All staff apparently let go. Not much of an art department numbers wise (almost all outsource), but a lot of the guys there were veterans of ACES Studios / Flight Simulator.
No word what the long-term plans are for the game itself, but I doubt it'll last long without developer support given that it's a DLC-based freemium title.
Here's crossing my fingers that everybody lands on their feet. There were a LOT of smart people there, in disciplines besides art as well - cartographers, aerodynamic simulation coders, net code folks... all people I looked up to hugely from my time working with (some of) them at ACES.
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MS Flight Live is in Seattle - they share(d) a building with Turn 10 (Forza Motorsport).
There are two closed projects mentioned in that article... Project Columbia and MS Flight Live.
Flight Live was in Seattle. The folks from the Flight Live studio have been posting on Facebook about the layoff today (we're all still connected, mostly, from the FlightSim days). One thing that may be somewhat confusing is that I've heard mention that some of the art was partially sidesourced to MS artists in Vancouver; I don't know whether that's accurate or not.