Speaking from experience, the 10-20 euro fares are not always available on flights. But then again, cheap fares are not always available on the trains either, especially at the times most people want to travel (Friday or Sunday evenings, etc). Also flying takes longer because the airports are not as central as the train stations, and you need to go through more luggage checks, board with more time to spare etc.

I think competition has helped drive down flight prices, and since they opened the Madrid-Barcelona high speed line to competition prices have dropped a lot for the train as well. If you compare Madrid-Barcelona to Madrid-Sevilla for example, the price difference is really high and much more than the distance would imply.