Here's an in-depth explanation of what caused the AI in Airships: Conquer the Skies to build outdated ships. I've tried my best to keep it relatively non-technical.
So in the game, the AI builds airships (and landships and buildings), and it researches technologies. Of course, it should use these new technologies in the construction of better ships. But a lot of the time, this was simply not happening, with the AI still deploying muskets and grenades late into the game.
After multiple tries, I finally figured out what was causing this bug, and also why it was so hard to diagnose.