The demand for lightweight, thermally stable, and energy-efficient power systems in aerospace applications has prompted the investigation of advanced magnetic materials beyond traditional alloys, such as Hiperco 50. This study aims to address the limitations of high core loss, poor efficiency, and thermal instability in conventional aerospace generators. A high-speed (10,000 RPM, 500 Hz) radial flux permanent magnet generator (RFPMG) was designed using Finemet as the stator material, Soft Magnetic Composites (SMC) for the rotor, and Litz wire windings to minimise eddy current and copper losses. Electromagnetic and thermal simulations were conducted using ANSYS Maxwell and Motor-CAD to ensure adherence to aerospace standards (IEC 60034-1, SAE ARP4990, IEEE 1812-2014). The results indicate that the proposed Finemet–SMC design achieves a 59% increase in output power (7.49 kW vs. 4.71 kW), an 11% improvement in efficiency (96.19% vs. 86.47%), and a 60% reduction in total losses, with stator and winding temperatures reduced by up to 45%. The torque ripple decreased by 44%, ensuring a smoother performance. These findings demonstrate that the proposed configuration not only surpasses standard aerospace requirements but also establishes a lightweight, cost-effective, and sustainable generator design suitable for next-generation hybrid and electrified aircraft propulsion systems.