It's a good decision. It's not like AI will be able to sell more J seats than that anyway, so it's better to concentrate on the Y market which AI might actually be able to capture successfully. And, with a smaller J cabin, the people flying in it will have actually paid for the ticket, instead of being babus/employees on upgraded tickets.
Regardless, the 787 isn't that big anyway - it's similar to the size of 767/A330.