To elaborate on what Laary wrote which is the correct answer.
AI format is not readable by any other application except Illustrator at least as a graphic.
What makes Illustrator usable in other applications is its pdf compatibilty, which is an option when saving the file.
It essentially saves two versions of the file one in the ai format and the other in the pdf format it is the pdf portion of the file that you see when placing the file.
If you wish to have the file flat as you refer to it then when saving as a pdf uncheck the option in the pdf dialog Create Acrobat Layers from Top Level Layers.
Also when you flatten a file in Illustrator it is not the same thing as flattening a file in Photoshop
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