United's Merger Quest is Delayed

United Airlines is focusing its merger ambitions on US Airways after Continental Airlines' board Sunday backed its management's decision to go it alone.

"Every US carrier, including Continental, is under enormous pressure from record high fuel prices, a slowing U.S. economy and a weak dollar," Kellner wrote. But the airline isn't seen as being in quite the same straits as United, and Kellner argued in his letter that it had some operational strengths, including its trans-Atlantic route network and hubs in New York and Houston.

A spokesman for Continental's pilots union told The Associated Press that given the weak condition of the other carriers, "we are somewhat relieved" at Continental's decision.

"We look around at the first-quarter financials from the other legacy carriers. Do you really want to swim out to a drowning man and just get pulled down by them?" said Mark Adams.

Though not identifying United by name, the Continental letter amounted to a stinging rebuke of its potential partner. The letter also raised new questions about the industry's direction given that the only healthy major carrier at the moment is discount-focused Southwest and that two other big players, Northwest and Delta, already have thrown in their lot together by announcing merger plans.

Investors are pessimistic about prospects for all the legacy carriers because they all are saddled by high cost structures and have struggled in a cutthroat environment since travel fell off after the Sept. 11, 2001, terrorist attacks.

In the latest indication of trouble in the skies, Eos Airlines Inc., the start-up carrier that offered premium service across the Atlantic, ceased operations Sunday after filing for bankruptcy protection, the latest casualty in the money-losing industry.

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