UPDATE 1-Air China hopes for govt funds, pursues East Star

* Air China continues to hope for govt capital injection

* Flag carrier expects $878 mln loss in 2008

* Will continue to push ahead with East Star acquisition

* Air China shares up 3.1 percent in Hong Kong (Adds details, background)

By Lin Miao-jung

TAIPEI, March 16 (Reuters) - China's flag carrier Air China (601111.SS) (0753.HK) said on Monday it continues to hope for a government capital injection, as it vowed to press ahead with an acquisition despite being rebuffed, its chairman said on Monday.

"We're still financially healthy, but of course we hope for government help," Air China Chairman Kong Dong told reporters during a ceremony to open its first office in Taiwan. "But even if we don't get any help, we'll still be able to weather the current crisis."

Kong had said in early March that the airline hoped to be profitable in 2009, and that it has asked the government for a cash injection of at least 3 billion yuan. [ID:nPEK304767]

Air China's main rivals China Eastern (0670.HK)(600115.SS) and China Southern (600029.SS)(1055.HK) have both received aid of up to 3 billion yuan from the Chinese government.

Another company executive, senior vice president Tan Zhihong, also said Air China expects to make a 6 billion yuan ($878 million) loss in 2008, more than the 5.6 billion yuan loss that analysts polled by Reuters Estimates were expecting.

Like their international rivals, airlines in China have been struggling with slowing demand for air travel, volatile fuel prices and tighter access to credit.

Despite losses last year, Kong said his airline intends to push ahead with its planned acquisition of East Star Airlines, a small carrier based in the central Chinese city of Wuhan that was grounded on Sunday for being unable to pay back heavy debts. [ID:nPEK216249]

"We have a responsibility to acquire, merge with or help airlines that are struggling right now," Kong said. "The notion that East Star might reject our help is probably the view of a small minority."

The proposed takeover is just the latest in China's airline industry which, like its global peers, has been hard hit by high oil prices followed by a plummet in demand during the global downturn.

Another proposed merger between Shanghai Air 600591.SS and China Eastern (600115.SS)(0670.HK) is still unresolved.

Sources said previously that the government is brokering a merger of the two, but Shanghai Air's chairman said last week he has not been informed of a merger by the government and the two have never discussed the issue. [ID:nSHA165625]

Separately, at the Air China office opening in Taipei, Taiwan officials said they are aiming to strike a deal with China on expanding their cross-strait flight routes to include other global destinations. ($1= 6.8 yuan) (Additional reporting by Kelvin Soh and Fang Yan in Shanghai; Editing by Lincoln Feast)