What about this situation:
Swan Lake Flight Centre is in Florida. It is in, let’s say, Grapefruit County. It is a 141 school with mostly foreign students. 60/40 mix let’s say. The operations area, hangar, and dormitory are all colocated in the same building. Let’s say 10 - 30 students at any given time. A dozen in the dorms.
There is another flight school, Puzzle Aeronautical University, let’s call it. In Volusia County. It is a large private university. Industry leader.
COVID-19 comes along. To Florida. The Governor, a good free-market capitalist, realises the longer we give businesses to take in revenue, the less painful the shutdown is going to be. This seems especially true as there is no evidence of the virus in rural areas at this time. Grapefruit County and Volusia County also put off stay-at-home guidelines. Counties in hot-spot parts of the state enact stay-at-home guidelines locally.
Some of the state-run flight centres at local colleges decide to cease training. After all, tax payer’s deep pockets will still be there when they decide to reopen. Puzzle and Swan Lake decide to continue training, but Puzzle does close its dorms.
Let’s say last week there is an asian student at Swan Lake that has flu-like symptoms. Doesn’t get tested. Everyone decides to dismiss it as ‘food poisoning’.
Let’s say a couple of days ago the Governor issues a stay-at-home order. Puzzle’s in-house counsel interprets the order as them needing to shutdown flight ops, and issues a notice similar to this one:
Swan Lake is a private school. For-Profit. So the accounting equation applies:
Assets = Liability + Owner’s Equity.
And salary, as we all know, is a direct debit of Owner’s Equity.
Swan Lake decides to take a broad view of the Executive Order, and continue flying. After all, if this shutdown lasts too long, they may not be able to keep the lights on. Or, with a looming recession, it is better to bring in as much revenue as possible before closing the doors.
So now, today, their doors are open, their dorms are full, and they are flying. So, the dorms have become a possible cluster of…’food poisoning’. The flight instructors don’t live in the dorms. The flight instructors are arriving on property each morning, and leave the property every evening, going back into the native community.
I pose this first question: Should Swan Lake suspend training? If so, for what reason? If not, for what reason?
I pose this second question: If Swan Lake is an LLC, are the FIs protected from possible litigation? Corporate veil and all.