The President of Kiribati says the ferry that has been missing for 11 days may have been carrying as many as 100 passengers, not the 50 stated in earlier reports.
The MV Butiraoi, a 17.5m wooden catamaran, departed Nonouiti Island, Kiribati, on January 18 on a two-day journey to the port of Betio on Tarawa atoll.
Radio New Zealand reports President Taneti Mamau said after a special cabinet meeting today that the vessel might have been carrying as many as 100 people. He also said the vessel had not been seaworthy.
A New Zealand Air Force Orion found the 4-5m dinghy with seven people on board in the search area and dropped a package with water and a radio to them.
Senior search and rescue officer John Ashby said the dinghy appeared to be one of the two that had been on the 17m inter-island ferry.
The seven survivors, including an unconscious teenage girl, were safely transferred to a nearby fishing vessel late on Sunday, Defence Force Air Commodore Darryn Webb told Radio New Zealand.
Reuters reports the air search resumed at first light today.
The 17m ferry was reported missing on January 20, two days after it departed Nonouti Island on a 250km trip to Betio in Kiribati.
"They [the search crew] will be feeling mixed emotions now that they've discovered a dinghy with some survivors but not everyone on board," Webb said.
The Defence Force believed there could be a life raft with more surviving passengers, he added.
"We remain optimistic that we may find some more survivors," he told Reuters.
New Zealand has been coordinating the search since Saturday and a Royal New Zealand Air Force P-3K2 Orion aircraft spotted the dinghy within two hours of reaching the search area on Sunday morning, the NZDF said.
Before it left Nonouti Island, the missing ferry, a wooden catamaran, had undergone repairs to its propeller shaft after running aground.
The Rescue Coordination Centre of New Zealand was asked to carry out an aerial search on Thursday after the ferry was reported being almost a week overdue.
The Airforce Orion was in its second day of helping with the search when it discovered the dinghy. The Fiji Search and Rescue was co-ordinating the search, also involving Air Kiribati and local vessels.
The search continues in a search area about the size of New Zealand.