This indicates that the Time Capsule wireless service has been turned Off....so the Time Capsule is not broadcasting a wireless signal at all.
Since the MacBook Air can only connect using wireless.........unless you have a USB to Ethernet adapter, or a Thunderbolt to Ethernet adapter to allow the MacBook Air to connect using a wired connection........the MacBook Air will not be able to connect to the Time Capsule.
If you want the Time Capsule to broadcast a wireless signal, you will need to........
Change the setting for Network Mode to Create a wireless network
Enter a name that you want to call the wireless network
Select WPA2 Personal wireless security
Enter a password that you want to use for the wireless network
Verify the password
Click Update at the lower right of the window to save the new settings
Allow a full minute for the Time Capsule to restart