The movie that was proposed was a lot different than the movie the film became. Leading lady Joan Caulfield was the protégé of Mark Sandrich, who directed many of the Astaire-Ginger Rogers musicals. Sandrich was originally slated to direct this film, but died of a heart attack during pre-production and Stuart Heisler was drafted in to replace him. Heisler wanted Caulfield replaced, but Crosby, who had approval of his leading ladies, insisted she remain in the film. Reportedly Heisler and Crosby did not get along, and the following year Heisler would direct Susan Hayward in SMASH UP: THE STORY OF US which was based on an unflattering portrayal of Dixie Lee Crosby. Also Paul Draper, a Broadway dancer was supposed to star with Bing, but he left the film early on as well. Bing and Draper did not get along. Crosby was laid back to his way of filming, while Paul approached every scene and nuance of the movie as if he was choreographing and intricate ballet. Draper did not endear himself to Crosby either but trying to get actress Joan Caulfield removed from the picture. He was constantly complained about her lack of singing and dancing ability. During the first week of production Draper's speech impediment and his trenchant criticism of Caulfield's dance ability led Crosby to insist on his replacement by Fred Astaire who, then forty-seven, had already decided that this would be his final film and that he would retire.
In common tradition to many 1940s movies, most commonly found in the "film noir" genre, BLUE SKIES is told in flashback, starting in modern day setting at a radio station, Broadcast Network of America in New York City's Rockefeller Center, where Jed Potter (Fred Astaire), a former dancer now a radio personality, relates his life story and career to his listeners, a story with a beginning but without a finish. Dating back circa 1919 following World War I finds Jed attracted to Mary O'Hara (Joan Caulfield), a girl, a "very pretty girl," working in the chorus. He invites her to accompany him for dinner at a night club owned by Johnny Adams (Bing Crosby), his Army buddy. Almost immediately, Mary is attracted to Johnny, but in spite of Jed's warning that Johnny is not the marrying kind, she cannot resist him. Johnny and Mary marry, and during their union have a daughter, Mary Elizabeth (Karolyn Grimes). All goes well until Mary finds that Jed is right in his assumption of Johnny being selfish and unstable, buying and selling nightclubs (one of them called "Top Hat") at a moment's notice, and unable to settle down at in one place they could call home. After their divorce, Mary becomes engaged to Jed. Finding she's unable to marry Jed, Mary disappears, leaving Johnny as well as Jed, through his narration, to wonder whatever became of her.