What you are asking is quite hard to do.
The game doesn't really support cloth animation, which would be the "proper" way of doing it.
Simulating cloth animation doesn't sound feasible either. You could sort of fake it with animated texture with transparent edges, BUT, that means you would need three things:
1. Having the flag with an independent texture.
2. Support for animated texture for the flag (otherwise it'll just look at the first animation frame and stick to that).
3. Support for transparency on the flag texture, so you can make it so the borders of the flag move around.
That way you could build a looping animation of a waving flag, which could look reasonably decent at typical IL-2 distances, and still frames, but it wouldn't be perfect.
Also making the flag animation would be sort of hard, but doable I think. If anyone knows if the things I mentioned are possible, it would be interesting to try to experiment with this.