First, make sure your Overlimit is filled to level 1 at least. Then stand toward either the far left or far right side of the ship and keep using Azure Edge until Zagi come to attack you. Now hold down X to block and wait for him to use his Cyclone attack. Because you are blocking you will not get knocked into the air and he will float above your head. Quickly release block and hit your d-pad to activate your Overlimit. The small burst from the activation will send him into the water.
An easier way might be to position Zagi in between you and the railing, then use Fang Strike to knock him into the air, then trigger your Overlimit and send him over the side.