Close friends Pete Sandich (Richard Dreyfuss) and Al Yackey (John Goodman) combat major wildfires from the air, flying World War II-vintage water bombers. Pete is a risk taker, to the growing worry of his girlfriend, Dorinda Durston (Holly Hunter), as well as Al. After he runs his plane out of fuel to make an extra retardant drop, Dorinda and Al both express their concern for his safety; Al tells him about the impending start-up of an air attack training base in Flat Rock, Colorado, which will need a commanding officer. Pete dismisses the notion out of hand, with too great a love of flying and fighting fire to give it up for a desk job.The same night, Dorinda pours her heart out to Pete, who reluctantly opts to take the job if it means they will remain together. However, he is called to work an extra day fighting the current fire. As he and Al assault the leading edge of the blaze, Al's plane hits a burning tree, causing an engine fire. Pete makes a dangerously steep dive to drop a retardant load and extinguish Al's engine, but as he tries to pull up out of the wildfire's wrath, his own plane catches fire and explodes.As Dorinda and Al grieve, Pete finds himself walking in a charred forest in the aftermath of a fire, where he comes upon a white-clad woman named Hap (Audrey Hepburn), standing on an oasis of green grass. Pete is stunned when Hap reveals to him that he is dead, but she then goes on to explain that his spirit will be sent back to serve as inspiration to a rookie pilot. The living, she tells him, will be able to "hear" him speaking to them through their own thoughts. Six months after his demise, Pete sees his new protegé, Ted Baker (Brad Johnson), at the training base in Flat Rock; he is also delighted to find Al sitting behind the base commander's desk. Due to Ted's questionable record, Al is reluctant to take him on board, but a very loudly spoken "thought" from Pete convinces him to give Ted a chance.Al's students prove woefully unprepared to fight fire from the air - especially Ted, who (with guidance from Pete) accidentally dumps a load of retardant directly on Al and his assistant. Furious, Al orders Ted to take a hike before he departs for San Diego, where he finds Dorinda working as an air traffic controller. Al finds that Dorinda still has been unable to let go of Pete, so he brings her back to Flat Rock, where she rents a house at the edge of the airfield.In spite of Al's warning, Ted also returns to Flat Rock, determined to get his air attack certificate; but a malfunctioning guide tractor leads him straight to Dorinda's house. Pete speaks to Dorinda and is relieved to find that her heart still belongs to him. He continues to work with Ted, even as Ted spends more and more time with Dorinda, and - to Pete's anguish - begins to win her over. Again Pete meets Hap, who reminds him that he is wasting spirit by not letting go of Dorinda and trying to intercede between her and Ted.Ted shows some of the remarkable ability he has gained with Pete's guidance in the first major wildfire of the year. However, a distress call from a group of ground firefighters spurs him to fly a rescue mission. Unwilling to watch another lover fly to his death, Dorinda commandeers Ted's plane and flies the mission herself, with Pete attempting to talk her into turning back. When she presses on, Pete changes his approach and guides her through a harrowing flight in the thick of the huge fire, until she successfully drops a load of retardant to clear the firefighters' safe passage to the river.Pete tells Dorinda everything that he never got around to telling her when he was alive, even telling her for the first time that he loves her; but damage to the plane during the rescue mission forces her to make a splash landing in a lake. Sinking to the bottom, she seems about to accept her fate, but Pete appears before her, taking her hand to pull her to the surface. Back at the airfield, Ted and Al rush to greet Dorinda as Pete tells her that he is finally releasing her to her new life. As Dorinda and Ted meet with a loving embrace, Pete turns and walks away to his eternal reward.