Doug Masters spent more time on a jet fighter simulator than doing his homework, so his grades were not good enough to get into the Air Force Academy. To avenge a prank against his girlfriend, Doug challenges the town bully to a plane vs. motorbike race through Snake Canyon - but the bully (and his gang) are cheats.
The confrontation with the bullies mirrors an attack on Doug's father - who had been flying in international airspace when shot down, so he could be held hostage. The film doesn't say which country was involved, only that it claimed a "200 mile limit" while the US only recognizes 12 miles, and "Bilyad" sounds a lot like Libya; see Gulf of Sidra incident.
After hearing the bad news about his dad - and the fact that the US is planning no military response, Doug borrows some time on the world's most expensive video game (an F-16 flight simulator vs. MiGs). He finds out the pilot whose simulator time he borrowed is Colonel Charles Sinclair (USAF Reserve), the airplane mechanic who helped him win the Snake Canyon bet. They have a tense conversation about rescuing Doug's dad.
The next day, Doug graduates from high school, reflecting on the inspiring words of the valedictorian's speech: "Be grateful for the freedom and sustenance we received, and believe in ourselves." He gathers his friends together, like Colonel Blaze's son who gets the latest intelligence reports by sneaking past Hazel (to the tune of Twisted Sister's "We're Not Gonna Take it").
Lou Gosset applies his "flair for projecting quiet authority"  to his characterization of an airplane mechanic willing to help Doug plan a clandestine rescue mission. Chappy's Motown jukebox provides an amusing intergenerational contrast with Doug's Heavy Metal. Col. Masters earned Chappy's respect when he stood up for him against some racist pilots.
While some may have felt the film's plot was cheesy, the air combat scenes were quite realistic. 
Despite being panned by the critics, Iron Eagle contains many iconic themes and ethical lessons for young men. Patriotism, love of father, respect for people of other races, honor, gratitude, loyalty, initiative, perseverance & determination, bravery, teamwork.
- The Israel Air Force puts in an unaccredited cameo role in the Iron Eagle series. All the aerial work was shot in Israel using IAF pilots and IAF F-16, Kfir and F-4 Phantom jets. The F-16s, of course, were painted in USAF colors and the Kfirs and Phantoms were supposed to be the evil enemy MiGs. ... the flying is sublime.