The airline called a pitch in July for its media planning and buying account, ending a 22-year relationship with Manning Gottlieb OMD.
Arena beat PHD in the final round of the review but after prolonged contract discussions with both agencies, Arena withdrew from the process after it failed to resolve a conflict issue at the holding group level.
Arena is part of Havas Media Group, while PHD is owned by Omnicom Group.
Reuben Arnold, the senior vice president, marketing and customer experience, at Virgin Atlantic Airways said: "PHD is a highly capable and innovative agency that clearly understands our brand and demonstrated really strong strategic and connection planning capability.
"We are excited about welcoming them on board as an important partner that will play a key role in helping us achieve our ambitious marketing vision."
PHD will start working on the account immediately.
Verica Djurdjevic, the managing director at PHD UK, said: "Virgin Atlantic is a great fit for our agency culture.
"For the team at PHD, this win offers an opportunity to work on a brand so many of us have been personal advocates of for many years. We look forward to playing our part in its ambitious plans and future business success."