Las Vegas-based Silver State Helicopters argues its collapse was due to insufficient numbers of students enrolling to support its 34 locations across the USA, while some students claim the academy was a "pyramid scheme" that was unsustainable.

According to court documents, each student paid about $70,000 at the beginning of their 18-month training, but inadequate instructors, simulators and helicopters delayed graduation or made the course impossible to complete.

Arbitration is on hold for forty students who sued the academy claiming fraud. The bankruptcy puts their case alongside thousands of creditors with up to $50 million in claims.

"It's a horrible hardship. It's also a big black eye for the industry as a whole," says John Stonecipher, president of Guidance Helicopters in Arizona.

Stonecipher says he could fit in perhaps 30 students from the academy, but all 2,700 could not be absorbed by other schools. "I am certain there are fewer than 1,000 students in all of the 141 helicopter schools in the USA now," he says.

The attorneys general of California and Oregon are examining the case, but the governor of Nevada continues to support academy founder and chief executive Jerry Airola, who in January was promoted to the Nevada Economic Development Advisory Board.