Or A for Allemagne, or S for Sachsa, or N for Německo, P for Purutia, or U for Ubudage, or T for Teutschland, or V for Vācija or F for Frángoi.... I had a look at the article Names of Germany, and 15 out of 26 letters have been the first letter of Germany's name, in some language at some point in time. That's not counting words for a German person, only the country Germany. So, it seems that it wasn't chosen for that reason... if they'd just picked a random letter there was a greater than 50% chance it would have matched up with one of those names!
Because those other pennants already had internationally recognized meanings, that would have resulted in dangerous ambiguities:
Note also the very specific instruction:
The Council ruled that "no ceremony shall be accorded this flag which shall not be dipped in salute to warships or merchant ships of any nationality".
There was very intentionally no national character to be associated with the ensign.
In particular, the A pennant already had the meaning:
I have a diver down; keep well clear at slow speed."
and the "B" pennant the meaning:
I am taking in or discharging or carrying dangerous goods.
Selecting either of these two alphabetically preceding penants would have been an absurd, bordering on insane, choice endangering lives.
In contrast the "C" pennant had the benign and innocuous meaning:
Remember Occam's Razor at all times: The most likely explanation is the simplest one consistent with all known facts.