UPDATE 1-Stobart Group says no longer pursuing regional carrier Flybe

LONDON, March 22 (Reuters) - Britain's Stobart Grouphas scrapped plans to buy Flybe Group, it saidon Thursday, adding the UK-based regional airline had rejected abid and it had decided against making a higher offer.

Stobart, an infrastructure and support services company,said in February that it was considering bidding for Flybe aspart of a consortium.

Flybe has been hit by faltering demand and the company'sshares lost almost a third of their value in 2017.

"The board of Stobart Group has determined that it is not inits shareholders' best interests to increase its latest proposalfor Flybe above the level which was rejected by the board ofFlybe," Stobart said in its statement.

Stobart shares were unchanged while Flybe shares were downalmost 24 percent to 35.5 pence as of 0814 GMT.

Flybe said in response to Stobart withdrawing its approach:"The board remains highly confident in the prospects of Flybeand believes that the group continues to have an exciting futureas an independent company."

It plans to cut costs by reducing its fleet.

Stobart said it would continue to work with Flybe as the twooperate a franchise agreement between their airlines. Itsaviation arm operates some European flights for Flybe fromLondon Southend Airport, which Stobart owns.

Stobart started life as haulage business Eddie Stobart buthas switched its focus away from lorries in recent years.

Trucking firm Eddie Stobart Logistics, best-knownin Britain for its distinctive green and red lorries, is nowseparately listed on the London stock market.

(Reporting by Sarah Young; editing by Kate Holton and JasonNeely)