Question

Alveoli are lined by squamous epithelial cell layer. Epithelial cells are essentially avascular. Thus, how does the blood in the body get oxygenated via alveoli?

Answer 1

Perhaps you are confusing this "wet" type of squamous cell with others such as in thicker tissues like stratified squamous?
Special squamous cells in the alveoli make surfactant to help the alveoli stay open and also help in the exchange of gases.

These cells are only one cell thick and they are also extremely flat. Diffusion easily occurs across these cells' membranes. The same is true with the squamous cells that make up the tiny capillaries in the vascular system.

Here you can see both capillary and alveolar squamous cells.

Here can be seen how thin they are.