First, let's hop on your ship and head back to Altair to report what has happened.
Optional Story: if go the throne room and talk to Gordon, he'll tell you that Hilda is acting strangely.
Remove all Leila's equipment.
Then enter the Hilda bedroom just below the king's room.
Talk to Hilda.
Boss: Lamia Queen
This is a pretty standard fight, just keep attacking and using magic until you win.
Gordon joins the party again.