A video shot by a passenger on another flight appears to show smoke pouring from the balloon's basket for some time before the balloon itself collapsed, leaving the basket full of tourists to freefall to earth.

Workers prepare a hot air balloon for take off at a launch site near Egypt's ancient temple city of Luxor before it exploded and plunged to earth on Tuesday. Christophe Rmichel / Agence France-Presse

"This is terrible, just terrible," the employee told AFP by telephone, declining to give her name. "We don't yet know what happened exactly or what went wrong."

Ezzat had imposed an immediate ban on all hot-air balloon flights in the province as the prime minister ordered the investigation.

Security services cordoned off the crash site in Luxor's dense sugar cane fields, as police and residents inspected the charred remains of the balloon.

"There was a terrifying sound when the balloon exploded," one resident, Ahmed, 40, said.

"Bodies engulfed in flames were falling out of the balloon," said Youssef al-Tayyeb, another resident who witnessed the accident.

The balloon had been floating over the west bank of Luxor, one of Egypt's most renowned archaeological sites and home to the famous Valley of the Kings and the grand Temple of Hatshepsut, when it exploded.

Nine of those killed were from Hong Kong.

"We believe that there is a high possibility that nine of our customers have died," said Raymond Ng, general manager of travel agency Kuoni, which organized the Hong Kong residents' tour.

The five women and four men were between the ages of 33 and 62, Ng said, adding their relatives were flying to Cairo accompanied by three Kuoni staff.

The nine were among a group of 15 Hong Kong residents who had left for Egypt on Friday. Ng said that according to local employees, the balloon caught fire about an hour after it had set off, plummeting to the ground two minutes later.

French hot air balloon expert Philippe Buron-Pilatre de Rozier said the blast could have been caused by a leak after a spark caused by a lighter or a cigarette.

Another reason could be wear and tear due to poor maintenance, said Buron-Pilatre de Rozier. Hot air balloons such as the ones used in Egypt are generally 40 meters high and can carry up to 25 passengers, he added.

Tuesday's crash comes as widespread anger over safety standards in Egypt following several deadly transportation and construction accidents.