MBA = Premium Computing Experience
iPad = Visually Stimulating Experience
MBA = Input and Output
iPad = Output Only
MBA = Executive Working
iPad = Consumer being Entertained
MBA = Notebook Capabilities
iPad = Less than Netbook Capabilities
MBA = Profit for Apple at Point of Sale
iPad = Profit for Apple via advertising, sales of apps, iBooks, and iTunes content long after iPad is sold.
MBA = Traditional Business Model
iPad = New Business Model
There is plenty of business for Apple to sell both the MBA and iPad. What would Apple rather sell? Probably either. The MBA offers a great profit margin now and loyal computing customers who will upgrade often and keep wanting a premium experience over the standard MB consumer. Also, the MBA allows Apple to focus on business users to get the executive into the mindset of expanding Apple into his or her business model. The iPad offers little margin now, but with every sale it drives more development of apps driving more demand for the iPad with greater margins later. In addition, the iPad drives more sales of apps, iBooks, and iTunes content. Apple isn't making a ton of money off of each content sale, but in the long run the content sales drive more iPad sales driving more app choices driving more iPad sales and so on.
Furthermore, the MBA is the futuristic direction of the Mac notebooks. Apple can use the MBA to leverage its entire Mac notebook lineup and to fully test the usefulness and features intended for the other Mac notebooks. It was the MBA that introduced the unibody case, large multi-touch trackpad, wireless design, feature on portability, removed optical drive, and ultra thin/lightweight form and design yet allowing MB like function. I think Apple will continue to use the MBA for futuristic evolution of its other Mac notebooks. I think the MBA gets 3G, expanded wireless functions (wireless display), docking station capabilities, and perhaps most importantly new display technologies. I see an IPS HD Display as the greatest possibility for the next release, but I don't count out a 3D or OLED display anytime in the future. The display is the obvious place to provide the MBA user an upgraded luxurious experience over the MB. In addition, the costs of components for the MBA has been substantially reduced. Apple isn't going to keep dropping the MBA prices, but will include new technologies to provide a greater value proposition for the MBA buyers.
The MBA will continue to sell to the business user, grad student, college professor, tech enthusiast, lawyer, doctor, traveler, salesperson, tech enthusiast, prosumer, professional on the go, and anyone willing to pay a little more for a premium experience. The iPad is targeted at the consumer wanting to be entertained! It's just that simple... these are two completely different devices with different markets. There is a little bit of overlap, but then there's some overlap between most of Apple's offerings. Everything is designed to give the user the best experience and certain devices focus a little better on some aspects than others. In no way does the iPad reduce the need for the MBA within the Apple Mac business model. Furthermore, I would say that the iPad can actually drive MBA sales. Many non-Mac users will be trying out the iPad. A lot of these people will realize that Apple products can provide a great experience... many of these people will ultimately convert from the dark side and many will want the extreme portability of the MBA. If anything, the iPad sells more Macs than the iPod and iPhone did together.