Survivors were battling for their lives in lifeboats in heavy seas that were also complicating rescue efforts, maritime sources said. Fourteen bodies had already been recovered amid fears of a much higher death toll.

Radar contact with the ship had been lost after its departure late Thursday from a Saudi port but the cause of the accident remained a mystery. No distress signal was reported to have been received.

"A helicopter has spotted lifeboats with people on board," said Red Sea port authority chief Mahfuz Taha. "The ship sank 57 miles off Hurghada."

The lifeboats were seen in waters off the Egyptian port city of Safaga, some 600 kilometers (370 miles) southeast of Cairo, security sources said. Earlier, a security source said bodies were sighted in the water.

At least 12 people were rescued but efforts were being hampered by heavy seas, winds and strong currents. However officials said relatively warm weather would help the survival chances of those in lifeboats.

Maritime sources said at least 1,310 passengers were on board, mostly Egyptians but also almost 100 Saudis, two Sudanese, one Canadian and an undetermined number of Syrians.

Among the passengers were pilgrims returning from the annual hajj pilgrimage to Mecca, they said.

Transport Minister Mohammed Mansur told Egyptian public television that 104 crew members were onboard and added that coordination with Saudi rescuers was underway.

"The seas were very high and the weather was not good," he also told CNN. "The Egyptian navy, the Egyptian coast guard and army have sent four frigates to assist with the rescue operation."

Britain's Royal Navy diverted the HMS Bulwark warship in the Red Sea to offer help but the vessel would reportedly take one and a half days to reach the scene.

The Egyptian ship, called Al-Salam 98, had departed from the Saudi port of Duba and had been due to reach Safaga at 2:30 am local time (0030 GMT) after a crossing of up to 18 hours.

The boat was also reported to be carrying more than 40 vehicles.

The Panamian-flagged ship is 118 metres long (387 feet) and around 24 metres wide (78 feet).

Close to 500 people had perished when another Salam Express ferry boat sunk in the Red Sea in 1991 in the deadliest shipping accident in the Middle East in recent years. A probe found it was caused by a navigation error on the part of the captain.

Andrea Odone, from the operations department of the Al-Salam Maritime Transport company's Cairo headquarters told AFP that the ship complied with all safety rules.

"The ship is registered in Panama. It met all the safety requirements, and it fully complies with international safety rules... The number of passengers on board was less than the maximum number," he said.

"We have diverted three of our vessels to go on the spot. One of them will be at there 3:30 pm (1330 GMT)," said Odone, who was unable to give any figures on the number of people feared dead.

Red Sea Governor Bakr al-Rashidi announced that an operations room had been set up in Safaga and a state of emergency was declared in the area's hospitals.

According to French-based shipping expert Yvan Perchoc, the Al-Salam Baccaccio 98 is one of several old Italian ferries to which extra levels were added in order to boost passenger capacity, sometimes threefold.

"Among the ships operating crossings in the Red Sea... some are remarkable because of the height of their structures. They are old Italian ferries to which four extra decks have been added, raising the capacity from 500 to around 1,400," he told AFP.

"Despite the addition of extra bulges on the sides of these ships, one can wonder about their stability," he said, adding that the draft of such ships was generally very low.

A ship owned by the same Al-Salam company collided with a cargo ship near the entrance of the Suez canal in October, causing a stampede that left two dead and up to 100 wounded.

An inquiry into the accident blamed the captain for violating the rules governing transit through the Suez canal.

The popular Red Sea holiday area was already hit by tragedy on January 31 when a bus carrying HongKong tourists overturned between Hurghada and Safaga, leaving 14 dead and 30 wounded.