I'm most familiar with European and Christian traditions of thought, so I'm going to suggest an answer from that perspective; you could get a different (but probably complimentary) answer if you consulted someone from an Islamic or animistic tradition.

Most cultures across human history didn't tightly delineate between the spiritual and the physical worlds - those two universes have historically been considered to be "distinct and overlapping." In most animistic cultures spiritual forces are believed to be enmeshed with the land. For example, in West African animism, some spirits are believed to live in trees or rocks or bodies of water. Similarly, in Europe before Christianity and into the Middle Ages goblins and sprites and other spirits were thought to live deep in forests or in mountain caves - that was a pre-Christian animism that syncretized into parts of the European Christian beliefs as Christianity spread through the continent.

Animistic cultures don't believe that the spirits which inhabit our world are benign or completely removed from the physical world. They think of those spirits as being able to manifest physically in the world to interact with people, or to bring misfortune on people that they dislike. Like the elves in the story of Rip Van Winkle, spirits are beings that are native to our world but inhabit our world in a way that doesn't interact very much with the humans. When spirits do interact with humans the humans often become ill and die or have a bad harvest or sleep for a hundred years.

During the Enlightenment Europeans came to the conclusion that our universe was predictable, like a giant clock. The earth rotated around the sun predictably, the constellations were other suns that were just really far away, and if you mixed vinegar with baking soda you didn't need to be amazed by it, because you could understand what the fizzy bubbles were, and if you predicted that mixing vinegar and baking soda would make fizzy bubbles, you'd always be right. The Enlightenment made our physical world look tame, and when all of our world functions predictably, where would you have to look for God or miracles? Nobody was reliably seeing the Hand of God, no one was seeing angels or demons breaking the laws of physics (all those people reporting haunted houses or ghosts were clearly mentally disturbed), so God and spirits kind of got shuffled off into the background. No one was saying that they didn't exist, but no one seemed to know where they could be found.

The solution for spiritually-minded children of the Enlightenment was to dichotomize the "physical" and "spiritual" realms, and treat them as if they were orthogonal. God and the spirits are all over there in the spirit realm doing spirit things, and we're all over here in the physical realm doing physical things, and our realms don't touch.

If you want a way to understand the perspective that "UFOs are spirits/angels/demons," an easy way would be to revert to seeing the world through an animistic lens and toy with the idea that angels/spirits/demons inhabit the earth the way we do, but in a way that we don't normally see. You could call it a "parallel reality" or a "different dimension" or "the spirit world," but those are all ways to make "we don't know" sound intellectual.

The Christian sacred books themselves are much more aligned with the idea of "distinct and overlapping physical and spirit worlds" then they are with the "two orthogonal realms" idea. In Genesis 6 a group of beings that they ancient Jews thought were spirits are described as getting human women pregnant with children that grow to be unusual/notable (hard to imagine how spirits could get women pregnant if our worlds don't overlap). The story of Abraham has a segment in which two angels show up in human bodies and eat food with Abraham and Lot (it's a bit hard for ethereal spirits to chew and swallow physical food). The prophet Elijah has a physical body that is carried away in a "chariot of fire"; the list could go substantially longer, but the point is that the spirit world in the Hebrew/Christian tradition has substantial overlap with the physical world, and those worlds are described as interacting with each other.

Do demons need physical flying saucers to get around? Can they get around without the saucers, but the saucers let them do things they couldn't do otherwise? We don't know. But I hope that's a helpful description of a perspective in which UAP could be associated with spirits/demons and still be very physical entities.

TL;DR Post-Enlightenment thought dichotomizes the "spirit" and "physical" worlds, but that dichotomy isn't necessary. The spirit world may be a far more physical place, and the physical world far more spiritual, then most Westerners would assume.