The air inside the water balloon is made up of many gas molecules flying around. Once you tie the balloon, the air inside can’t escape, so the number of molecules stays the same. How far apart the molecules are depends on the pressure outside of the balloon, which presses the balloon inward.

If you place the balloon in a low pressure outside environment, there is less force pushing the gas molecules together, and the balloon expands. So, it will look like there is now more air in the balloon! You still have the same number of gas molecules in the balloon, but they are farther apart and take up more space.

To remove the air in the water balloon, fill it up with a little too much water, and then carefully let the air and a little water out before tying the balloon.

If the air inside of the balloon is at higher pressure than the surrounding air, then it will try to escape, and may pop the balloon if the pressure is too great. The water will have no effect.

If the water balloon is sealed, air cannot escape from it even in a low-pressure environment. (At least, not quickly: over days or weeks, air may escape through the walls of the balloon because the fabric of the balloon is slightly permeable.)

If you want to remove air from a water balloon quickly, you will have to create an opening for the air to escape. A simple way to do that would be to use a syringe. If you can push it into the opening of the balloon, you can draw air out of the balloon and into the syringe, then remove the syringe and discard the air, and repeat.