The plane, operated by Egyptian charter company Flash Airlines, disappeared from radar screens on Saturday, minutes after take-off from Sharm al-Shaikh airport at 02:44 GMT and crashed into deep water a few kilometres to the southeast.
Egypt's civil aviation minister, Ahmad Muhammad Shafiq Zaki, said the cause of the crash was "entirely technical", and a senior aide said there was no sign of terrorism.
"There was a problem at take-off," France's deputy transport minister Dominique Bussereau told reporters at Paris's Charles de Gaulle airport, the charter's final destination. "It tried to turn back and when trying to do this it crashed."
Zaki said the pilot might have been planning to turn back, but did not do so. Technical problems might account for the pilot's failure to tell the control tower that the plane was in trouble, he told Reuters at Sharm al-Shaikh airport.
"It was like someone had put people and their luggage together in a grinder"
The French government said there were 133 French passengers aboard and a French medical official said many of them were children on family holidays. It said the other two passengers were a Moroccan man and a Japanese woman.
Officials said there had been 13 Egyptian crew aboard, some of them off duty.
No survivors or corpses
Egyptian military aircraft and ships, helped by small boats from nearby diving centres, launched a rescue operation at first light. Witnesses said they were finding pieces of human bodies, but no complete corpses and no survivors.
"It was like someone had put people and their luggage together in a grinder," said Sharif Kazim, who spent the morning fishing out debris from the air crash.
A postcard written in French by a passenger, but never sent was floating in the carpet of clothes, cracked suitcases, body parts and wreckage from the plane. The postscript read "I think this card will arrive after me."
"All I can remember most is part of a child's leg floating still wearing its white sneaker. I could not make myself pick this up," said Kazim, a technical search and rescue diver who rushed to the scene to help as soon as he heard the news.
Entire families including children
were among the 148 victims
"The rescuers were trying to chase away the sharks that were eating the bodies," he said. The smell was so bad most people helping in the clean-up operation got dizzy or vomited.
The plane was heading for Cairo to refuel, change crew and take on more passengers before flying on to Paris.
French Prime Minister Jean-Pierre Raffarin and Transport Minister Gilles de Robien rushed to Charles de Gaulle airport, where distraught friends and relatives who had gone to meet the flight were being told of the crash.
French Justice Minister Dominique Preben asked prosecutors to open a judicial inquiry for manslaughter, saying this would provide a legal framework for French and Egyptian investigators to work together to find the cause of the crash.
Egyptian Foreign Minister Ahmad Mahir said Egyptian authorities would run the investigation. French experts would be welcome, but "what matters is to find out the truth, and Egypt has enough capacity and experience to find out the truth."
The plane crashed in the Strait of Tiran, between the Sinai peninsula and Saudi Arabia, where the water is hundreds of metres deep - too deep for divers to reach the flight recording devices, diving school managers said.
French President Jacques Chirac telephoned his Egyptian counterpart Husni Mubarak and expressed his "deepest shock" at the tragedy, his office said.
Paris psychological units met with
distraught friends and relatives
Flash Airlines is an Egyptian charter airline based in Cairo and flying to European cities. It flew two Boeing 737-300 planes manufactured in 1993, according to its Web site.
The plane was maintained regularly in Norway and there was no sign of any mechanical fault before its last flight, the official Egyptian news agency MENA reported.
Sharm al-Shaikh, a major diving resort, is considered one of the most secure places in Egypt because of its isolation and Mubarak's frequent presence. Police man checkpoints on the paved roads into the resort and check travellers' identities.
The last major crash involving an Egyptian plane took place in May 2002, when a Boeing 767 belonging to the state airline EgyptAir crashed near Tunis airport, killing 15 people.
In October 1999, an EgyptAir Boeing 767 plunged into the sea off Nantucket, Massachusetts, killing all 217 people on board.