96, you have to realize something VERY important: the game is NOT played on the system, its played on your front end, your computer. Imagine that AH was a boxed sim -- just that the "AI" was provided by volunteers all over the world. The "System" just routes the other players information, and keeps score.
SO when you see a plane, you're really seeing where it was a second or more ago. At 400 mph, that can be a big difference! To make it more complicated, on HIS computer, your plane is a second behind its position on YOUR computer! To balance out the lag everybody sees, whether they're a mile from HTC or halfway around the world, the only solution is to have the game played as it is, on your computer.
That means when you collide, the other guy may never have come within 50 feet of you. He doesnt take damage because he never collided.
If that doiesnt help enough, please consider the seearch button above. The problem has been discussed endlessly. In fact, search "collision" with user id "Hitech" -- i remember he had a post where he linked past discussions. Maybe it was skuzzy, but I think HT