In the wake of the conquest of Greece, German forces planned to capture the island of Crete as an air base commanding the eastern Mediterranean. The Germans needed to capture a port or (given British naval strength) an airstrip. Their airborne attack fell in three areas, from west to east around Malame, Canea, Retimo and Heraklion, beginning on 21 May.
Weakened by the defeat in Greece and by commitments throughout the Middle East, the British could spare little to reinforce Crete. Though the British and Australians defeated the landing at Heraklion and the Australians at Retimo held off the German attack for a week, the German assault at Malame succeeded. Soon airborne and mountain troops arrived by Junkers 52 transport aircraft to reinforce the landings west of Canea. The Luftwaffe dominated the sky over Crete, making all movement in daylight hazardous and bombing the old Venetian town of Canea to rubble.
Depleted New Zealand battalions, joined by the Australian 2/7th and 2/8th Battalions, withdrew towards Canea. All were weak, many down to less than half strength. By 27 May the survivors occupied a line running south from Suda Bay to the foothills of the Malaxa escarpment - 42nd Street.
The Commonwealth troops on Crete faced the elite of the German air force and army: paratroops of the Luftwaffe and soldiers of the 5th Alpine Division. The paratroopers - young, highly trained and motivated - had suffered terrible losses as they fell from their aircraft. With sections exterminated and companies reduced to platoons, the paratroops re-formed in several battle-groups, moving forward in loose co-ordination.
On the morning of 27 May the Australians and New Zealanders formed the rearguard of the Commonwealth force retreating southward toward the evacuation beaches at Sfakia. The troops on 42nd Street looked out from the cover of an earth bank through closely planted olive groves toward a creek, which the desert-wise Australians called a "wadi". Their commanding officers conferred, agreeing that if the Germans came close they would attempt a counter-attack.
As the Germans approached, two of the 2/7th's companies suddenly charged, shouting and firing, taking the Germans in their flank. New Zealanders of the 28th (Maori) Battalion quickly joined in the attack. Startled by men erupting from dense cover, the Germans ran before the Australians.
The charge at 42nd Street stopped the 5th Alpine Division for the rest of the day: 200 Germans and four Australians died on the 2/8th's front, with the Maoris estimating that they had killed another 80 Germans. That afternoon, though, 42nd Street's defenders saw mountain troops moving across the foothills of the escarpment. Staying would lead to encirclement and the defenders withdrew to join the columns trudging south. Five days later, after the tortuous retreat through the White Mountains, the 2/7th reluctantly surrendered on the cliffs above Sfakia.