Maintenance Aware Design Environment (MADe) is an integrated simulation tool used for system testability and health monitoring analysis based on function flow model, system failure knowledge and test information.The definition of function flow model and modeling process are presented. The aircraft bleed air system is analyzed including working modes, hierarchy, function flows and physical failure process for typical component. The model of bleed air system is achieved under typical work condition. Based on the system model and the propagation feature of function, the sensor sets are simulated and analyzed, including the selection of sensor set and diagnostic rules analysis. The simulation results show that the simulation method can be used for bleed air system modeling effectively, and it contributes to the optimization of health monitoring and fault diagnosis for aircraft bleed air system.