The military necessity for supersonic aircraft to perform subsonic, high-performance maneuvers and to deploy between continents places demands upon propulsion systems which are ineptly met with currently available engine designs. Thrust requirements for modern supersonic aircraft are met with engines having airflow schedules differing widely from the airflow available from inlet designs. This incompatibility of delivered and used flow accounts for a significant aircraft drag fraction. The thrust losses making up this drag fraction are considered to be those associated with the free stream area defined by the design-point inlet capture area, so that propulsion system performance can be analyzed and assessed effectively. Current design techniques to minimize transonic thrust losses throughout the propulsion system (including the inlet, engine, and exhaust systems) involve reducing maximum engine airflow at the supersonic design-point below potential design limits, resulting in propulsion system weight and supersonic maneuverability penalties. An assessment of typical supersonic aircraft performance limits reveals specific areas of the propulsion system which offer significant technical improvement potential. Some critical technical aspects and approaches in each are briefly discussed. These aspects and approaches need to be definitized and procedures implemented to permit future propulsion systems to adapt efficiently to widely varying vehicle thrust requirements. More detailed attention is given the engine, to define the internal operating requirements implied by the need for vehicle stabilized thrust and flow matching. These operating requirements are then discussed with respect to the major engine components, their current performance levels, and the improvement potential that is evident.