So to sum it up, flights between IOM and LCY in the past were packed to the the rafters and generated breath-taking profits, but the airlines, instead of milking a cash-cow, decided to withdraw sevices just out of wickedness. And just to be sure that nobody forces them to return and to make money again, they went bancrupt as a precaution....
One of the problems with a relatively low-volume route is that it needs to generate decent traffic at both ends. While LCY has improved in that regard, it has always been a tricky destination for airlines as traffic patterns are heavily biased towards inbound traffic.So while you easily get a full load into LCY in the morning, it is not as easy to sell seats for the return flights unless you sell very cheap tickets that are cross-subsidized. I made use of that phenomenon often when accommodation in London was no issue for me - and often I was leaving LCY on morning flights on 50 seater planes with single digit loads. Add to that the problem of what to do with a relatively large aircraft at a low-volume destination during the day - if you canot fill it with mid-day flights to LCY, can you indeed fill it to secondary destinations without literally giving away tickets?.