This is a game, not reality, so to make it payable, there are a few times when illogic reigns. This case happens to be one of them. To answer your question, each player always gets to choose his own caualties, which almost always means that he will take the least IPC value pieces as casualties. Some exceptions would be when you want to capture a territory, , so you have to lose an air unit instead of your last land unit, or in naval battles - depending on the situation, you may wish to keep a lower IPC value unit occasionally. In the House Rules section, you can find different house rules dealing with this situation, such as having dogfights, or armor hits go to armor units, infantry hits go to infantry units, etc…