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We all know the AI has its issues. (e.g. it should never just stand around with its army when attacked, I really wish that script would get removed and the AI would jsut rush all the time, which would be much more challenging then it waiting to get attacked to act!!!)
However this one here as can be seen in the replay is one of the top no-goes.
Playing a VH/L Clan Angrund Campaign and after having a very nice encounter against Malus Darkblade him being the lone survivor of the ongoing battle and finally falling back on Tzarkan to win against 1/2 of my army.
His chances to win were actually not too bad, but after I scattered my forces to buy time for his degeneration he stopped acting once he finished off another unit.
He could still see at least 1 ground unit and my gyrocopters hovering above him. I assume the AI sometimes tries to attack flying units with ground units but since that is not possible it seems like it does nothing. (but most likely it gives an attack order over and over again)
I really hope these bad habits of the AI can be fixed one day!