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Thunderbird, the Arizona business school, has received a significant setback in its plans to form an alliance with Laureate Education, the for-profit education company, a year after it first announced the strategy.

The alliance involves the creation of a joint venture and a new corporation, which in turn requires approval from the US Higher Learning Commission. The Higher Learning Commission Board of Trustees has voted not to approve the requested changes, although Thunderbird remains accredited by the commission.

The decision by Thunderbird to team up with Laureate divided the business school’s community. Board members resigned from the school and alumni were up in arms at what they saw as a dumbing down of the school’s programmes, particularly the MBA. Disgruntled alumni from the school have amassed a $2m war chest to maintain an independent alumni association and report that $17m has been committed to support the next stage of the school’s development.

A shopping list of demands from the Thunderbird Independent Alumni Association include a restructuring of the Board of Trustees and hiring new teaching professionals. It also plans for the school to have an alumni membership based non-profit structure and to focus on postgraduate degrees.

Larry Penley, president of Thunderbird, told the FT in July 2013 that Thunderbird needed the Laureate partnership to help the school maintain its reputation as one of the top global business schools, by helping it launch programmes overseas using the latest technology. Part of the strategy involves the launch of an undergraduate business degree.

For many in the business school world, the woes at Thunderbird are seen as symptomatic of real structural problems in the US MBA market, as the demand for these programmes continues to decline at all but the very top schools. Although many deans have warned for the past decade that increasingly high fees combined with demographics – the declining number of those in their twenties who would be eligible for MBA degrees – would be the death of many business schools, few have heeded the warnings.

Thunderbird reported decreasing enrolments for its MBA degree over recent years and after a steady decline dropped out of the Financial Times Global MBA two years ago – it was last ranked in 2012 at number 89.

The continued endorsement of Thunderbird by the HLC is essential if the business school is to be accredited by the US business school accreditation body, the AACSB, says Robert Reid, Chief Accreditation Officer there. The school is at present under review by the AACSB as part of the standard re-accreditation process - this happens every five years. Ensuring quality across all the business school’s programmes is critical, says Mr Reid.

According to the Higher Learning Commission, Thunderbird can file a new application related to the alliance “in fall of 2014 or thereafter”.

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