In this paper, a baseline system which utilizes dual-channel sensor measurements for aircraft engine on-line diagnostics is developed. This system is composed of a linear on-board engine model (LOBEM) and fault detection and isolation (FDI) logic. The LOBEM provides the analytical third channel against which the dual-channel measurements are compared. When the discrepancy among the triplex channels exceeds a tolerance level, the FDI logic determines the cause of the discrepancy. Through this approach, the baseline system achieves the following objectives: 1) anomaly detection, 2) component fault detection, and 3) sensor fault detection and isolation. The performance of the baseline system is evaluated in a simulation environment using faults in sensors and components.