Virgin owner Sir Richard Branson is confident the company has moved a step closer to launching commercial flights to space, after a six-passenger spaceship fired its rocket engine in flight for the first time.

The powered test flight over California's Mojave Desert lasted 16 seconds and broke the sound barrier.

"It was stunning," Branson said. "You could see it very, very clearly. Putting the rocket and the spaceship together and seeing it perform safely, it was a critical day."

The spaceship and its carrier aircraft WhiteKnightTwo are owned by an offshoot of Virgin Group.

It took off from the Mojave Air and Space Port at 7:00 am local time on Monday (11pm AEST) and headed to an altitude of about 46,000 feet (14,000 metres), at which point SpaceShipTwo was released.

Two pilots then ignited the ship's rocket engine and climbed another 10,000 feet (3,000m), reaching Mach 1.2 in the process.

Additional test flights are planned before the spaceship will fly even faster, eventually reaching altitudes that exceed 100 kilometres.

"Going from Mach 1 to Mach 4 is relatively easy, but obviously we've still got to do it," Branson said.

"I think that the big, difficult milestones are all behind us."

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Virgin Galactic is selling rides aboard SpaceShipTwo for $193,000 per person and so far more than 500 people have put down deposits.

Branson and his children plan to be the first non-test pilots to ride in the spacecraft this time next year.

SpaceShipTwo is based on a three-person prototype called SpaceShipOne, which in October 2004 clinched the $9.6 million Ansari X Prize for the first privately funded human spaceflights.

Microsoft co-founder Paul Allen bankrolled SpaceShipOne's development, estimated at $24.1 million.

So far, Virgin Galactic and partner Aabar Investments PJC of Abu Dhabi have spent about $482.7 million developing SpaceShipTwo, and expect to sink in another $96.5 million before commercial service starts, Branson said.

The company plans to build four more spaceships and several WhiteKnight carrier jets, which also will be used for a satellite-launching business.

Reuters