As someone who actually uses shorthaul business class regularly for business rather than the many retirees and leisure travellers off with their other halves for weekend jaunts, I am very happy with the service offered on the ground (far better than that offered, for instance, in the USA on similar tickets) and also the offering in the air, including catering.
Not everyone will agree with that, but it is my strong assertion that the flexible layouts work well for shorter European flights under two hours duration. Unless you’re obese, you simply don’t need extra space.
The only possible criticisms would be variability of crew (being addressed with the introduction of performance management, albeit softly-softly to start with) and second the need for internet enabled aircraft (for data only!).
Otherwise the pricepoints, frequencies, flight times, lounges, aircraft used and BAEC incentives keep me loyal. Any improvement towards a more luxurious but less efficient layouts would increase prices, and with travel budgets stretched, it wouldn’t take much for my all-business class policy to change to Y, which would lose money for the airlines long term.
We have seen something of what Alex describes on midhaul routes with the switch to fixed seating in the A321s on flights in the 5+ hour range (Amman, Beirut) and some routes becoming longhaul configured (Moscow and one Iberia Madrid flight, for instance).
I’d hope that Larnaca and Athens would become midhaul in due course, though unlikely with current events continuing to strangle growth in Southern Europe.
I’m afraid I see it more along the lines of preserving the status quo on flights 1-3 hours, but perhaps reducing the cost of the economy cabin (with promotions such as no checked baggage fares) to better compete with LCCs, or the removal of a premium altogether on some shorter routes and the introduction of some fixed mid haul and longhaul configured cabins on certain flights, depending on timings.