How do I enter my Recovery Key to unlock the volume on my MacBook Air

Here are the steps Apple provides for this:

If asked for your recovery key

After clicking "Forgot all passwords?", if you're asked for your FileVault recovery key:

Enter your FileVault recovery key. You received it when you turned on FileVault and chose to create a recovery key instead of allowing your iCloud account (Apple ID) to unlock your disk.

When prompted to reset your password, click Reset Password.

Select a user to reset the password for.

After successfully authenticating, click Exit.

Choose Apple menu  > Restart, then log in with your new password. Password reset is now complete. You don't need to take additional steps.

Ref: If you can't reset your Mac login password - Apple Support