First, blow up a balloon until it is slightly smaller than you want your finished one to be; knot it. Now with some newspaper cover the balloon and leave a small section at the bottom clear.
When the newspaper gets dried pop the plastic balloon and remove its remnants. Then make four equally spaced holes around the bottom of your newspaper balloon.
After that, thread a piece of string through each of the holes; secure them by either gluing or tying. Then secure the string around the rim of the basket by tying. Make sure the basket hangs level under the newspaper balloon.
Now paint the outside of the newspaper shell different sections at different times and apply more than one coat of paint.
Finally, glue a hook to the top of your decorative hot air balloon.