MacBook Air M1's Bluetooth to AirPods is still flaky.
Yes, there are known issues. The M1 MacBook Air has a long history of Bluetooth problems with AirPods — especially the AirPods Pro and regular AirPods.
Audio drops out for a second or two, especially when you’re in a crowded Wi-Fi environment or near other Bluetooth devices. Sometimes the connection just refuses to lock on, requiring a forget-and-repair cycle. And the automatic switching between your iPhone and Mac is more of a suggestion than a feature.
Apple has patched some of this with macOS updates, but it’s not fully fixed. If you’re unlucky, you’ll get the worst of it. If you’re lucky, it works fine most of the time. There’s no way to know until you try.
A few things that help: disable Bluetooth on your iPhone when you’re using the Mac (stops the device wrestling match), keep your Mac close, and avoid USB 3.0 hubs near the Mac — they cause interference.
Apple may never fully iron this out. If Bluetooth reliability is critical, the M2 and M3 MacBooks have fewer complaints. But if you already own the M1, you just learn to live with the occasional stutter.