The game in general has good bones, but I ended up confused more times than I would have liked. I would have appreciated the controls being listed somewhere and it being more obvious when you can or cannot fly (maybe make the backgrounds where you can fly have some specific visual style or some effect on the player).
The time mechanic didn't really matter during my playthrough. As Crime Dog said, it wasn't very integrated with the gameplay. That being said, I think it could really contribute to the horror vibe you're going for, especially if you add some audio for it running out a la Sonic running out of air). If you are going to keep the mechanic (& think you should b/c of the stress factor), as (again) Crime Dog said, it would be cool if there were tradeoffs related to time. One of the things Mark Brown has said for a few games is that he likes it when games are easy, but force you to go fast and mess up (or something like that). The only example I think of off the top of my head is Overcooked. If you had unlimited time, it would be easy. It's the time limit that forces you to go faster than you are able to. If the combat had more strategy that forced you to stop and think, but the timer continued in real time, that could force you to go fast and make mistakes. In the overworld, you already had something like this where there was a few flying circles that would be easy to take slowly, but I had to go fast because of my 1 minute air supply.
That all being said, I have a few concerns with the time limits:
1) The limited air discourages exploration, especially the more cautious types (like me). It doesn't feel worth it to look around when I could suffocate. Maybe changing the one-use air canisters to unlimited-use air supplies stations would help? That way those stations could also become a base of sorts for exploration. Space things the right distance apart and players will want to explore while still needing to keep track of their air.
2) The 1 hour time limit on finding the cure had me worried that messing up early could lock me into failure, sort of like how it is in Simon's Quest. I don't how much or little the time limit is going to affect your story or if/how you can affect the limit. You could always break it up so that you have 1 hour (or some time period) per part of the cure.
3) Time limits can discourage the player from stopping to look around and enjoying all the hard work you put into your world. If I'm running low on time, I might avoid NPCs and anything outside the path. It also makes taking a wrong turn all the more frustrating.
I hope some of this is useful. I don't know your game very well (let alone as well as you do), so take everything I say with a good helping of salt.