A hot air balloon flying over Egypt's ancient city of Luxor caught fire and crashed into a sugar cane field on Tuesday, killing 19 foreign tourists, health officials said.

Initial reports said 18 foreigners were killed, but the toll rose after tour operator Thomas Cook confirmed a British tourist died of his injuries in hospital. Two other British nationals were found dead at the crash scene.

The only two survivors include a British tourist, who is listed in stable condition, and the balloon's Egyptian pilot. State radio reported the pilot suffered severe burns. The two have been flown to Cairo for further treatment.

Other casualties included French, Belgian, Hungarian and Japanese nationals, as well as nine tourists from Hong Kong, Luxor Governor Ezzat Saad told reporters.

It was one of the worst accidents involving tourists in Egypt and could push the key country's tourism industry deeper into recession.

"I heard a loud explosion and saw smoke," photographer Christopher Michel said on Twitter. Michel was on a similar balloon tour in the Luxor area, and posted photos from takeoff and his flight.

According to the Egyptian security official, the balloon was carrying 20 tourists over Luxor on an early morning excursion when it caught fire and plunged at least 300 metres from the sky.

It crashed into a sugar cane field outside al-Dhabaa village just west of Luxor, 510 kilometres south of Cairo, said the official, speaking on condition of anonymity because he was not authorized to talk to the media.

Rescue workers prepare to remove a body from the scene of the crash. (Hagag Salama/Associated Press)

"The representative of the companies that offer these rides said he believed there was a gas explosion on board, which led to the collapse and crash of the balloon," CBC's Nahlah Ayed said.

According to initial indications, the balloon was in the process of landing after 7 a.m. when a fire erupted, according to an investigator with the state prosecutor's office.

The balloon then shot up in the air, the investigator said. The fire set off an explosion of a gas canister and the balloon fell to the ground, according to the security official.

Passengers jumped to escape flames

"I saw tourists catching fire and they were jumping from the balloon. They were trying to flee the fire but it was on their bodies," said Hassan Abdel-Rasoul, a farmer in al-Dhabaa. He said one of those he saw on fire was a visibly pregnant woman.

Bodies of the dead tourists were scattered across the field around the remnants of the balloon, as rescue officials collected the remains in body bags.

A spokeswoman for Canada's Department of Foreign Affairs said the Canadian embassy in Cairo has confirmed with local authorities that no Canadians were affected by the Luxor balloon crash.

"Our thoughts are with the families and friends of those involved in a hot air balloon crash in Egypt," DFAIT spokeswoman Amanda Reid said in an emailed statement.

Initial death toll revised

The security official said foul play has been ruled out. He also said initial reports of 19 dead were revised to 18 as confusion is common in the aftermath of such accidents.

In Hong Kong, a travel agency said nine of the tourists that were aboard the balloon were natives of the semiautonomous Chinese city. It did not say whether all nine were killed. The information was posted on the agency's website.

Christopher Michel, a photographer, took photos of the launch site in Luxor before the crash. (Photo courtesy of Christopher Michel)

The head of Japan Travel Bureau's Egypt branch, Atsushi Imaeda, confirmed that four Japanese died in the crash. He said two were a couple in their 60s from Tokyo. Details on the other two were not immediately available.

In Paris, a diplomatic official said French tourists were among those involved in the accident, but would give no details on how many, or whether French citizens were among those killed.

French media reports said two French tourists were among the dead but the official wouldn't confirm that.

Officials grounded all hot air balloon flights around the ancient sites indefinitely after the crash.

Hot air ballooning, usually at sunrise over the famed Karnak and Luxor temples as well as the Valley of the Kings, is a popular pastime for tourists visiting Luxor.

The site of the accident has seen past crashes. In 2009, 16 tourists were injured when their balloon struck a cellphone transmission tower. A year earlier, seven tourists were injured in a similar crash.

The toll puts the crash among the deadliest involving a recreational hot air balloon. In 1989, 13 people were killed when their hot air balloon collided with another over the Australian outback near the town of Alice Springs.

After the 2009 accident, Egypt suspended hot air balloon flights for several months and tightened safety standards. Pilots were given more training and a landing spot was designated for the balloons.

But Tuesday's crash raised accusations that standards had fallen, and many in Luxor were afraid it would only further damage tourism in a city that relies on foreign visitors.

Egypt's tourism industry has been decimated since the 18-day uprising in 2011 against autocrat leader Hosni Mubarak and the political turmoil that followed and continues to this day.

Luxor's hotels are currently about 25 per cent full in what is supposed to be the peak of the winter season.