Microsoft has confirmed the closure of ACES Studio, with a spokesperson commenting to IGN that the decision was made within Microsoft's Internal Entertainment Business "to align our people against our highest priorities."
In addition, the company noted: "You should expect us to continue to invest in enabling great LIVE experiences on Windows, including flying games, but we have nothing specific to announce at this time."
Elsewhere, former ACES developer Phil Taylor, who moved away from the company before these layoffs, has been further detailing the shutdown in a blog post.
According to his reports, the studio has indeed been largely closed, with six employees retained to fulfill contractual duties - though he comments on the hope that Flight Simulator may continue to exist as a franchise in some other form.
The Microsoft-owned Flight Simulator is possibly the game industry's longest-running continuous franchise.
The first Microsoft-branded version was released in 1982, and ongoing development stretches back over more than a quarter-century and twelve main versions.
The most recent version, Flight Simulator X, was released in 2006 and said to have been a success, with an expansion in 2007. A Microsoft representative had confirmed at that time that further editions of the game were in development.
The Flight Sim series is well-known not just for its official releases, but for its unusually dedicated fan base, which has produced copious amounts of user mods and resources for players.
Also in development at ACES Studio was Microsoft Train Simulator 2, the followup to Kuju's original 2001 game. The sequel was previously speculated to be releasing this year. Furthermore, ACES Studio was responsible for Microsoft ESP, a wide-ranging "visual simulation platform" based on Flight Simulator X technology.
The future of the three software lines in or out of house is unclear, particularly given how extensive the ACES Studio layoffs are said to be, but Gamasutra has contacted Microsoft for comment on the report.