Continental Airlines Inc. (CAL) said it would forgo a merger with UAL Corp.’s (UAUA) United Airlines unit, while all-business-class carrier Eos Airlines Inc. ceased operations after filing for bankruptcy protection - two weekend developments that illustrate the escalating pressures that domestic air carriers continue to face.

Continental’s management ended months of speculation by announcing that a merger with troubled United would do more harm than good, even with the intense pressure airlines are under due to record high oil prices and the competitive threat posed by the recent deal between Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA).

"The risks of a merger at this time outweigh the potential rewards,” Chief Executive Officer Larry Kellner said in a letter. "While some would prefer to see Continental pursue a merger, we strongly believe we have made the right decision."

As for the niche carrier Eos, in grounding itself it joins Skybus Airlines, Aloha Airgroup Inc.’s Aloha Airlines and ATA Airlines Inc., which have already ceased operations, as well as U.S. charter operator Champion Airlines, which announced plans to stop flying at the end of May.

Frontier Airlines Holdings Inc. (FRNT) also has filed for bankruptcy protection, but at this time plans to keep flying.

The Eos downfall was "no surprise," Calyon Securities airline analyst Ray Neidl told The Associated Press. "We saw it happen with other smaller, undercapitalized airlines. Basically, there are too many airlines. We’re in a period of consolidation. The weaker guys, [facing] $120-a-barrel oil, are finally succumbing."

With jet fuel the single largest expense for carriers, merging to capitalize on economies of scale makes sense.