Galileo International Reports 13th Consecutive Quarter of Economic EPS Growth

23rd Oct 2000

1.1 Million Shares Repurchased
Explores Strategies to Maximize Shareholder Value

ROSEMONT, Ill., Oct. 23 /PRNewswire/—Galileo International, Inc.
(NYSE: GLC), today reported that third quarter economic earnings per share
grew 4.4 percent to $0.72 per diluted share, compared to economic earnings of
$0.69 per diluted share for the same quarter last year.(A)  Reported earnings
in the third quarter were $38.8 million, or $0.43 per diluted share, compared
to $54.2 million, or $0.58 per diluted share last year.  Total revenue grew
5.5 percent to $405.9 million for the quarter.  Galileo’s operating margin
remained strong at 20.7 percent for the quarter.  Operating income declined
13.0 percent to $84.0 million, largely due to the incremental intangible
amortization expense resulting from the acquisition earlier this
year.  These results are before a special charge taken in the quarter
($1.7 million, pre-tax) related to the integration of Galileo’s distribution
company in the United Kingdom (Galileo UK), which was also recently acquired.
“Our continued focus on cost control and business efficiency has enabled
us to deliver another quarter of growth in economic earnings per share,” said
Cheryl Ballenger, executive vice president and chief financial officer.  “We
continue to be the most efficiently run CRS in the industry and these results
are a testament to our commitment to delivering value to our shareholders.”

Global Distribution Revenues Increase for the quarter ended September 30, 2000, total revenues were
$405.9 million, a 5.5 percent increase year over year.  Electronic global
distribution services (EGDS) revenues increased 5.0 percent to $384.9 million
from $366.5 million in the same period last year.  EGDS revenue growth was
driven mainly by price increases and other yield improvements, as well as
revenue from and Galileo UK.  Information services revenues grew
15.3 percent to $21.0 million for the quarter, reflecting an increase in
revenue from providing fare quotation services to airlines and additional
revenue from hosting, network and development services to a large airline
Overall, global booking volumes fell 3.3 percent to 84.7 million compared
to third quarter 1999, driven primarily by weak bookings in the U.S.
Worldwide airline booking volumes were down 3.5 percent in the third quarter,
while car, hotel and leisure bookings were 1.9 percent lower than the prior
International bookings grew 1.5 percent in the third quarter.  This lower
than expected growth is attributable to a change in airline behavior that
resulted in an increased number of cancellations of waitlist and other
non-ticketed bookings, primarily in Europe and the Middle East, which reduced
the net billable segments in the quarter.  The company intends to address the
revenue impact of these actions with its 2001 pricing.*  Bookings were also
lower due to the impact of a threatened pilot strike in Canada and a reduction
in capacity resulting from the Air Canada and Canadian Airlines merger.
  The company continues to enjoy a strong market position outside the U.S.,
and experienced air bookings growth of nearly 10 percent in the Asia Pacific
region, with double-digit growth in India, Japan, China and several other
In the U.S. market, bookings declined 9.8 percent during the third
quarter, primarily due to the increasing impact of a shift in bookings to
Internet travel sites, the loss of the Preview Travel account, the impact of a
slowdown in traffic at a major airline customer and the slight market share
loss attributable to the transition to a new sales force in 1999.  Galileo
continued to strengthen its position in the traditional travel agency channel
during the third quarter, as the company’s U.S. sales force renewed, expanded
and won several distribution contracts.
“While we have won U.S. contracts representing over four million
incremental annualized segments so far this year, the full impact of these
wins has not yet been reflected in our results,” said Ballenger.  “We expect
to benefit from these additional bookings in 2001.  In addition, we will
continue to aggressively pursue travel agency conversions to Galileo’s
Apollo(R) computer reservation system, and have significant opportunities in
the pipeline.”*
The company also took a major step toward strengthening its position in
the important Internet distribution channel by registering nearly 400 new
travel agencies on its agency portal, and by introducing an
innovative and efficient marketing program designed to help agencies drive
traffic to the site.  The company believes this unique site,
which brings the experience and support of professional travel agents together
with the convenience and flexibility of the Internet, offers a tremendous
opportunity to greatly expand its Internet presence.*

Operating Expenses
Total operating expenses grew 11.7 percent in the third quarter to
$321.9 million from $288.1 million a year earlier.
Cost of operations expenses grew 12.8 percent for the quarter, primarily
due to higher intangible amortization expense related to the
acquisition, incremental operating expenses related to the acquisition of and Galileo UK, and increased network costs related to Galileo’s
convergence to a single Internet protocol.  Partially offsetting these higher
expenses were lower subscriber maintenance and installation expenses and
increased capitalization of software development expenses.  Excluding the
expenses resulting from the acquisitions of and Galileo UK, the cost
of operations fell 5.8 percent, demonstrating Galileo’s proven ability to
control costs and operate a highly efficient global distribution system.
  Total commissions, selling and administrative expenses increased
10.8 percent in the third quarter, primarily due to higher subscriber
incentive payments.  Higher distributor commission payments resulting directly
from higher revenues in markets managed by national distribution companies
were largely offset by commission savings resulting from the company’s
acquisition of Galileo UK.  Also contributing to the increase in selling and
administrative expenses were the incremental expenses of and Galileo

  Nine-Month Earnings
  For the nine months ended September 30, 2000, total revenues grew
7.1 percent to $1.27 billion.  Electronic global distribution revenues grew
7.0 percent to $1.21 billion, while information services revenues grew
9.0 percent to $60.6 million.  Total operating expenses, before one-time
items, grew 11.7 percent as higher intangible amortization expense, subscriber
incentive payments, distributor commissions, and network communication costs
were partially offset by a reduction in subscriber maintenance and
installation expenses.  For the nine-month period, economic earnings per
share, excluding one-time items, grew 6.4 percent to $2.30 from $2.16.


Balance Sheet/Cash Flow
  Galileo’s balance sheet remains solid.  At September 30, 2000, total debt
was $660.0 million, a decrease of $50.5 million over second quarter 2000.  In
the third quarter, cash flow from operations was used primarily to reduce bank
debt, make capital investments to grow the business and repurchase Galileo
shares.  Galileo expects to continue to use its strong cash flow for capital
investments, strategic acquisitions, share repurchase and debt repayment, and
will continue to evaluate these options in order to maximize long-term
shareholder value.*
Capital expenditures, including internally developed software, were
$29.3 million for the quarter and $62.4 million for the first nine months of
2000.  This capital investment was made primarily to upgrade the technological
platform of Galileo’s computer systems and to purchase subscriber equipment.
The company continues to expect full-year capital expenditures of between
$110 million and $130 million, in part due to the delivery of equipment
previously ordered by its network subsidiary Quantitude.*  Total depreciation
and amortization expense was $57.2 million for the quarter, and $157.9 million
year-to-date.  Amortization of intangible assets relating to mergers and
acquisitions totaled $31.0 million for the quarter and $81.1 million



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