Like the rest of the airline industry, AMR's ( AMR) American Airlines and Continental Airlines ( CAL) face a gloomy winter, with sky-high fuel prices and the normal seasonal travel slowdown. However, J.P. Morgan analyst Jamie Baker believes next year is starting to look bright for the two carriers -- the only so-called legacy airlines able to avoid bankruptcy in the wake of the Sept. 11, 2001, terrorist attacks. Baker, whose firm does and seeks to do business with companies covered in its research reports, raised his ratings on both stocks to overweight Tuesday. His investment call lifted AMR 25 cents, or 2%, to $13.01, and Continental 29 cents, or 2.5%, to $12.14. Baker contends that high oil prices are at long last having a salutary effect on the industry by forcing excess capacity from the system and allowing carriers to boost unit revenue. "Ex-fuel margins are reaching new highs," Baker writes in a research note. "By our account, a model that was supposedly 'not built for $40 oil' appears poised to function at $60, though you wouldn't guess it looking at how certain equities have performed as of late. Not surprisingly, we feel better about the industry's near-term fundamental prospects and equity potential upside than at any time this decade." In 2006, rising unit revenue should help AMR record a profit of $1.60 a share and Continental EPS of $1.15, Baker writes, adding that his forecasts are based on crude oil averaging $62 a barrel next year and crack spreads -- which measure the additional cost of refining that oil into jet kerosene -- averaging $12 a barrel. Judging by what his peers predict, the J.P. Morgan analyst is sticking out his neck. The average estimates of Wall Street analysts surveyed by Thomson First Call are for AMR to lose $2.22 a share next year and Continental to lose 79 cents a share.