[John Rogers]

So the air does not come out when the hot faucet is first turned on? I would suggest turning off the power to heat the water and see if it still does the air bubbles. If so then it is not the heating element. In that case somehow air is drawn back into the hot water heater/lines usually from a leaking valve or fitting. This is very evident with multi-story homes and we had this happen in our main bath shower fitting. Where the hand held was fastened to the wall pipe, water would not leak out but when I turned off the water with the shower head laying on the floor of the shower, I could hear a whistle of air in through one of the rubber seals. If I left the hand held on the hook, no air got into the system?