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It is shown in this work that annealing of Schottky barrier diodes (SBDs) in the form of Ni/AlN/SiC heterojunction devices in an atmosphere of nitrogen and oxygen leads to a significant improvement in the electrical properties of the structures. Compared to the non-annealed device, the on/off ratio of the annealed SBD devices increased by approximately 100 times. The ideality factor, derived from the current-voltage (IV) characterization, decreased by a factor of ~5.1 after annealing, whereas the barrier height increased from ~0.52 to 0.71 eV. The bonding structure of the AlN layer was characterized by X-ray photoelectron spectroscopy. Examination of the N 1 s and O 1 s peaks provided direct indication of the most prevalent chemical bonding states of the elements.