Saturday, February 9, 2008

When Flight Schools Go Bankrupt

A large helicopter flight training school in the US, Silver State Helicopters recently ceased operations. Here's an article from the latest AvWeb News Flash

Students Left Hanging By Silver State Closure

Shocked by the downfall of Silver State Helicopters, the Nevada-based flight school that declared bankruptcy earlier this week, former students and employees are telling AVweb they face major financial losses. Silver State Helicopters abruptly shut down operations at its 34 nationwide locations on Sunday afternoon, leaving more than 800 employees without jobs and more than 2,500 flight students saddled with millions in debt.

Company president and founder Jerry Airola has yet to speak publicly on the event, but a statement released by the company alleges that “a rapid, unprecedented downturn in the U.S. credit markets” curtailed the availability of student loans for the company’s students and resulted in a “sharp and sudden downturn in new student enrolment.”

Tony and Heather Sullivan told AVweb they were at a Super Bowl party when they got the news. Heather was employed as a receptionist and flight dispatcher at Silver State’s Houston facility, where her husband was a student. To date Tony has logged just 81 of the 200 hours he signed up to receive, and said he does not know how he is going to complete his training. Tony, who works full time as a human resources manager for a construction company, said he has an outstanding loan through American Education Services (AES) for approximately $70,000, the cost of the 18-month program designed to get students through their private, commercial, instrument and initial flight instructor certificates.

Mike Reiber, spokesperson for AES, told AVweb that AES is one of several companies that originated and serviced loans made to Silver State students. “Effective this past Monday we are no longer dispersing money to Silver State Helicopters,” he said. “Any disbursements that were sent out are being returned.” Reiber said that AES is awaiting direction from Student Loan Xpress, the guarantor of the loans. Student Loan Xpress spokeswoman Jenn Stark said Silver State should pay unused tuition back. “As a result of Silver State Helicopter School's decision to file for bankruptcy protection, we are currently working with its students to ensure that their loans are managed properly until the bankruptcy court decides upon a course of action to assist them." she wrote in an email to AVweb. She said affected students can contact Student Loan Xpress for information, at 888-568-2429, between the hours of 8 a.m.-5 p.m. EST.

Silver State Helicopters is a member of the Helicopter Association International (HAI). In an undated membership profile on HAI’s website, Silver State lists a fleet of 195 helicopters including 138 two-place Robinson R22s and 43 four-place R44s. HAI president Matthew Zuccaro told AVweb that the loss of such a large flight school will be felt throughout the industry. “It’s certainly of concern to us,” he said. Jerry Airola founded Silver State Helicopters in 1999 and quickly became known throughout the industry for using aggressive sales tactics to recruit students to the program.

One of the biggest problems is that many students had paid in advance for the courses. Therefore, not only do they now not have the cash, but if they want to complete their training, they'll have to invest extra as even if they do eventually obtain some of their loans back, it will likely be a fair amount of time before this occurs.

It is generally a bad idea to pay in advance for your flight training. Sometimes it's unavoidable due to the nature of the program - e.g. a college program, but you should be wary of what you invest.

This type of thing has happened in Canada. In 2001, Advanced Flight Training Centre in Barrie, Ont went out of business. At the time, the provided flight training for any students who wished to pursue the flight option in conjunction with Georgian College's Aviation Management Program (Georgian since has a new flight training provider). Numerous students lost thousands of dollars each. In fact, the operator of the flight school was charged with 22 counts of fraud and 22 counts of theft. Recently however,the charges were stayed (meaning that she would no longer be prosecuted) because of the delay in having the matter come to trial.

Be careful where you invest your hard earned training dollars.

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