NEW YORK, May 24 (Reuters) - JP Morgan on Friday started coverage of the five largest U.S. airlines with a "long-term buy" rating on American Airlines parent AMR Corp. (AMR) and a "buy" rating on United Airlines parent UAL Corp. (UAL). Atlanta-based Delta Air Lines (DAL), the No. 3 U.S. carrier, and Minneapolis-based Northwest Airlines (NWAC), No. 4, were also started with "long-term buy" ratings, while Houston-based Continental Airlines (CAL), No. 5, was started at "market performer." "Despite long-term challenges for the U.S. majors, industry fundamentals are in a recovery and we are generally bullish on the two-year prospects for the top five," JP Morgan airline analyst Jamie Baker wrote in a research note. UAL shares rose 76 cents, or 6.5 percent, to $12.51 in morning New York Stock Exchange trade. AMR rose 47 cents, or 2.3 percent, to $20.94, and Delta rose 46 cents, or 1.75 percent, to $26.84. Northwest dipped 11 cents to $16.22 and Continental slipped 13 cents to $23.14. "Solvency and survival are not at issue for our names. Recovery is," Baker wrote. Shares of Chicago-based UAL, the No. 2 U.S. carrier behind Fort Worth, Texas-based American Airlines, recently have lagged others in the group "on the popular (though mistaken) belief that its very survival rests solely in the hands of labor," Baker wrote. Continental's past success is mainly due to sub-industry wages that will likely increase significantly with new pilots and mechanics agreements, Baker wrote. The five majors have adequate cash and industry fundamentals are improving slowly, but net losses for the entire industry should total about $4 billion in 2002, making it the second-worst year ever, after last year, Baker wrote. Earnings estimates for 2003 appear too high, well above JP Morgan forecasts for no profit to a $250 million profit, and modest industry profitability appears most likely in 2004, he wrote. Increasingly robust low-fare carriers pose a growing challenge for major carriers over the longer term, and unless the majors bring costs under control, they are likely to cede market share and market capitalization, Baker wrote. JP Morgan plans to cover low-fare and regional airlines later. ©2002 Reuters Limited.