Michael, or Red as he's known in the Great House he lives in, wants to escape from the horrid institution. He meets a green flying boy who exchanges places with him, granting him freedom and the ability to fly.
The new Loblolly Boy flies to a small bay and meets Captain Bass who has a magic telescope that can see into the future. The Loblolly Boy also learns he can't be seen by most people, only by Sensitives and Collectors.
The Captain gives the Loblolly Boy a small model train engine and instructs him to return it. Michael flies off to find his future. He meets Suzy and Meg and sits with the dog Bella while they're at school. They must be Sensitives.
The Loblolly Boy goes to Meg and Suzy's home and gives Meg the model train to look after. They all go to the park and see a creepy-looking insect collector who scares the girls. He catches The Loblolly Boy in his net.
Suzy comes into the room where the Collector has trapped the Loblolly Boy in a cage and agrees to exchange with him. She will become a Loblolly Boy and be able to fly away free, and he will become Suzy left in the cage.
After a bit of exchanging, Meg and Suzy become themselves again and Michael is the Loblolly Boy once more. He goes back to the Captain to return the model train and is nearly caught by the Collector again.
The Loblolly Boy flies back to the Great House and finds Red, the boy who exchanged with him in the first place. He gives him back the train and Red agrees to exchange back to being a Loblolly Boy, just as Suzy, Meg and their mother turn up.