In the original announcement thread there was some speculation that the air is a precursor to folding models down the line. I hope that’s true.
I don't think the Air is merely a precursor to the foldable, however. It's rather that the technological evolution that allowed for the 5mm thin iPad Pro last year allows for the Air this year and helps with the foldable next year (and thinner MacBooks are rumored as well). But the Air is probably there to stay as a separate form factor, assuming that it doesn't flop in terms of sales. The foldable will be much heavier and bulkier, more resembling a Pro Max.
The iPhone Air tests none of those things.
They did something similar when they transitioned the product line to aluminum.
(As a product, it’s the opposite of what I’d want — worse battery, bigger screen, worse camera, but they’ll certainly sell enough to debug the assembly lines.)
I don’t disagree that it has something to do with supply chain, but it’s not the titanium cases.
I've also seen speculation that it's an engineering experiment to see if they can squeeze all the essential components of a high-powered computer into a space the size of the camera plateau. Which may eventually lead to viable AR Glasses (or a cheaper Vision).