The owner of Southern Rail has been handed a £13.4 million fine by the Department for Transport for its poor performance after a spate of delays and cancellations last year.
Govia Thameslink Railway (GTR) would have been given a bigger fine, however the Government said it recognised most delays were not the fault of the company.
The DfT said that unprecedented levels of sick leave and strikes were a key part of the problem, the BBC reported.
But transport secretary Chris Grayling admitted the strikes were not solely to blame for the terrible performance of Southern Rail.
He wrote a letter to GTR's chief executive Charles Horton and said: "Performance on Southern has improved dramatically since Christmas, as the disruption from union activity has decreased.
"But that performance is still not good enough." He also said: "Passengers who depend on Southern have been badly let down."
Grayling has announced the fine is to be spent on improvements to performance and for passengers. A toal of £4 million will fund 50 on-board supervisors for the next two years.
A spokesman for the rail company said this fine was a "fair outcome" and added "we are pleased that this issue has been concluded, and accept and are sorry that our service levels haven't been good enough for passengers."
But Mick Cash, general secretary of the RMT union which was central to last year's strikes, has been angered over the fine, claiming the company has been let off the hook.
Cash said the "response to the abject failure by Southern/GTR to deliver on their contract doesn't even stack up to a slap on the wrist."
The RMT, which represents train guards, and Aslef, which represents drivers, blamed Govia and the DfT for attempting to impose dangerous plans for driver-only plans and ignoring the wishes of their members.