SpaceX, the commercial space company set up by PayPal founder Elon Musk, has suffered another setback as the third attempt to put a payload into orbit failed.

Its Falcon 1 rocket blasted off on schedule from a Pacific atoll on Saturday but its primary fuel tank failed to separate and less than three minutes in the flight contact was lost.

"It was obviously a big disappointment not to reach orbit on this flight," said Musk.

"On the plus side, the flight of our first stage, with the new Merlin 1C engine that will be used in Falcon 9, was picture perfect. Unfortunately, a problem occurred with stage separation, causing the stages to be held together. "

The rocket was carrying three satellites, one from the Department of Defence and two from Nasa, including the $2.3m Nanosail D system, which was due to be the first solar sail deployed in space.

Also lost were the ashes of 208 people, who had paid to have their remains sent into orbit. These included James Doohan, better known as 'Scotty' from Star Trek and Mercury astronaut Gordon Cooper, the first American to sleep in orbit.

A ship has been sent out to try and recover any of the payload that might still be intact.

This was the third flight of a Falcon booster, none of which have worked so far. The first rocket exploded in mid flight after a fuel leak and the second made it into space before contact was lost.

Musk has issued a statement confirming that funds are available to carry on flights and development of new boosters.