· Propulsion system for hybrid craft blows up · Three workers killed and three wounded in blast

Blow for Virgin space programme as prototype rockets go up in smoke

Richard Branson's plans to run the first commercial space flight service were thrown into disarray yesterday after an explosion during a test of the rocket's propulsion system left three workers dead and three seriously wounded with shrapnel injuries and burns.

Witnesses at the world's first commercial spaceport at Mojave in California, said the explosion was accompanied by a blast that sounded like a 500lb bomb.

The accident happened at 2.34pm local time on Thursday during tests of the propulsion system used in the new SpaceShipTwo - the prototype for Virgin Galactic's eight-seater private rockets.

The system is hybrid, using both solid fuels and liquid oxidisers, a combination chosen paradoxically because it is safer than solid fuels alone. Two workers were killed at the scene while the third died later in hospital.

The billionaire entrepreneur has invested at least $200m (£99m) in the groundbreaking work of Scaled Composites, the company leading the mission that launched the first private manned flight into space in October 2004.

Sir Richard's spokesman Will Whitehorn yesterday declined to comment on the incident until it had been properly investigated.

The blast is a setback for Burt Rutan, the maverick and secretive aerospace designer who is pioneering the development of the rockets. Described by those in the business as a studious, quiet genius, Mr Rutan made his name creating experimental planes before he branched out into private space travel.

Clearly shaken, he told a press conference that the accident was "a very big deal". He said he didn't know what went wrong: "We felt it was completely safe."

The accident comes at a bad time for his company as Scaled Composites is in the closing stages of being sold to another firm, Northrop Grumman.

It is also awkward timing for Sir Richard who has pledged to start commercial space flights in 2009. The inquiry into the incident is likely to cause delays, though some analysts estimated they may be no more than six to nine months.

Under the Branson/Rutan plans, would-be space travellers will pay $200,000 for one of six passenger seats on SpaceShipTwo. They would feel the thrust of the rocket's engines that propel the vehicle from 140 knots to supersonic speeds in about 10 seconds. As one of the pilots from the first series of three flights in SpaceShipOne put it: "Boy, that first 10 seconds is about the most dynamic flying I've ever done."

The ship would then rise to 62 miles above the ground, giving the passengers and two pilots views back over Earth and the experience of five minutes' worth of weightlessness.

The test that went awry involved the passing of pressurised nitrous oxide through an injector to gauge its performance - a process known as "cold flow". There was no flame present and no fuel, and observers were baffled as to why the nitrous oxide, or laughing gas, should have ignited.

Similar tests had been conducted without incident on SpaceShipOne, the first prototype developed by Scaled Composites, which made the 2004 manned commercial debut and was funded by Paul Allen, co-founder of Microsoft.

"Nitrous oxide is something that is often handled, it is not a particularly exotic material," said John Loizou of Vega, an aerospace technology company.

He said that while tragic, the accident did not reflect on the safety of the nascent space tourism industry. "It's not the same thing as a flight test accident. You can't extrapolate from this to the safety of the operating system."

Though the technology involved in travel into space is decades old, it is only now that it is being applied commercially. Brett Alexander, president of the Personal Spaceflight Federation that represents 18 companies and organisations, said that at least six firms were actively developing commercial manned rockets.

How the explosion will impact on the timetable of the Branson launch will have deep resonance for the residents of Mojave, a community of just 4,000 people in the desert. About 1,500 of them work at the spaceport.

Bill Deaver, editor of the weekly Mojave Desert News, said the community has always been engaged in pioneering travel since the days in the 1880s when it developed the 20-mule team wagons used to pull borax from the local mines.

"This is the kind of place where when you look up at the sky you may see a restored world war two fighter or there may be something you have never seen before. People are constantly pushing out the envelope."

Scaled Composites uses part of the isolated airport, a former US air force base, as a testing facility for its space ventures. A number of other companies - including other commercial space ventures - used the Mojave facility for testing, said Stuart Witt, the site's general manager.

"What we do is inherently risky," he said. "These are not the days we look forward to, but we deal with it."

A local hospital spokesman said two of the three injured workers were in a critical condition and one was serious. All were suffering numerous shrapnel wounds.

Tourism: the final frontier

April/May 2001: Dennis Tito, a US millionaire, becomes the first space tourist after paying $20m to visit the International Space Station

October 4 2004: SpaceShipOne wins the $10m X prize as the first firm to fly to a height of 62 miles twice in two weeks

April 2007: Most recent space tourist Charles Simonyi pays Space Adventures for the trip to the ISS. He is the fifth person to do so

2008: The launch of SpaceShipTwo, Virgin Galactic's passenger-carrying vehicle, was scheduled for next year

2009: First commercial space flights, costing $200,000, were due to launch