The explosion occurred after a static-fire test of the emergency abort system on the new Crew Dragon space capsule, which is intended for use by NASA's Commercial Crew program to ferry astronauts to and from the International Space Station.
And it comes ahead of tests of the capsule's escape system, which is created to jettison the spacecraft away from its rocket in the event of an emergency.
SpaceX had been set to fly the capsule with a crew aboard on another test flight this year. The test "sent a reddish-orange plume into the sky visible for miles around", suggesting a fairly serious malfunction of the engine systems, said Spaceflight Now, which described the anomaly as an accident. Created to keep a crew safe, this feature will only be used in case of an emergency during flight, but SpaceX must show it works properly.
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It's not immediately clear just how this incident will affect SpaceX's timeline for launching crew. SpaceX will work with NASA to determine what caused the issue.
In a statement, SpaceX said it's committed to ensuring that its systems "meet rigorous safety standards".
NASA called the flight "a major milestone", and it raised hopes that the Crew Dragon's first manned flight could take place before year's end. The spacecraft successfully docked with the space station.
This is concerning, as the United States has purchased seats on the Russian Soyuz rocket to fill the gap between the ending of the Space Shuttle and Commercial Crew coming online. That Dragon was slated to be reused for the upcoming in-flight abort test.
Once SpaceX teams have solved the problem from this weekends anomaly with Crew Dragon and regained hardware readiness for the inflight abort test, the next objective will be the all important Demo-2 mission. And its first crewed mission, which will carry astronauts Doug Hurley and Bob Behnken, was slated for July, though NASA recently said that timeline was under review.