I agree there's a big price difference, but my rebuttal would be that for the target group we're talking about: I think a decent number of ppl currently get "upsold" to buy the 16" MBP because they need/want the bigger screen. They're not happy about it, but they find a way to buy it.Base MBA = $1,299.00 CAD
Base MBP 16" = $3,149.00 CAD
Difference = $1,850.00 CAD <- How many people, outside of the tech world (by that I mean people like us who visit tech forums regularly) would be happy with that price difference for the sake of a bigger screen?
I like the mathematical way you're thinking about it. We could nitpick the details, but I'll give you that monetarily, it's possible that Apple could be indifferent between the 2 options. It's even possible they could make more overall revenue (and let's even for sake of argument say more profits as well) with a 16" MBA with the additional volume they'll make (counter-acting loss in 16" MBP sales).M = People who want an Apple laptop with a bigger screen, can afford, and want, a 16" MBP.
S = People who want an Apple laptop with a bigger screen, can afford a 16" MBP, and are willing to compromise on price and weight.
E = People who want an Apple laptop with a bigger screen, and can afford a 16" MBP but want thin and light.
P = People who want an Apple laptop with a bigger screen, can't afford a 16" MBP, but could afford around $500 more.
R = People who want an Apple laptop with a bigger screen, but are unwilling to pay over $1k more for a few inches.
If the below is true, then they would not be cannibalizing their 16" MBPs.
M + S < E + P + R
The other non-monetary argument is that they lose the "bigger is more premium" correlation which so far exists with their other product lines. Eg. iPhone Pro Max vs iPhone / iPhone Pro; 12.9" iPad Pro vs iPad Air / 11" iPP, and has up until now existed with the 16" MBP.
I'm just not sure Apple wants to give that up, even if in the near-term, it's possible it could be net-positive financially. In the long-term, it may end up hurting them as it sets a new precedent and changes the nuanced brand / marketing of product lines.