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That is likely what it will be. The iPhone Air was probably just a test to see if all the super-thin components could work. Now they'll throw a hinge in the middle and a screen on the back. It'll end up being 2 or 3mm thicker, because of the bonus screen.

I was hoping for a small phone as well since I’ve read rumours about the display being 5.3in when folded. However it also said 7.8in unfolded, which implies 4.1in × 3.3in folded… quite big and squarish.

You mean like a Galaxy Flip?

I considered the Z Flip many times, because I want something that is smaller by default. But people who have used one have regular display issues. I'm hoping that Apple somehow nailed this better than the competition.

The thinness and low weight of the Air is also great though. I hope that Google makes a Pixel like that, so that I can have a phone with GrapheneOS that is this thin/light.