By Mohammed Ghobari and Mohammed Mukhashaf
SANAA/ADEN (Reuters) - A woman, a 10-year-old boy and a local al Qaeda leader were among at least 11 people killed alongside two Western hostages when U.S.-led forces fought Islamist militants in a failed rescue mission in Yemen, residents said on Sunday.
U.S. special forces raided the village of Dafaar in Shabwa province, a militant stronghold in southern Yemen, shortly after midnight on Saturday, killing several members of al Qaeda in the Arabian Peninsula (AQAP).
American journalist Luke Somers, 33, and South African teacher Pierre Korkie, 56, were shot and killed by their captors during the raid intended to free them, U.S. officials said.
AQAP, formed in 2006 by the merger of the Yemeni and Saudi branches of the network, has for years been seen by Washington as one of the movement's most dangerous branches.
Western governments fear advances by Shi'ite Muslim Houthi fighters with links to Iran have bolstered support among Yemeni Sunnis for AQAP, which has established itself in parts of Yemen, including Shabwa where the raid took place.
However, since Islamic State in Syria and Iraq began distributing films of its militants beheading Western hostages, the focus on AQAP, which has traditionally used hostage-taking as a way to raise funds, had diminished until now.
At least two more hostages are being held by the group.
The Yemen-based group, loyal to the wider al Qaeda organization founded by Osama bin Laden, has denounced Islamic State, but Western and Gulf sources say there may be operational connections between the two.
"AQAP and Daesh (Islamic State) are essentially the same organization but have different methods of execution and tactics," a senior Yemeni intelligence official said.
South Africa does not want to assign blame for Korkie's death, government spokesman Nelson Kgwete said on local television, when asked if Pretoria blamed the United States.
Korkie's wife, Yolande, who was released in January after being held with her husband, spoke of forgiveness.
"So today we choose to forgive. We choose to love. We choose to rejoice in the memories of Pierre and keep him alive in our hearts," she said in a statement.
No ransom was paid for Korkie as his kidnappers eventually relented on an earlier demand for $3 million, Gift of the Givers, the relief group that had tried to secure his release, said. The group had expected Korkie to be freed on Sunday.
The South African government said Korkie's body was expected in South Africa on Monday.
Apart from the woman and the boy, reports on social media feeds of known militants said an AQAP commander and two members of the group were killed. Six other members of the same tribe also died, the reports said, although they could not be immediately verified.
The commander, identified as Jamal Mubarak al-Hard al-Daghari al-Awlaki, appeared to be the same person as Mubarak al-Harad, named by the Yemen Defence Ministry on Saturday as the leader of an AQAP group.
Several of those said by militants to have died were from the Daghari and Awlaki families, important tribes in Shabwa province. Yemen's government said on Saturday the hostages were being held in the house of a man named Saeed al-Daghari.
As special forces battled al Qaeda militants in the house, kidnappers in another building nearby shot the two hostages, a local man who identified himself as Jamal said.
U.S. officials have said the raid was carried out by U.S. forces alone, but Yemen's government and local residents said Yemeni forces also participated.
"Before the gunshots were heard, very strong floodlights turned the night into daylight, and then we heard loud explosions," Jamal told Reuters. "The soldiers were calling on the house's inhabitants to surrender and the speaker was clearly a Yemeni soldier," he added.
Another witness, named Abdullah, said the Yemeni army had blocked access to the area before the raid began.
"When the forces withdrew, we found lots of bloodstains, but did not know if those were of the soldiers or the hostages," Abdullah said.
U.S. Secretary of State John Kerry said the operation, the second attempt to free Somers in 10 days, had only been approved because of information that the American's life was in imminent danger.
Abdel-Razaq al-Jamal, a Yemeni journalist who specializes in covering Islamist militants, said AQAP may have originally intended to ransom Somers as well, but appeared to have been angered by the earlier rescue attempt on Nov. 25.
"I don't think this marks a change in position by al Qaeda," Jamal told Reuters.
(Additional reporting by Yara Bayoumy in Manama and Stella Mapenzauswa in Johannesburg; Writing by Sami Aboudi; Editing by Angus McDowall and Giles Elgood)