update software old time capsule

You don't need to reset the Time Capsule to update the software (firmware).

Make sure that your MacBook Air is connected to the WiFi signal from the Time Capsule

Open AirPort Utility on the MacBook Air (Finder > Applications > Utilities > AirPort Utility)

Click on the picture of the Time Capsule

When you do this, a smaller window will appear

Look for an Update button

Click on the Update button to update the firmware on the Time Capsule

The most up to date version is 7.9.1

Ok, thanks for the additional information. I see that you have the (most current) version of the 802.11ac "tower" Time Capsule. I'm going to assume that your MacBook Air (MBA) is running macOS Mojave or later ... is that correct?

Regardless, take a look at the following article to see if it can help:

• Update the firmware on your AirPort base station - Apple Support

Which exact model is your "old" Time Capsule? What device (Mac, iOS, or PC) will you be using to administer it?

What version is it running now? Is your new MBA a 2020 M1 or Intel model? If it's Intel, is it running macOS Big Sur?