Airline Travel Are Far From Grounded By Rising Fuel Prices

Travelocity's Gilliland: "Airline tickets are still a screaming good deal. They're still about 15% lower on average than they were before 9-11."

IBD: What's fueling the growth?

Gilliland: Certainly a fair amount of this growth is coming from Travelocity. Travelocity now accounts for about a third of Sabre's total revenue. That's up from about 10% in 2002. We expect Travelocity to be closer to 40% of revenue by the end of the year.

IBD: Where else is Sabre growing?

Gilliland: We're growing our hotel business as part of the Sabre Travel Network. It's grown by a fairly dramatic clip of about 25%. That's indicative of the value we're providing to hotels, not only through Travelocity but also through our larger travel distribution network.

IBD: How is Sabre doing internationally?

Gilliland: Our non-U.S. revenue has grown from a little less than 30% of total sales in 2002 to a little less than 40% today. And we operate now in about 143 countries. Our global footprint has changed considerably.

IBD: What about free cash flow?

Gilliland: Sabre expects its free cash flow to be greater than $300 million in 2006. This compares with free cash flow of $134.9 million last year.

IBD: What types of deals did Sabre strike with airlines last quarter?

Gilliland: On April 21, Sabre announced that it had signed long-term full content (fare publishing) agreements with Delta Air Lines for seven years and United Airlines for five years. (And Monday, it announced a five-year pact with Continental Airlines.)

This is in addition to a long-term five-year deal signed with Northwest in the first quarter and another five-year deal with U.S. Airways. We also signed a five-year deal late last year with AirTran.

IBD: What was the point of these deals?

Gilliland: We're focused on developing a balanced distribution model for everyone, including travel agents and corporations. The deals are cost-efficient for airlines, require us to continue our own cost reduction focus at Sabre, and drive acceptable balance between long-term stability and efficiency, and incentive reductions for travel agents.

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