Aer Lingus projects itself as an airline for quality-conscious passengers prepared to pay more than bargain prices for flights. As troubles mount at the carrier, however, its homely self-image seems entirely at odds with reality.

The latest of many traumas to burden the company in recent months sees its chief executive, Mr Michael Foley, pitched against the company after a board sub-committee returned unfavourable findings against him in an inquiry into allegations of sexual harassment made by two female staff members.

These are not developments that any company would welcome. And for Aer Lingus, long the supposed flagship of State-owned companies, the episode is something of a nightmare.

It compounds serious difficulties caused by a sharp downturn in bookings, which senior figures fear will reduce profits this year to £15 million from the projected £50 million. Profits last year were about £60 million, it is believed.

Company sources have attributed falling ticket sales to the US downturn and foot-and-mouth outbreaks in Britain and elsewhere in Europe. But the airline's business has been damaged too by a spate of strikes linked to pay claims which have halted flights on five occasions in the past six months.

The claims were lodged by workers throughout the company as it sought to gear up for a stock market flotation. They argued that low pay applying since the time Aer Lingus almost closed in the mid-1990s in a severe financial crisis was no longer valid now the company had returned to profit.

Such disputes were compounded by inter-union rivalry after the defection of cabin crew workers to the IMPACT union from SIPTU.

In addition, there was said to be a widely held perception within the airline that its management was divided on the question of how to bring it forward. Figures familiar with the company say certain colleagues of Mr Foley were not convinced by his attempts to change certain practices.

All this diverted the focus away from flotation, which the Government has pushed since December 1999. Mr Foley was headhunted last year by Aer Lingus and joined the company last September. But as he spoke at the time of an initial public offering in March, it soon became clear that that target was not going to be met. The plan is now on hold.

What no-one could have predicted was that Mr Foley would face two allegations of sexual harassment within months of joining Aer Lingus.

Lodged in February and March, the allegations - one by a worker-director, Ms Joan Loughlane - led the airline into uncharted territory.

It has faced financial crises, strikes and downturns in bookings on previous occasions. Never before has such a senior figure at the company been accused of sexual harassment. As a separate board sub-committee met yesterday to consider the report into Mr Foley's alleged behaviour, airline sources conceded there was no easy way out of the dilemma.

Mr Foley's spokesman has said he is determined to remain in his position and determined to "clear his name". The chief executive is seeking an independent appeal of the report's findings.

At precisely the time when Aer Lingus was supposed to be putting its house in order for a flotation, it has lurched into yet another crisis. Voted the best western European airline in a recent poll of 2.7 million people by the British-based research firm Skytrax, the airline is unlikely to win further accolades any time soon.