I found that after I read this chapter, I no longer had much interest in the series... In my opinion, it will go one of four ways:
1. They really are all dead, which in my mine is highly unlikely, but I guess it could happen
2. They get reincarnated....
3. They somehow survived.... Ive read some suggestions involved alternate dimensions and what not that seem plausible
4. Some survived, some didnt
Most of what I can think of has me wanting to drop the series. I'm really hoping the author explains it well, and that this doesnt become something that kills it for me, since I've really enjoyed it so far...

It seems like he was introducing a timeskip in this page (Chapter 234)
http://www.tenmanga.com/chapter/FairyTail234/241956-20.html

But then the next chapter just continued the fight as if that new character was never introduced and he made the timeskip in chapter 253
http://www.tenmanga.com/chapter/FairyTail253/253551-19.html