This is unlocked at the end of Chapter one on the level Remis. Once you reach the roof with Freddie you need to throw grenades at the Zeppelin. The baron will throw a few at you that will explode. The last one he throws will not. Once you have a grenade in hand aim it at the Left propeller, grab a second grenade and land it inside the engine. Repeat this process on the right and Boom! bye, bye zeppelin.
Also as Dr Prime Nex points out skipping cut scenes can effect achievements.