BA won't sell you a cheap single to MAD, but they will sell you a cheap return.

They also don't mind if the return leg comes back from somewhere else rather than MAD, so it becomes an open-jaw ticket made up of two half round-trip fares.

LUX-LHR just happens to offer one of the cheapest half round-trip fares anywhere on the BA network, other xxx-LHR flights would work too if you could actually use it.