The combination of directional well technique and air drilling has been regarded as an effective technique for drilling engineering. Given the currently inadequate understanding of drillstring lateral vibration for air drilling in highly-deviated wells, the modeling and numerical study is conducted. Therefore, a new finite element (FE) model with full-dimensional beam elements was built in the paper, which combined the advantage of FE method and beam-column theory to avoid complicated derivation and solution. The model also included contact model, static-kinetic friction model, mass eccentricity, and Rayleigh damping. To verify the stability and applicability of the model, a numerical simulation was conducted to study the effects of rotation speed, weight on bit (WOB), well inclination, friction coefficient, and stabilizer (STB) on lateral vibration for air drilling in highly-deviated wells. Besides, the effects of drilling mud on lateral vibration were discussed. The results show that the FE model can be used effectively to analyze drillstring lateral vibration. Meanwhile, rotation speed and friction coefficient have promoting effects on lateral vibration, full-packed STB has a suppressing effect, while WOB has a relatively small effect. Moreover, well inclination has a suppressing effect on lateral displacement, and a promoting effect on lateral acceleration. Compared with mud drilling, the lateral displacement and lateral acceleration of air drilling are obviously large. When air drilling is used in highly-deviated wells, a smaller rotation speed is proposed as long as it satisfies the ROP demand, and a slightly larger WOB is proposed as long as it does not lead to drillstring buckling, and full-packed STBs are proposed to limit lateral vibration. In addition, the formations with large friction coefficients can make lateral vibration more violent, and the drilling process needs more attention. Furthermore, increasing the lubricity of the circulating medium is recommended to reduce lateral vibration. The study in this paper can help to further develop drillstring dynamics, understand lateral vibration characteristics, and select suitable parameters for air drilling in highly-deviated wells.