Virgin Galactic has officially unveiled a low-cost, small satellite launch system that builds on elements of its space tourism development.

The LauncherOne system will deliver payloads up to 500 lb. to low Earth orbit, and with a target price of under $10 million per launch, is aimed at dramatically cutting the cost of launching small satellites.

Backed by Virgin Galactic’s partner Aabar Investments, the development of the “new vehicle will create a long-awaited shake-up of the satellite launch industry,” Virgin founder Richard Branson says.

The system is based on a 30,000-lb.-class, winged vehicle that will be carried to around 50,000 ft. for air launch by the WhiteKnightTwo mother ship developed as the carrier aircraft for the SpaceShipTwo (SS2) suborbital vehicle.

LauncherOne will be powered by a two-stage, liquid-fueled rocket, now in initial development by Virgin Galactic. The same rocket also is intended to ultimately replace the non-reusable RM2 hybrid motor that will power the SS2 to suborbit, Virgin says.

The RM2 is in the final stages of development by Sierra Nevada Space Systems and “all major components have now been qualified for powered flight,” according to Virgin Galactic CEO George Whitesides. The RM2 is the major pacing item to the start of rocket-powered flight tests of SS2, which are expected to start by year’s end. Assuming tests go as planned, Virgin hopes to start initial suborbital passenger flights by the end of 2013.

Initial LauncherOne flights are due to start in 2015, with commercial flights getting under way by 2016. The development will run closely in parallel with Virgin Galactic’s recently awarded Airborne Launch Assist Space Access (Alasa) program, a U.S. Defense Advanced Research Projects Agency (Darpa) initiative to design air-launch systems that can orbit payloads below 100 lb. for $1 million, including range costs.

Virgin is one of three winners of the initial Alasa contract, along with Boeing and Lockheed Martin. This $46 million, 18-month first phase runs through September 2013, when Darpa plans another competition to select at least one team to conduct up to 36 launches in 2015.

Initial customers for the LauncherOne include Skybox Imaging, a California-based developer of a high-resolution imaging constellation, and GeoOptics, which is working on non-imaging remote sensing systems. Others are smallsat aggregator Spaceflight, and Planetary Resources, the recently launched asteroid mining venture.