I have always understood you call mayday for your own aircraft not another. For another aircraft in distress the call would be a pan call
I guess it's a matter of interpretation
jonkster, pertinent sentences fromCASA for pan
My aircraft and its occupants are threatened by grave and imminent danger and/or I require immediate assistance
I have an urgent message to transmit concerning the safety of my aircraft, or other vehicle or of some person on board, or within sight, but I do not require immediate assistance
It is also correct to use Pan-Pan if relaying a Mayday call from another aircraft or station that is out of range
The crashed aircraft never put out a mayday so it was not a relay, the pilots correct (my judgement) use of mayday signaled the gravity of the situation as he had no idea if the crew had survived the entry into the water, were injured etc and needed rescue or medical attention, also at the time of transmission he probably had not had time to assess his own state. Nothing wrong with calling mayday, you can always downgrade. From the ATC transmission he was aware of what might had happened and was promptly answered "Yes they're in the water". Obviously he, ATC, would then have called upon rescue services.