Similar to what Mew2king said. Pokemon is not known for its logic. Gyrados is similar in that sense as it is known as a dragon Pokemon but it is not a Dragon type. It says that Lugia is so strong that it has to hide under the sea to prevent him from causing Storms. So it is not so much as a Pokemon of Water but a Pokemon that lives under water, maybe in a Psychic Air bubble? Though Lugia has been a water type in TCG.
From Bulbapedia: Lugia usually live very deep on the ocean floor, not because they are natural sea-dwellers, but because they fear that they can accidentally cause untold devastation.
