Higher-order spectra (HOS) are utilized to investigate the nonlinear flutter behavior of a two-dimensional pitch/plunge airfoil system in transonic flow with freeplay and aerodynamic nonlinearity. It is shown that on the route to diverging flutter the system begins with the pitching and plunging modes being uncoupled and undergoes various evolutions exhibiting quasi-periodic behavior as it moves towards an ordered state of high-amplitude periodic limit cycle behavior. New physical insights come from the bispectral densities being computed at critical stages as the system evolves from through different stages of periodicity with the coalescence of the pitching and plunging frequencies into a single coupled limit cycle. Based on these estimates the nonlinear interaction mechanisms which occur within the nonlinear aeroelastic system prior to diverging flutter can be characterized. Furthermore, aerodynamic nonlinearity in the form of Tijdeman Type-B shock motion is quantified and its effect in combination with freeplay assessed.