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UPDATE 1-Wizz Air warns recovery could stall on travel restrictions

* Airline flying at 80% of last year’s capacity

* Warns that 80% is limit for now, could also fall

* Wants to expand at UK’s Gatwick but thwarted by EU waiver

* Says UK quarantine rules manageable (Adds detail, background)

LONDON, Aug 25 (Reuters) - Hungary’s Wizz Air warned its industry-leading recovery could stall as COVID-19 warnings and restrictions hamper travel across Europe, but said Britain’s quarantine rules had not led it reconsider long-term expansion plans there.

The low-cost airline, which in recent years has expanded from eastern into western Europe, has been one of the fastest airlines to recover from the COVID-19 crisis, currently flying at 80% of last year’s capacity.

However, ticket data shows Europe’s travel recovery began to stall in August after a stronger performance in July, and Wizz said 80% capacity was as high as it could go under current circumstances, and that capacity might fall again.

“From here on, either you’re going to be able to hold the line or somewhat come down on capacity,” CEO Jozsef Varadi told Reuters.

Bigger rival Ryanair said last week it was scaling back plans to run up to 70% of its capacity by October, while easyJet plans to fly 40% of last year’s capacity by the fourth quarter.

Since the pandemic struck, Wizz has stuck to expansion plans, announcing ten new bases in the last three months, but Varadi conceded “we are not immune from the short term issues”.

Looking ahead, Wizz’s ambition is to build a 20 plane base at London’s Gatwick Airport, and Britain’s 14-day quarantine rules, brought in with little notice and which apply to arrivals from Spain, France and Croatia, have not changed that.

“For the time being, the UK is manageable,” Varadi said, explaining Wizz had adjusted its capacity, shifting some flights last week away from Croatia to Portugal, which was taken off the quarantine list.

Wizz’s Gatwick plans, however, depend on the European Union dropping a COVID-19-related waiver that allows airlines to keep landing slots without running a minimum number of flights.

While most airlines are pushing for the waiver to be extended, Wizz wants it scrapped, helping it to expand at Gatwick if rivals are forced to give up slots. (Reporting by Sarah Young; editing by Kate Holton and Mark Potter)

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