Engineer AA is currently a fairly potent weapon against airplanes, especially in lower BR brackets when they are much slower and easier to hit. Even with the traverse angle changes where AA guns can “technically” be used against infantry, no one does since the damage against infantry was artificially nerfed to be the same as a G17 in CS:GO. It doesn’t even one shot kill, let alone have AOE.
A few years back when AA was very overpowered against infantry, it was possibly one of the most fun things you could do on a defense mission in this game. Of course in that implementation, it was far too strong and had many issues.
There is 100% a way where DF could make AA fulfill its historically accurate secondary niche as a potent anti-infantry weapon (in a way that is balanced with counterplay options):
Volume of Fire:
The number of barrels for AA guns with obviously stay the same (1), as this was a principal issue of the old implementation against infantry.
Ammo capacity in its current implementation should be balanced (60 rounds). If even with these changes volume of fire becomes a problem, an overheating mechanic could be added after 10-15 shots or so.
Damage
Direct hit: Always a one shot kill (should deal similar damage as HMG in game files). It is a direct hit with a 20mm shell after all–no one survives that. Even with this, you will get relatively few kills this way as the magazine size is only 20 rounds.
AOE: Should be very similar to that of vehicle-mounted 20mm (see Pz. IIC and aircraft). It should be large enough that a closely packed group of infantry dies but small enough that infantry more than ~2-3m apart will be uninjured by splash.
Survivability
AA guns in terms of their raw HP are fine where they sit. But, the placement of the crew should be modified in a way that makes them easily prone to getting headshotted or killed when flanked.
A mechanic where you must be in gunner view to shoot could be introduced so an AA gun is more vulnerable to flanking unless its user frequently checks their surroundings outside of gunner view (skillful play, should not be addressed).