The performance of an intercooled turbofan engine is analysed by multidisciplinary optimization. A model for making preliminary simplified analysis of the mechanical design of the engine is coupled to an aircraft model and an engine performance model. A conventional turbofan engine with technology representative for a year 2020 entry of service engine is compared to a corresponding intercooled engine. A mission fuel burn reduction of 4.3% is observed. The results are analysed in terms of the relevant constraints such as compressor exit temperature, turbine entry temperature, turbine rotor blade temperature and compressor exit blade height. It is then shown that a separate variable exhaust nozzle mounted in conjunction with the intercooler together with a variable low pressure turbine may further improve the fuel burn benefit to 5.5%. Empirical data and a parametric CFD study is used to verify the intercooler heat transfer and pressure loss characteristics.