I am unable to connect Bluetooth on my iPhone to my MacBook air

This is expected behaviour. While there are many shared iPhone/MacBook activities that require Bluetooth to be turned on, they do not require pairing in the traditional Bluetooth sense.

What are you hoping to accomplish?

Some references you may find useful:

Continuity features and requirements on Apple devices - Apple Support

iCloud+ - Apple

Set up iCloud on your Mac - Apple Support

iPhone User Guide - Apple Support