According to reports, CMG will not be participating in a repitch for the work, which is to be conducted by the New York consultancy Roth Associates.
Independent agency CMG has held the Virgin Atlantic account since 1994, and has received numerous awards for its work on the brand.
John Riordan, vice-president of marketing at Virgin Atlantic, said: "Virgin Atlantic would not be what it is today without CMG Communications. Although we are still happy with its creative and service, we have regrettably come to the conclusion that CMG may not have the depth of resources for our future growth."
In the UK, Virgin Atlantic has run a series of ads starring celebrities such as Marianne Faithfull and Anna Friel to promote its Upper Class service, as well as a series of humorous ads showing people's attempts to blag upgrades. The airline uses Rainey Kelly Campbell Roalfe/Y&R in the UK.
The agency has also developed a series of posters taking potshots at rival carrier British Airways. One reads: "BA don't give a shiatsu", referring to Virgin Atlantic's offer of free massages for Upper Class passengers.
The airlines are nervous over any possible war in Iraq, as it is likely to hit passenger numbers. They were already hard hit by the September 11 terrorist attacks in 2001, which saw passenger levels decline, especially on trans-Atlantic routes.
Virgin Atlantic hopes to appoint a new agency by May.
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