A decomposition methodology based on the concept of "thermoeconomic isolation" and applied to the synthesis/design and operational optimization of an advanced tactical fighter aircraft is the focus of this paper. The total system is composed of six sub-systems of which five participate with degrees of freedom (493) in the optimization. They are the propulsion sub-system (PS), the environmental control sub-system (ECS), the fuel loop subsystem (FLS), the vapor compression and Polyalphaolefin (PAO) loops sub-system (VC/PAOS), and the airframe sub-system (AFS). The sixth subsystem comprises the expendable and permanent payloads as well as the equipment group. For each of the first five, detailed thermodynamic, geometric, physical, and aerodynamic models at both design and off-design were formulated and implemented. The most promising set of aircraft sub-system and system configurations were then determined based on both an energy integration and aerodynamic performance analysis at each stage of the mission (including the transient ones). Conceptual, time, and physical decomposition were subsequently applied to the synthesis/design and operational optimization of these aircraft configurations as well as to the highly dynamic process of heat generation and dissipation internal to the subsystems. The physical decomposition strategy used (i.e. Iterative Local-Global Optimization-ILGO) is the first to successfully closely approach the theoretical condition of "thermoeconomic isolation" when applied to highly complex, highly dynamic non-linear systems. Developed at our Center for Energy Systems research, it has been effectively applied to a number of complex stationary and transportation applications. (c) 2006 Elsevier Ltd. All rights reserved.