/setblock ~ ~ ~ air destroy does not replace liquids (water or lava) with air. Instead, the block break sound plays but the block itself does not change. Note that using /setblock ~ ~ ~ stone destroy on liquids works, as well as /fill ~ ~ ~ ~ ~ ~ air destroy.
/setblock ~ ~ ~ air destroy should replace the liquid block with air.
A block break sound plays and the command is tracked as successful, but the liquid remains.
Use /fill ~ ~ ~ ~ ~ ~ air destroy instead of /setblock ~ ~ ~ air destroy.
*Steps to reproduce*
1. Target a liquid block (water or lava) with /setblock x y z air destroy.
3. The liquid is not replaced with air.