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(Corrects headline and paragraph 1 to say biggest shareholder, not majority shareholder, sells stake)
* Rosedale Aviation sells 48.1 pct stake in Flybe
* Flybe says free float expected to increase to 85 pct
* Shares fall as much as 15 pct
Nov 13 (Reuters) - Flybe Group Plc said its biggest shareholder, Rosedale Aviation Holdings, has sold its entire 48.1 percent stake in the airline to bluechip institutional investors.
Flybe shares fell as much as 15 percent in early trade, making the embattled carrier's stock the biggest percentage loser on the London Stock Exchange on Wednesday morning.
The company's free float is now expected to increase to 85 percent, Flybe said in a statement.
Rosedale Aviation Holdings, controlled by the family trust of the late Jack Walker, the steel magnate, placed the shares through Liberum Capital.
Liberum said the buyers were UK institutions but declined to provide any additional details.
Flybe's second largest shareholder after Rosedale is British Airways owner International Consolidated Airlines Group , with a 15 percent stake on June 14.
The airline, whose other shareholders include billionaire investor George Soros and recently departed chairman Jim French, has been struggling under the weight of soaring fuel costs and higher airport charges.
The company, which operates Europe's largest regional airline, said on Monday it would cut 500 jobs in addition to the 590 positions it axed earlier in the year. Flybe also said it would further reduce its routes, review its fleet mix, remove surplus capacity and improve aircraft and crew utilisation.
Flybe's shares, which have gained about 103 percent since it started slashing jobs in January, were down almost 8 percent at 95.95 pence at 0824 GMT. (Reporting by Richa Naidu in Bangalore; Editing by Supriya Kurane)