Why would it cost as much as a 16” MBP?
If you configure a 14” MBP and a 16” MBP to the same spec the 16” is $200 more. That gives an approximate price for adding the larger screen. If you apply that same upgrade price to a 13” MBA at $1199, you get a 15” MBA at 1399. That is a reasonable base price for a 15” MBA.
People do worry that a larger Air would canibalize sales from the 14 or 16 MBP. But, while their base price is higher, their base configurations are better. I suspect if you configured a 15” MBA to the same level (except SOC) it would be a little cheaper than the 14” MBP but maybe only $100 or so. Still it would have the larger screen but not as large as the 16”. All in all, the 15 will appeal to some and may take sales away from the MBP but Apple won’t be hurting. You can relax about that.
Apple increased the price of the MacBook Air with the launch of the M2. So Apple is going to do the same with the 15” M2 MacBook Air.
The current M1 / M1 Pro / M1 Max / M1 Ultra didn’t receive a price increase yet due to inflation & chip shortages.