While Western allies debated whether to take military action against Libyan leader Moammar Gadhafi Monday, media reports suggested the embattled dictator had reached out to rebel fighters to establish an exit strategy that would pave the way for his resignation.

Al Jazeera television, as well as two Arab newspapers, reported late Monday that Gadhafi had proposed a meeting with the interim National Council, which represents the interests of the rebel-held eastern part of the country.

The reports quoted sources who said Gadhafi suggested a meeting of Libya's parliament to discuss the terms under which he would resign, including guarantees of his and his family's safety and an agreement that he would not be charged or tried in court.

However, according to the al Jazeera report, the council rebuffed the overtures, saying an agreement would lead to an honourable end to Gadhafi's 42 years of iron-fisted rule.

Meanwhile, Gadhafi ramped up his air campaign against rebel forces on Monday, just as the U.S. and its NATO allies were considering military action, including a no-fly zone over the North African nation.

Britain and France are reportedly drafting a UN resolution that would establish a no-fly zone over Libya, a measure rebel fighters have called for as they advance on Gadhafi's last strongholds around Tripoli.

The rebels have said they are willing to take on the embattled Libyan leader's ground forces, but have no way to protect themselves against his air power.

"We don't want a foreign military intervention, but we do want a no-fly zone," rebel fighter Ali Suleiman said Monday.

Suleiman said the rebels can take on "the rockets and the tanks, but not Gadhafi's air force."

British Foreign Secretary William Hague told the House of Commons Monday that Britain is "working closely with partners on a contingency basis on elements of a resolution on a no-fly zone."

A British diplomat at the UN stressed that the draft resolution is being prepared in case it is needed but no decision has been made whether or not to introduce it at the Security Council.

The crisis in Libya is expected to top the agenda of a meeting of NATO defence ministers this week.

NATO Secretary-General Anders Fogh Rasmussen said Monday that NATO had no immediate plans to intervene militarily in Libya, but said it was his job to "conduct prudent planning for any eventuality."

But if Libyan forces continued to attack unarmed civilians, he added: "I can't imagine that the UN and international community will stand idly by."

NATO did agree Monday to increase surveillance flights over Libya from 10 to 24 hours per day to glean more information about both the humanitarian and military situations on the ground.

President Barack Obama said the U.S. and NATO are considering a military response to violence in Libya.

While he ruled out direct involvement by U.S. troops, Obama called the Libyan leader's attacks on demonstrators and protesters against Gadhafi's rule "unacceptable" and said the U.S. will stand with the Libyan people.

He said Gadhafi and his supporters will be held responsible for the violence there.

As Obama spoke, U.S. military planes ramped up their humanitarian efforts Monday, flying between Europe and Tunisia to bring supplies and evacuate refugees who have flooded across the border. Obama also announced $15 million in new humanitarian aid funding to assist the evacuation efforts.

A White House spokesperson also said arming rebels was one of several options being considered by the Obama administration.

"The option of providing military assistance is on the table because no options have been removed from the table," Jay Carney said.

Craig Skjerpen, commander of HMCS Charlottetown, which is making its way to the coast off Libya, said he has not received any orders to prepare for a military mission in the country.

Skjerpen told CTV News Channel in a telephone interview from the frigate that he and his crew are preparing to help execute evacuation plans for Canadians and other foreign nationals, as well as aid in humanitarian efforts.

"This type of training is no different than the way you look at Sidney Crosby training and practicing for hockey games," Skjerpen said. "Even though he's quite good at what does, he still takes the time and goes out and practices."

Libyan warplanes launch airstrikes

Libyan warplanes launched multiple airstrikes on opposition fighters in the second day of a government counteroffensive to thwart rebels advancing on Gadhafi's stronghold in Tripoli.

But the bombing attacks on the oil port of Ras Lanouf failed to push rebel forces out of the town, despite the fact that one strike hit a gas station, leaving two large craters in the ground and at least two people wounded.

CTV's South Asia Bureau Chief Janis Mackey Frayer said it is unclear how the rebels will fare in the days ahead.

Mackey Frayer told Canada AM the rebels face an additional disadvantage in the fact that they are much less organized than the professional soldiers who are fighting for Gadhafi.

"What the rebels lack is a sense of organization," Mackey Frayer said. "So, if the rebel forces become split, it's unclear how they communicate with each other and how they regroup."

Further fighting is expected later this week as the pro-Gadhafi forces ramp up their efforts to block the rebels from advancing towards the capital, where the Libyan dictator's power remains strong.

The opposition is still trying to set up adequate supply lines for munitions and food, and are still awaiting rocket launchers and tanks to arrive from their headquarters in the eastern city of Benghazi.

The pro-government forces regained control of the town of Bin Jawad, and they also fought rebel forces in the opposition-held city of Misrata.

Gadhafi loyalists also appeared to take back control of Zawiya, just west of Tripoli, which was the site of heavy fighting over the weekend.

One resident told The Associated Press that tanks and guns opened fire in the early morning hours and by afternoon, the rebels had been driven out of the city's square.

The fighting between the rebels and pro-Gadhafi forces has prompted tens of thousands of foreign workers to flee Libya, while hundreds of thousands of others are still struggling to get out.

Jemini Pandya, a spokesperson for the International Organization for Migration, said only a small fraction of Libya's 1.5 million foreign workers have managed to leave the country.

"We know more migrant workers will flee," she said Monday. "So far, we have seen more over 213,000 migrant workers leave the country, and they represent only 15 per cent of the foreign population. So there are still a lot of people stuck inside the country."

With files from The Associated Press