Macbook Air 13" Mid 2017 Power 2 External Displays With Macbook Air with lid closed Can the Macbook Air 13" Mid 2017 power 2 external displays at 2560 if the lid is closed?

This is what it says on the Apple website,

Dual display and video mirroring: Simultaneously supports full native resolution on the built-in display and up to 3840-by-2160 resolution at 60Hz on an external display, both at millions of colors.

So this means it's possible to have the Macbook Air running it's own display with an external display.

If now the lid is closed, can a second external display be supported? Not mirroring but dual display.
This answer assumes you're asking about the model still currently available, as the MacBook Air hasn't been upgraded since early 2015 (9 March 2015 to be exact), although there was a very minor spec update in June due to a 12.5% increase in the processor's speed. This, however, has no impact on the integrated GPU being used and even Apple's website does not list this as a "new" model.

Originally this model was only rated by Apple as supporting a single external display of up to 2,560 x 1,600 pixels. However, it was found to actually support Ultra HD (i.e. 4K) resolutions of 3,840 x 2,160 pixels and Apple officially revised their specs. 

Most resources (including everymac.com) imply that the MBA only supports a single external display. However, this is not strictly the case, so long as you're using Thunderbolt displays.

According to Apple:


  These Thunderbolt-capable Mac computers can support up to two connected Apple Thunderbolt Displays:
  
  
  MacBook Pro (2011 and later)
  MacBook Air (Mid 2012) and later
  iMac (2011 and later)
  Mac mini (2011 and later)
  


Source: About Thunderbolt ports and displays 

So, you can use two Thunderbolt displays with a MacBook Air, but you will need to daisy chain them. Note this applies to all models of MBA from Mid-2012 and later. In some cases users have had to do this by, for example, connecting a Thunderbolt display directly to the MBA and then connecting another powered Thunderbolt device (e.g. a Thunderbolt drive) to the display, and then connecting your second Thunderbolt display to the Thunderbolt drive.

Other options

I have seen setups in which users have connected one Thunderbolt display directly to the MBA's Thunderbolt port and a second DVI display via a USB-DVI adapter. Some seem to work quite well, others not so much. If your intention is to just do some word-processing and browsing, this'd be fine, but if you wanted to use the display for more intensive tasks, I would not go this route.