The Aer Lingus balance sheet could be significantly strengthened if the European Commission accepts a proposal to allow airlines to trade officially in landing slots at Heathrow and other major airports.

A 400-page report commissioned by the Commission has recommended that airlines be allowed to trade in slots and list them as assets on their balance sheets, a practice currently prohibited under EU regulations.

This could boost the Aer Lingus balance sheet by more than €100 million. The airline has 20 to 30 slots at Heathrow, depending on the time of the year.

The report by London-based consultancy, National Economic Research Associates (NERA), for the Commission, claims that some peak time slots are under-utilised by owners and a free trade system would allow supply to match demand.

Slots are already traded in a so-called "grey market", but the Commission may now move to formalise this arrangement, opening the way for the slots to come onto airline balance sheets.

This would benefit Aer Lingus ahead of a potential flotation or private placement. It would also give a boost to Ryanair which has many slots at Stansted, although these are not as valuable as Heathrow slots. Last October British Airways paid £12 million (€17 million) for four Heathrow slots from US carrier United Airlines. More recently Australian carrier Qantas paid £20 million for two peak time slots at Heathrow. Slots are priced according to their position in peak flying time.

The Minister for Transport, Mr Brennan, has previously warned that Heathrow slots may be of national strategic importance and in any Aer Lingus sale their position must be carefully considered.

The fear among Government advisers is that in a few years Heathrow slots could be sold off by the new owners of Aer Lingus to bigger carriers which might want to use them for transatlantic routes.

The report by NERA also describes Dublin as having "excess demand at peak times of the day", but it says far more serious congestion problems exist at Dusseldorf, Frankfurt, Heathrow, London Gatwick, Milan, Paris Orly and Madrid. These airports suffers from congestion "throughout" the day, it claims.

Meanwhile passenger traffic for Britain's biggest airports operator, BAA plc, rose 4.4 per cent in the last year and there was an improvement in its hard-hit north Atlantic routes, the firm said yesterday.

The owner of seven UK airports including Heathrow, said March passenger traffic rose 10.4 per cent year on year.