Airplane mode is a huge misconception when it comes to mobile devices, and I see a lot of incorrect answers on this one. Enabling airplane mode on a mobile device essentially kills power to all of your device's active radios -- Bluetooth, WiFi, mobile data, NFC, etc. In this state, your mobile device neither transmits nor receives active radio signals (emphasis added), i.e. radio signals requiring power amplitude from a baseband radio or modem for receiving or transmitting. There has been much debate as to whether active radio signals are capable of interfering with an aircraft's radio and navigation systems. Understandably, airlines would rather err on the side of caution.
While in Airplane Mode, however, your GPS sensor will remain active, receiving location and timing data, via passive radio signals, from a constellation of satellites known as the Global Positioning System, or GPS. Unlike active radio signals, the passive signals being received by your GPS sensor do not require amplitude or reciprocal transmission. Your device's GPS sensor simply "listens to," or passively receives signals being transmitted from space. This is the very reason that, although your phone can be in Airplane Mode, it will automatically adjust the time with the crossing of time zones. (Although not relevant to the Android OS, it is noteworthy that, for whatever reason, Apple devices also killed power to the GPS sensor when Airplane Mode was activated, on devices running iOS v8.2 and earlier.)
Now, back to your original question regarding location scanning while in Airplane Mode. Apps can utilize location data being received by your GPS sensor while Airplane Mode is enabled, but cannot use the combined WiFi and/or Bluetooth services needed for higher accuracy location determination. Because Airplane Mode completely kills power to both the WiFi & Bluetooth radios, apps can only use the location and time data being received by the passive GPS sensor. With the Android OS, turning location services off most certainly DOES NOT turn off your GPS sensor. To easily validate this, download a GPS sensor monitoring app from the app store, turn off all location services, and you will continue to see the passive activity of your GPS sensor and its receiving of time and location data. Turning location services off merely prevents most apps (but not all) from accessing your location data. Many system apps and processes continue to read your passive GPS data, even with location services disabled in device settings. (With superuser [root] access to the Android OS, the GPS sensor can be disabled by modifying activity flags within the sensor hardware drivers, typically located within the kernel.)
