The discount for residents only applies to direct and connecting flights between mainland and non-mainland airports (except for residents of Ceuta, who are eligible for the discount for flights between Seville, Málaga and Jerez and other destinations on the mainland). When you have chosen the origin and destination of your flight, if the combination is eligible for the discount the Residents dropdown menu will appear. Select the Resident option  as appropriate and the flights will appear with the discount already applied. This subsidy is granted by the Spanish government and does not apply if you choose to pay for tickets with Avios.