User blog comment:FairyRaven/Fairy Tail Chapter 396: Air, Review and Commentary/@comment-24784846-20140812160110/@comment-24784846-20140812161547

Well its not like it was a long chapter in there "time" to say, besides Levy heard Gajeel's voice so that says now near they really are she was obviously going to him(which meant it wasn't a long battle and not alot of time had passed. So that also answers why Levy was able to hold her breath, because she wasn't really far away

As for why Gajeel could hold his breath is because(from what I can see) he was surrounded entirely by the black misty water like Natsu Lucy and Juvia were, and he used the Iron thing to tape his mouth shut so he could fight without having to open his mouth

Hopefully I answered those questions