I still have the favorites list in my Apple phone app, and when you swipe right from the home screen it shows the most frequent people you're in touch with, which is most likely your favorites anyway.
It makes sense to mix this up. They are 2 apps where one is inside the other. It also makes sense that it is this way. I think they could lose the contacts app. Or add something else to it that helps you organize contacts in some unique way. But then you would want that while in the phone app. Yeah just ditch it.