Your phone is not in airplane mode if it's making any kind of signal. You're just using Wi-Fi with the cellular modem disabled. Since GPS is only reading the satellite signals, it works fine.
The last time I was on a plane I was asked to turn on pairplane mode during take-off and the landing. I could use it in the air, there even was a (extremly expensive) GSM network. Can't remember if GPS works in Airplain mode, though. But I'd suspect it to do since GPS is only passive.
Maybe not from a legal standpoint, but you can put your phone in airplane mode and then re-activate Wi-Fi and it will still be in airplane mode... unless they changed the behavior on newer Android OS
I thought there was some kind of aviation safety rule against using radio receivers on board commercial flights, maybe because of retransmission of signals on the receiver's intermediate frequency?