THUNDERBIRD DEFENDS THE DEAL AS NECESSARY TO ITS FUTURE
“I think because of opportunity costs, students are no longer choosing two-year MBA programs like they did in the past,” he said. “And the price of tuition has gone up at all private schools. As a result of high opportunity costs, students are voting with their feet and are choosing one-year MBA programs, masters programs and online MBA programs. So schools must shift with that shift in demand. We might be nostalgic or love what the two-year MBA does, but every MBA program that’s successful doesn’t have to be a two-year program.”
In March of this year, Penley announced that beginning this fall it would offer a core MBA curriculum that can be completed in 12 months and will cost about $20,000 less than its current 20-month program (see Thunderbird Moves To A One-Year MBA). With the help of some $13 million of Laureate cash, the school also plans to create new online and undergraduate programs while also expanding its global footprint by reaching more students all over the world. Penley said Thunderbird is looking to launch campuses in Paris, Madrid, Santiago, Sao Paulo and Asia.
THE DEAL WILL GET $24.5 MILLION IN DEBT OFF THE SCHOOL’S BALANCE SHEET
The alliance with Laureate will also pull Thunderbird out of an accumulating debt crisis. At the height of the economic implosion in 2009 and 2010, Thunderbird was running annual budget surpluses, but Penley said that due to the fluctuating financial nature of a private institution that relies on tuition, gifts and grants, Thunderbird is no longer running a surplus. Instead, the school has racked up $24.5 million in debt and was $4 million in the red in fiscal 2012 when its $79.9 million in expenses overwhelmed $75.9 in revenues.
The partnership with Laureate, he argues, will include other financial benefits as well. First, a sale-leaseback for $52 million will pull the school out of debt for the first time in Thunderbird’s history. Secondly, the alliance could take Thunderbird back to the days of operating solidly in the black with the potential to produce $100 million in operating surplus. Finally, adds Penley, $30 million will be invested in campus upgrades.
DON’T MISS: THUNDERBIRD: A CASE STUDY IN ORGANIZATIONAL DECLINE or THE $4.3 MILLION BUNCH AT THUNDERBIRD
