In this paper, a methodology is presented to develop models for a Condition Based Modelling techniques using Gas Path Analysis for a typical military engine. The baseline engine model is developed using the known aero-thermodynamic parameters of the engine in Numerical Propulsion System Simulation (NPSS). First, the sensitivity of the gas turbine engine’s performance to the efficiency of each gas path component is studied. Naturally, the engine’s performance is determined to be highly sensitive to the fluctuation in performance of the compressor, turbine, and burner modules. The response of the model to simulated faults in these critical components is then studied. The observations are made in terms of data available during engine test bed operation. The observations show a good correlation with the Fault Correlation Matrix available from the original manufacturer. The developed model and technique can be used for subsequent development of a predictive or condition-based diagnostic tool for any gas turbine engine. Furthermore, this technique can be extended to develop models for online fault diagnosis during aircraft operation, thus reducing the time and cost overhead of the conventional techniques that require extensive man-hours and downtime of the aircraft.