Instructor redundancies would lag any drop in enrollment by many months. If their 2008 courses were chocker, then they'd be halfway through 2009 before any drop in FI requirements starts to show up and probably closer to the end of 2009 before they'd need to make any FIs redundant. I don't know how full their 2008 courses were, but that is the best indicator as to when a drop in revenue and human resource requirements would lead to redundancies.
I don't think FTO's will drop prices, they will seek to contain and cut costs. When a business has money, particularly borrowed money, tied up in inventory, they drop prices to move it. We probably all got some nice Crimbo prezzies last week as a result. But FTO's don't have inventory, so staff redundancies become the cost containment technique of choice, but this lags any drop in sales by at least the length of ground school. Going to the wall only happens if sales revenue drops below the absolute break even point after staff is reduced to the bare minimum and cash is exhausted. Obviously, too much existing debt can accelerate failure while new financing or capital investment from deep pocketed owners can serve as effective life support to stave off failure until enrollment grows again.
Cabair has had a strong business for many years, so if their owners have not abused leverage, they could ride out a down cycle like they have before. Unless anyone has some solid sources indicating trouble, I'd chalk this up to unfounded rumours, particularly this early in a downturn. The fiscal soundness of an FTO merits very strong consideration by any wannabe though, not just in a down cycle, but in an upward one as well, so there is value in the topic even if Cabair is fine.