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.
Chairman and Chief Executive Michael S. "Sam" Gilliland said the sale wouldn't change Sabre's business strategy.
Eighty-five percent of financial executives surveyed in January 2005 feel their companies will spend more or the same on corporate travel in the coming year.
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According to the U.S. Travel Association, leisure travel is expected to rise 2%; business travel, 2.5%; and international travel into the U.S., 3% this year.