Apple already failed with the 15" Air because they try to ride the horse backwards. It looks like the last time they've looked at the PC market was when netbooks were still around. The small notebooks are the premium ones, not the big ones (when talking about similar internals). If they want to do a cheap one, it must be in the 14-15 range, like how everyone else does. That's why the big Air sells badly, there are very rare edge cases when someone will buy a bigger machine for more with the same specs.I think the issue people have is that MacBook Airs aren't in the same sizes as MacBook Pros. Just make the Air 14 and 16 inch like the Pro, but ofc keep it passive-cooled, worse display and weaker chip.
Then they could just make this MacBook SE (or whatever it's gonna be called) 12 inch with the same PPI as MBA, maybe a downclocked M3, and limit it to a maximum of 16 GB of RAM and 512 GB of SSD (base model should come with 8/256 or unlikely even 6/128 to further differentiate it from MBA). And *bam* you have a "cheap" MacBook that is perfect for university or someone travelling a lot, that doesn't have a need for a lot of computing power.
Air should be the small and light premium brand for macbooks (preferably 12 and 14), Pro should be the performance premium brand (14 and 16), then the plain macbooks at 14. And make it "plain" by using cheaper materials and worse displays, not by trying to make them DoA with ridiculous specs. Having three 14" models could save a lot on logistics, and the premium lightness of the 12" Air and the premium performance of the 16" could justify the higher pricing to cover the costs. Not to mention that calling a line Air but being the only notebook manufacturer that doesn't have an offering at/under 1 kg is a bloody disgrace for Apple.