MOJAVE, Calif.—An improper co-pilot command preceded Friday’s in-flight breakup of Virgin Galactic LLC’s rocket, according to investigators, when movable tail surfaces deployed prematurely.

Two seconds after the surfaces moved—with SpaceShip Two traveling faster than the speed of sound—“we saw disintegration” of the 60-foot-long experimental craft, according to Christopher Hart, acting chairman of the National Transportation Safety Board.
The co-pilot died in the accident, and the other pilot was severely injured.

The sequence of events released by the NTSB indicates that the rocket ship separated normally from its carrier and the propulsion system worked normally until the tail surfaces, called feathers, deployed.

The disaster, coupled with the explosion earlier last week of an unmanned Orbital Sciences Corp. cargo rocket destined for the international space station, has set back the ambitious timetables embraced by space-tourism proponents and other commercial ventures seeking to get beyond Earth’s atmosphere. Some in the industry predict difficulties obtaining additional private-equity funding for startup ventures, while others worry about nagging propulsion problems and public confidence. 

“Recent events bring home the reality that we’re in a very dangerous phase” of pursuing space activities relying on the private sector, said Howard McCurdy, a space history expert at American University. Launching rockets and vehicles “is always a very risky business,” he said, and no amount of ground tests “can duplicate the aerodynamic stresses and other conditions” of actual space flight.

Virgin Galactic had initially hoped to start commercial service by 2008, but persistent development and testing challenges have repeatedly pushed back the date. Before the accident, company officials were talking about inaugurating service by early 2015, with company founder Sir Richard Branson and members of his family slated to take the first ride. Now, the initial launch date is uncertain because the probe is likely to stretch for many months.

How much the fledgling industry is set back may depend on what investigators determine caused the two accidents. Some industry officials and analysts predict that Virgin Galactic’s fatal mishap may have a long-term residual impact as dramatic as the fallout from the 2003 in-flight breakup of the space shuttle Columbia, which killed all seven crew members. 

“It’s clearly bad news for commercial space,” said one veteran industry official affiliated with another commercial space company. “But from the beginning, people recognized a fatal event on some spacecraft was inevitable.” 

Earlier Sunday, George Whitesides, Virgin Galactic’s chief executive, defended the company’s safety procedures and indicated that the rocket motor on the craft that crashed was a derivative of a design that had been successfully tested on the ground and in the air for years.

“At the end of the day, safety of our system is paramount,” he said in an interview. “The engineers and the flight-test team have the final authority” to determine when and how experimental flights are conducted.

Virgin Galactic has pledged to cooperate fully with the probe, which also includes experts from the Federal Aviation Administration and Scaled Composites, a Northrop Grumman Corp. unit that designed and is testing the Virgin crafts—SpaceShip Two and its carrier aircraft, dubbed WhiteKnight Two. The pilots on Friday’s test flight were Scaled Composites employees.

Mr. Whitesides, a former senior NASA official, is in charge of the roughly $500 million project intended to take passengers on suborbital flights for more than $200,000 each. He said last week’s test flight wasn’t rushed. “I strongly reject any assertion that something pushed us to fly when we weren’t ready,” he said.

SpaceShip Two’s fuel tanks and engine were recovered largely intact. The hybrid motor fueled by nitrous oxide and a plastic-based compound was found some 5 miles from where large sections of the tail first hit the ground. Sections of the fuselage, fuel tanks and cockpit were located some distance from the engine itself.

The condition and location of various pieces of the wreckage suggest there was no propulsion-system explosion before the craft started coming apart miles above California’s Mojave Desert, according to air-safety experts who have reviewed the images.

“It’s hard to figure how an engine explosion” could produce such a debris field, said John Cox, an industry consultant and former accident investigator for the Air Line Pilots Association.

The rocket ship was equipped with six onboard video cameras and many sensors feeding data to the ground. The flight also was followed by radar, and was filmed from the ground and by a plane flying close by.

SpaceShip Two’s rocket motor received considerable attention immediately after the accident. Industry officials and news reports concentrated on the fact that it was burning a new type of plastic-based fuel for the first time in flight.

The new engine-fuel combination was tested on the ground about a dozen times in the months leading up to Friday’s flight.