BAE is planning to invest £20.6 million ($31.8 million) in a 20% stake of Reaction Engines, a UK-based engineering firm which has developed what it calls "breakthrough" aerospace engine technology, which could potentially be used for a new generation of reusable space vehicles and, as a commercial offshoot, could revolutionize air travel.

An announcement on BAE's website states that the partnership will allow collaboration on Reaction Engines' SABRE technology -- "a new aerospace engine class that combines both jet and rocket technologies with the potential to revolutionize hypersonic flight and the economics of space access."

Along with hypersonic air travel, Mark Thomas, Reaction Engines' managing director, told CNN's Richard Quest that a reusable space plane that takes off and lands like an aircraft is "one of the concepts that could be made possible by this engine."

Five times the speed of sound

SABRE, which stands for Synergetic Air-Breathing Rocket Engine, is an air-breathing engine, which uses ultra-lightweight heat exchangers to cool very hot air streams -- such as those encountered at hypersonic speeds.

The technology will "enable aircraft to operate easily at speeds of up to five times the speed of sound or fly directly into Earth orbit," Reaction Engines says in a press release on its website.

Through its ability to use atmospheric oxygen for propulsion, the engine's design negates the need for heavy fuel reserves on board, drastically reducing the weight of a SABRE-powered vehicle.

BAE's statement says that SABRE can also "transition" to a rocket mode, allowing spaceflight at speeds up to orbital velocity -- or 25 times the speed of sound.

Thomas describes the design as an "absolutely revolutionary... visionary concept."

He explains that SABRE is, at heart, a rocket engine but can breathe air when in the atmosphere "so you don't need to carry so much liquid oxygen on board your vehicle, it massively reduces the weight, and you can put that into vehicle design capability or payload."

The company's advanced heat exchanger, which can reduce hypersonic air temperature by over a thousand degrees in a hundredth of a second, is fundamental to the engine's design.

"If you're doing hypersonic speed the air is around 1000˚C (1832˚F) which is more typical of the air coming out the back of the engine than goes in the front," he explains. "So you have to be able to cool that down really quickly."

(CNN)