01 - Slice onions into 1/2-inch thick rings and carefully separate individual rings. Discard very small center pieces or reserve for other uses.
02 - Arrange three shallow bowls in a line. Combine flour, garlic powder, smoked paprika, salt, and black pepper in the first bowl. Whisk eggs and milk in the second bowl. Place panko breadcrumbs in the third bowl.
03 - Working with one ring at a time, dredge in flour mixture to coat completely, shaking off excess. Dip into egg mixture, allowing excess to drip off. Press firmly into panko breadcrumbs, ensuring even coating on all sides.
04 - Place coated onion rings in a single layer in the air fryer basket, leaving space between each ring for air circulation. Lightly spray tops with cooking spray.
05 - Cook at 400°F for 10-12 minutes, flipping halfway through cooking time. Rings are done when deeply golden and crisp. Cook in batches if necessary to avoid overcrowding.
06 - While onion rings cook, whisk together mayonnaise, ketchup, Dijon mustard, lemon juice, smoked paprika, salt, and pepper until completely smooth and incorporated.
07 - Transfer hot onion rings to a serving plate alongside the dipping sauce. Enjoy while hot and crispy for best texture.