How are they even going to know if there is an airtag in someone's luggage? Are they particularly obvious on an x-ray or is there some kind of specialised detector?
If it's just scare tactics then the similarity to watches is irrelevant. However, if for whatever reason they want to crack down on it, it being similar to wristwatches isn't going to stop them. I suspect most wristwatches are kept with the person rather than in checked luggage, and that if were actually determined they could demand a search of your luggage if they spot anything that remotely looks like an airtag on x-ray.
The law (it’s short): https://www.law.cornell.edu/cfr/text/14/91.21
An advisory circular relating to it: https://www.faa.gov/documentLibrary/media/Advisory_Circular/...
This allows an air carrier to approve anything they’re confident won’t cause an issue but not approve AirTags.