By Kathy Fieweger CHICAGO, Jan 28 (Reuters) - American Airlines Chief Executive Donald Carty said the world's largest airline will begin to restore some flights it cut after the Sept. 11 attacks, starting this week and increasing through the spring. American, a unit of AMR Corp. (AMR), like other airlines slashed about a fifth of its schedule after the attacks on the United States dampened the demand for air travel and caused huge, ongoing losses for most carriers. It grounded about 20 percent of its capacity, measured by available seat miles, in line with most other major carriers with the notable exception of Southwest Airlines Co. (LUV). Some Wall Street analysts have said airlines' ability to keep those cuts in place would be key to turning profits as demand recovers. If fewer seats were available, then airlines could raise fares. However, Carty's comments, made in a recorded message to employees at the end of last week, indicate that American will be restoring part of what it cut out. An airline spokeswoman said American would be adding back flights on existing routes as opposed to adding new service. She declined to say where, other than at "areas where we had to cut at our hubs." The original cuts were systemwide and across the board, she said. Some airlines grounded planes altogether and others simply used them less frequently. Many planes are now idle, and when one airline starts adding back flights, others may be forced to follow or lose competitive ground. UBS Warburg analyst Samuel Buttrick said his analysis of schedules filed for the first half of 2002 shows airlines putting back capacity at the rate of 0.5 percent per month. "American's comments appear consistent with that," he said. KEY ELEMENT TO RECOVERY "A key element of our recovery plan is the rebuilding of our network," Carty said in the message. "We will begin adding some capacity back into the system next week, Jan. 31, at our hubs in some of our big cities. We'll also add another layer of new service in the March schedule. "And, unless the economy dips south, we'll add more in April. This is part of our strategy to gradually and thoughtfully restore the capacity as we see demand start to grow, especially among business travelers." He said the airline was still losing "lots of money every day, but it's certainly less than it was before." Fares are at 12-year lows, Carty said. Last week, after reporting a record loss of nearly $800 million in the fourth quarter, Chief Financial Officer Thomas Horton said AMR, which is based in Fort Worth and is also parent of TWA, was burning through about $6 million in cash per day in December. The airline expects to generate cash in the second or third quarter. "Our plan is to systematically rebuild our network so that we can get into a position to recall our furloughed people and, eventually, restore ourselves to profitability," Carty added. "But that's not going to happen overnight." LESS THAN 2 PERCENT OF FLIGHTS DELAYED Carty also said that the airline's operations since new bag screening rules were required nationwide were running very smoothly. Over the first weekend, which included the Martin Luther King Jr. holiday, he said only 2 percent of flights were delayed, with an average delay length of 12 minutes. On Friday, AMR filed a report with the Securities and Exchange Commission which outlined its fleet plans for years going forward. After having 978 jets on hand at the end of year 2000, AMR added 179 in 2001 with the acquisition of TWA for a total of 1,157. At the end of 2002, it plans to have reduced that total by 38 planes to 1,119, but then it plans to start adding planes again in years beyond. For 2003, the airline expects to add 15 jets for a total of 1,134. In 2004, it plans to add 13 jets for a total of 1,147. Shares of AMR were up 2.88 percent on the New York Stock Exchange in midday trading Monday, rising 73 cents to $26.10.