Ok, so let's take a look at the various collision schemes.
1) I DEMAND ALL PLANES GO DOWN IF I COLLIDE WITH ONE!!!
Side effect: Now, you avoid the collision with another plane by a good 400 feet, but still blow up because the other player did not avoid the collision. How easy is that to exploit?
2) I DEMAND ALL COLLISIONS BE DISABLED!!!
Side effect: No one bothers avoiding head on's and just blazes away flying through you plane. With no risks, the reward becomes more arcade than sim.
3) I DEMAND THE SERVER TAKE CONTROL OF THE COLLISIONS!!!
Side effect: For a server based collision system to work , the server would also have to take control of all stick inputs so it could accurately position the planes in its memory. To allow the remote players to handle input would cause all matter of inconsistency in when a collision might happen. You might intersect with an object, you might not.
The bottom line is this. The system we use is not perfect but it is the only system which places absolute control of a collision in the player flying his plane. Any other system allows the remote player to have some control over it.
So, how do you fix something and not make it worse? All collision systems have downsides.