American Airlines Group (AAL -0.72%) said on Monday it will offer $5 billion in notes to pay down a loan issued by the U.S. Treasury, part of the airline's recovery following the COVID-19 crisis.

The airline said it would offer $2.5 billion in notes due in 2026 and an equal amount due in 2029, while also entering into a $2.5 billion senior secured term-loan credit facility. All of the new borrowings will be secured by the company's frequent flyer program.

An American Airlines tail at night.

Image source: American Airlines.

Last year American and other airlines borrowed from the U.S. government under the CARES Act, which provided emergency funding to help the industry survive plummeting demand for travel. American will use part of the proceeds of this private debt offering to repay what it owes under the term loan facility with the Treasury. That borrowing is currently secured by the same collateral that will, in part, secure the new borrowings.

American said the remainder of the funds will be used for general corporate purposes, which may include the repayment of other debt.

The offering should be viewed by investors as fresh evidence the industry is beginning to heal. The Treasury loans were viewed as a stop-gap measure, to provide liquidity at a time when investors were unsure the airlines would be able to survive, and came with strict guidelines.

American shares were up slightly in pre-market trading. The stock has gained 31% year to date.