* Takes 4.3% stake in Hanjin Kal, to move to 10% over time
* Hanjin Kal targeted by activist fund
* Delta wants to ensure stable management - Korean Air
* Hanjin Kal shares end down 15%, Korean Air down 2.6% (Adds KCGI comments; updates shares to close)
By Hyunjoo Jin and Tracy Rucinski
SEOUL/CHICAGO, June 21 (Reuters) - Delta Air Lines bought a small stake in Korean Air Lines Co's parent company and said it wants to increase it to 10%, giving a boost to the management of South Korea's top carrier that seeks to thwart a local activist fund's challenge.
Shares of the parent, Hanjin Kal Corp, tumbled 15 percent on Friday, as Delta's move dashed investor hopes of a battle to control the family-run group that had driven up shares since the death of patriarch Cho Yang-ho in April.
Korean Air, which has a joint venture with Delta since last year, said on Friday it believes Delta's 4.3 percent stake buy intends to ensure the 'stable management" of the company and support for its leadership.
Should the No. 2 U.S. carrier raise its stake to 10% in Hanjin Kal, the airline's founding family and its allies will have a total stake of 39%, versus the 16% stake held by the activist fund, Korea Corporate Governance Improvement (KCGI).
"Delta played a role as a white knight for Hanjin," said Choi Nam-gon, an analyst at Yuanta Securities.
"Now it would be impossible for KCGI to take control of the group. The stake buy removes the chance of a management battle at Hanjin Group," he said.
KCGI said in a statement that if Delta's investment decision intends to "simply defend the management rights of the controlling family members, this would go against the honour and principles that it has built so far."
It proposed Delta, backed by U.S. investor Warren Buffett, work together to eliminate inefficiencies and improve management transparency at the Hanjin Group.
Korean Air shares fell 2.6% and its budget affiliate Jin Air Co Ltd rose 0.2% in the wider market that was down 0.3%.
Korean Air has been plagued in recent years by a series of scandals involving its founding family members.
In April, the tycoon suddenly died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline's board, in a show of growing shareholder activism in Asia's fourth-biggest economy that has long been dominated by family-owned conglomerates.
The group subsequently appointed his only son Walter Cho, 43, as CEO and chairman, but the company has yet to inform regulators about a definitive succession plan. He and his two sisters have small stakes in Hanjin Kal, in which the late Cho has a 17.8% stake.
Against that backdrop, KCGI raised its stake to nearly 16%, fueling speculation about an impending ownership battle at the conglomerate.
Delta Chief Executive Ed Bastian said earlier this month he had "a lot of confidence" in Walter Cho, noting their friendship had gone back 20 years.
"The investment demonstrates Delta’s commitment to the success of its joint venture with Korean Air," Delta said in a statement. The venture includes 290 U.S. destinations and over 80 in Asia.
The U.S. airline did not disclose how much it paid for the 4.3% stake. It also did not say who it bought the stake from or when it may raise it to 10 percent.
Atlanta-based Delta has been growing internationally both through joint ventures - which allow airlines to coordinate fares and schedules while building a presence in new markets - and direct equity investments, which help airlines align their respective strategies.
Delta also owns stakes in Grupo Aeromexico, Air France KLM, China Eastern, Brazil's Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.
Shares in Delta closed down 0.7% at $55.97 in New York on Thursday. (Reporting by Tracy Rucinski in Chicago and Hyujoo Jin in Seoul; Additional reporting by Rachit Vats in Bengaluru, Ju-Min Park and Hayoung Choi in Seoul and Jamie Freed in Singapore; Editing by G Crosse, Peter Cooney and Muralikumar Anantharaman)