It was covered in other forums but the main point is that Air Madrid specialised in delays. Mosrt airlines delays could be a few hours. It nearly made the news when an Air Madrid flight left on the same day it was supposed to. Air Madrid was not too good at looking after its stranded passengers in the delays. The Spanish government were very annoyed by this and told Air Madrid to improve this. They did not. Eventually the Spanish government told Air Madrid that their license to operate would be revoked. Before this happened, management shut the airline down. Apparently there were also large debts and one of their A330s could not fly due to it needing a replacement part but Air Madrid couldn't get it. I am open to correction on some of the facts.
LTU also expressed a wish to take over their assets and staff but this fell through, some other Spanish airline stepped in and offered to take over routes and staff, I think it was Air Comet.
I hope this helps somewhat