the
desired results. Both jurisdictions recognize that there is a possibility that
subscribers will book flights which appear early on in availability displays, as
they may be reluctant to read through all information presented in subsequent
displays. Accordingly, both jurisdictions require that CRSs:

- provide airline displays for travel agencies which are ordered on the
basis of specific formulas to ensure neutral treatment and

- charge all airlines the same fees for the same level of participation.

The EU regulations go further and require that fees must be reasonably
structured and reasonably related to the cost of the service provided and used.
Moreover, under EU regulations, airlines have the ability to disallow certain
types of bookings, unless they have already been accepted.

Both the U.S. and EU regulators seek to address the potential that a CRS
used for internal reservation purposes would offer a travel agency subscriber
superior access to the hosted airline and inferior access to all other airlines.
The EU regulations mandate a separation between the internal reservations
functionality and the functionality used by travel agencies to provide neutral
information, and require annual confirmation of compliance with this rule, among
others, by independent auditors. The U.S. regulations also require functional
equivalence between the functionality offered to airlines whose internal
reservation systems are hosted in a CRS and those provided to all other
airlines. The EU regulations require the CRS owner airlines to provide the same
data, and accept and confirm bookings with equal timeliness in all CRSs, when
requested to do so. The U.S. regulations contain no counterpart to the EU
requirement that subscribers be offered access to the CRS on a nondiscriminatory
basis. Although the U.S. regulations extend only to use of CRSs by travel
agencies, and do not apply to products distributed directly to corporate travel
departments and individual consumers, EU and Canadian rules apply to all
subscriber uses of CRSs, whether by travel agencies, individuals or corporate
travel departments.

The U.S. regulations are currently under review. Changes to the EU
regulations became effective March 15, 1999 and we do not anticipate these
changes will materially impact our financial results.

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<PAGE> 33

MANAGEMENT

EXECUTIVE OFFICERS

Our executive officers, their positions with the company and their ages, as
of March 31, 1999, are as set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James E. Barlett..................... 55 Chairman, President, Chief Executive Officer and
Director
Paul H. Bristow...................... 56 Senior Vice President, Chief Financial Officer,
Treasurer and Director
Lyn Bulman........................... 39 Senior Vice President, Human Resources and
Corporate Relations
Michael G. Foliot.................... 44 Senior Vice President, Global Vendor Marketing
Babetta R. Gray...................... 40 Senior Vice President, Customer Service Delivery,
General Counsel, Secretary and Director
James E. Lubinski.................... 43 Senior Vice President, Information Services and
Operations
David A. Near........................ 40 Senior Vice President, Subscriber Marketing
</TABLE>

Mr. Barlett has been President and Chief Executive Officer since November
1994 and Chairman since May 1997. Prior to joining Galileo, he served as
Executive Vice President of Worldwide Operations and Systems of MasterCard
International Corporation and was a member of the MasterCard International
Operations Committee. Prior to his employment at MasterCard, Mr. Barlett served
as Executive Vice President of Operations for NBD Bancorp where from 1979 to
1992 he managed the redevelopment of core banking systems and directed the
development, implementation and operation of the Cirrus International automated
teller switching system and served as Vice Chairman of Cirrus Inc.

Mr. Bristow has been Senior Vice President and Chief Financial Officer
since February 1993 and Treasurer since May 1997. Prior to joining Galileo, Mr.
Bristow served as financial advisor to various companies in the United Kingdom
before which he had spent two years as a member of a buy-in group involved in
corporate finance as intermediaries and as advisors. From 1980 to 1988, he
worked for London International Group plc, a listed international consumer
products company in London, initially as Division Finance Director and then on
the Main Board as Group Finance Director. Prior to 1980, Mr. Bristow worked for
ITT in Canada, Norway and Singapore; with Philip Morris in Switzerland and
Canada; and with Arthur Andersen & Co. in Canada.

Ms. Bulman has been Senior Vice President, Human Resources and Corporate
Relations since May 1995. From 1990 to March 1993, she served as Manager of
Compensation and Benefits and from April 1993 to May 1995, she served as
Director of Human Resources -- Europe. Prior to joining Galileo, Ms. Bulman held
executive positions in the United Kingdom at Dun & Bradstreet Corporation and
Fisons (Pharmaceutical Division) plc.

Mr. Foliot has been Senior Vice President, Global Vendor Marketing since
January 1997. In this position, Mr. Foliot is responsible for all airline, car,
hotel, leisure, corporate and consumer, and GlobalFares sales and marketing.
From 1993 to 1996, he served as Senior Vice President Asia/Pacific and the
Americas for Galileo. From 1990 to 1993, Mr. Foliot was Vice President and
General Manager for all American Express activities in Canada related to
corporate card, corporate travel and leisure travel business and prior to that
he held various positions with American Express International in Singapore,
Indonesia and Korea.

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<PAGE> 34

Ms. Gray has been Senior Vice President, Customer Service Delivery and
General Counsel since July 1998, and has been Secretary since May 1997. In this
position, Ms. Gray is responsible for ensuring that our products are backed by
quality service offerings that are valued by our customers. From March 1996
until May 1997, she was Senior Vice President, Legal and General Counsel. From
September 1995 until March 1996, she served as Vice President, Legal and General
Counsel. She joined Galileo as Senior Counsel in April 1990. Before joining
Galileo, Ms. Gray was Counsel for Reebok International Ltd. from 1989 to 1990
and an associate with the Boston law firm of Foley Hoag & Eliot from 1984
through 1988.

Mr. Lubinski has been Senior Vice President, Information Services and
Operations since July 1995. In this position, Mr. Lubinski is responsible for
ensuring technological leadership in our systems development. Prior to joining
Galileo, Mr. Lubinski served since 1994 as Senior Vice President and Division
Head of Systems and Operations for Boatmen's Trust Company. From 1978 to 1994,
Mr. Lubinski held several technical positions at NBD Bancorp, including First
Vice President and Development Manager.

Mr. Near has been Senior Vice President, Subscriber Marketing since January
1997. In this position, Mr. Near is responsible for all marketing activities
related to our subscriber customers, as well as our relationships with our
various national distribution companies. Prior to assuming these
responsibilities, Mr. Near served as Senior Vice President of Intuitive Products
and Interactive Services and as Director of Car, Hotel, Leisure and Advertising
Product Management for Galileo and Covia Partnership. Prior to joining Galileo
in 1987, Mr. Near held a number of management positions at United Airlines and
B.F. Goodrich.

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<PAGE> 35

RELATIONSHIP WITH AIRLINE STOCKHOLDERS AND CERTAIN TRANSACTIONS

We have entered into various commercial and other agreements with our
airline stockholders. Seven of our directors are currently nominees of the
airline stockholders. Following this offering, four of these directors will
remain on our board of directors.

COMMERCIAL ARRANGEMENTS

COMPUTER SERVICES AGREEMENT

We have entered into computer services agreements with our airline
stockholders under which we provide certain fares quotation services, internal
reservation services, other internal management services and software
development services. The computer services agreements, except for fares
quotation services and services to United Airlines, each discussed below, are
generally cancellable by either party upon six months' prior written notice,
except that we may not cancel the agreement prior to the third anniversary of
our July 1997 initial public offering. The computer services agreements
generally require us to provide the services at prices based upon a fully
allocated cost methodology for a period of up to three years, after which
pricing will be determined on an arm's-length basis.

We also provide fares quotation services to many of the airline
stockholders, including United Airlines, through our GlobalFares fares quotation
system. We provide these fares quotation services under pricing arrangements
that were in effect prior to our initial public offering. We will continue to
provide these services at the same pricing for a period of approximately five
years following our initial public offering, after which pricing will be
determined on an arm's-length basis. These services may be canceled by either
party upon six months' prior written notice, except that we may not cancel the
provision of such services prior to the end of the existing pricing period.

We also provide internal reservation services, other internal management
services and software development services to United Airlines. Internal
reservation services and other internal management services will be provided
through July 2001 at fixed prices based upon a fully allocated cost methodology.
Software development services will generally be provided for a minimum of six
years following our initial public offering at prices based upon a fully
allocated cost methodology.

NETWORK SERVICES AGREEMENT

We are a party to a network services agreement with United Airlines under
which we provide them the use of our network for communication services and
manage such communication services. The network services agreement will remain
in effect until terminated by either of us upon two years' prior written notice.

GLOBAL AIRLINE DISTRIBUTION AGREEMENTS

We have entered into global airline distribution agreements with our
airline stockholders as well as with each of our airline travel vendor
customers. Under these agreements, travel vendors store, display, manage and
sell their services through our systems. Airlines are offered varying levels of
functionality at which they can participate in our systems. We also provide
travel vendors marketing data generated from reservation activity in our systems
for fees that vary based on the type and amount of information provided. This
information assists travel vendors in the management of their inventory and
yields.

DISTRIBUTOR SALES AND SERVICE AGREEMENTS

We are party to distributor sales and service agreements with NDC
affiliates of certain airline stockholders. In exchange for its efforts to sell
our products to travel agencies in its territory, the NDC receives a percentage
of the booking fees generated by travel agency use of our CRS within its
territory.

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<PAGE> 36

In the absence of material breach, these agreements cannot be terminated by
either party so long as an affiliate of the relevant NDC retains an interest in
us.

OTHER DISTRIBUTION SUPPORT

We have an arrangement with United Airlines pursuant to which they provide
support for our distribution efforts in certain countries in Latin America.

TERMINATION OF REVENUE SHARING OBLIGATIONS

During 1997, in conjunction with the acquisitions of Galileo Nederland and
Traviswiss, we terminated our obligations to share with KLM and SAirGroup a
portion of the booking fee revenue generated in certain European territories. In
consideration of the termination of such revenue sharing obligations, we agreed
to pay KLM and SAirGroup, in four annual installments, the aggregate amounts of
$14.8 million and $22.4 million, respectively.

SERVICES AGREEMENTS

Under our services agreement with United Airlines, US Airways and Air
Canada, these airlines provide certain marketing and other services designed to
assist us in growing the Apollo business. During the sixth year following the
consummation of our initial public offering, we will pay these airline
stockholders a fee of up to $200.0 million, on a present value basis as of the
date of the agreement, based on improvements in our air booking fee revenue over
the five-year period immediately following our acquisition of Apollo Travel
Services, as measured by the weighted average annual air segment growth rate and
the weighted average annual price increase rate over such period.

In connection with our acquisitions of Traviswiss and Galileo Nederland, we
entered into a services agreement with each of SAirGroup and KLM under which
each of them provides services designed to assist us in growing the business of
Traviswiss and Galileo Nederland, respectively. During the sixth year following
the effective dates of these agreements, we will pay SAirGroup a fee of up to
$6.8 million and we will pay KLM a fee of up to $4.7 million, each on a present
value basis as of the dates of the agreements and based on improvements in our
air booking fee revenue over the five year period immediately following the
acquisitions, measured in a manner similar to that described in the preceding
paragraph.

In connection with our acquisition of Galileo Canada, we entered into a
services agreement with Air Canada under which Air Canada will provide services
designed to assist us in growing the business of Galileo Canada. During the
sixth and eighth years following the effective date of the agreement, we will
pay Air Canada a fee of up to $20.5 million, on a present value basis as of the
date of the agreement, based on improvements in our air booking fee revenue over
the five and seven year period immediately following the acquisition.

NON-COMPETITION AGREEMENTS

Our non-competition agreements with each of the airline stockholders
prohibit them and their affiliates from competing with us in providing
reservations services to neutral travel agencies. However, the non-competition
agreements include certain exceptions that permit the airline stockholders and
their affiliates to, among other things, provide and market certain reservations
services to certain customers of the airline stockholders.

These agreements may be terminated upon 12 months' notice given at any time
after July 30, 1999, or upon six months' notice after July 30, 2000, provided
that the agreements may not be terminated while the stockholder controls one of
our NDCs. Each non-competition agreement also terminates automatically at such
time as the relevant airline stockholder ceases to own any shares of our common
stock,

37
<PAGE> 37

although the agreement will continue to be binding on any NDC in which such
airline stockholder owns an interest.

In the event any airline stockholder that has elected a director to our
board of directors in accordance with the provisions of the special voting
preferred stock gives notice of its intention to terminate its non-competition
agreement, such airline stockholder will no longer be entitled to have a
director on our board of directors.

REGISTRATION RIGHTS AGREEMENT

Under our registration rights agreement with the airline stockholders, each
continuing airline stockholder may, on two occasions after this offering, demand
registration under the Securities Act of shares of our common stock held by it.
We may postpone such a demand under certain circumstances. In addition, if we
register shares of our common stock under the Securities Act, subject to certain
limitations, each airline stockholder may request that we include shares of our
common stock owned by it in such registration.

STOCKHOLDERS' AGREEMENT

Under our stockholders' agreement with our airline stockholders and certain
parties related to them, they will vote their shares and take such other actions
as are necessary to cause our board of directors to:

- with limited exceptions, consist of 13 members,

- be divided into three classes,

- following this offering, consist of four directors elected by the airline
stockholders, three management directors and six independent directors
and

- designate nominating, audit and compensation committees.

The stockholders' agreement contains certain limitations on the transfer of
shares of special voting preferred stock and common stock, including provisions
granting the airline stockholders, their affiliates and certain transferees the
right of first refusal in the event that any of these persons proposes to sell
or transfer its shares of our common stock to another of these persons or an
affiliate thereof. In addition, the stockholders' agreement prohibits these
persons from transferring shares of our common stock to any affiliate without
such affiliate executing a counterpart of the stockholders' agreement. The
stockholders' agreement also restricts the ability of any of these persons to
acquire more than 50% of our capital stock entitled to vote in the election of
directors. The stockholders' agreement will terminate on the tenth anniversary
of our initial public offering.

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<PAGE> 38

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock by the selling stockholders and the other airline
stockholders that own in excess of 5% of our common stock. The term
"beneficially owned" is used in the table as defined in Rule 13d-3 of the
Exchange Act. In each case, the shares are owned directly by subsidiaries of the
relevant airline. The table lists only the corporate names of the airlines.

The percentages of outstanding common stock were calculated based on
104,806,681 shares outstanding as of May 3, 1999. The table assumes that the
U.S. underwriters will exercise their over-allotment option to purchase
4,790,500 shares from certain of the selling stockholders. If this option is not
exercised in full and we purchase shares from the selling stockholders, the
number of outstanding shares after the offering will be reduced and the
percentages of outstanding common stock owned by each stockholder after the
offering will increase. We would pay the price per share, net of underwriting
discounts and commissions, shown on the cover page of this prospectus for any
shares we purchase. These purchases would occur no later than the second
business day following the expiration of the over-allotment option.

<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON NUMBER OF SHARES
STOCK BENEFICIALLY STOCK BENEFICIALLY OF SPECIAL VOTING
OWNED PRIOR OWNED AFTER PREFERRED STOCK
TO THE OFFERING NUMBER OF SHARES THE OFFERING BENEFICIALLY
----------------------- OF COMMON STOCK ----------------------- OWNED AFTER
BENEFICIAL OWNER NUMBER PERCENTAGE BEING OFFERED NUMBER PERCENTAGE THE OFFERING
- ---------------- ---------- ---------- ---------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
United Air Lines, Inc...... 33,440,000 31.9% 17,500,000 15,940,000 15.2% 2
Koninklijke Luchtvaart
Maatschappij N.V.
(KLM).................... 10,639,200 10.2 10,639,200 -- -- --
British Airways Plc........ 7,000,400 6.7 -- 7,000,400 6.7 1
SAirGroup(Ltd.)............ 7,000,400 6.7 -- 7,000,400 6.7 1
US Airways, Inc. .......... 7,000,400 6.7 7,000,400 -- -- --
Alitalia-Linee Aeree
Italiane S.p.A. ......... 1,598,960 1.5 1,500,000 98,960 * --
Transportes Aereos
Portugueses S.A. ........ 88,000 * 88,000 -- -- --
</TABLE>

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

* Less than 1%.

The U.S. underwriters' over-allotment option includes the following number
of shares being offered by the airline stockholders controlled by the following
airlines:

<TABLE>
<S> <C>
United Airlines.............................. 2,820,102
KLM.......................................... 1,714,493
Alitalia..................................... 241,723
TAP Air Portugal............................. 14,182
</TABLE>

These selling stockholders will participate proportionately in any sales
pursuant to a partial exercise of the over-allotment option.

As a result of the selling stockholders controlled by KLM and US Airways
selling all of their common stock in the offering, we will redeem the shares of
special voting preferred stock currently held by these stockholders. KLM's
nominee to our board of directors, Frank H. Rovekamp, and US Airways' nominee,
Thomas A. Mutryn, will resign following this offering. In addition, as a result
of the selling stockholder controlled by United Airlines reducing its ownership
of common stock to below 25%, we will redeem one of the three shares of special
voting preferred stock currently held by this stockholder and one of its
nominees will also resign. Following this offering, the remaining directors will
elect independent replacement directors to fill the vacancies created by these
resignations.

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<PAGE> 39

DESCRIPTION OF CAPITAL STOCK

The following descriptions are summaries of the material terms of our
certificate of incorporation and bylaws. Reference is made to the more detailed
provisions of, and such descriptions are qualified in their entirety by
reference to, our certificate of incorporation and bylaws, copies of which are
filed with the SEC as exhibits to our annual report on Form 10-K which is
incorporated by reference into this prospectus, and applicable law.

Our authorized capital stock consists of 250,000,000 shares of common
stock, 7 shares of special voting preferred stock and 25,000,000 shares of
preferred stock.

COMMON STOCK

As of May 3, 1999, we had 104,806,681 shares of common stock outstanding.

Voting Rights. Holders of common stock are entitled to one vote per share
in elections of directors and all other matters to be voted upon by
stockholders.

Dividends. Subject to preferences that may be applicable to any
outstanding preferred stock, the holders of common stock are entitled to receive
ratably dividends when, as and if declared by our board of directors.

Liquidation. Subject to prior distribution rights of holders of special
voting preferred stock or other preferred stock outstanding, upon our
dissolution, liquidation or winding up, the holders of common stock are entitled
to share equally and ratably in the assets available for distribution after
payments are made to our creditors.

Listing. Our common stock is listed on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "GLC."

Registrar and Transfer Agent. Harris Trust and Savings Bank is the
registrar and transfer agent for our common stock.

Other. The common stock has no preemptive, subscription, redemption or
conversion rights, and holders of common stock are not liable for further call
or assessment. All of our outstanding shares of common stock, including the
shares being sold by the selling stockholders, are validly issued, fully paid
and non-assessable.

SPECIAL VOTING PREFERRED STOCK

Following the sale of the shares of common stock by the selling
stockholders and our redemption of three shares of special voting preferred
stock as a result of that sale, we will have four series of special voting
preferred stock outstanding, each series consisting of one share.

Voting Rights. Each series of special voting preferred stock, voting
separately as a single series, will generally be entitled to elect one director
to the Board of Directors so long as the holder of the share of special voting
preferred stock and its affiliates also own "relevant shares" (as defined in the
next paragraph) representing, with limited exceptions, at least 5% of the total
outstanding shares of common stock. However:

- a holder of shares of two or more series of special voting preferred
stock will only be entitled to elect two directors if that holder and its
affiliates also own relevant shares representing at least 15% of the
total outstanding shares of common stock and

- a holder of shares of three or more series of special voting preferred
stock will only be entitled to elect three directors if that holder and
its affiliates also own relevant shares representing at least 25% of the
total outstanding shares of common stock outstanding.

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<PAGE> 40

"Relevant shares" means shares of common stock:

- that were beneficially owned by the airline stockholders immediately
after our initial public offering,

- transferred or acquired in accordance with the provisions of our
stockholders' agreement,

- issued by way of a stock split or

- issued as (or issuable upon the conversion or exercise of any warrant,
rights, option or other convertible security which is issued as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of, the common stock referred to in the three previous bullet
points.

Transfer Restrictions. The holder of a share of special voting preferred
stock may transfer such share only if:

- the transfer is made in connection with a simultaneous transfer of
relevant shares to the transferee,

- the transferee was an airline stockholder immediately following our
initial public offering or is a third party that is or becomes a party to
our stockholders' agreement and a non-competition agreement and

- following the transfer, the transferee and its affiliates, in the
aggregate, would hold relevant shares representing at least 5% (if the
transferee is receiving one share) of the then outstanding shares of our
common stock.

Only shares of special voting preferred stock transferred as described above
will continue to have special voting rights.

Redemption. We must immediately and automatically redeem any share of
special voting preferred stock at a redemption price of $100 per share, to the
extent we have funds legally available therefor, if the holder:

- is not entitled to elect a director to our board of directors,

- is no longer subject to the terms of a non-competition agreement or

- has given us notice of its intention to terminate its non-competition
agreement.

Dividends. No holder is entitled to receive dividends on its share of
special voting preferred stock.

Liquidation Rights. Generally, holders will be entitled to receive $100
per share in the event of our liquidation, dissolution or winding-up before any
payment or distribution of our assets or proceeds from our assets is made to or
set apart for the holders of any class or series of our junior stock, such as
the common stock. Holders of special voting preferred stock will not be entitled
to any further payment.

PREFERRED STOCK

Our board of directors has the authority to issue one or more series of
preferred stock and to fix their rights, designations, preferences and
restrictions, including voting powers, dividend rights, liquidation preferences,
redemption rights and conversion or exchange privileges, without further vote or
action by our stockholders. Our issuance of preferred stock may have the effect
of delaying, deferring or preventing a change in control of our company and may
adversely affect the voting and other rights of the holders of common stock. At
present our board of directors has no intention of issuing any shares of
preferred stock.

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<PAGE> 41

CORPORATE OPPORTUNITIES POLICY

Our certificate of incorporation provides that the airline stockholders
have no duty to refrain from engaging in the same or similar activities or lines
of business as us, except as they may otherwise agree in writing. In addition,
no airline stockholder nor any of its officers or directors (except as described
in the next paragraph) will be liable to us or our stockholders for breach of
any fiduciary duty because of any of its competitive activities. If any airline
stockholder acquires knowledge of a potential transaction or matter which may be
a corporate opportunity for both the airline stockholder and us, the airline
stockholder will have no duty to communicate or offer the corporate opportunity
to us. The airline stockholder also will not be liable to us or our stockholders
for breach of any fiduciary duty as a stockholder because it pursues or acquires
such corporate opportunity for itself, directs such corporate opportunity to
another person, or does not communicate information regarding such corporate
opportunity to us.

If one of our directors or officers who is also a director or officer of an
airline stockholder acquires knowledge of a potential transaction or matter
which may be a corporate opportunity for both us and the airline stockholder,
this director or officer will be deemed to have fully satisfied his or her
fiduciary duty to us and our stockholders if he or she acts in a manner
consistent with the following policy:

- A corporate opportunity offered to any person who is one of our officers
and who is also a director but not an officer of an airline stockholder
will belong to us.

- A corporate opportunity offered to any person who is one of our directors
but not an officer, and who is also a director, officer or employee of an
airline stockholder, will belong to us if the opportunity is expressly
offered to such person primarily in his or her capacity as one of our
directors. Otherwise, the corporate opportunity will belong to the
airline stockholder.

- A corporate opportunity offered to any person who is both one of our
officers and an officer of an airline stockholder will belong to us if
the opportunity is expressly offered to such person primarily in his or
her capacity as one of our officers. Otherwise, the corporate opportunity
will belong to the airline stockholder.

For purposes of this corporate opportunities provision, the Chairman of our
board of directors or of one of its committees will not be deemed to be one of
our officers because he or she holds that position unless that person is also a
full-time employee.

Our certificate of incorporation also provides that, until the time that
the airline stockholders cease to beneficially own common stock representing at
least 20% of the total voting power of all classes of our outstanding common
stock, the affirmative vote of the holders of more than 80% of the total voting
power of all classes of our outstanding common stock will be required to alter,
amend or repeal this corporate opportunities provision in a manner adverse to
the interests of the airline stockholders.

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<PAGE> 42

MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

GENERAL

The following is a general discussion of United States federal income and
estate tax consequences of the ownership and disposition of our common stock
that may be relevant to you if you are a "non-U.S. holder." For purposes of this
summary, a non-U.S. holder is a beneficial owner of our common stock that is,
for United States federal income tax ("federal tax") purposes, (1) a nonresident
alien individual, (2) a foreign corporation, (3) a nonresident alien fiduciary
of a foreign estate or trust or (4) a foreign partnership one or more of the
members of which is, for U.S. federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.

This discussion does not address all aspects of United States federal
income and estate taxation that may be relevant to you in light of your
particular circumstances, and does not address any foreign, state or local tax
consequences. Furthermore, this discussion is based on provisions of the
Internal Revenue Code, Treasury regulations and administrative and judicial
interpretations as of the date hereof. All of these are subject to change,
possibly with retroactive effect, or different interpretations. If you are
considering buying our common stock, you should consult your own tax advisor
about current and possible future tax consequences of holding and disposing of
our common stock in your particular situation.

DISTRIBUTIONS

Dividends paid on our common stock generally will constitute dividends for
federal tax purposes to the extent paid from our current or accumulated earnings
and profits, as determined under federal tax principles. To the extent such
dividends exceed our current or accumulated earnings and profits, the dividends
will constitute a return of capital that is applied against and reduces your
basis in our common stock (but not below zero), and then will be treated as gain
from the sale of the stock. Dividends paid to a non-U.S. holder that are not
effectively connected with a United States trade or business of the non-U.S.
holder will (to the extent paid out of earnings and profits) be subject to
United States withholding tax at a 30 percent rate or, if a tax treaty applies,
a lower rate specified by the treaty. To receive a reduced treaty rate, a
non-U.S. holder must furnish to us or our paying agent a duly completed Form
1001 or Form W-8BEN (or substitute form) certifying to its qualification for
such rate.

Currently, withholding generally is imposed on the gross amount of a
distribution, regardless of whether we have sufficient earnings and profits to
cause the distribution to be a dividend for federal tax purposes. However,
withholding on distributions made after December 31, 2000 may be on less than
the gross amount of the distribution if the distribution exceeds a reasonable
estimate made by us of our accumulated and current earnings and profits.

Dividends that are effectively connected with the conduct of a trade or
business within the United States of a non-U.S. holder and, if a tax treaty
applies, are attributable to a United States permanent establishment of the
non-U.S. holder, are exempt from United States federal withholding tax, provided
that the non-U.S. holder furnishes to us or our paying agent a duly completed
Form 4224 or Form W-8ECI (or substitute form) certifying the exemption. However,
dividends exempt from United States withholding because they are effectively
connected or they are attributable to a United States permanent establishment
are subject to federal tax on a net income basis at the regular graduated
federal tax rates. Any such effectively connected dividends received by a
foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30 percent rate or a lower rate specified
by an applicable income tax treaty.

Under current United States Treasury regulations, dividends paid before
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of the country of address for purposes of the withholding
discussed above and for purposes of determining the applicability of a tax

43
<PAGE> 43

treaty rate. However, United States Treasury regulations applicable to dividends
paid after December 31, 2000 eliminate this presumption, subject to certain
transition rules.

For dividends paid after December 31, 2000, a non-U.S. holder generally
will be subject to United States backup withholding tax at a 31 percent rate
under the backup withholding rules described below, rather than at a 30 percent
rate or a reduced rate under an income tax treaty, as described above, unless
the non-U.S. holder complies with certain Internal Revenue Service ("IRS")
certification procedures or, in the case of payments made outside the United
States with respect to an offshore account, certain IRS documentary evidence
procedures. Further, to claim the benefit of a reduced rate of withholding under
a tax treaty for dividends paid after December 31, 2000, a non-U.S. holder must
comply with certain modified IRS certification requirements. Special rules also
apply to dividend payments made after December 31, 2000 to foreign
intermediaries, United States or foreign wholly owned entities that are
disregarded for federal tax purposes and entities that are treated as fiscally
transparent in the United States, the applicable income tax treaty jurisdiction,
or both. You should consult your own tax advisor concerning the effect, if any,
of the rules affecting post-December 31, 2000 dividends on your possible
investment in our common stock.

A non-U.S. holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund along with the required information with
the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to federal tax with respect
to gain recognized on a sale or other disposition of our common stock unless one
of the following applies:

- The gain is effectively connected with a trade or business of the
non-U.S. holder in the United States and, if a tax treaty applies, the
gain is attributable to a United States permanent establishment
maintained by the non-U.S. holder. In this case, the non-U.S. holder
will, unless an applicable treaty provides otherwise, be taxed on its net
gain derived from the sale under regular graduated federal tax rates. If
the non-U.S. holder is a foreign corporation, it may be subject to an
additional branch profits tax equal to 30 percent of its effectively
connected earnings and profits within the meaning of the Internal Revenue
Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable income tax treaty and duly
demonstrates such qualification.

- The non-U.S. holder is an individual, holds our common stock as a capital
asset, is present in the United States for 183 or more days in the
taxable year of the disposition, and certain other conditions are met. In
this case, the non-United States holder will be subject to a flat 30
percent tax on the gain derived from the sale, which may be offset by
certain United States capital losses.

- We are or have been a "United States real property holding corporation"
for federal tax purposes at any time during the shorter of the five-year
period ending on the date of the disposition or the period during which
the non-United States holder held our common stock. We believe that we
never have been and are not currently a United States real property
holding corporation for federal tax purposes. Although we consider it
unlikely based on our current business plans and operations, we may or
may not become a United States real property holding corporation in the
future. Even if we were to become a United States real property holding
corporation, any gain recognized by a non-U.S. holder still would not be
subject to federal tax if our common stock were considered to be
"regularly traded on an established securities market" and the non-U.S.
holder did not own, actually or constructively, at any time during the
shorter of the periods described above, more than five percent of a class
of our common stock.

FEDERAL ESTATE TAX

Common stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.

44
<PAGE> 44

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under United States Treasury regulations, we must report annually to the
IRS and to each non-U.S. holder the amount of dividends paid to such holder and
the tax withheld with respect to such dividends. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced by an applicable
income tax treaty. Pursuant to an applicable tax treaty, information may also be
made available to the tax authorities in the country in which the non-United
States holder resides.

United States federal backup withholding generally is a withholding tax
imposed at the rate of 31 percent on certain payments to persons that fail to
furnish certain required information. Backup withholding generally will not
apply to dividends paid before January 1, 2001 to non-United States holders. See
the discussion under "Distribution" above for rules regarding reporting
requirements to avoid backup withholding on dividends paid after December 31,
2000.

As a general matter, information reporting and backup withholding will not
apply to a payment by or through a foreign office of a foreign broker of the
proceeds of a sale of our common stock effected outside the United States.
However, information reporting requirements, but not backup withholding, will
apply to a payment by or through a foreign office of a broker of the proceeds of
a sale of our common stock effected outside the United States if that broker:

- is a United States person for federal tax purposes,

- is a foreign person that derives 50 percent or more of its gross income
for certain periods from the conduct of a trade or business in the United
States,

- is a "controlled foreign corporation" as defined in the Internal Revenue
Code or

- is a foreign partnership with certain United States connections (for
payments made after December 31, 2000).

Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain conditions are met or the holder otherwise establishes an
exemption.

Payment by or through a United States office of a broker of the proceeds of
a sale of our common stock is subject to both backup withholding and information
reporting unless the holder certifies to the payor in the manner required as to
its status as a non-U.S. holder under penalties of perjury or otherwise
establishes an exemption.

Amounts withheld under the backup withholding rules do not constitute a
separate federal tax. Rather, any amounts withheld under the backup withholding
rules will be refunded or allowed as a credit against the holder's federal tax
liability, if any, provided the required information or appropriate claim for
refund is filed with the IRS.

THE FOREGOING DISCUSSION IS A SUMMARY OF CERTAIN UNITED STATES FEDERAL INCOME
AND ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF OUR
COMMON STOCK BY NON-U.S. HOLDERS. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF OWNERSHIP AND
DISPOSITION OF OUR COMMON STOCK, INCLUDING THE EFFECT OF ANY STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS.

45
<PAGE> 45

SHARES ELIGIBLE FOR FUTURE SALE

GENERAL

The shares of our common stock sold in this offering will be freely
tradable without restriction under the Securities Act of 1933, except for any
such shares which may be acquired by our "affiliates" as that term is defined in
Rule 144 under the Securities Act, which shares will remain subject to the
resale limitations of Rule 144.

The shares of our common stock that will continue to be held by our airline
stockholders after this offering constitute "restricted securities" within the
meaning of Rule 144, and will be eligible for sale in the open market following
the offering, subject to the contractual lockup provisions and the requirements
of Rule 144 described below.

In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned shares for at least one
year is entitled to sell within any three-month period a number of shares that
does not exceed the greater of (1) 1% of the then outstanding shares of common
stock, and (2) the average weekly trading volume during the four calendar weeks
preceding the sale, subject to manner of sale requirements, and depending on the
amount sold, the filing of a Form 144 with respect to the sale. A person, or
persons whose shares are aggregated, who has not been our affiliate at any time
during the 90 days immediately preceding the sale who has beneficially owned the
shares for at least two years is entitled to sell shares pursuant to Rule 144(k)
without regard to the volume limitations.

We are unable to estimate the number of shares that will be sold under Rule
144, since this will depend on the market price for our common stock, the
circumstances of the sellers and other factors. Any future sale of substantial
amounts of our common stock in the open market may adversely affect the market
price of the common stock.

We, the selling stockholders, certain airline stockholders, our directors
and our executive officers have each agreed, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the underwriters, not to sell
or otherwise dispose of any shares of our common stock during the period ending
90 days after the date of this prospectus, subject to certain exceptions.

REGISTRATION RIGHTS AGREEMENT

Under our registration rights agreement with the airline stockholders, each
continuing airline stockholder may, on two occasions after this offering, demand
registration under the Securities Act of shares of our common stock held by it.
We may postpone such a demand under certain circumstances. In addition, if we
register shares of our common stock under the Securities Act, subject to
limitations, each airline stockholder may request that we include shares of our
common stock owned by it in such registration. We do not currently have any
other registration rights outstanding.

46
<PAGE> 46

UNDERWRITERS

Under the terms and conditions of the Underwriting Agreement dated the date
of this prospectus, the U.S. underwriters named below, for whom Morgan Stanley &
Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney Inc. are acting as
U.S. representatives, and the international underwriters named below for whom
Morgan Stanley & Co. International Limited, Merrill Lynch International, ABN
AMRO Rothschild, Lehman Brothers International (Europe) and Salomon Brothers
International Limited are acting as international representatives, have
severally agreed to purchase, and the selling stockholders have agreed to sell
to them, severally, the number of shares indicated below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated......................... 6,337,408
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ 6,337,408
ABN AMRO Incorporated..................................... 2,816,621
Lehman Brothers Inc. ..................................... 2,816,621
Salomon Smith Barney Inc. ................................ 2,816,622
Arnhold and S. Bleichroeder, Inc. ........................ 125,000
Banc of America Securities LLC............................ 300,000
Bear, Stearns & Co. Inc. ................................. 300,000
BT Alex. Brown Incorporated............................... 300,000
Chatsworth Securities LLC................................. 125,000
Credit Lyonnais Securities (USA) Inc. .................... 300,000
A.G. Edwards & Sons, Inc. ................................ 300,000
EVEREN Securities, Inc. .................................. 125,000
First Union Capital Markets............................... 125,000
Goldman, Sachs & Co. ..................................... 300,000
Guzman & Company.......................................... 125,000
Janney Montgomery Scott Inc. ............................. 125,000
Edward D. Jones & Co., L.P. .............................. 300,000
Loop Capital Markets...................................... 125,000
McDonald & Company Securities, Inc. ...................... 125,000
J.P. Morgan Securities Inc. .............................. 300,000
Muriel Siebert & Co., Inc. ............................... 125,000
Nesbitt Thomson Bongard Inc. ............................. 300,000
SG Cowen Securities Corporation .......................... 300,000
Wasserstein Perella Securities, Inc. ..................... 300,000
----------
Subtotal............................................... 25,549,680
----------
</TABLE>

47
<PAGE> 47

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ----------
<S> <C>
International Underwriters:
Morgan Stanley & Co. International Limited................ 1,728,210
Merrill Lynch International............................... 1,728,210
ABN AMRO Rothschild....................................... 777,000
Lehman Brothers International (Europe).................... 777,000
Salomon Brothers International Limited.................... 777,000
BT Alex. Brown International, a division of Bankers Trust
International.......................................... 60,000
Cazenove & Co. ........................................... 60,000
Credit Lyonnais Securities................................ 60,000
HSBC Investment Bank PLC.................................. 60,000
J.P. Morgan Securities Ltd. .............................. 60,000
Mediobanca-Banca di Credito Finanziario S.p.A. ........... 60,000
MeesPierson N.V. ......................................... 60,000
Societe Generale.......................................... 60,000
UBS AG, acting through its division Warburg Dillon Read... 60,000
Westdeutsche Landesbank Girozentrale ..................... 60,000
----------
Subtotal............................................... 6,387,420
----------
Total............................................. 31,937,100
==========
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from the selling stockholders and subject to prior
sale. The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares are conditioned on the
delivery of legal opinions by their counsel. The underwriters are obligated to
purchase all of the shares except those covered by the U.S. underwriters'
over-allotment option described below, if any are purchased.

In the Agreement between U.S. and International Underwriters, each U.S.
underwriter has represented and agreed that (1) it is not purchasing any shares
for the account of anyone other than a United States or Canadian person and (2)
it has not offered or sold, and will not offer or sell any shares or distribute
any prospectus relating to the shares outside the United States or Canada or to
anyone other than a United States or Canadian person. Each international
underwriter has represented and agreed that (1) it is not purchasing any shares
for the account of any United States or Canadian person and (2) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
or distribute any prospectus relating to the shares in the United States or
Canada or to any United States or Canadian person. For any underwriter that is
both a U.S. underwriter and an international underwriter, these representations
and agreements (1) made by it in its capacity as a U.S. underwriter apply only
to it in its capacity as a U.S. underwriter and (2) made by it in its capacity
as an international underwriter apply only to it in its capacity as an
international underwriter. The limitations described above do not apply to,
among other things, stabilization transactions or to other transactions
specified in the Agreement between U.S. and International Underwriters. As used
in this section, "United States or Canadian person" means any national or
resident of the United States or Canada, or any corporation, pension,
profit-sharing or other trust or other entity organized under the laws of the
United States or Canada or of any political subdivision of the United States or
Canada, other than a branch located outside the United States and Canada of any
United States or Canadian person. "United States or Canadian Person" includes
any United States or Canadian branch of an entity who is otherwise not a United
States or Canadian person.

48
<PAGE> 48

In the Agreement between U.S. and International Underwriters, sales of
shares may be made between U.S. underwriters and international underwriters. The
price of any shares so sold will be the public offering price set forth on the
cover page hereof, in United States dollars, less an amount not greater than
$.73 a share.

In the Agreement between U.S. and International Underwriters, each U.S.
underwriter has represented that it has not offered or sold, and has agreed not
to offer or sell, any shares in any province or territory of Canada or to, or
for the benefit of, any resident of any province or territory of Canada in
contravention of the securities laws of Canada. Each U.S. underwriter has
represented that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which the offer or sale is made. Each U.S.
underwriter has further agreed to send to any dealer who purchases from it any
of the shares a notice stating that, by purchasing the shares, the dealer agrees
that any offer or sale of shares in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or territory
of Canada in which the offer or sale is made. Each dealer will deliver to any
other dealer to whom it sells any shares a notice containing substantially the
same Canadian selling restrictions.

In the Agreement between U.S. and International Underwriters, each
international underwriter has represented and agreed that:

- it has not offered or sold and, prior to the date six months after the
closing date for the sale of the shares to the international
underwriters, will not offer or sell, any shares to persons in the United
Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments for the purposes
of their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995,

- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and

- it has and will distribute any document relating to the shares in the
United Kingdom only to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom such document
may otherwise lawfully be distributed.

In the Agreement between U.S. and International Underwriters, each
international underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell in Japan or to or for the account of
any resident of Japan any of the shares. This limitation does not apply to
offers or sales to Japanese international underwriters or dealers and offers and
sales pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law. Each international underwriter has further agreed to
send to any dealer who purchases from it any of the shares a notice stating
that, by purchasing the shares, the dealer agrees that any offer or sale of the
shares in Japan will be made only to Japanese international underwriters or
dealers under an exemption from the registration requirements of the Securities
and Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each dealer will send to any other dealer to whom it sells any
shares a notice containing substantially the same Japanese selling restrictions.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus. The underwriters may also offer the shares to
securities dealers at a price that represents a concession not in excess of $.73
a share under the public offering price. Any underwriter may allow, and dealers
may reallow, a concession not in excess of $.10 a share to other underwriters or
to securities dealers. After the initial offering of the shares of

49
<PAGE> 49

common stock, the offering price and other selling terms may from time to time
be changed by the representatives.

The U.S. underwriters have an option to purchase from certain of the
selling stockholders up to an aggregate of 4,790,500 additional shares of common
stock at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The U.S. underwriters'
option is exercisable for 30 days from the date of this prospectus. The U.S.
underwriters may exercise this option only for the purpose of covering
over-allotments, if any, made in connection with this offering. If this option
is exercised, each U.S. underwriter will become obligated to purchase the same
percentage of additional shares of common stock as set forth in the preceding
table. If the U.S. underwriters' option is exercised in full, the total price to
the public for this offering would be $1,652,742,000, the total underwriting
discounts and commissions would be $44,458,760 and the total proceeds to the
selling stockholders would be $1,608,283,240.

The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered hereby.

Each of Galileo, the selling stockholders, certain other airline
stockholders, our directors and our executive officers has agreed, subject to
limited exceptions relating primarily to the issuance of options or common stock
under our employee or director benefit plans, that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, they
will not:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock or

- enter into any swap or other arrangement that transfers to another
person, in whole or in part, any of the economic consequences of
ownership of the common stock,

during the period ending 90 days after the date of this prospectus, whether any
transaction described above is to be settled by delivery of common stock or
other securities, in cash or otherwise.

In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of our common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in our common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of our common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
shares in the offering, if the syndicate repurchases previously distributed
shares in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. The underwriters have reserved the right to reclaim
selling concessions in order to encourage underwriters and dealers to distribute
the common stock for investment, rather than for short-term profit taking.
Increasing the proportion of the offering held for investment may reduce the
supply of common stock available for short-term trading. Any of these activities
may stabilize or maintain the market price of our common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.

From time to time, certain of the underwriters have provided, and may
continue to provide, investment banking services to us.

We, the selling stockholders and the underwriters have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.

50
<PAGE> 50

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered by this
prospectus will be passed upon for us by Shearman & Sterling, New York, New
York. Certain legal matters relating to this offering will be passed upon for
the underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

Our consolidated financial statements as of December 31, 1998 and 1997, and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been audited by KPMG LLP, independent auditors, as stated
in their report appearing in this prospectus, and are included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements, and other information with the SEC.
These filings are available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any of these documents at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on
the public reference rooms and their copy charges. You may also inspect our SEC
reports and other information at the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.

This prospectus is part of a registration statement that we filed with the
SEC. This prospectus, which is part of the registration statement, does not
contain all of the information set forth in the registration statement, certain
parts of which are omitted in accordance with the SEC's rules and regulations.
You can obtain the full registration statement from the SEC as indicated above,
or from us.

The SEC allows us to "incorporate by reference" the information we file
with the SEC. This permits us to disclose important information to you by
referring to these filed documents. Any information referred to in this way is
considered part of this prospectus, and any information that we file with the
SEC after the date of this prospectus will automatically be deemed to update and
supersede this information. We incorporate by reference the following documents
that have been filed with the SEC:

- our annual Report on Form 10-K for the year ended December 31, 1998 and
all amendments thereto,

- our quarterly Report on Form 10-Q for the quarter ended March 31, 1999
and all amendments thereto and

- the description of our common stock contained in our registration
statement on Form 8-A, filed with the SEC on July 1, 1997.

We also incorporate by reference any documents we file with the SEC after
the date of this prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until the termination of the offering of the securities made by
this prospectus.

We will provide without charge upon written or oral request, a copy of any
or all of the documents that are incorporated by reference into this prospectus.
Requests should be directed to Investor Relations, Galileo International, Inc.,
9700 West Higgins Road, Rosemont, Illinois 60018 (telephone number
847-518-4000).

51
<PAGE> 51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-6
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996.............. F-7
Notes to Consolidated Financial Statements.................. F-8

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998......................... F-26
Condensed Consolidated Statements of Income for the quarters
ended March 31, 1999 and 1998 (unaudited)................. F-27
Condensed Consolidated Statements of Cash Flows for the
quarters ended March 31, 1999 and 1998 (unaudited)........ F-28
Condensed Consolidated Statement of Stockholders' Equity for
the quarter ended March 31, 1999 (unaudited).............. F-29
Notes to Condensed Consolidated Financial Statements........ F-30
</TABLE>

F-1
<PAGE> 52

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Galileo International, Inc.:

We have audited the accompanying consolidated balance sheets of Galileo
International, Inc. and subsidiaries (the "Company"), formerly Galileo
International Partnership through July 30, 1997, as of December 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the years in the three-year period ending December
31, 1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 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 financial position of Galileo
International, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

KPMG LLP

Chicago, Illinois
February 1, 1999

F-2
<PAGE> 53

GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 9,828 $ 19,367
Accounts receivable:
Trade receivables and others........................... 159,225 154,263
Due from affiliates.................................... 32,380 33,156
---------- ----------
191,605 187,419
Less allowances........................................ 13,747 22,012
---------- ----------
Net accounts receivable................................... 177,858 165,407
Deferred tax asset........................................ 31,885 19,167
Prepaid expenses.......................................... 11,711 9,643
Other current assets...................................... 12,245 10,691
---------- ----------
Total current assets........................................ 243,527 224,275
Property and equipment, at cost:
Land...................................................... 6,470 6,470
Buildings and improvements................................ 77,210 74,038
Equipment................................................. 392,299 330,112
---------- ----------
475,979 410,620
Less accumulated depreciation............................. 281,010 221,439
---------- ----------
Net property and equipment.................................. 194,969 189,181
Computer software, at cost.................................. 413,212 420,458
Less accumulated amortization............................. 223,965 195,883
---------- ----------
Net computer software....................................... 189,247 224,575
Intangible assets, at cost:
Customer list............................................. 405,600 405,600
Goodwill.................................................. 197,676 158,446
Other..................................................... 56,535 56,500
---------- ----------
659,811 620,546
Less accumulated amortization............................. 50,005 14,359
---------- ----------
Net intangible assets....................................... 609,806 606,187
Other noncurrent assets..................................... 53,531 24,279
---------- ----------
$1,291,080 $1,268,497
========== ==========
</TABLE>

(continued)

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 54
GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade payables and other............................... $ 30,876 $ 49,649
Due to affiliates...................................... 16,025 7,305
---------- ----------
46,901 56,954
Accrued commissions....................................... 32,424 31,175
Accrued restructuring costs............................... 29,457 13,786
Accrued compensation and benefits......................... 24,584 15,077
Income taxes payable...................................... 11,873 1,721
Other accrued taxes....................................... 14,580 12,724
Other accrued liabilities................................. 66,031 62,008
Capital lease obligations, current portion................ 5,976 7,918
---------- ----------
Total current liabilities................................... 231,826 201,363
Pension and postretirement benefits......................... 55,982 44,399
Deferred tax liability...................................... 25,404 19,618
Other noncurrent liabilities................................ 42,969 41,645
Capital lease obligations, less current portion............. 22,752 27,776
Long-term debt.............................................. 69,520 250,000
---------- ----------
Total liabilities........................................... 448,453 584,801
Stockholders' equity:
Special voting preferred stock: $.01 par value; 7 shares
authorized; 7 shares issued and outstanding............ -- --
Preferred stock: $.01 par value; 25,000,000 shares
authorized; no shares issued........................... -- --
Common stock: $.01 par value; 250,000,000 shares authorized;
104,930,750 and 104,799,700 shares issued; 104,761,650 and
104,799,700 shares outstanding............................ 1,049 1,048
Additional paid-in capital.................................. 668,466 663,688
Retained earnings........................................... 184,575 18,832
Unamortized restricted stock grants......................... (3,559) --
Accumulated other comprehensive income...................... (1,139) 128
Common stock held in treasury, at cost; 169,100 shares in
1998...................................................... (6,765) --
---------- ----------
Total stockholders' equity.................................. 842,627 683,696
---------- ----------
$1,291,080 $1,268,497
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 55

GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Revenues:
Electronic global distribution services.......... $ 1,342,705 $ 1,180,114 $ 1,050,635
Information services............................. 138,113 75,989 37,624
------------ ----------- -----------
1,480,818 1,256,103 1,088,259
Operating expenses:
Cost of operations............................... 568,271 385,298 254,600
Commissions, selling and administrative.......... 554,509 639,164 658,320
Special charges.................................. 26,460 20,111 --
------------ ----------- -----------
1,149,240 1,044,573 912,920
------------ ----------- -----------
Operating income................................... 331,578 211,530 175,339
Other income (expense):
Interest expense, net............................ (9,629) (8,842) (8,060)
Other, net....................................... 3,532 2,925 (181)
------------ ----------- -----------
Income before income taxes......................... 325,481 205,613 167,098
Income taxes:
Income taxes..................................... 129,867 28,641 1,882
Initial deferred income taxes.................... -- 15,335 --
------------ ----------- -----------
129,867 43,976 1,882
------------ ----------- -----------
Net income......................................... $ 195,614 $ 161,637 $ 165,216
============ =========== ===========
Income before income taxes as reported............. $ 205,613 $ 167,098
Pro forma income tax expense....................... 82,245 66,839
----------- -----------
Pro forma net income............................... $ 123,368 $ 100,259
=========== ===========
Weighted average number of shares outstanding
(1998), and pro forma weighted average number of
shares outstanding (1997 and 1996)............... 104,796,282 94,999,875 88,000,000
============ =========== ===========
Basic earnings per share (1998), and pro forma
basic earnings per share (1997 and 1996)......... $ 1.87 $ 1.30 $ 1.14
============ =========== ===========
Diluted weighted average number of shares
outstanding (1998), and pro forma diluted
weighted average number of shares outstanding
(1997 and 1996).................................. 105,186,241 95,024,199 88,000,000
============ =========== ===========
Diluted earnings per share (1998), and pro forma
diluted earnings per share (1997 and 1996)....... $ 1.86 $ 1.30 $ 1.14
============ =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 56

GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net income................................................ $ 195,614 $ 161,637 $ 165,216
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 172,537 134,073 80,369
(Gain) loss on disposal of property and equipment...... (419) 728 973
Deferred income taxes, net............................. (5,167) 15,284 --
Changes in operating assets and liabilities, net of
effects from acquisition of businesses:
(Increase) decrease in accounts receivable, net...... (8,149) 6,998 (27,820)
(Increase) decrease in other current assets.......... (2,826) 1,377 4,763
(Increase) decrease in noncurrent assets............. (28,428) (10,281) 2,260
Increase in accounts payable and accrued
commissions......................................... 2,903 6,057 4,812
Increase (decrease) in accrued liabilities........... 30,258 (8,536) (15,715)
Increase (decrease) in income taxes payable.......... 10,140 (3,973) (360)
Increase (decrease) in noncurrent liabilities........ 12,615 21,374 (420)
--------- --------- ---------
Net cash provided by operating activities................... 379,078 324,738 214,078
Investing activities:
Purchase of property and equipment........................ (89,442) (53,696) (32,572)
Purchase and capitalization of computer software.......... (23,496) (33,449) (28,978)
Proceeds on disposal of property and equipment............ 3,750 322 408
Acquisition of businesses, net of cash acquired of $3,576
and $26,244, respectively.............................. (50,433) (688,451) --
Refund of lease deposit................................... -- -- 40,461
Other investing activities................................ (5,076) -- --
--------- --------- ---------
Net cash used in investing activities....................... (164,697) (775,274) (20,681)
Financing activities:
Borrowings under credit agreements........................ 49,392 450,000 158,000
Repayments under credit agreements........................ (230,004) (320,000) (239,375)
Dividends paid to stockholders............................ (29,871) (6,288) --
Payments of capital lease obligations..................... (7,311) (4,149) (5,559)
Proceeds from sale of stock, net of fees paid............. -- 384,288 --
Repurchase of common stock for treasury................... (6,765) -- --
Proceeds from exercise of employee stock options, net..... 787 -- --
Distributions to partners of Galileo International
Partnership............................................ -- (112,150) (36,599)
--------- --------- ---------
Net cash (used in) provided by financing activities......... (223,772) 391,701 (123,533)
Effect of exchange rate changes on cash..................... (148) 6 (35)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents............ (9,539) (58,829) 69,829
Cash and cash equivalents at beginning of year.............. 19,367 78,196 8,367
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 9,828 $ 19,367 $ 78,196
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 57

GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SPECIAL
VOTING ADDITIONAL UNAMORTIZED
PARTNERS' PREFERRED COMMON PAID-IN RETAINED RESTRICTED
CAPITAL STOCK STOCK CAPITAL EARNINGS STOCK GRANTS
--------- --------- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995................... $ 137,316 $ -- $ -- $ -- $ -- $ --
Comprehensive income:
Net income.................................... 165,216 -- -- -- -- --
Foreign currency translation adjustments...... -- -- -- -- -- --
Comprehensive income...........................
Distributions to partners...................... (36,599) -- -- -- -- --
--------- -------- ------ -------- -------- -------
Balance at December 31, 1996................... 265,933 -- -- -- -- --
Comprehensive income prior to the Merger:
Net income prior to the Merger................ 136,517 -- -- -- -- --
Foreign currency translation adjustments prior
to the Merger............................... -- -- -- -- -- --
Comprehensive income prior to the Merger.......
Distributions to partners...................... (112,150) -- -- -- -- --
Conversion of partners' net investment into
common stock and special voting preferred
stock, 88,000,000 and 7 shares,
respectively.................................. (290,300) -- 880 279,568 -- --
Issuance of 16,799,700 shares of common stock
in initial public offering.................... -- -- 168 384,120 -- --
Comprehensive income subsequent to the Merger:
Net income subsequent to the Merger........... -- -- -- -- 25,120 --
Foreign currency translation adjustments
subsequent to the Merger.................... -- -- -- -- -- --
Comprehensive income subsequent to the
Merger........................................
Dividends paid ($.06 per share)................ -- -- -- -- (6,288) --
--------- -------- ------ -------- -------- -------
Balance at December 31, 1997................... -- -- 1,048 663,688 18,832 --
Comprehensive income:
Net income.................................... -- -- -- -- 195,614 --
Foreign currency translation adjustments...... -- -- -- -- -- --
Comprehensive income...........................
Issuance of 97,900 shares of restricted
stock......................................... -- -- 1 3,991 -- (3,992)
Amortization of restricted stock grants........ -- -- -- -- -- 433
Issuance of 33,150 shares of common stock under
employee stock option plans................... -- -- -- 787 -- --
Repurchase of 169,100 shares of common stock
for treasury.................................. -- -- -- -- -- --
Dividends paid ($0.285 per share).............. -- -- -- -- (29,871) --
--------- -------- ------ -------- -------- -------
Balance at December 31, 1998................... $ -- $ -- $1,049 $668,466 $184,575 $(3,559)
========= ======== ====== ======== ======== =======

<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE TREASURY
INCOME STOCK TOTAL
------------- -------- ---------
<S> <C> <C> <C>
Balance at December 31, 1995................... $ (7,763) $ -- $ 129,553
Comprehensive income:
Net income.................................... -- -- 165,216
Foreign currency translation adjustments...... (2,795) -- (2,795)
---------
Comprehensive income........................... 162,421
Distributions to partners...................... -- -- (36,599)
-------- ------- ---------
Balance at December 31, 1996................... (10,558) -- 255,375
Comprehensive income prior to the Merger:
Net income prior to the Merger................ -- -- 136,517
Foreign currency translation adjustments prior
to the Merger............................... 706 -- 706
---------
Comprehensive income prior to the Merger....... 137,223
Distributions to partners...................... -- -- (112,150)
Conversion of partners' net investment into
common stock and special voting preferred
stock, 88,000,000 and 7 shares,
respectively.................................. 9,852 -- --
Issuance of 16,799,700 shares of common stock
in initial public offering.................... -- -- 384,288
Comprehensive income subsequent to the Merger:
Net income subsequent to the Merger........... -- -- 25,120
Foreign currency translation adjustments
subsequent to the Merger.................... 128 -- 128
---------
Comprehensive income subsequent to the
Merger........................................ 25,248
Dividends paid ($.06 per share)................ -- -- (6,288)
-------- ------- ---------
Balance at December 31, 1997................... 128 -- 683,696
Comprehensive income:
Net income.................................... -- -- 195,614
Foreign currency translation adjustments...... (1,267) -- (1,267)
---------
Comprehensive income........................... 194,347
Issuance of 97,900 shares of restricted
stock......................................... -- -- --
Amortization of restricted stock grants........ -- -- 433
Issuance of 33,150 shares of common stock under
employee stock option plans................... -- -- 787
Repurchase of 169,100 shares of common stock
for treasury.................................. -- (6,765) (6,765)
Dividends paid ($0.285 per share).............. -- -- (29,871)
-------- ------- ---------
Balance at December 31, 1998................... $ (1,139) $(6,765) $ 842,627
======== ======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 58

GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)

1. SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Galileo International, Inc. (the "Company"), formerly Galileo International
Partnership, is one of the world's leading providers of electronic global
distribution services for the travel industry utilizing a computerized
reservation system ("CRS"). The Company provides travel agencies and other
subscribers with the ability to access schedule and fare information, book
reservations and issue tickets for airlines. The Company also provides
subscribers with information and booking capability covering car rental
companies and hotel properties throughout the world. The Company distributes its
products in 104 countries on six continents.

Principles of Consolidation and Business Acquisitions

The consolidated financial statements include the accounts of Galileo
International, Inc. and all majority-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.

Effective July 30, 1997, Galileo International Partnership merged into a
wholly owned limited liability company subsidiary of Galileo International, Inc.
(the "Merger"). References to the Company mean, at all times prior to the time
of the Merger, Galileo International Partnership and its consolidated
subsidiaries and, at all times thereafter, Galileo International, Inc. and its
consolidated subsidiaries. In connection with the Merger, the Company effected
an initial public offering of its Common Stock, par value $.01 per share (the
"Common Stock") at an initial public offering price of $24.50 per share
resulting in net proceeds to the Company, after exercise of the underwriters'
over-allotment option, of $384,288 after deducting underwriting discounts,
commissions and other expenses (the "Offering").

During 1998, the Company acquired a Florida based airline information
systems company, S. D. Shepherd Systems, Inc. ("Shepherd Systems") and two
national distribution companies: Galileo Nordiska AB ("Nordiska") and Galileo
Canada Distributions Systems, Inc. ("Galileo Canada"). Nordiska, Galileo Canada
and Shepherd Systems were acquired on January 1, June 1 and November 19, 1998 at
purchase prices of $2,066, $34,392 and $16,740, respectively. In connection with
the acquisitions, the Company also incurred expenses of $811, which have been
accounted for as part of the purchase prices. The Company accounted for the
acquisitions using the purchase method of accounting. Accordingly, the costs of
the acquisitions were allocated to the assets acquired and liabilities assumed
based on their respective fair values. Goodwill related to the cost of the
acquisitions is being amortized over 10 to 25 years and is included in cost of
operations expenses. The results of operations and cash flows of the acquired
companies have been consolidated with those of the Company from the date of each
acquisition. In connection with the acquisition of Galileo Canada, the Company
incurred $34,392 of debt under a five-year term loan agreement. The aggregate
impact of the acquisitions in 1998 was immaterial.

During 1997, the Company acquired three national distribution companies
(the "NDC Acquisitions"): Apollo Travel Services Partnership ("ATS"), Traviswiss
AG ("Traviswiss") and Galileo Nederland BV ("Galileo Nederland"), (ATS and
Traviswiss were acquired on July 30, 1997 and Galileo Nederland on September 17,
1997) at purchase prices of $700,000, $8,502 and $2,000, respectively. In
connection with the NDC Acquisitions, the Company also incurred expenses of
$4,193, which have been accounted for as part of the purchase prices. The
Company accounted for the NDC Acquisitions using the purchase method of
accounting. Accordingly, the costs of the NDC Acquisitions were allocated to

F-8
<PAGE> 59
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

the assets acquired and liabilities assumed based on their respective fair
values. Goodwill related to the cost of the NDC Acquisitions is being amortized
over 25 years and is included in cost of operations expenses. The results of
operations and cash flows of the acquired NDCs have been consolidated with those
of the Company from the date of each acquisition. In connection with the NDC
Acquisitions, the Company incurred $340,000, net, of debt under a five-year
credit agreement.

In connection with the acquisitions of Traviswiss and Galileo Nederland,
the Company terminated certain revenue sharing obligations in exchange for
agreements to pay SAirGroup and KLM Royal Dutch Airlines ("KLM"), in four annual
installments beginning on the acquisition dates, a total of $22,400 and $14,800,
respectively. The remaining liability was $21,200 at December 31, 1998. The
related intangible asset of $37,200 is being amortized over 17 years.

Uses of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

The Company uses the U.S. dollar for financial reporting purposes as
substantially all of the Company's billings are in U.S. dollars. The balance
sheets of the Company's foreign subsidiaries are translated into U.S. dollars
using the balance sheet date exchange rate, and revenues and expenses are
translated using the average exchange rate. The resulting translation gains and
losses are recorded as a separate component of stockholders' equity. Foreign
currency transaction gains and losses are reflected in the consolidated
statements of income.

Cash and Cash Equivalents

Cash in excess of operating requirements is invested daily in liquid,
income-producing investments, having maturities of three months or less. The
carrying amounts reported on the balance sheet for cash equivalents include cost
and accrued interest, which approximate fair value.

Fair Value of Financial Instruments

The Company's financial instruments are valued at their carrying amounts,
which, except for derivative financial instruments, are reasonable estimates of
fair value due to the relatively short period to maturity of the instruments, or
variable interest rates, in the case of long-term debt.

Allowance for Doubtful Accounts Receivable

The allowance for doubtful accounts receivable was $13,747, $22,012 and
$14,747 at December 31, 1998, 1997 and 1996, respectively. Provisions for bad
debts were $(3,862), $4,219 and $5,671 for the years ended December 31, 1998,
1997 and 1996, respectively. Write-offs of uncollectible accounts, net of
recoverables and allowance adjustments, were $5,124, $652 and $2,637 for the
years ended December 31, 1998, 1997 and 1996, respectively. The 1998 provision
includes a $7,548 recovery settlement related to a contractual dispute from a
prior year.

F-9
<PAGE> 60
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Accounting for the Impairment of Long-Lived Assets

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("Statement 121"), requires that long-lived assets and certain identifiable
intangibles to be held and used by any entity be reviewed for impairment
wherever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Statement 121 also requires that long-lived
assets and certain identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. The carrying amount of
the Company's long-lived assets at December 31, 1998 and 1997 primarily
represents the original amounts invested less the recorded depreciation and
amortization. Management believes the carrying amount of these investments is
not impaired.

Property and Equipment

Depreciation of property and equipment is provided on the straight-line
method over the following estimated useful lives of the assets:

<TABLE>
<S> <C>
Buildings and improvements.................................. 5-35 years
Equipment................................................... 3-10 years
</TABLE>

Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was
$83,724, $54,591 and $31,533, respectively.

Computer Software

Effective January 1, 1998, the Company adopted the provisions of Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." Accordingly, certain costs to develop internal-use
computer software are being capitalized. Prior to 1998, the Company capitalized
certain software development costs in accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
Be Sold, Leased or Otherwise Marketed." The ongoing assessment of recoverability
of capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including but not limited
to, estimated economic life and changes in software and hardware technology.

Computer software consists principally of purchased computer software and
capitalized computer software development costs. Amortization is provided on a
straight-line method over estimated useful lives of 3-10 years. Amortization
expense for the years ended December 31, 1998, 1997 and 1996 was $52,688,
$62,820 and $47,611, respectively.

Intangible Assets

Intangible assets are amortized on the straight-line method over the
following useful lives:

<TABLE>
<S> <C>
Customer list............................................... 17 years
Goodwill.................................................... 10-25 years
Other....................................................... 8-17 years
</TABLE>

The Company assesses the recoverability of these intangible assets by
determining whether the carrying amount of the assets are recoverable over their
remaining lives. Amortization expense for the years ended December 31, 1998 and
1997 was $35,692 and $14,356, respectively.

F-10
<PAGE> 61
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Revenue Recognition

Fees are charged to airline, car rental, hotel and other travel vendors for
bookings made through the Company's CRS and are dependent upon the level and
usage of functionality within the CRS at which the vendor participates. Booking
fee revenue is recognized at the time the reservation is made for air bookings,
at the time of pick-up for car bookings, and at the time of check-out for hotel
bookings.

Research and Development

Research and development costs, excluding amortization of computer
software, are expensed as incurred and were $4,786, $8,550 and $8,185 for the
years ended December 31, 1998, 1997 and 1996, respectively.

Derivative Financial Instruments

In the normal course of business, portions of the Company's expenses are
subject to fluctuations in currency values and interest rates. The Company
addresses these risks through a controlled program of risk management that
includes the use of derivative financial instruments. To some degree, the
Company is exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, but management does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The Company does not hold or issue financial instruments for trading
purposes.

The Company enters into foreign exchange forward contracts to manage
exposure to fluctuations in foreign exchange rates related to the funding of its
United Kingdom and Canadian operations. The Company accounts for such contracts
by recording any unrealized gains or losses in income each reporting period. At
December 31, 1998, the Company had entered into foreign exchange forward
contracts which provide for purchases of GBP 11,500 and CAD 20,000 at various
dates throughout 1999. At December 31, 1998 and 1997, the notional principal
amounts of outstanding forward contracts were $31,323 and $62,421, respectively.
The fair value of outstanding forward contracts at December 31, 1998 and 1997
was $821 and $1,417, respectively.

The Company has also entered into interest rate swap agreements to convert
portions of its variable rate debt to fixed rate. The Company accounts for its
interest rate swap agreements as a hedge of its interest rate exposure. See Note
4 for further information regarding the Company's interest rate agreements.

Income Taxes

In 1998 and subsequent to the Merger in 1997, the Company accounts for
income taxes in accordance with the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to the
difference between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.

F-11
<PAGE> 62
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Prior to the Merger in 1997, the Company operated in the form of a
partnership and accordingly the Company's income tax liabilities were the
responsibility of its partners.

Earnings per Share

Basic earnings per share data for the year ended December 31, 1998 is
calculated based on the weighted average shares outstanding for the period.
Diluted earnings per share is calculated as if the Company had additional Common
Stock outstanding from the beginning of the year or the date of grant for all
dilutive stock options, net of assumed repurchased shares using the treasury
stock method. This resulted in an increase in the weighted average number of
shares outstanding for the year ended December 31, 1998 of 389,959.

Pro forma basic earnings per share data for 1997 and 1996 is calculated as
though (i) the partners' capital was converted in the Merger into 88,000,000
shares of Common Stock as of January 1, 1996 and the 16,799,700 shares issued to
the public were outstanding from July 30, 1997, and (ii) the Company had
operated in a corporate form effective as of January 1, 1996 and accordingly was
subject to federal and state income taxes.

Pro forma diluted earnings per share data for 1997 is calculated as if the
Company's dilutive stock options were outstanding from July 30, 1997, net of
assumed repurchased shares using the treasury stock method, causing a 24,324
increase in the weighted average number of shares outstanding in 1997.

2. TRANSACTIONS WITH AFFILIATES

Prior to the Merger, for financial reporting purposes, affiliates were
considered to be all airline owners of Galileo International Partnership, with
individual ownership percentages ranging from 38.0% to 0.1%. Subsequent to the
Offering, the airline stockholders, in aggregate, own 64.9% of the Company's
outstanding Common Stock, with only United Air Lines, Inc. ("United Airlines")
and KLM deemed to be affiliates due to indirect ownership, individually, greater
than 10% of the Company's outstanding Common Stock.

The Company recognized electronic global distribution services revenues,
primarily in the form of booking fees, from affiliates totaling $170,346 for the
year ended December 31, 1998, $63,820 for the five months ended December 31,
1997, $236,015 for the seven months ended July 30, 1997 and, $355,535 for the
year ended December 31, 1996. The Company also received information services
revenues from affiliates totaling $128,839 for the year ended December 31, 1998,
$50,126 for the five months ended December 31, 1997, $19,805 for the seven
months ended July 30, 1997 and, $34,335 for the year ended December 31, 1996.
Total revenues from United Airlines of approximately $269,942, $209,106 and
$164,179 were greater than 10% of the Company's revenues for the years ended
December 31, 1998, 1997 and 1996, respectively.

The Company, in the ordinary course of business, purchases services from
affiliates. Services purchased from affiliates and classified within cost of
operations in the accompanying consolidated statements of income totaled zero
for the year ended December 31, 1998, zero for the five months ended December
31, 1997, $2,051 for the seven months ended July 30, 1997 and, $14,232 for the
year ended December 31, 1996. Services purchased from affiliates and classified
within commissions, selling and administrative expenses totaled $15,623 for the
year ended December 31, 1998, $5,399 for the five months ended December 31,
1997, $267,935 for the seven months ended July 30, 1997 and $424,536 for the
year ended December 31, 1996.

F-12
<PAGE> 63
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

At the time of the Merger, the Company entered into Computer Services
Agreements with certain airline stockholders pursuant to which the Company
provides certain fares quotation services, internal reservation services, other
internal management services and software development services. The Company will
provide the fares quotation services under existing pricing arrangements for a
period of approximately five years. The Company will provide the remaining above
mentioned services to United Airlines for a minimum period of four years from
the date of the Offering for the internal reservation services and a minimum of
two years from the date of the Offering for the internal management services,
generally at prices in effect immediately prior to the Offering, which are based
upon a fully allocated cost methodology. The software development services will
be provided to United Airlines for a minimum of six years from the date of the
Offering at prices based upon a fully allocated cost methodology.

3. LEASES AND COMMITMENTS

The Company leases various office facilities and equipment under operating
leases with remaining terms of up to 15 years. Rental expense under operating
leases was $25,756, $24,493 and $23,935 for the years ended December 31, 1998,
1997 and 1996, respectively.

The Company also leases data processing equipment under capital leases.
Equipment, at cost, includes $26,027, $25,969 and $21,930 relating to capital
leases at December 31, 1998, 1997 and 1996, respectively. Accumulated
depreciation includes $21,842, $15,616 and $8,831 relating to capital leases at
December 31, 1998, 1997 and 1996, respectively, with lease amortization included
in depreciation expense.

During 1996, the Company issued a letter of credit in exchange for the
refund of a $40,461 lease deposit held by the lessor of the Company's United
Kingdom facility.

Future minimum lease payments under capital leases and noncancelable
operating leases at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1999....................................................... $ 7,478 $ 22,057
2000....................................................... 6,698 15,898
2001....................................................... 6,698 11,580
2002....................................................... 6,698 8,528
2003....................................................... 6,698 8,238
Thereafter................................................. -- 33,304
------- --------
Total minimum lease payments............................... 34,270 99,605
Less sublease income....................................... -- (17,020)
--------
Net rental payments........................................ $ 82,585
========
Less amount representing interest.......................... (5,542)
-------
Present value of future minimum lease payments............. 28,728
Current portion of present value of future minimum lease
payments................................................. 5,976
-------
Long-term portion of present value of future minimum lease
payments................................................. $22,752
=======
</TABLE>

F-13
<PAGE> 64
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

4. LONG-TERM DEBT

Outstanding long-term debt consists of the following at December 31, 1998
and 1997:

<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Five-year revolving credit agreement....................... $35,000 $250,000
Term loan.................................................. 34,392 --
Other...................................................... 128 --
------- --------
69,520 250,000
Less current portion of long-term debt..................... -- --
------- --------
Long-term debt............................................. $69,520 $250,000
======= ========
</TABLE>

On June 5, 1998, in connection with the acquisition of Galileo Canada, the
Company incurred $34,392 of debt under a five-year term loan agreement (the
"Term Loan"). In addition, on June 5, 1998, the Company entered into an interest
rate swap agreement for a notional amount of $34,392 to fix the effective
interest rate of the Term Loan until maturity in June 2003. At December 31,
1998, the notional interest rate on the Term Loan was 5.55% and the effective
interest rate was 6.17%. The Term Loan requires quarterly interest payments
throughout the five-year term.

The Company is party to a $200,000 364-day credit agreement and a $400,000
five-year credit agreement (collectively, the "Credit Agreements") with a group
of banks. Facility fees range from 5.5 to 15.0 basis points under the 364-day
credit agreement and from 8.0 to 22.5 basis points under the five-year credit
agreement. Interest on the borrowings may be either Base rate, CD rate or
Euro-dollar rate based and is reset in six month intervals. At December 31,
1998, the nominal interest rate for loans outstanding under the Credit
Agreements was 5.58%.

At December 31, 1998, borrowings totaled $35,000 under the five-year credit
agreement with no required repayments until maturity in July 2002 and the
balance outstanding on the Term Loan was $34,392, with no required repayments
until maturity in June 2003. No amounts were outstanding under the 364-day
credit agreement.

The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its outstanding borrowings. At December
31, 1998 and 1997, the Company had outstanding interest rate swap agreements
having a total notional value of $34,392 and $89,009, respectively, with fixed
interest rates averaging 5.87% and 5.03%, respectively. The fair value of
outstanding swap agreements at December 31, 1998 and 1997 was $(979) and $547,
respectively. For the years ended December 31, 1998, 1997 and 1996, the
effective interest rate on the Company's outstanding debt under the Term Loan
and Credit Agreements was 5.89%, 5.31% and 5.73%, respectively.

Total interest, including interest under capital leases, of $11,876,
$12,266 and $11,307 was incurred for the years ended December 31, 1998, 1997 and
1996, respectively.

5. EMPLOYEE PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has defined benefit pension plans and other postretirement
benefit plans that cover substantially all U.S. employees. Other benefits
include health care benefits provided to retired U.S. employees and retiree
flight benefits provided to certain former United Airlines employees. The
Company has no significant postretirement health care benefit plans outside of
the United States. The

F-14
<PAGE> 65
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

majority of its U.S. employees may become eligible for these benefits if they
reach normal retirement age while working for the Company.

The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets for the years ending December 31,
1998 and 1997, and a statement of the funded status as of December 31, 1998 and
1997:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Obligation at January 1....................... $ 90,304 $ 42,707 $ 40,120 $ 21,497
Service cost.................................. 6,964 4,541 1,910 1,337
Interest cost................................. 7,178 4,654 2,733 2,062
Plan amendments............................... -- -- (1,613) --
Actuarial (gain) loss......................... 10,388 1,507 538 (323)
Acquisitions.................................. -- 38,017 -- 15,767
Benefit payments.............................. (1,404) (1,122) (272) (220)
-------- -------- -------- --------
Obligation at December 31..................... $113,430 $ 90,304 $ 43,416 $ 40,120
======== ======== ======== ========
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1........ $ 79,781 $ 34,768 $ -- $ --
Actual return on plan assets.................. 21,362 9,381 -- --
Acquisitions.................................. -- 32,531 -- --
Employer contributions........................ 18 4,223 272 220
Benefit payments.............................. (1,404) (1,122) (272) (220)
-------- -------- -------- --------
Fair value of plan assets at December 31...... $ 99,757 $ 79,781 $ -- $ --
======== ======== ======== ========
Funded status
Funded status at December 31.................. $(13,673) $(10,523) $(43,416) (40,120)
Unrecognized transition obligation............ 2,239 2,487 -- --
Unrecognized prior-service cost............... 2,961 3,324 (1,455) --
Unrecognized (gain) loss...................... (7,195) (3,705) 4,776 4,138
-------- -------- -------- --------
Net amount recognized......................... $(15,668) $ (8,417) $(40,095) $(35,982)
======== ======== ======== ========
</TABLE>

F-15
<PAGE> 66
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

The following table provides the amounts recognized in the consolidated
balance sheets as of December 31, 1998 and 1997:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- --------------------
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Accrued benefit liability................... $(15,668) $(8,417) $(40,095) $(35,982)
Additional minimum liability................ (129) (219) -- --
Intangible asset............................ 129 219 -- --
-------- ------- -------- --------
Net amount recognized....................... $(15,668) $(8,417) $(40,095) $(35,982)
======== ======= ======== ========
</TABLE>

The Company's nonqualified pension plan was the only pension plan with an
accumulated benefit obligation in excess of plan assets. The plan's accumulated
benefit obligation was $604 and $403 at December 31, 1998 and 1997,
respectively. There are no plan assets in the nonqualified plan due to the
nature of the plan. The Company's plans for postretirement benefits other than
pensions also have no plan assets. The aggregate benefit obligation for those
plans was $43,416 and $40,120 as of December 31, 1998 and 1997, respectively.

The following table provides the components of net periodic benefit cost
for the plans for years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------------- ------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost............................ $ 6,964 $ 4,541 $ 3,725 $1,910 $1,337 $1,169
Interest cost........................... 7,178 4,654 3,093 2,733 2,062 1,542
Expected return on plan assets.......... (7,500) (4,748) (2,526) -- -- --
Amortization of transition obligation... 249 249 249 -- -- --
Amortization of prior-service cost...... 582 581 524 (259) -- --
Amortization of net (gain) loss......... 16 (11) 55 -- 51 274
------- ------- ------- ------ ------ ------
Net periodic benefit cost............... 7,489 5,266 5,120 4,384 3,450 2,985
Settlement gain......................... -- (157) -- -- -- --
------- ------- ------- ------ ------ ------
Net periodic benefit cost after
settlements........................... $ 7,489 $ 5,109 $ 5,120 $4,384 $3,450 $2,985
======= ======= ======= ====== ====== ======
</TABLE>

The prior-service costs are amortized on a straight-line basis over the
average remaining service period of active participants. Gains and losses in
excess of 10% of the greater of the benefit obligation and the market-related
value of assets are amortized over the average remaining service period of
active participants.

F-16
<PAGE> 67
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

The assumptions used in the measurement of the Company's benefit obligation
are shown in the following table:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
1998 1997 1998 1997
----- ----- ---- ----
<S> <C> <C> <C> <C>
Weighted-average assumptions as of December 31:
Discount rate..................................... 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets.................... 9.50% 9.50% N/A N/A
Rate of compensation increase..................... 4.00% 4.25% N/A N/A
</TABLE>

The health care trend rate used to determine the accumulated postretirement
benefit obligation was 11% for 1998, decreasing by 1% each year until reaching
4% for the year 2005 and beyond.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A 1% change in assumed health care
cost trend rates would have the following effects:

<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
<S> <C> <C>
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost...... $ 44 $ (72)
Effect on the health care component of the accumulated
postretirement benefit obligation......................... 526 (814)
</TABLE>

The Company has a defined contribution pension plan covering a majority of
the United Kingdom employees which requires the Company to annually contribute
10% of eligible employee compensation on behalf of each participant. The
Company's contributions to the plan were $2,319, $2,410 and $2,289 during the
years ended December 31, 1998, 1997 and 1996, respectively.

The Company offers its U.S.-based employees a 401(k) savings plan.
Employees can elect to contribute pretax earnings, as limited by the Internal
Revenue Code, to their account and can determine how the money is invested from
a selection of options offered by the Company. The Company's contributions,
matching participating employees up to a designated level, were $2,705, $1,982
and $1,983 during the years ended December 31, 1998, 1997 and 1996,
respectively.

F-17
<PAGE> 68
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

6. GEOGRAPHIC AND SEGMENT INFORMATION

The Company derives substantially all of its revenues from the global
travel industry. The location of the travel agent making the booking determines
the geographic region credited with the related revenues. Data relating to the
Company's operations by geographic area is set forth below:

<TABLE>
<CAPTION>
UNITED STATES OTHER
MARKET MARKETS TOTAL
------------- -------- ----------
<S> <C> <C> <C>
1998
Revenues........................................... $588,312 $754,393 $1,342,705
Identifiable assets................................ 162,912 32,057 194,969
1997
Revenues........................................... 536,218 643,896 1,180,114
Identifiable assets................................ 160,719 28,462 189,181
1996
Revenues........................................... 498,522 552,113 1,050,635
Identifiable assets................................ 82,477 23,721 106,198
</TABLE>

Revenues consist of electronic global distribution revenues only. No
country outside the United States contributes more than 10% of revenue or had
more than 10% of identifiable assets in any of the years presented. Providing
geographic area data for information services revenues would be impracticable.

7. SPECIAL CHARGES

The Company recorded special charges of $26,460 ($15,902 after tax) during
the year ended December 31, 1998 related to a strategic realignment of the
Company's operations in the United Kingdom and, to a lesser degree, other
realignments within the Company. These special charges were comprised primarily
of $15,025 in severance costs related to termination of 399 employees, primarily
in the development and marketing groups, and $11,435 of other costs, principally
related to the closing of the remaining Swindon, United Kingdom facilities. As
of December 31, 1998, $54 of severance costs have been paid and charged against
the liability and 10 employees have been terminated. The Company expects the
realignment activities to be substantially complete in 1999. Also related to the
closing of Swindon, United Kingdom facilities, in 1993 the Company, formerly
Covia Partnership, combined with The Galileo Company Ltd. and consolidated its
two data center facilities resulting in the closing of the Swindon, United
Kingdom data center. In connection therewith, the estimated cost of the
consolidation was charged to expense. At December 31, 1998 and 1997, the
estimated remaining liabilities for all of the above mentioned restructuring
activities, principally related to Swindon, United Kingdom severance costs and
facility closure costs, were $44,115 and $20,908, respectively, and are included
in the accompanying consolidated balance sheets.

The Company recorded special charges of $20,111 ($12,099 after tax) during
the year ended December 31, 1997 related to the integration of the NDCs acquired
in 1997 into the Company's operations. The special charges were comprised
primarily of $12,315 in severance costs related to termination of 202 employees
and $7,796 of other integration costs, principally related to the closing of
duplicate facilities. As of December 31, 1998, $9,170 of severance costs have
been paid and charged

F-18
<PAGE> 69
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

against the liability and 108 employees have been terminated. The Company
expects the integration activities to be complete in 1999. At December 31, 1998,
the estimated remaining liability related to the integration was $3,414 and is
included in the accompanying consolidated balance sheet.

8. SUPPLEMENTAL INFORMATION

Supplemental cash flow information and noncash investing and financing
activities are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Supplemental cash flow information
Cash paid during the period for:
Interest.................................... $ 11,994 $12,786 $11,517
Income taxes................................ 123,508 32,001 --
Supplemental noncash investing and financing
activities
Capital lease obligations and accounts payable
from acquisition of equipment............... $ 901 $ 7,295 $ 3,705
</TABLE>

9. INCOME TAXES

For financial reporting purposes, income before income taxes includes the
following components:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Domestic operations............................ $317,862 $198,071 $159,365
Foreign operations............................. 7,619 7,542 7,733
-------- -------- --------
Total net income before income taxes........... $325,481 $205,613 $167,098
======== ======== ========
</TABLE>

The provisions for income taxes consist of the following:

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Current taxes:
Federal.................................................. $112,799 $26,867
State.................................................... 20,803 5,317
Foreign.................................................. 1,432 (3,501)
-------- -------
Total................................................. 135,034 28,683
Deferred taxes:
Federal.................................................. (3,834) (36)
State.................................................... (1,333) (6)
-------- -------
Total................................................. (5,167) (42)
-------- -------
Provision for income taxes................................. $129,867 $28,641
======== =======
</TABLE>

No provision for U.S. federal and state income taxes was recorded prior to
July 30, 1997, as such liability was the responsibility of the partners of
Galileo International Partnership, rather than of the

F-19
<PAGE> 70
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Company. Certain of the Company's non-U.S. subsidiaries are subject to income
taxes. As a result of the Merger, the Company recorded initial deferred income
taxes of $15,335 to reflect the establishment of deferred tax assets and
liabilities. The remaining provisions for income taxes for the year ended
December 31, 1997 relate to the period subsequent to July 30, 1997.

Deferred tax assets related to the Canada Acquisition were $1,765. Deferred
tax assets (liabilities) are comprised of the following at December 31, 1998 and
1997:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current:
Special charges........................................... $ 10,319 $ --
Productivity payments..................................... 7,701 5,021
Compensation accruals..................................... 6,639 6,045
Bad debt reserves......................................... 4,352 7,294
Other..................................................... 2,874 807
-------- --------
$ 31,885 $ 19,167
======== ========
Noncurrent:
Software amortization..................................... $(69,036) $(65,430)
Postretirement medical and pension accruals............... 21,834 17,158
Depreciation.............................................. 17,169 11,552
Other liabilities......................................... (5,968) (1,329)
Facilities reserves....................................... 5,736 8,651
Other assets.............................................. 4,532 9,780
Services agreements....................................... 3,610 --
Rights agreements......................................... (3,281) --
-------- --------
$(25,404) $(19,618)
======== ========
</TABLE>

The effective tax rate on income before taxes differs from the U.S.
statutory rate. The 1997 provision for income taxes is based on income earned
for the period July 31 through December 31, 1997 of $67,627, and includes
foreign tax expense incurred for the period January 1, 1997 through July 30,

F-20
<PAGE> 71
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

1997 of $1,469. The following table reconciles the U.S. statutory rate with the
effective rate for the years ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Tax at U.S. federal income tax rate........................ $113,918 $23,669
Increase (decrease) in taxes resulting from:
State income taxes, net of U.S. federal income tax
benefit............................................... 13,522 3,457
Amortization of excess of cost over net assets acquired
and related purchase accounting adjustments........... 2,111 880
Tax effect of non-deductible expenses.................... 344 175
Foreign and U.S. tax effects attributable to foreign
operations............................................ 323 110
Other.................................................... (351) 350
-------- -------
Taxes on income at effective rate.......................... $129,867 $28,641
======== =======
</TABLE>

Undistributed earnings of the Company's corporate foreign subsidiaries
amounted to approximately $3,401 at December 31, 1998. Those earnings are
considered to be indefinitely reinvested, and accordingly, no provision for U.S.
federal and state income taxes and foreign withholding taxes have been made.
Upon distribution of those earnings, the company would be subject to U.S. income
taxes (subject to a reduction for foreign tax credits) and withholding taxes
payable to the various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable; however,
unrecognized foreign tax credit carryovers would be available to reduce some
portion of the U.S. liability. Withholding taxes of approximately $240 would be
payable upon remittance of all previously unremitted earnings at December 31,
1998.

10. STOCKHOLDERS' EQUITY

Special Voting Preferred Stock

The Company's Special Voting Preferred Stock (the "Special Preferred"), of
which seven shares are authorized, issued and outstanding, permits, under
certain circumstances, each holder of a share of Special Preferred to elect one
director to the Company's Board of Directors. The Special Preferred shares do
not provide the holder with any further stockholder voting privileges nor does
the holder receive dividends on such shares. In the event of liquidation,
dissolution or winding-up of the Company, holders of the Special Preferred are
entitled to $100 per share, but holders are not entitled to any further payment.
Substantial restrictions exist as to the transferability of the Special
Preferred shares by the holders.

Preferred Stock

The Board of Directors of the Company is authorized, without further
stockholder action, to divide any or all shares of its authorized Preferred
Stock into one or more series and to fix and determine the rights and
qualifications, limitations or restrictions thereon of each such series,
including voting powers, dividend rights, liquidation preferences, redemption
rights and conversion or exchange privileges.

F-21
<PAGE> 72
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Common Stock

Each share of Common Stock entitles the holder thereof to one vote in
elections of directors and all other matters submitted to a vote of
stockholders. Each share also has an equal and ratable right to receive
dividends paid from the Company's assets, as and if declared by the Board of
Directors.

Common Stock Held in Treasury

The Board of Directors of the Company authorized the use of up to $100,000
to repurchase outstanding shares of Common Stock. The repurchased shares will be
accumulated by the Company and held in treasury for the purpose of providing
available shares for the Company's employee benefit plans, for possible resale
in future public or private offerings, and for other general corporate purposes.
The purchases will be funded through the Company's working capital. The amount,
timing and price of purchases will depend on market conditions and other
factors. The number of shares of Common Stock purchased was 169,100 in 1998.

Stock Incentive Plan

During 1997, the Company adopted the 1997 Stock Incentive Plan (the
"Plan"). The Plan, whose purpose is to attract, retain and motivate officers and
other key employees and consultants of the Company, provides for the award of
Common Stock in the form of stock options, stock appreciation rights, stock
awards or such other forms as determined to be consistent with the purposes of
the Plan. The Company granted employees, employed by the Company on the date of
the closing of the Offering, options to purchase the Company's Common Stock.
Such options vest in equal installments over a three-year period measured from
the date of the Offering. In addition, the Company granted to senior management
options to purchase the Company's Common Stock, which vest in equal installments
over a five-year period. All of the foregoing options have a ten-year term.

During 1998, the Company granted each employee, employed by the Company on
the date of grant, options to purchase shares of the Company's Common Stock. In
addition, the Company granted senior management and other key employees options
to purchase the Company's Common Stock. All of the foregoing options vest in
equal installments over a three-year period measured from the date of grant and
have a ten-year term, except for options granted to the Company's President and
Chief Executive Officer, which vest in equal installments over a five-year
period and have a nine-year term.

An aggregate of 8,140,000 shares of Common Stock are reserved for issuance
under the Plan. The number of shares available for issuance under the Plan will
be proportionately adjusted in the event of certain changes in the Company's
capitalization or a similar transaction. Shares issued pursuant to the Plan may
be authorized but unissued shares, treasury shares or any combination thereof.

The Company also adopted the 1997 Non-Employee Director Stock Plan (the
"Director Plan") to retain the services of qualified individuals who are not
employees of the Company to serve as members of the Board of Directors. The
Director Plan authorizes awards of options, based on the director's term, which
generally vest six months after the date of grant, have an exercise price equal
to the fair market value at the date of grant, and expire ten years from date of
grant. Directors who are employees of an airline stockholder will receive, in
lieu of such options, a cash payment equal to the value of the option calculated
on the basis of the Black-Scholes option valuation model. An aggregate of
500,000 shares of Common Stock are reserved for issuance under the Director
Plan.

F-22
<PAGE> 73
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

During 1998, the Company's Board of Directors approved the issuance of
97,900 shares of restricted Common Stock to the Company's President and Chief
Executive Officer. Half of these shares vest in equal installments over a
five-year period from the date of grant and the remaining shares vest in equal
installments over a four-year period beginning one year from the date of grant.
During 1998, $433 of compensation cost for restricted shares was recognized in
the financial statements.

Stock option activity during 1998 and 1997 is as follows (number of shares
in thousands):

<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at January 1................. 1,064 $25.40 -- $ --
Granted.................................. 1,889 40.75 1,107 25.37
Exercised................................ (33) 24.57 -- --
Forfeited................................ (96) 30.56 (43) 24.50
Expired.................................. -- -- -- --
----- -----
Outstanding at December 31............... 2,824 $35.51 1,064 $25.40
===== =====
Options exercisable at December 31....... 188 24.76 -- --
Weighted average fair value of options
granted during the year................ $14.53 $ 6.73
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998 (number of shares in thousands):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------------
RANGE OF AVERAGE WEIGHTED WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OF SHARES CONTRACTUAL LIFE EXERCISE PRICE OF SHARES EXERCISE PRICE
-------- --------- ---------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$24 to $29 971 8.6 $25.52 187 $24.69
$34 to $41 1,853 9.3 40.74 1 37.81
----- ---
$24 to $41 2,824 9.1 35.51 188 24.76
===== ===
</TABLE>

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. The following table presents pro forma information had
the Company determined compensation cost based on the fair

F-23
<PAGE> 74
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

value at the grant date for its stock options under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation":

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Valuation assumptions:
Expected option term (years)............................ 5.0 5.0
Expected volatility..................................... 35.0% 25.0%
Expected dividend yield................................. 1.0% 1.0%
Risk-free interest rate................................. 5.0% 5.0%
Pro forma effects(1):
Net income as reported.................................. $195,614 $161,637
Pro forma effect........................................ (4,118) (624)
-------- --------
Net income as adjusted.................................. $191,496 $161,013
======== ========
Basic earnings per share as adjusted(2)................. $ 1.83 $ 1.29
======== ========
Diluted earnings per share as adjusted(2)............... $ 1.82 $ 1.29
======== ========
</TABLE>

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

(1) Estimated using Black-Scholes option pricing model.

(2) Basic and diluted earnings per share as reported for 1997 are calculated
using pro forma net income and weighted average number of shares outstanding
as discussed in footnote 1.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

11. COMMITMENTS & CONTINGENCIES

The Company is involved in various matters of litigation as both plaintiff
and defendant. In the opinion of management, none of these matters, individually
or in the aggregate, if determined against the Company would have a material
adverse effect on the business, consolidated financial condition or results of
operations of the Company.

In connection with the NDC Acquisitions and the acquisition of Galileo
Canada, the Company entered into agreements (the "Services Agreements") with
United Airlines, US Airways, Air Canada, SAirGroup, and KLM (collectively, the
"Service Providers") to provide certain marketing services to the Company.
During the sixth year (eighth year for a portion of Galileo Canada) following
the effective date of the Services Agreements, the Company is contractually
required to pay the Service Providers a fee of up to $232,000 (on a present
value basis as of the date of the agreements), contingent upon improvements in
the Company's airline booking fee revenue in the seller's respective territories
over the five-year period immediately following the acquisitions, as measured by
the annual price increase rate

F-24
<PAGE> 75
GALILEO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

and over the five-year period (seven-year period in the case of Galileo Canada)
immediately following the acquisitions, as measured by the annual air segment
growth rate. The Company has currently estimated the probable future liabilities
under the Service Agreements and is ratably recording these liabilities over the
remaining contract periods. At December 31, 1998, the estimated liability
related to the Services Agreements was $9,257 and is included in other
noncurrent liabilities in the accompanying consolidated balance sheet.

In connection with the Shepherd Systems Acquisition, the Company is
contractually required to make additional payments up to an aggregate of $5,040,
which have been accounted for as part of the purchase price. Payments are due
ratably over the five calendar years commencing with the calendar year ending on
December 31, 1999 and are based on a calculation of the relevant calendar year's
annual cash flow of Shepherd Systems. At December 31, 1998, the liability
related to these payments was $5,040 and is included in other noncurrent
liabilities in the accompanying consolidated balance sheet.

12. BUSINESS AND CREDIT CONCENTRATIONS

The Company derives substantially all of its revenues from the travel
industry. Accordingly, events affecting the travel industry, particularly
airline travel and participating airlines, can significantly affect the
Company's business, financial condition and results of operations.

Travel agencies are the primary channel of distribution for the services
offered by travel vendors. If the Company were to lose and not replace the
bookings generated by any significant travel agencies, its business, financial
condition and results of operations could be materially adversely affected.

F-25
<PAGE> 76

GALILEO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 43,710 $ 9,828
Accounts receivable, net.................................. 234,499 177,858
Other current assets...................................... 51,394 55,841
---------- ----------
Total current assets........................................ 329,603 243,527
Property and equipment, at cost:
Land...................................................... 6,470 6,470
Buildings and improvements................................ 77,638 77,210
Equipment................................................. 398,994 392,299
---------- ----------
483,102 475,979
Less accumulated depreciation............................. 304,619 281,010
---------- ----------
Net property and equipment.................................. 178,483 194,969
Computer software, net...................................... 182,346 189,247
Intangible assets, net...................................... 600,078 609,806
Other noncurrent assets..................................... 65,439 53,531
---------- ----------
$1,355,949 $1,291,080
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 40,639 $ 46,901
Accrued commissions....................................... 41,121 32,424
Income taxes payable...................................... 59,230 11,873
Other accrued liabilities................................. 111,391 134,652
Capital lease obligations, current portion................ 25,743 5,976
---------- ----------
Total current liabilities................................... 278,124 231,826
Pension and postretirement benefits......................... 59,328 55,982
Deferred tax liability...................................... 22,182 25,404
Other noncurrent liabilities................................ 48,535 42,969
Capital lease obligations, less current portion............. -- 22,752
Long-term debt.............................................. 34,392 69,520
---------- ----------
Total liabilities........................................... 442,561 448,453
Stockholders' equity:
Special voting preferred stock: $.01 par value;
7 shares authorized; 7 shares issued and outstanding.... -- --
Preferred stock: $.01 par value; 25,000,000 shares
authorized; no shares issued............................ -- --
Common stock: $.01 par value; 250,000,000 shares
authorized; 104,963,525 and 104,930,750 shares issued;
104,794,425 and 104,761,650 shares outstanding.......... 1,050 1,049
Additional paid-in capital................................ 669,257 668,466
Retained earnings......................................... 254,729 184,575
Unamortized restricted stock grants....................... (3,360) (3,559)
Accumulated other comprehensive income.................... (1,523) (1,139)
Common stock held in treasury, at cost: 169,100 shares.... (6,765) (6,765)
---------- ----------
Total stockholders' equity.................................. 913,388 842,627
---------- ----------
$1,355,949 $1,291,080
========== ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE> 77

GALILEO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
---------------------------
1999 1998
------------ -----------
<S> <C> <C>
Revenues:
Electronic global distribution services................... $ 385,229 $ 342,230
Information services...................................... 18,762 34,780
------------ -----------
403,991 377,010
Operating expenses:
Cost of operations........................................ 132,130 135,100
Commissions, selling and administrative................... 151,045 135,631
------------ -----------
283,175 270,731
------------ -----------
Operating income............................................ 120,816 106,279
Other income (expense), net:
Interest expense, net..................................... (790) (3,263)
Other, net................................................ 9,767 649
------------ -----------
Income before income taxes.................................. 129,793 103,665
Income taxes................................................ 51,787 41,362
------------ -----------
Net income.................................................. $ 78,006 $ 62,303
============ ===========
Weighted average number of shares outstanding............... 104,683,986 104,799,700
============ ===========
Basic earnings per share.................................... $ 0.75 $ 0.59
============ ===========
Diluted weighted average number of shares outstanding....... 105,483,986 105,063,135
============ ===========
Diluted earnings per share.................................. $ 0.74 $ 0.59
============ ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-27
<PAGE> 78

GALILEO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating activities:
Net income................................................ $ 78,006 $ 62,303
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 41,628 41,516
(Gain) loss on sale of assets........................ (9,477) 141
Deferred income taxes, net........................... 978 283
Changes in operating assets and liabilities:
Increase in accounts receivable, net.............. (57,317) (55,849)
(Increase) decrease in other current assets....... (198) 2,313
Increase in noncurrent assets..................... (4,959) (3,268)
Increase in accounts payable and accrued
commissions..................................... 3,118 6,940
Decrease in accrued liabilities................... (15,720) (1,804)
Increase in income taxes payable.................. 47,456 40,296
Increase in noncurrent liabilities................ 8,552 1,723
-------- --------
Net cash provided by operating activities................... 92,067 94,594
Investing activities:
Purchase of property and equipment........................ (11,174) (18,598)
Purchase and capitalization of computer software.......... (4,523) (4,093)
Proceeds on sale of assets................................ 9,508 2,925
Other investing activities................................ (7,274) --
-------- --------
Net cash used in investing activities....................... (13,463) (19,766)
Financing activities:
Borrowings under credit agreements........................ 10,000 --
Repayments under credit agreements........................ (45,128) (30,000)
Dividends paid to stockholders............................ (7,852) (6,288)
Payments of capital lease obligations..................... (2,139) (2,032)
Proceeds from exercise of employee stock options, net..... 792 --
-------- --------
Net cash used in financing activities....................... (44,327) (38,320)
Effect of exchange rate changes on cash..................... (395) (182)
-------- --------
Increase in cash and cash equivalents....................... 33,882 36,326
Cash and cash equivalents at beginning of period............ 9,828 19,367
-------- --------
Cash and cash equivalents at end of period.................. $ 43,710 $ 55,693
======== ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-28
<PAGE> 79

GALILEO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SPECIAL ACCUMULATED
VOTING ADDITIONAL UNAMORTIZED OTHER
PREFERRED COMMON PAID-IN RETAINED RESTRICTED COMPREHENSIVE TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK GRANTS INCOME STOCK TOTAL
--------- ------ ---------- -------- ------------ ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998.... $ -- $1,049 $668,466 $184,575 $(3,559) $(1,139) $(6,765) $842,627
Comprehensive income:
Net income..................... -- -- -- 78,006 -- -- -- 78,006
Other comprehensive income, net
of tax:
Unrealized holding losses on
securities................. -- -- -- -- -- (199) -- (199)
Foreign currency translation
adjustments................ -- -- -- -- -- (185) -- (185)
--------
Other comprehensive income..... (384)
--------
Comprehensive income............ 77,622
Amortization of restricted stock
grants......................... -- -- -- -- 199 -- -- 199
Issuance of 32,775 shares of
common stock under employee
stock option plans............. -- 1 791 -- -- -- -- 792
Dividends paid ($0.075 per
share)......................... -- -- -- (7,852) -- -- -- (7,852)
-------- ------ -------- -------- ------- ------- ------- --------
Balance at March 31, 1999....... $ -- $1,050 $669,257 $254,729 $(3,360) $(1,523) $(6,765) $913,388
======== ====== ======== ======== ======= ======= ======= ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-29
<PAGE> 80

GALILEO INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial
statements of Galileo International, Inc. (the "Company") have been prepared
pursuant to the rules of the Securities and Exchange Commission for quarterly
reports on Form 10-Q and do not include all of the information and note
disclosures required by generally accepted accounting principles. The
information furnished herein includes all adjustments, consisting of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods presented.

The results of operations for the quarter ended March 31, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999.

These financial statements should be read in conjunction with the audited
financial statements and notes to the audited financial statements for the year
ended December 31, 1998 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 22, 1999.

2. BUSINESS ACQUISITIONS AND INVESTMENTS

On November 19, 1998, the Company acquired S. D. Shepherd Systems, Inc.
("Shepherd Systems"), an airline information systems company, for $16.7 million.
The Company also acquired two national distribution companies ("NDCs") during
1998. On June 1, 1998, Galileo Canada Distributions Systems, Inc. ("Galileo
Canada") was purchased for $34.4 million and on January 1, 1998 Galileo Nordiska
AB ("Nordiska) was purchased for $2.1 million. In connection with these
acquisitions, the Company also incurred expenses of $0.8 million, which have
been accounted for as part of the purchase prices. The Company accounted for
these acquisitions using the purchase method of accounting. Accordingly, the
costs of the acquisitions were allocated to the assets acquired and liabilities
assumed based on their respective fair values. Goodwill and other intangible
assets related to the cost of the acquisitions are being amortized over 6 to 25
years and are included in cost of operations expenses. The results of operations
and cash flows of the acquired companies have been consolidated with those of
the Company from the date of each acquisition. In connection with the
acquisition of Galileo Canada, the Company incurred $34.4 million of debt under
a five-year term loan agreement.

During the quarter ended March 31, 1999, the Company acquired minority
ownership equity positions in three technology-related companies for $7.3
million.

3. EARNINGS PER SHARE

Basic earnings per share for the quarters ended March 31, 1999 and 1998 is
calculated based on the weighted average shares outstanding for each quarter.
Diluted earnings per share is calculated as if the Company had additional common
stock outstanding from the beginning of the year or the date of grant for all
dilutive stock options, net of assumed repurchased shares using the treasury
stock method. This resulted in an increase in the weighted average number of
shares outstanding for the quarters ended March 31, 1999 and 1998 of 800,000 and
263,435, respectively.

4. SPECIAL CHARGES

The Company recorded special charges of $26.4 million ($15.9 million after
tax) during the quarter ended December 31, 1998 related to a strategic
realignment of the Company's operations in the United Kingdom and, to a lesser
degree, other realignments within the Company. These special charges were
comprised primarily of $15.0 million in severance costs related to the
termination of 399 employees,

F-30
<PAGE> 81
GALILEO INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

primarily in the development and marketing groups, and $11.4 million of other
costs, principally related to the closing of the remaining Swindon, United
Kingdom facilities. As of March 31, 1999, $1.2 million of severance related
costs have been paid and charged against the liability and 23 employees have
been terminated. The Company expects the realignment activities to be
substantially complete in 1999. In 1993, the Company, formerly Covia
Partnership, combined with The Galileo Company Ltd. and consolidated its two
data center facilities resulting in the closure of the Swindon, United Kingdom
data center. In connection therewith, the estimated cost of the consolidation
was charged to expense. At March 31, 1999 and December 31, 1998, the estimated
remaining liabilities for all of the above mentioned restructuring activities
were $35.5 million and $44.1 million, respectively, and are included in the
accompanying condensed consolidated balance sheets.

The Company recorded special charges of $20.1 million ($12.1 million after
tax) during the year ended December 31, 1997 related to the integration of NDCs
acquired in 1997 into the Company's operations. These special charges were
comprised primarily of $12.3 million in severance costs related to the
termination of 202 employees and $7.8 million of other integration costs,
principally related to the closing of duplicate facilities. As of March 31,
1999, $9.4 million of severance related costs have been paid and charged against
the liability and 121 employees have been terminated. The Company expects the
integration activities to be complete in 1999. At March 31, 1999 and December
31, 1998, the estimated remaining liabilities related to the integration were
$2.4 million and $3.4 million, respectively, and are included in the
accompanying condensed consolidated balance sheets.

5. STOCKHOLDERS' EQUITY

During the quarter ended March 31, 1999, the Company accounted for a $0.3
million unrealized holding loss on available-for-sale marketable equity
securities in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
after tax effect of $0.2 million is included as a separate component of
Stockholders' Equity.

6. SUBSEQUENT EVENTS

On May 5, 1999, the Company filed a registration statement with the
Securities and Exchange Commission relating to a proposed underwritten secondary
offering of its common stock pursuant to its Registration Rights Agreement with
its airline stockholders. The Company filed the registration statement as a
result of a demand for registration made by one of its airline stockholders, a
subsidiary of US Airways, Inc., that has requested the registration of all
7,000,400 shares of common stock it currently owns. Under the Registration
Rights Agreement, the other airline stockholders have the right to participate
in the registration initiated by the subsidiary of US Airways, subject to the
ability of the managing underwriters of the offering to limit the number of
other stockholders' shares that may be included in the registration. The airline
stockholders controlled by United Airlines, KLM Royal Dutch Airlines, Alitalia
and TAP Air Portugal have requested the inclusion in the offering of 17,500,000,
10,639,200, 1,500,000 and 88,000 shares, respectively, of common stock they
currently own. The Company anticipates commencing the offering, which will be
made only by means of a prospectus, during the second quarter of this year. The
Company will not receive any proceeds from the offering.

In addition, on April 29, 1999, the Board of Directors of the Company
authorized an increase in the size of the Company's share repurchase program
from $100.0 million to $500.0 million. The amount, timing and price of any
repurchases of the Company's common stock will depend on market conditions and
other factors.

F-31
<PAGE> 82

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