Police and witnesses say the balloon struck power lines and burst into flames, before plunging to the ground.
The crash happened on farmland at Clareville, near the town of Carterton, in the Wairarapa region – an area that is popular with balloonists.
“We are deeply sorry to learn of this tragic accident and our hearts go out to those who are now mourning the loss of life,” Transport Minister Gerry Brownlee said, according to Associated Press news agency.
An investigation by New Zealand’s Transport Accident Investigation Commission is under way.
Eyewitness Bevan Lambess, who was driving by, told Reuters news agency: “The wicker basket was on fire and I saw something holding it down – it looked like ropes but I got closer and it was actually the top (electric) power line that was holding the basket down.
“It probably still would have been 15m in the air. I slowed down and then the whole basket started to go up in flames.”
Police commander Mike Rusbatch said two people appeared to have jumped from the basket of the balloon as it came down.
Another witness, David McKinley, told the state broadcaster TVNZ he noticed part of the basket was on fire when it passed over his garden.
“It was just above the trees when I first saw it. It looked like he tried to raise it a bit higher. All of a sudden there was just 10 m of flames.
“It was like a rocket coming down,” David McKinley said.
The incident occurred in bright, clear conditions with little wind.
Lance Hopping was considered an experienced and safety-conscious pilot who acted as safety officer for the Balloons over Wairarapa annual event – with organizer Jonathan Hooker quoted as saying he had more than 10,000 hours of commercial ballooning experience.
The incident is New Zealand’s worst air disaster since 1979, when an Air New Zealand sightseeing flight crashed into Mt Erebus in Antarctica, killing all 257 passengers on board.
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