Three, two, one ... lift-off for Branson

Until last week Richard Branson's proposed flight into space had looked like a flight of fancy – another personal adventure by the man who has set records for journeys by sea and balloon. Then an Arab investment company bought a third of his Virgin Galactic company in a deal valuing the venture at $900m. Suddenly the space project looked like it might be a business after all.

Sir Richard celebrated the deal with his Abu Dhabi partner by taking his first flight in VMS Eve, the Virgin mothership that will launch the spaceships. "This has been one of the most incredible experiences of my life," he said, as he landed at the airbase in Wisconsin.

He meant the brief trip in Eve but many see the $280m capital injection as equally incredible. Sir Richard refers to Virgin Galactic as "the world's first commercial spaceline", but few others have regarded it as commercial. Has Aabar Investments seen profits where others see only costs, or is the Emirates company – controlled by the sheikh who owns Manchester City – on a flight of fancy of its own?

Aabar's investment values Virgin Galactic at about half the stock market capitalisation of easyJet and not far behind Sir Richard's Virgin Atlantic airline. But Virgin Galactic has yet to make a flight into space; it has no timetable and still awaits approvals from America's Federal Aviation Authority and other bodies.

Sir Richard has never doubted that his project will fly, however. He registered the Virgin Galactic name a decade ago and met the designer of his spaceships, Burt Rutan, through fellow adventurer Steve Fossett. Virgin Atlantic sponsored Fossett, who died in a plane crash in 2007, for his round-the-world, non-stop, solo flight in GlobalFlyer, which Rutan built.

Rutan had also built SpaceShipOne with finance from Paul Allen, the co-founder of Microsoft, with the aim of claiming the Ansari X prize for the first reusable private craft to take a pilot at least 100km into space. When they won in 2004, the $10m award offset part of Allen's $26m investment and Virgin teamed up with the duo to develop a second-generation spacecraft.

Virgin has so far spent about $100m developing the mothership that will carry SpaceShipTwo 50,000ft towards space, where it will launch the craft with up to six passenger astronauts and two pilots in a cabin that is twice as big as the craft that won the Ansari prize, but still only about the size of an executive jet.

This mothercraft flew for the first time last December and had completed 15 test flights before Sir Richard climbed aboard last week. The spaceships are nearing completion and test flights are due to start this year and could last into 2011, when Virgin hopes to start commercial flights.

The $280m investment by Aabar will provide sufficient capital to finance Virgin Galactic until paying passengers come on board, says Sir Richard. It is high stakes for Aabar, however, whose value on the Abu Dhabi stock exchange is just £330m.

It has been on a spending spree this year that has already seen it invest £1.75bn for a 9 per cent stake in Daimler, commit $735m to buying land in Abu Dhabi, another $140m investment in an Austrian property and technology venture, plus the acquisition of the Swiss private-banking subsidiary of AIG, the insurance company bailed out by the US government.

But 71 per cent of Aabar's shares are owned by the International Petroleum Investment Company, a wholly owned vehicle of the Emirate's government and chaired by Sheikh Mansour bin Zayed Al Nahyan, half-brother of the country's president and a minister in the government as well as a businessman – and owner of Manchester City. Besides its oil wealth, including 47 per cent of Spain's Cepsa petroleum group, Aabar's parent owns MAN, the German lorries group, and has just made £1.5bn selling part of the Barclays shares it bought last autumn.

Virgin Galactic will initially earn revenues by charging passengers $200,000 for a short flight into space. The trip is "sub-orbital" – meaning it does not even complete a full circuit of the Earth – but 85,000 people have registered interest in flying and about 300 have put up money in advance. Some have paid only $20 and will be at the back of the queue but others have paid in full and deposits so far total $40m towards $60m of tickets.

That equates to $1.2m of income per flight, but Virgin is not revealing the cost of launching each mothership and spacecraft. However, Sir Richard says: "We aim to fly 500 people in the first year and 50,000 in the first 10 years." That would be $100m a year revenue.

Virgin's paying astronauts will have to undergo two or three days of preparation, medical checks, team bonding and G-force acclimatisation at its purpose-built spaceport in New Mexico, but the flight would last just two hours.

Anne-Marie Hansen of the specialist travel company Kuoni reckons there are still sufficient travellers in the world prepared to pay for a new experience. "People want innovative ideas," she says. "There'll always be demand for that and there'll always be super-explorers with the financial ability to do so."

Kuoni, parent of Voyages Jules Verne – named after the Frenchman who wrote about space travel – adds: "There'll always be people who want to marvel at the Earth from afar. If this is someone's interest and desire, you can't put a price on it."

Virgin sees a further source of income from undertaking research work in space, including micro-gravity experiments and instrument testing and also from training professional astronauts.

Aabar will invest another $100m, increasing its 32 per cent stake in Virgin Galactic, to fund the launching of small satellites from the mothership for third parties. Virgin Galactic plans to develop these unmanned vehicles.

And Sir Richard talks of using his spacecraft for intercontinental travel, reducing journey times to, say, Australia to just a couple of hours. The first non-US flights are likely to be from a spaceport near Kiruna in Sweden but Aabar plans to build another spaceport in its home country. Last week's deal gives it exclusive rights to the Gulf region for hosting tourist and research flights.

But Aabar and its parent gain more from the Virgin Galactic association than potential dividends. The link is not only another diversification from its oil-based economy, but it is also an attempt to establish a reputation for Abu Dhabi as a technological leader.

Its chairman, Khadem Al Qubaisi, says: "Aabar's stake in Virgin Galactic will open a new avenue of opportunity. The partnership not only falls in line with Abu Dhabi's larger plans to inculcate technology research and science at grass-roots levels but also complements its aim to be the international tourism capital of the region."

Sir Richard says the deal leverages Aabar's solid financial backing with Virgin's pioneering technology. "It is indicative of the interesting and high-value investments that mark the Emirates' commercial portfolio," he says. And the price put on Virgin Galactic by last week's deal means the space venture is now the third largest investment in his own portfolio, behind Virgin Atlantic and the Virgin Active health clubs.

The talk now is that while Virgin's astronauts float in space, Virgin Galactic could float on a stock market during the next decade.

Sky high: The ships that will carry Virgin's space tourists

Instead of using Nasa-style rockets rising vertically into space, Sir Richard Branson intends to launch his spacecraft by releasing them from a mothership that climbs to 50,000ft above Earth, then returns to land like an aeroplane so that it can be reused. The spaceships will have feathered wings that allow them to glide to Earth, landing on a runway.

This is safer and more environmentally friendly than conventional space technology, he insists.

Virgin has ordered three mothercraft which are being built by Mojave, California-based Scaled Composites, the company run by Burt Rutan and owned by Northrop Grumman. The craft are being made from composite materials rather than metal and the 78-foot long mothership will be the largest totally composite plane in service. The 140ft wingspan makes it only 16ft smaller than a Boeing 767, and one of its twin fuselages is pressurised like a normal plane, while the other can carry high-altitude experiments. It is powered by four Pratt & Whitney PW308 engines.

Five spacecraft – the SpaceShipTwos – have also been ordered and will be built while testing of the mothership continues. The 12ft-long craft have large windows right round the cabin to allow views extending 1,000 miles over the Earth's surface as they soar to about 70 miles above the planet's crust. Passengers can leave their seats and float in space. After release from the carrier aircraft the spacecraft operate on an internal power supply, travelling at up to Mach 3.

Sir Richard emphasises the environmental aspects of Virgin Galactic. The air launch means short rocket burn and reusable craft mean no debris in space.

"Virgin Galactic is working with Pratt & Whitney towards a goal of eventually flying the aircraft entirely on a renewable jet aviation fuel," he says. The work is being conducted with his Virgin Atlantic airline, which last year flew a partly biofuelled Boeing 747 between London and Amsterdam.