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Reduction in CO2 emissions is strongly linked with the improvement of engine specific fuel consumption, as well as the reduction in engine nacelle drag and weight. Conventional turbofan designs, however, that reduce CO2 emissions—such as increased overall pressure ratio designs—can increase the production of NOx emissions. In the present work, funded by the European Framework 6 collaborative project NEW Aero engine Core concepts (NEWAC), an aero-engine multidisciplinary design tool, Techno-economic, Environmental, and Risk Assessment for 2020 (TERA2020), has been utilized to study the potential benefits from introducing heat-exchanged cores in future turbofan engine designs. The tool comprises of various modules covering a wide range of disciplines: engine performance, engine aerodynamic and mechanical design, aircraft design and performance, emissions prediction and environmental impact, engine and airframe noise, as well as production, maintenance and direct operating costs. Fundamental performance differences between heat-exchanged cores and a conventional core are discussed and quantified. Cycle limitations imposed by mechanical considerations, operational limitations and emissions legislation are also discussed. The research work presented in this paper concludes with a full assessment at aircraft system level that reveals the significant potential performance benefits for the intercooled and intercooled recuperated cycles. An intercooled core can be designed for a significantly higher overall pressure ratio and with reduced cooling air requirements, providing a higher thermal efficiency than could otherwise be practically achieved with a conventional core. Variable geometry can be implemented to optimize the use of the intercooler for a given flight mission. An intercooled recuperated core can provide high thermal efficiency at low overall pressure ratio values and also benefit significantly from the introduction of a variable geometry low pressure turbine. The necessity of introducing novel lean-burn combustion technology to reduce NOx emissions at cruise as well as for the landing and take-off cycle, is demonstrated for both heat-exchanged cores and conventional designs. Significant benefits in terms of NOx reduction are predicted from the introduction of a variable geometry low pressure turbine in an intercooled core with lean-burn combustion technology.