It had two open cockpits, a fixed tailwheel landing gear and was powered by a 225 hp (168 kW) Jacobs L-4 radial engine.

Kellett then hired Johnny Miller, who thoroughly understood autogyros, as chief test pilot.

A KD-1B was a development of the KD-1A, with an enclosed cockpit for the pilot, radio, blind-flying instruments and a landing light, and was ordered and operated by Eastern Air Lines, who hired Miller to fly it.

They inaugurated the first scheduled rotary-wing air-mail service on 6 July 1939 between Camden Central Airport and Philadelphia's main Post Office.

The XR-2 was destroyed by rotor ground resonance problems and the evaluation was continued with another modified YG-1B designated the XR-3.