Paper towels are more hygenic as it turns out that friction after you wash your hands is essential for removing some dirt & germs. The environmental impact of paper towels is minimally worse than air dryers.

http://conversableeconomist.blogspot.com/2012/12/paper-towel...

Also have you ever tried to dry your face with an air dryer? Awkward is not nearly a strong enough term to describe it, let alone if there is someone watching you.