March 3, 1981

The merger between Continental Air Lines and Western Airlines was dealt a potentially fatal blow yesterday when the Civil Aeronautics Board approved a bid by Texas International Airlines to buy control of Continental. The five-member panel's vote was unanimous. The agency first voted authorization of the Continental-Western merger. But that became academic when the C.A.B. then gave Texas International permission to raise its holding to 48.5 percent of Continental's shares and the right to vote its shares against a merger of Continental and Western. Texas International began gathering commitments for Continental at $13 each in early February.

Peter Tufo, chairman of the city's watchdog Board of Correction, declared yesterday that New York City jails were so overcrowded that the situation had reached ''crisis proportions.'' A spokesman for the city's Department of Correction said that within the next few days the city will announce its short-term solutions to the problem. Mr. Tufo said in an interview that within the last eight weeks the number of inmates in city jails had jumped by 1,303 to 9,243 and that experts expected the trend to continue. City jails were designed to house around 8,300 inmates, he said.

Almost nothing touches people as much as the death of a child. The waste of a life at a young age is deeply disturbing, but it is made even the more poignant as many parents almost unavoidably identify with the loss. When two young boys attending the same school died 10 days apart in Dix Hills, L.I. recently, there was even more than the usual community pain. It was possible, at least in the minds of the parents and some doctors, that some deadly contagion was in the air. The parents not only identified with the loss of other parents but imagined it happening to themselves. Although health officials stressed that no public health threat was at hand, the reassurances did not salve the fear of most parents. In fact, a panic that drew national attention ensued. Throughout this period, health officials had to stay sensitive to that panic but still keep a tight lid on their own emotions so that they could go about their painstaking medical work. Scores of pathological and other tests were needed to determine if the two deaths were linked. Additional virological and bacteriological tests were needed to rule out an unrecognized outbreak of a communicable disease.

Governor Carey called today for a $5 billion five-year program of improvements in the Metropolitan Transportation Authority system ''on an emergency basis,'' and asked that the agency be excluded from a broad range of regulatory procedures in acquiring land and equipment. But Mr. Carey said he did not plan to provide any new state operating aid for the transit system in this year's budget, although, he said, that was ''not to foreclose'' negotiations on such aid. The chairman of the Transportation Authority, Richard Ravitch, said that without new money, a 10-cent to 15-cent increase in bus and subway fares and a 20 to 25 percent increase in commuter fares would be needed by the end of the year to cover an expected $170 million deficit for the authority. Need for Funds Stressed The lack of new operating aid drew immediate criticism from Mayor Koch, who said here that the state must address the transit system's need for operating funds at the same time as it addresses its equipment and maintenance needs.

The conflict over energy policy between the federal Government and the province of Alberta intensified today when the central Government placed a special tax on crude oil and blamed Alberta for having forced the levy. Ottawa said the added tax revenue was needed to pay for an increase in crude oil imports to offset a 10 percent cut in production yesterday by Alberta. Marc Lalonde, Minister of Energy, Mines and Resources, blamed Alberta's government for the tax, saying the federal Government had had to respond to the province's ''regretta@ble'' decision to cut output. The tax will be levied nationwide and passed on to retail product prices. The effect on consumers works out to about 1.7 cents a gallon (United States funds). A gallon of regular unleaded gasoline in Ottawa now costs about 92 cents.