I am having the same issue. I exchanged the device and the problem persists. I called Apple they said it's a "know issue" that they are working on. That was over two months ago. This is how I use this device's keyboard 100% of the time!!!
They have only seen this on the iPad Air (ver 1). This device is no longer returnable and no longer being produced. So now have ZERO monetary reason to devote ANY resources to fix this product/issue. I am beyond livid. This product was functioning fine when I bought it and now they have made it defective and will not allow me to return it for a functioning model AND it's still covered under AppleCare Plus! So if I destroyed this device they'd replace it no questions asked, but if APPLE destroys it ... tough ****, deal with it.
Totally unacceptable. It's to bad the Android EcoSystem ***** or I'd vacate this ********.
Perhaps the worlds greatest Industrial Designer has reached the Peter Principle proven out because things no longer "just work" and they no longer have decent/reasonable customer service.
Replace this model or fix it TODAY!!!