Victoria police superintendent Mick Frewen said investigations centred on a “catastrophic engine failure”.
The flight made a May-Day call before crashing, he added.
A DFO shopworker identified as Ash told Sky News he saw “the fireball go up into the air”, adding it “felt like a bomb had gone off”.
“The fire was just so hot we could not get anywhere near it,” he said. “We could see the wreckage, or what was left of it.
Plumber Michael Howard, 29, told the Australian Broadcasting Corporation he saw a “blue flash”.
“I was … just looking out the window … and then all of a sudden I just saw a blue flash come down and then all of a sudden there was a massive fireball.”