Leo Mullin, the 60 year-old CEO of Delta Air Lines' (NYSE:DAL) is out. When the former management consultant and banker voluntarily steps down on May 1, what sort of company will the heralded "outsider" leave Delta investors?

A little history: When Delta sacked 34-year veteran Ronald Allen back in 1997, the accepted rationale was his arguably draconian Leadership 7.5 Program. Mr. Allen had attempted to reduce Delta's operating cost per seat mile from 9.5 cents to 7.5 cents.

According to executive vice-president Bob Colman in 1999, "While it saved the company, Leadership 7.5 barely left the house intact." Colman went on, "When Leo arrived, the airline was dead last in key customer service ratings, and you needed a microscope to find employee morale."

What's eating Delta today? You guessed it, high operating costs.

Compare the domestic operating costs at Delta with its two primary low-cost competitors. For the year ending Q2 2003, Delta's operating costs per seat mile increased from 10.3 cents to 13.8 cents. That same period, AirTran's (NYSE:AAI) costs declined from 8.5 to 8.2 cents and JetBlue's (NASDAQ:JBLU) from 6.3 to 6.1 cents. What a difference!

It doesn't look any better when you compare Delta to its peers. AMR's (NYSE:AMR) American Airlines operated at 11.6 cents in the second quarter. UAL's United's costs were 11 cents. Both benefited from negotiating labor concessions.

Last Friday, ratings agency Fitch lowered Delta's rating on $4.5 billion in unsecured debt, citing high operating costs as one reason. Clearly, from Mr. Allen's departure in 1997, Delta has gone full circle:

Delta's needs a leader. Delta must reduce operating costs. It needs a vision to guide the company and strengthen its balance sheet (which has $12 billion in total debt).

With a market capitalization of $1.5 billion, the stock trades at levels not seen since the early-1980s. The stock is up marginally since the end of last year and has roughly doubled from its recent $6.10 low set in March 2002. But it's still a far cry from its all-time highs of $71.58 in July 1998.

Where to from here? Given so much debt, high costs, and an unsettled management, investors would be well advised to stand aside. With so much cost-cutting required, and competition so fierce, it's investors that may not be left "intact."

W.D Crotty was a consultant at Delta Air Lines in the days of Leadership 7.5. Reach him at wdcrotty@fool.com or other investors on the Motley Fool's discussion boards. For a 30-day free trial to the discussion boards, clickhere.