An investigation released Thursday found that the Cougar Helicopters flight "inadvertently descended and came within seconds of striking the water" on July 23, 2011.
The board found that numerous problems, including crew errors, contributed to the near-crash.
The aircraft — a Sikorsky S-92A — was the same as the one involved in a disaster off Newfoundland's east coast that killed 17 people in March 2009.
In the July 2011 incident, the chopper — which was carrying two crew and five passengers — left an offshore oil platform to head back to St. John's.
The TSB found that the helicopter effectively dropped like a stone, coming within 38 feet — or about 11.5 metres — of the Atlantic Ocean.
The investigation identified numerous operational, procedural and training problems that all contributed to the incident.
"During the departure, the captain made a large, rapid aft control input just prior to activating the go-around mode, causing the helicopter to enter a nose-high, decelerating pitch attitude in cloud," the TSB said in a statement.
The chopper started dropping when it fell below the minimum control speed, with problems then compounded when other things went wrong.
"The captain, subtly incapacitated, possibly due to spatial disorientation, did not take action to recover from the descent in a timely manner," the TSB said.
503-foot drop in 5 seconds
Rather than jumping into action, the first officer did not take control of the aircraft, as specified in Cougar's training. The board said the first officer had been "lacking confidence in his abilities to recover from the inadvertent descent."
The TSB found that chopper dropped 503 feet in just five seconds.
"The aviation industry is increasingly relying on cockpit automation in its day-to-day operations," TSB investigator Daryl Collins said in a statement.
"Despite the many benefits of cockpit automation in aviation, it is vital that flight crews maintain their hands-on visual and instrument flying proficiency so that they have the experience and confidence to deal with unusual situations."
After halting the rapid descent, the crew was able to regain control of the aircraft. The flight continued to St. John's without incident.
There were no injuries or damage to the aircraft.
Since the incident, the investigation said, Cougar Helicopters has improved its training and now requires pilots to fly a minimum of two manually flown instrument approaches every 90 days.
The TSB said Cougar has also clarified its standard operating procedures involving what's called "unusual attitude recovery," as well as the use of autopilot.