It cuts Apple’s costs, so they do it.
Because of the company’s insistence on not pre-filling the retail channel before a launch, and its almost exclusive use of manufacturing in China, Apple ends up needing to air-freight a lot of iPhones in the days around a new model launch. Air freight is the most expensive way to deliver goods, and air-freighting millions of anything gets really expensive, really quickly.
A fully-loaded 747 cargo holds about 500 cubic metres of cargo, which is about 500,000 boxed iPhones (not exact numbers, but that's the magnitude involved). Most of the volume being carried is air, with the phone being the biggest contributor to the overall mass, so every gramme you shave off those phones’ weight equates to half a tonne of payload weight that doesn’t have to be paid for. (once you get to surface transport, volume is the what costs you money, not weight).
Around the time of the iPhone 5 launch, someone who was involved with this operation gave me the real numbers for the air-freight savings figures from moving to the relatively heavy 4S to the cheaper-feeling, but 28 grammes lighter design of the 5... I can’t remember the exact figure, but it was in the high millions of dollars, and that was just for the 90 days after launch.
Regarding Titanium itself, yes, it’s light, but it’s a horribly expensive metal to work with, and it scratches really easily. The normal approach to the scratching problem is to plate the metal surface, but the best-performing kinds of protective plating for titanium include nickel: a metal which can cause skin rashes in a significant portion of the population - not ideal for something that people hold all day... as Apple itself discovered in 2001 when customers complained that their brand-new titanium PowerBooks were making their palms red and itchy.