Newman and General Harrisburg watch a recorded threat by Dr. Badham, that if all nuclear weapons aren't disarmed by noon on New Year's Eve, he'll launch ten nuclear missiles in America and ten in Russia as the consequence.
A small support group helping Badham are holed up in a distillery on the Isle of Dundee, which is where St. John and Jason are headed in Airwolf. Mike is already there to try and crack the key code Badham used to reprogram the missiles. He sneaks into the distillery and enters the control room after Badham leaves with Angus, a large man who is mute, and seems to have a childlike mentality. Just as Mike connects his device to the computer's circuitry to relay the code to Airwolf, they catch him. Mike shoots Angus, but it doesn't faze him, since a frying pan is hidden beneath his shirt.
Mike makes a run for it, and is shot and falls into a silo. He is collected and brought back into the distillery. Badham and his partner Pervis have a disagreement, and Badham is shot and killed. It takes the whole group of men to move Angus to his holding place. St. John waits outside to make his move, with Jason covering him with Airwolf. Pervis injects a serum into Mike that seems to kill him. Just at that moment, St. John gives Jason the green light to send down ground fire as he goes in and shoots the men. He grabs Mike and carries him to Airwolf, where Jason is shocked to learn that Mike is dead.
On the way home, they tell Jo and Harrisburg the news, and he says he's taking over the operation. While running a diagnostic on Airwolf, Jason finds that Mike is still alive and they rush him home. At the hospital, they find that the serum reduced him to a comatose state. Later, General Harrisburg informs the crew that his team came up with nothing, and Mike has two days to come around with the code, otherwise, he fears the worst with the missiles. They all have their flashbacks of their moments with Mike, then the doctor tells them Mike is waking up. When they visit with him, they're shocked to discover that he has amnesia.
It's December 30th, and Mike has a nightmare about being shot, and Jason and St. John standing over him. The next day, Harrisburg is hammering Mike to remember the code. The doctor cuts the talk short and general leaves for the Isle of Dundee as the crew arrives. Gaining back small bits of his memory, he remembers Jo. Upon hearing St. John's name, he has a flashback of him and St. John laughing over his and Stringfellow's names. He also remembers Airwolf.
Since the doctor suggested taking him to familiar places to jog his memory, the crew takes Mike to his and St. John's apartment, where he has a flashback of the night he moved in. He then remembers where he hid his rent money. They take him to the lair and show him Badham's video, which helps Mike remember more, but not the code. Since he can't talk to Badham directly, he suggests going back to Scotland.
It's New Year's Eve, and with just over 3 hours until the deadline, the crew scrambles to get to the distillery. Two Russian fighters outside their jurisdiction come after Airwolf shooting. St. John uses chain guns on one to shoot it down, and the other retreats. They make it to the distillery, where they meet up with Harrisburg.
Once inside the control room, Mike has flashes of Badham and Angus. He goes and finds Angus nearby and gets a fairy tale book that Badham used to read to him. The last page contains story title entries used as possible missile codes. With less than an hour left, they use the last entry, "Pied Piper," which doesn't work. But Mike remembers overhearing when Badham offered to read "Jack and the Beanstalk" during his first trip. Beanstalk grants them access when entered. They are able to disable all the missiles, except one Russian missile that didn't respond to the code. It soon launches.
The crew goes up in Airwolf to intercept the missile, which is targeted for New York. They determine that using the laser as the missile reaches its apex will be their best shot. They climb to about 52,000ft. As the missile begins to drop, St. John fires the laser, successfully destroying it.
Back in the lair, the crew reflects on the brilliance of Dr. Badham, and his idealistic, yet misguided approach to world disarmament. Jason walks in with champagne, and they all toast to the return of Mike, and fairy tales.