Attempts are underway to recover a sunken passenger ferry in the Bay of Islands

A recreational launch smashed into the boat taking travellers to Paihia from Russell - about midday yesterday.

One or two passengers flew overboard, the skipper sustained critical injuries, and the ferry later sank.

Police, Maritime New Zealand and the Transport Accident Investigation Commission are investigating.

Chief Commissioner Janes Meares says a master-mariner is now observing the ferry's retrieval.

She says also want to interview both skippers - although one is in hospital at the moment.