Kou, his friend Chuck Keith, and veterans South Burning and Dick Allen follow Gato through the outback in an attempt to recapture the Physalis. Zeon forces ambush them and kill Allen as Gato awaits a Komusai shuttle for extraction. Kou destroys the shuttle but it is actually a diversion - Gato escapes on a submarine that provided covering fire during the Torrington base attack.

Back at Torrington, Federation General John Kowen assigns Burning to lead the Albion's pursuit of Gato with a new crew of pilots to help him. Kou and Keith join the mission. Lt. Bernard Monsha, one of the new additions, doubts Kou's capability to fly the GP01. Despite Nina's assurance that Kou handled the mobile suit well, Monsha challenges him to a first-shot mobile suit duel to see who better deserves to pilot the Zephyranthes. Although Kou wins the match, Burning intervenes and sends both pilots to one week in the brig. Meanwhile, Gato heads for the Kinbareid diamond mine in East Africa, which is still occupied by Zeon holdouts from the One Year War.

Somewhere in East Africa, the Albion goes on patrol, while Monsha faces Albion chief engineer Mora Bascht's wrath for hitting on the ship's female crew and trying to sabotage Kou's landing after his search patrol. Gato arrives at Kinbareid and boosts the morale of the soldiers. Meanwhile, Orville - the Zeon mole who helped Gato's infiltration in the first episode - has been unmasked and flies out in a Core Fighter II to warn Kinbareid of the Albion's patrols but could not find the base complex and is shot down by a Zaku patrol. The Zeon forces mobilize and attack the Albion to buy time for Gato and the GP02 to fly into orbit using one Heavy Launch Vehicle still in the base. The base holdouts surrender as soon as Gato flies away.

Gato flies back to the Garden of Thorns, a secret Zeon colony base in the Shoal Zone, to present the GP02 to Delaz. However, a chance encounter with Zeon commander Cima Garahau rankles him when their ships almost collide. Upon delivering the GP02, Delaz makes an Earth Sphere-wide declaration of war, explaining that the GP02 and its nuclear weapon is proof of the Earth Federation's military buildup. Meanwhile, aboard the Albion, Nina tries to get closer to a dense Kou when the alert sounds. Kou and the rest of the Albion's mobile suit pilots engage the Zeon intruders. However, Nina's warning about the GP-01's poor mobility in space without the so-called Full Vernian (Full Burnern) backpack proves true as Kou crashlands in the Albion under heavy damage.

The Albion arrives at Von Braun City on the Moon to have the GP01 upgraded to Full Vernian (Full Burnern) while the crew goes on shore leave. A snide comment from Monsha at a bar prompts Kou to wander around the city where he is beaten up by some thugs. A one-armed man named Kelley Layzner rescues him and brings him to a junkyard where he lives with his lover. Kou learns of Kelley's origins as a Zeon pilot and helps him fix a Val Walo mobile armor that has been hidden for years. He returns to the Albion and begins testing the Full Vernian-equipped GP01. Elsewhere in the city, Cima blackmails Anaheim boss Gilbert O'Sullivan with a colony drop if he talks to the Federation about her. She also tells Kelley to get the Val Walo ready for action.

Cima's blackmailing apparently works, as Anaheim asks Nina to be reassigned away from the Albion and out of the mobile suit development team altogether. Keith, who dates Mora, offers Kou movie tickets so he can ask Nina out after a field test. He does make a move, but a remark about the tests angers Nina again. Meanwhile, Kelley gets paid in gold bullion for his work on the Val Walo, but is shocked to hear that the Zeon forces do not want him piloting it for the new campaign. Incensed, Kelley takes out the mobile armor and challenges Kou to fight him so he could prove himself worthy of joining the Delaz Fleet again. When Nina gets in the way, Kou finally admits his feelings for her and defeats Kelley, who does not bail out from the exploding Val Walo because he never installed an escape system.