In 1916, Major Stephan Petróczy von Petrócz of the Austro-Hungarian Army envisioned replacing hydrogen-filled observation balloons with tethered helicopters. These helicopters would have been used as static observation platforms. Compared to hydrogen balloons, the helicopters’ were much less likely to catch fire, presented a smaller target for the enemy, increased operational readiness, required fewer ground and support crew, and eliminated the need for hydrogen generating equipment.

To achieve his goal, Petróczy, along with Oberleutnant Dr. Theodor von Kármán and Ingenieurleutnant Wilhelm Žurovec, conceived the Schraubenfesselflieger (S.F.F) mit Elektromotor (captive helicopter with electric motor). This machine is now commonly refered to as the Petróczy-Kármán-Žurovec 1 (PKZ 1) helicopter. Built in 1917 and primarily designed by von Kármán and Žurovec, the PKZ 1 consisted of a rectangular frame with an observation basket in the middle. On each side of the basket were two lift rotors. All four rotors were powered by a single 190 hp (142 kW) Austro-Daimler electric motor.

The PKZ 1 was flight tested and was able to lift three men to a tethered height of 20 in (50 cm).  However, the electric motor generated 50 hp (37 kW) less than anticipated, and on the fourth flight, the straining motor gave out. Because of the scarcity of high-grade electrical copper and quality insulation, Daimler was not able to repair the motor. In addition, the PKZ 2, which was originally known as the S.F.F. mit Benzinmotor (captive helicopter with petrol engine), was nearing completion. No further work was done on the PKZ 1.

The PKZ 2 helicopter (for which he received German patent 347,578) was designed solely by Wilhelm Žurovec. The PKZ 2 was privately funded by the Hungarian Bank and the iron foundry / steel fabrication firm of Dr. Lipták & Co AG, who built the machine. The PKZ 2 utilized two two-blade contra-rotating rotors to cancel out torque and provide lift. The rotors, made of high-quality mahogany, were 19 ft 8 in (6.0 m) in diameter and were rotated at 600 rpm by three 100 hp (75 kW) Gnome rotary engines. A removable observation basket sat atop the rotors.

The craft had three outrigger legs; each supported one engine. All engines were connected to the rotors via a common gearbox. The PKZ 2 was supported by a central air cushion and three additional air cushions; one on each outrigger leg. These air cushions were filled by an air pump driven from the rotor drive. Attached to each outrigger was a tethering cable that was connected to the ground and controlled by an electric winch. With one hour of fuel, The PKZ 2 weighed 2,645 lb (1,200 kg).

Tethered and unmanned, the PKZ 2 was test flown on 2 April 1918. After several flights, including one that lasted about an hour, tests were suspended on 5 April because of insufficient power from the Gnome engines. The engines were replaced by 120 hp (89 kW) La Rhône engine (that were captured and rebuilt) and, with a few additional modifications, tethered and unmanned flight tests resumed on May 17th. With the new engines and calm winds, an altitude of 165 ft (50 m) was achieved, and the PKZ 2 could lift 330–440 lb (150–200 kg). The craft would lose lift at higher altitudes, but the PKZ 2 was kept under control as long as tension remained on the tethering cables.

On 10 June 1918 the PKZ 2 was demonstrated for high ranking members of the military. A flight was made with the observation basket in place, but the engines were not running well and the craft became unstable. The basket was removed and another flight attempted. The wind had picked up, and as the PKZ 2 hovered at 40 ft (12 m) tethered to the ground, the craft began to rock. The overheating engines lost power, and the tether winch crew could no longer maintain control. The PKZ 2 crashed from a height of 6.5 ft (2.0 m), severely damaging the airframe and completely destroying the rotors.

Realizing the technical problems could not be overcome quickly, the government cancelled the project on 21 June 1918. However, Žurovec pressed on and began to design an individual cylinder water jacket to water-cool the rotary engines. The craft was being rebuilt to resume flight tests in November 1918 when the end of the war and revolution caused all development to cease. The PKZ 2 made over 15 tests flights, but it is doubtful any were manned.