UPDATE 1-Lehman upgrades U.S. airline sector to positive

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June 5 (Reuters) - Lehman Brothers upgraded the U.S. airline sector to "positive" from "neutral," saying industry restructuring was coming at an accelerated pace.

"We see real value in the capacity reductions now under way and believe it is time for investors to revisit the airline space," analyst Gary Chase said in a note to clients.

Several airlines are reducing workforce and domestic fleet as the industry grapples with soaring fuel costs and a weakening economy.

Chase upgraded UAL Corp (UAUA.O) and Northwest Airlines NWA.N to "overweight" from "equal weight," but said he likes Delta Air Lines (DAL.N) above all.

Though Delta Air Lines and Northwest Airlines have a relative safety margin, even these companies could suffer significantly if there is a sharp spike in oil and might possibly be forced to file for bankruptcy, Chase said.

"We believe a compelling survivor play is developing within the airline sector," Chase said. "What's clear to us is that if nothing changes, bankruptcy risk is significant for the entire industry. It is for that very reason, however, that we believe significant changes must, and ultimately will, happen."

The industry will need to access almost $3 billion in new equity over the next 12 to 18 months to shore up liquidity positions, he said. (Reporting by Neha Singh, Bhaswati Mukhopadhyay in Bangalore; Editing by Deepak Kannan)