How do I erase TimeCapsule with Airport Utility 5.6.1

Open AirPort Utility 5.6.1

Click on the Time Capsule icon, then click Manual Setup

Click the Disks icon at the top of the next window that appears

Click the Disk tab just below the Disk icon

Click Erase

If you plan to keep the Time Capsule, use the Quick Erase option, which will only take a few minutes. If you are moving the Time Capsule to another user, you will probably want to perform a more secure erase. Use the Zero Out option, in that case, which will lkely take approximately 4-6 hours if your Mac is connect to the Time Capsule using an Ethernet cable. If you are using wireless, the process will likely take 3-4 times longer.

It's explained quite well by Bob, post above -- but since I had to go through it myself I made photos of detailed steps/screens I had to go through. Either of the posts here should be indicated as 'solving' your question.

As mentioned, You start to erase the Time Capsule's drive by launching Airport utility (in Applications > Utilities). Opening this will give the first photo (below). Then click on your Time Capsule's icon, gives you the 2nd photo, etc.