Firefighters were at the scene for about 60 minutes.
"Our crews did well to contain and extinguish the fire; unfortunately, the bus is gutted. Thankfully, no-one was hurt," Gourlay said.
He understood the students were from the Te Puke area.
Eyewitness Grayson Ottaway said it was "a hell of blaze" and that he could feel the intense heat even about 150 metres away from the burning bus.
Go Bus Transport Limited's chief operating officer Nigel Piper told the Bay of Plenty Times the two students and the driver were able to evacuate the bus safely.
"The driver did a great job and he did exactly what he was trained to do.
"Buses can be replaced, and we are so thankful no-one was injured and everyone is safe."
Piper said a specialist fire investigator was being called in by the company's insurers.
"There is nothing to suggest there is any suspicious about the fire, but because the bus is extensively damaged, it is very difficult for our guys to determine what caused it.
"We understand there were two passengers on the bus and one of them alerted the driver that smoke was coming from the back of the bus."
Piper said he also wanted to thank the firefighters for their quick response.
A replacement bus was brought in to transport the two students home and there was no disruption to the normal service today, he said.
Piper estimated the cost to replace the bus would be up to $300,000, depending on the required specifications.
Piper was not able to say which school the two passengers attended.