Air safety investigators will examine why a Ferris wheel was installed next to an airstrip following yesterday's dramatic plane crash at a carnival on the mid north coast.

Amber Arndell, 13, and her brother Jessie, 9, had to be rescued from the top of the Ferris wheel. The pilot of the microlight, Paul Cox, 53, and his passenger, John Rowan, 32, were trapped for almost three hours inside the wreckage as it dangled 10 metres off the ground after it struck the ride at the Old Bar Festival at Taree about 10:20 a.m. yesterday.

"I went nose up and straight into it. Next thing I know I was stuck inside the Ferris wheel," he said.

At one stage, emergency services were forced to spray the plane with foam because it was leaking fuel on to the wheel, heightening fears of an explosion.

A Rural Fire Service spokesman confirmed all four people involved escaped unharmed.

Witnesses said the Cheetah S200 took off from a grass airstrip but failed to gain sufficient altitude to clear the Ferris wheel, which was placed at the southern end of the strip for the festival.

Following a loud "crunch", crowds of festivalgoers gathered at the scene, gasping at the sight of a plane dangling from the ride, and how close it had come to hitting the children.

Gary Scanes, who lives next to the airstrip, said: "I was watching and saw the little plane take off to the south. It wasn't gaining height from the moment it left the ground. I was thinking: 'What's this guy doing?' He was slightly to the left of the airfield where the temporary Ferris wheel has been erected.

"He started to veer to the left and he flew straight into the second from top carriage on the right hand side...there were lots of ambulances and fire crews using foam and water because the plane dropped its fuel.

"When the plane took off there was very little breeze, if any. It could be pilot error or it could be a mechanical thing."

The Old Bar Festival is an annual event now in its sixth year. Residents said the Ferris wheel was usually erected in the same spot each year.