It is feared 100 bodies are trapped inside the ferry that sank off Papua New Guinea.
So far, 238 survivors have been rescued but searchers have yet to find any bodies.
The 22-year-old MV Rabaul Queen went down early on Thursday morning near the end of its 20-hour journey between Kimbe, on the island of New Britain, and Papua New Guinea's second largest city, Lae.
Three vessels, two helicopters and two planes were searching for survivors on Friday.
Rony Naigu, from PNG's Maritime Safety Authority, says about 100 people are thought to have been trapped inside.
The authority's acting chief executive, Captain Nurur Rahman, says certificates show the ferry had an official limit of 310 people, but the ship's owner reports 362 people were on board.
A statement from the ship's owner says it carried up to 550 passengers when it operated on shorter runs.
Passengers say the ship was overcrowded and running on just one engine when it sank about 16km offshore.
A journalist with the radio station PNG FM, Zaningo Theo, says passengers are reporting there were more than 500 people on board.
"In between Kimbe and Lae one of the ship's engines went off, so they were travelling on one engine towards Lae when the incident happened."
Many students aboard
Mr Theo says many of the survivors are teachers' college students heading back to university and others include a businessman who had been travelling with his wife and six-year-old child, but could only save himself.
Mr Theo says angry relatives of passengers have burnt down a shipping company agent's office on Buka Island, near Bougainville.
The Rabaul Shipping Company says the ferry's captain had routine radio contact with another vessel before the sinking and gave no indication that anything was wrong.
Hospital staff say only three of the survivors are seriously injured.
Dangerous stretch of water
A town official from Lae says the strait where the Rabaul Queen sank is known by all vessels as a dangerous area with a strong tide.
Chamber of Commerce president Alan McClay told Radio New Zealand's Morning Report programme on Friday the stretch of water where the ferry sank is treacherous and the conditions were rough at the time.
Officials say people have survived for up to two days in the warm waters around Papua New Guinea and it is hoped more survivors will be found. The cause of the disaster is still unclear.
Papua New Guinea's Prime Minister Peter O'Neill says there will be a full investigation.
The ABC's correspondent in Papua New Guinea, Liam Fox, says questions have been raised about the ferry company's safety record. He says one of the Rabaul Shipping Company's ships caught fire in port in 2006 and another sank, though with no loss of life.
The owners of the Japanese-built ferry say they are devastated by the disaster.