In 1918, German pilot Lieutenant Fabian (Albert Hehn), along with his fiancée Gerda (Carsta Löck) learn that he has been awarded the Order of Pour le Mérite ("The Blue Max"), Germany's highest award for valor. The next morning, Fabian and Jagdgeschwader 1 (the "Flying Circus" of Manfred von Richthofen) is ordered back to the front.

On the Western Front, Fabian and other officers of the squadron continue the aerial fight. Their commanding officer, Captain Prank (Paul Hartmann) returns from homeland with the news that a revolution has broken out in Germany. Prank and his men fly their aircraft back to Germany, but the squadron becomes involved in disputes with the local workers and soldiers. With the squadron's aircraft destroyed, the pilots and crew surrender, with only Moebius (Fritz Kampers) seemingly disappearing.

Postwar, the former officers successfully find work in civilian occupations, but, Prank cannot cope. Moebius suddenly reappears and takes Prank and his wife Isabel to his estate, where Moebius has hidden his former warplane. He plans to start a flying school, but, a communist group attacks, and his aircraft is destroyed. During the attack, Isabel is killed. Prank is arrested, and when Moebius fails in a rescue attempt, an embittered Prank serves out his sentence and then goes abroad.

After 1933, a wave of National Socialism flows in Germany with the Nazi regime attracting the discontented former officers of Jagdgeschwader 1, all holders of the coveted Pour le Mérite award. They have continued to keep in touch and developed a strong camaraderie. At one point, the men take to the streets to fight against communists, and are arrested.

In 1935, Nazi Germany restores a new Luftwaffe and invites former officers to come back. Fabian, Gerdes (Herbert A.E. Böhme) and Moebius, convince Prank to come back to Germany, where the latter gets appointed as the commanding officer of a new fighter squadron.

Reichsmarschall Hermann Göring, a former commander of Jagdgeschwader 1, visits the squadron as it equips with the new Messerschmitt Bf 109 fighter aircraft.