Hawke and Dominic complete a mission collecting storm data for Michael, then take Airwolf back to the lair and leave in the Santini jeep. A limo drives into the area, and a man named Quist tells a man and his girlfriend Grace to get out. Once outside, Quist tries to shoot the man, but they fight over the gun while Grace runs. Quist shoots the man, then he and his driver shoots Grace from a distance, hitting her in her side. They chase her, but when some dirt bikers ride into the area, they let her go. Grace finds the lair and stumbles in, setting off the alarm at Santini Air.
Hawke and Dom fly to the lair and find Grace unconscious. Quist is heading back to town and relays the shootings to his boss: John Bradford Horn. Horn wants Quist to be certain that Grace was killed, otherwise he'll be next. Dom and Cate meet Hawke and Michael at the FIRM's secret medical facility, hidden in a barn. Michael questions her, and despite her innocent and ditsy demeanor, it's obvious she's lying about how she got shot and stumbled into the lair. Hawke and Michael want to trick her into telling the truth without her realizing it, so they allow her to sneak out of the facility. She gets to the road and thumbs a ride, which ends up being Hawke.
Hawke drops Grace off at her hotel, where Quist and Horn are waiting. A moment later, Hawke goes to the front desk, while Horn's limo goes into the garage. As Grace walks to her car, the limo blocks her and she's thrown in. She's taken back to Horn's mansion, where he tells Grace to find Airwolf. Michael and the crew can't determine if Grace is a spy of some sort, so they decide to relocate Airwolf.
Quist takes Grace back to the lair, but Airwolf is gone. Quist prepares to kill Grace for lying, but changes his mind and takes the heat for her instead. All the while, Michael and the crew are listening in and hear that Horn is behind it all. Back at his mansion, Horn turns things around on Hawke, coercing Grace to go back out there and get herself caught, so he'll be led to Airwolf.
While Grace does physical therapy at a swimming pool, Hawke comes in to check on her. Right at that moment, Quist walks in shooting. Hawke "saves" Grace and she's taken back to the barn facility. There, she tells Michael the truth about how she found Airwolf, but begins lying again about Horn's whereabouts. Michael tries to convince her to help capture Horn. Grace leaves in the FIRM limo and is dropped off on a neighborhood block. Another car picks her up as a FIRM helicopter watches from above. The helicopter loses her when her car enters a tunnel and she switches cars.
Grace is taken back to Horn's mansion, where she tells him everything, including her assumption that Airwolf is being hidden at the ranch facility. Horn deduces that it's a trap and guess that Airwolf is actually in the lair for him to steal. At the ranch facility, an Airwolf-shaped camo netting has been set up, in case Horn shows up there, but the crew is reluctantly hoping Horn steals Airwolf from the lair. Hawke and Dom fly to the lair, and sure enough, Airwolf is gone.
Dangling from a Huey, Airwolf is brought to the San Pedro Harbor and unhooked. The homing signal inside registers on the FIRM's radar at the ranch facility, and Michael, along with the Zebra Squad go to the location. Dom and Hawke are picked up along the way. At the harbor, Horn hops out of his chopper to marvel over the Lady. He's about to have Quist and Grace killed to reward them for their help, until the FIRM limo and Zebra squad arrive. A gunfight ensues, and in the process, Quist is shot and killed, and Grace is shot a second time. Horn's chopper takes off as the rest of the shooters are forced to surrender. Hawke goes to Grace's side to comfort her, but she succumbs to her wounds.
Angry over such an innocent person getting duped into Horn's scheme, Hawke blames himself. He and Dom takes off in Airwolf to avenge Grace's death. They catch up to Horn's chopper over the ocean, and it gets behind Airwolf and starts firing. Hawke does a 360 degree loop to get back behind the chopper and lowers his visor. He fires two copperheads, sending the chopper in a fiery shell towards the water below. Hawke suddenly realizes that shooting Horn's chopper down was too easy. Horn, who was listening in, responds and Dom tries to track the call. They can't get a trace, and check around the harbor. It proves fruitless, as he's escaped on a tugboat, at large once again.