Hi Dima,
Couple of things about your settings:
1) Your 'App Path' is set to a .ipa file, which can only be used on a real device. See if your developer can generate an app for use with a Simulator.
2) I believe there is a bug in Appium where if you specify a UDID that Appium will automatically treat the device like a real device. Appium will try to use ideviceinstaller, for example, which can only be used with a real device. On a simulator, Appium installs the app with 'xcrun simctl'. BTW--you can always tell the difference between the UDID of a Simulator and a real device because the Simulator will have dashes ('-').
So 2 things for you to do:
1) Get an app that is compiled for x86 processor (Simulator) rather than ARM (real device)
2) Don't use the UDID setting when testing against a Simulator.
Good luck!