In this study, an assessment of degradation and failure modes in the gas-path components of twin-shaft industrial gas turbines (IGTs) has been carried out through a model-based analysis. Measurements from twin-shaft IGTs operated in the field and denoting reduction in engine performance attributed to compressor fouling conditions, hot-end blade turbine damage, and failure in the variable stator guide vane (VSGV) mechanism of the compressor have been considered for the analysis. The measurements were compared with simulated data from a thermodynamic model constructed in a Simulink environment, which predicts the physical parameters (pressure and temperature) across the different stations of the IGT. The model predicts engine health parameters, e.g., component efficiencies and flow capacities, which are not available in the engine field data. The results show that it is possible to simulate the change in physical parameters across the IGT during degradation and failure in the components by varying component efficiencies and flow capacities during IGT simulation. The results also demonstrate that the model can predict the measured field data attributed to failure in the gas-path components of twin-shaft IGTs. The estimated health parameters during degradation or failure in the gas-path components can assist the development of health-index prognostic methods for operational engine performance prediction.