User blog comment:FairyRaven/Fairy Tail Chapter 396: Air, Review and Commentary/@comment-83.255.195.39-20140812155229/@comment-76.161.172.226-20140812181943

The nameless Fairy Tail wizards were fleeing the water, rather than going into it like Levy, and are likely fine.

They are south of Magnolia because the cube was no longer directly over the town and when it broke apart and fell to the ground it was to the south of the town. You can clearly see the rubble of the cube behind them. Cavelike tunnels, rubble that isn't from the building and so forth.

So what happened was the CS king cut apart Plutogrimm, and it crumbled and fell to the ground south of the town. Then he freed everyone. So now most of Fairy Tail is trying to re-orient and regroup at the rubble from Plutogrimm, while Makarov has gone back alone for Lumen Histoire.