Aer Lingus may be worth almost €1.1 billion if the airline's lucrative slots at London Heathrow are included in any valuation, a new report from Davy states.

The report says the company could achieve a valuation of €789 million when its initial public offering takes place, most likely in September or October. Davy describes this as the "enterprise value" of the company. Enterprise value is often described as the theoretical price of acquiring a company. It includes the market capitalisation, but also debt and cash resources.

The report by aviation analyst Stephen Furlong notes that Aer Lingus has 21 pairs of slots at Heathrow airport. It says that, of these, 13 pairs are used for Dublin services, and four each for Cork and Shannon services.

It states: "The value of the slots depends critically on the time of day they relate to, but it is also determined by the related issue of gate availability at the same time. Prime-time slots have traded for up to £10 million (€14.5 million) per pair. This valuation would put a value of €306 million on the value of the Aer Lingus slots."

However, it cautions that the valuation may be lower as not all the slots are in peak periods. It suggests the slots could be disposed of without any great damage to Aer Lingus. "We view the importance of having Heathrow as a connection point to Ireland to be increasingly irrelevant."

The report claims passengers have other hubs they could use. It also suggests the legal status of the slots is "not black and white".

It suggests Aer Lingus does not need so many services going through Heathrow. "We believe that there is no need for Aer Lingus to offer 13 Dublin departures per day to Heathrow and Aer Lingus could offload some slots without seriously affecting revenue," Mr Furlong wrote.

The report is broadly upbeat about the airline's prospects, suggesting it has a lower cost base than many of its competitors. It also says a new open-skies regime could create significant growth opportunities.

However, with oil hovering around $70 (€55) a barrel, challenges remain. "Aer Lingus would have to come at a discount to be an attractive offering," the report says.

While the report is relatively optimistic about the airline's cost base, it says labour represents 31 per cent of this total, an issue that the airline's management should be asked about when the flotation roadshow begins. The report points out that in 2005, labour costs rose even though there were 11 per cent less staff.

The suggestion that Aer Lingus could dispose of some slots or reduce its services into Heathrow airport drew a negative reaction from Fáilte Ireland, the national tourism development group.

Its chairwoman, Gillian Bowler, said any reduction in access would have negative consequences for Irish tourism.

"The Dublin-Heathrow slots are the busiest air routes into Ireland. Bearing in mind that approximately one-third of North American visitors arrive via Britain and two-thirds of travellers from other long-haul areas arrive in Ireland through Britain, the importance of ensuring appropriate connections should not be underestimated."