St. John, in a plane, and Jo, in a chopper, are testing an in-flight device over the mountains near Santa Mira. When Jo playfully races ahead, she's shot down by a laser. St. John is also hit, but recovers and locates Jo and the wreckage. Due to radio trouble, he's unable to put out a mayday.
At Lundahl Industries, Martin Lundahl sends Sheriff Duranti to the airstrip when he sees St. John's emergency landing. They don't listen when he tries to tell them about Jo's crash. At the hospital, Dr. Tracy Kensington is being persuaded by her alcoholic father to stay and help him mind the place. In the next room, St. John is trying to leave, but is being held back by the sheriff. He becomes upset to discover that he was unconscious all night and no attempt was made to find Jo. Sheriff Duranti takes him to the location to look for her.
Jason and Mike return to the lair in Airwolf and try to contact St. John and Jo at the hangar, but get no answer. Sheriff Duranti and St. John arrive at the crash site, but Jo's chopper is nowhere to be found. Irritated, St. John wants to get to his plane. Lundahl and a deputy look on from behind some trees, and Lundahl states that he wants St. John out of the way.
St. John is taken back to the airstrip, where he finds two of Lundahl's mechanics tampering with his plane. He's furious about the nonchalant attitudes regarding Jo's crash and disappearance. He goes to use a phone, but as soon as he makes contact with Mike in the lair, the receptionist is signaled by the sheriff to kill the line. Mike and Jason mount Airwolf and take off for Santa Mira.
In town, St. John tries to rent a car, but Hank, owner of the store, pretends nothing is available, although there are cars outside ready to go. As he leaves, he runs into Tracy, who takes him back to the crash site. A deputy in an unmarked car follows. Once there, St. John finds scrapes against a rock, made by something metal. He also finds Jo's sunglasses lens. As they head back into town, the deputy chases them. St. John takes over the wheel, and runs him into a parked car. The deputy is killed after his car flips and explodes.
At the town bar, Hank warns Duranti that St. John is becoming a problem, and some townspeople listening in wants to bring an end to Lundahl's hold over the town. Dr. Kensington is getting drunk when St. John and Tracy walk in. St. John demands to know where Jo is, and the doctor takes them both to the hospital; Duranti and Hank soon follow.
Mike and Jason approach the crash site and find Jo's chopper. It has been buried, which explains its disappearance. They later find Lundahl Industries and discover that a stash of missiles and ammo is inside. Mike hops out to sneak in, while Jason goes airborne in Airwolf. At the hospital, Kensington takes St. John to Jo, whom he had hidden in a storage room. As they try to leave, Duranti and Hank pull up in an SUV, rifle drawn.
At Lundahl's factory, he gives a presentation on his illegally manufactured high-powered weapons to potential buyers while Mike watches from the background. Duranti arrives with St. John and the group. As Lundahl continues his presentation of a laser weapon, Mike comes from behind some boxes shooting a rifle, which starts a fire. St. John belts Hank and takes his rifle and shoots a sandbag dummy, which bumps Duranti into the fire and engulfing him.
Jason approaches the factory in Airwolf and fires a missile to blow the door, allowing Mike to drive everyone to safety in the sheriff's SUV. Lundahl and Hank leave in the truck with the mounted laser weapon and Hank starts shooting his rifle when they see Airwolf. Jason begins destroying the factory with missiles, until Lundahl strikes Airwolf with the laser. Airwolf loses power and altitude, but Jason is able to repair some connections and recover. Lowering his visor, he decimates the laser, killing Lundahl and Hank, and finishes off the factory.
The next day, as St. John and Jo are leaving, they're greeted by Tracy and her father, now sober. They've decided to stay in Santa Mira to help whoever stayed behind after the factory was destroyed. They all go out to dinner to celebrate the decision.