I personally think that demons are exclusively in the spiritual realm. To see into the spirit your spiritual senses must be open. UFO's are spotted by all kinds of people. That's enough for me to say they can't be demons! Aliens, demons or aircrafts we won't ever know until we get up close or get a revelation from God.
Demons are exclusive to the spiritual realm? What is the spiritual realm? The Bible teaches that there is no difference between what we perceive as physicality and the lowest level of heaven. As such, humanity struggles with what C.S. Lewis called our spiritual-physical amphibian nature. It therefore follows from testimony recorded in scripture and in the lives of contemporary folk that demons and unclean spirits (they are different creatures) do indeed inhabit and affect what most humans perceive as physical reality.
UFO's are indeed seen by multitudes, but that doesn't mean they are space aliens or trans-dimensional entities (a sci-fi word for spirit). It is a distinctly atheistic habit to explain these non-corporeal visitations as being extraterrestrial beings. In point of fact, these things have been around for as long as humanity has been able to record their appearances.
As one who has long studied UFO incidents, I can tell you for a certainty that they are NOT for the most part physical. For example, in the late nineteenth and early twentieth century the aerial appearances of these things resembled balloons or blimps. They were long, cylindrical and moved slowly. As human technology advanced, so did the sightings. During WWII, the 'foo-fighters' as they were sometimes called resembled man made aircraft. At mid-century a famous newspaper article described one of them as being saucer shaped. Thus was the term 'flying saucer' coined. Coincidentally, the number of sightings of saucer shaped objects also increased.
In the mid-1950's, international airline travel increased dramatically. At the same time, the flying objects adopted colored running lights nearly identical to those displayed by human passenger aircraft. Following the development of helicopters and oddly shaped aircraft and spacecraft in the latter part of the twentieth century, the UFO's also changed their shape. The sightings always seem to be one half-step ahead of human development. hmmmm
The greatest bit of evidence that points to the non-physical nature of UFO's is their silence. ANY OBJECT which moves through the earth's atmosphere at a velocity greater than 770mph (the speed of sound) WILL create a sonic boom. It doesn't matter what the propulsive force is. In the 1950's an American test pilot bailed out of a stratospheric ballon and dove to the earth. During the fall he exceeded 770mph. Aside from establishing the fastest free fall in atmosphere, the man also is on record for being the only human to break the sound barrier WITHOUT AN AIRFRAME. His body created a sonic boom. BTW he survived the test. When a UFO flies faster than sound they NEVER create a sonic boom. This is either because they are terribly considerate of earthly noise levels or because they are not physical bodies.
The primary speculation for the appearance of UFO's is alien, but the primary reality is that they've been here a long time. They are as much a part of the earth as we are albeit not one of us.