The 41-year-old man, from northern Tasmania, was killed on February 14 when his water bombing aircraft crashed into a paddock at Lebrina, north of Launceston.
A preliminary Australian Transport Safety Bureau report into the crash, released on Friday, noted an air crew on board a Fireboard 460 observed the pilot's chopper miss a water drop on a small hot-spot.
The VH-UHX helicopter, a heavy bomber, then started to gradually turn left and track away from the staging area.
"Suspecting the pilot of VH-UHX was encountering an in-flight difficulty, and wanting to avoid any potential conflict with the approaching helicopter, the pilot of Fireboard 460 initiated a climbing 360° turn away from VH-UHX," the ATSB report read.
"After completing the 360° turn the Firebird 460 pilot trailed VH-UHX and observed the helicopter descend toward an open paddock where it impacted the terrain."
The Firebird pilot did not detect any radio calls from VH-UHX, the report said.
A witness on the ground also observed the chopper miss the hot-spot, before starting to descend, entering a hover and then rapidly 'yawing' - deviating from its straight course - twice and dropping out of view.
The pilot, who was the sole occupant, was killed in the crash, with the helicopter destroyed from the impact and a fuel-fed fire.
Its tail section separated from the fuselage and came to rest near the main wreckage, while the bucket and line was released prior to impact and found about 300 metres from the crash site.
The preliminary report does not establish a cause of the crash, with analysis and findings to be published at the end of the ATSB investigation.
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